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INM Jan 2011 - America Is Greedy and Grossly Manipulating (AIG & GM)
Kenneth J. Gruneisen, Founder and Contributing Writer, www.CANSLIM.net
CANSLIM.net


The way things are going, it seems as if the market lately is unstoppable. However, one key concern that makes many investors wonder about the rally's ongoing sustainability is the fact that crony capitalism has gained a solid foothold in our equities markets. 

The facts have shown us why we should rather own companies that have flawless quarterly and annual earnings histories. When we can find them with patience in today's market environment, it is an unnecessarily reckless option to dabble with fundamentally flawed buy candidates. 

AMERICA IS GREEDY
It is a huge vote of confidence when insiders who are most familiar with a firm are writing checks and buying their company's shares, even when it is not growing sales revenues and it has a shaky earnings history and other fundamental concerns that make it not a considerable buy candidate for disciplined investors. When your company still owes taxpayers many billions and your directors have to contend with new limitations on executive pay, that does not preclude them from making legal stock purchases that are reported. There was a cluster of insider buys prior to its 12/09/10 technical breakout.

Note that American Int'l Group (AIG) stock shares were reverse split in July 2007 by 1/20, otherwise its shares would be closer to penny-stock prices at $2.88 today. Maybe the insiders are optimistic that underwriters may eventually succeed in unloading some of the government's significant ownership interest. Those Wall Street firms which have low expectations for FY '11 earnings estimates (see red -67% near bottom of the box in the upper left hand corner) may likely find it easier to attract greater sums of capital from institutional investors with an offering of higher priced shares at some future point.  The company's questionable fundamentals are an overriding concern. 

GROSSLY MANIPULATED
The whole world is also watching to see if the new General Motors (GM) can stay out of the emergency lane. The new "GM II" rolled out of the pits in late 2010 with many wondering about the fundamentals of the auto giant and the American automobile industry. The old GM rolled over loyal investors and crushed them.  But America is not only greedy, it is forgiving. America has been willing to give those who have behaved badly another chance. Not always, but in the cases of Michael Vick, Martha Stewart, and even outrageous wrongdoers of a far more magnificent scale like BP Plc (BP).

The 20 Earnings Per Share (EPS) rank for GM and 36 EPS for AIG tell any investor considering them that they are bottom of the barrel candidates. We didn't choose to buy either of these companies, nor would we buy them for clients who rely upon our direction. We will be sticking to those with 80+ and 90+ EPS ranks and always checking to make sure that the stocks we buy are free of fundamental flaws.

 

About Kenneth J. Gruneisen, Founder and Contributing Writer, www.CANSLIM.net :
Kenneth J. Gruneisen has successfully completed the CAN SLIM® Certification Program.  Mr. Gruneisen became a Registered Representative in 1987 and his career includes experience offering personalized assistance to investors with more than a decade of experience as a Registered Principal managing a branch office.

The recommendations made by CAN SLIM® certified individuals are their own and may not be attributed to the CAN SLIM® Certification Program, William O'Neil & Co., Investor's Business Daily or their affiliates. The CAN SLIM® Certification indicates only that the individual has successfully completed the CAN SLIM® Certification Program. CAN SLIM®, William O'Neil & Co., Investor's Business Daily and any of their affiliates are in no way responsible for any loss or damage caused as a result of the services provided by these individuals.


Comments contained in the body of this report are technical opinions only and are not necessarily those of Gruneisen Growth Corp. The material herein has been obtained from sources believed to be reliable and accurate, however, its accuracy and completeness cannot be guaranteed. Our firm, employees, and customers may effect transactions, including transactions contrary to any recommendation herein, or have positions in the securities mentioned herein or options with respect thereto. Any recommendation contained in this report may not be suitable for all investors and it is not to be deemed an offer or solicitation on our part with respect to the purchase or sale of any securities.

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The recommendations made by CAN SLIM® Certified individuals are their own and may not be attributed to the CAN SLIM® Certification Program, William O'Neil + Co., Investor's Business Daily or their affiliates. The CAN SLIM® Certification indicates only that the individual has successfully completed the CAN SLIM® Certification Program. CAN SLIM®, William O'Neil + Co., Investor's Business Daily and any of their affiliates are in no way responsible for any loss or damage caused as a result of the services provided by these individuals.

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