Penny Stocks with Low Risk,and High Profits. See Now at: http://tinyurl.com/72x37mb

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Amazingly enough, a number of American financial sector stocks were thrown into penny stock
realm in the past two weeks. In the past few months, even bigger banks declared bankruptcy.
The SEC defines penny stocks as "low-priced (below $5), speculative securities of very small
companies. While penny stocks generally are quoted over-the-counter, such as on the OTCBB or
in the Pink Sheets, they may also trade on securities exchanges, including foreign securities
exchanges. In addition, penny stocks include the securities of certain private companies with no
active trading market."
By this definition, the financial sector stocks like Citibank and Bank of America, are penny stocks.
Last fall, the SEC took the unprecedented action of banning short sales and calling for a short
cover on financial sector stocks that taken a beating by the shorts. It's a lament that penny stock
companies have been complaining of for years, but went unheeded.
And now these established, down-on-their-luck financial companies have convinced the American
public that they are deserving of billions in taxpayer dollars because they are established
companies and not traditional penny stocks as defined by the SEC.
So what have we really done for these behemoths? We've altered the definition of penny stocks to
accommodate them. We've altered the level playing field by exempting them from short sellers.
And now we're giving them tax dollars like some government sponsored clinic while hard working
entrepreneurs have to fight for their place in this shrinking economy.
Are these billion dollar bailout babies really that different from your traditionally defined penny
stock?
Traditionally, risk characteristics attributed to penny stocks include:
1. Penny stock companies are usually start-ups that lack of information about the company, its
history and its management. I would argue that financial sector companies suffer from the same
lack of transparency. After all, how could anyone not see the leverage and the misguided asset
classifications and still invest in these behemoths? The derivatives are way too complicated for the
layman to analyze. So we rely on the banks to tell us the truth, while they have a conflict.
2. Large control blocks. Penny stock company founders traditionally have a large block of stock
(albeit restricted) to ensure their interests are aligned with the rest of the shareholders while
ensuring they cannot sell their shares for a quick profit at the detriment of other shareholders. In
the financial sector, these large blocks are held by fund managers who similarly cannot sell their

2. blocks quickly without lowering the market price and thereby impairing the return to themselves.
What's more, the CEO's of the companies barely have any stock in their portfolios, eliminating the
alignment with shareholder values. Instead, it's become vogue to pay these CEO's via stock
options, giving them an incentive to show short term results and then cash out their options while
the rest of the investing public holds shares that were sold by insiders.
This is done by using unwitting brokers, paid analysts and unquestioning media to tow the
company line. And because the CEO's and the companies have been held in high esteem, no one
questions the use of these tools or their motives.
Penny stock companies often use similar tools. Only with a penny stock it's called stock
promotion. And penny stock companies have better motives: without stock promotion, the best
company in the world won't be worth anything because no one would have heard of it - and
therefore the enterprise would be hard pressed to raise money for growth. Promotion should be a
driving investment criterion for choosing a penny stock.
The issue with promotion is that the SEC often believes that stock promotion involving a penny
stock needs more supervision than the promotion being conducted by billion dollar house hold
names. Is there in fact an opportunity for fraud in the penny stock market? Of course there is.
But I contend that the risk is much higher with well established companies that have CEO's
holding stock options (big motive for early liquidation since options expire) rather than actual
restricted stock (unsellable) for which they actually paid (as many penny stock companies
experience). Empirical proof is offered by the billions lost in the financial sector right under the
nose of, and with the blessing of the SEC and other regulatory bodies than has ever been lost on
penny stocks.
3. Penny stocks are often accused of being used by scam artists who sell them through spam
email or off-shore brokers. As the recent IRS/SEC probes have proven, many, many, many
American CEO's have offshore accounts making them no more honest or dishonest than the
operators of penny stock companies.
Both traditional penny stock startups and the fallen as exemplified by the financial sector have the
potential for growth and for fraud. Both are blighted by cash requirements, by short sellers and by
image problems.
The difference is that the fallen companies have the government and SEC fighting for them while
the typical startup penny stock company is vilified. The dichotomy is even more surprising when
we stop to think that economists have long been telling us, and the American experience has long
proved that the start-up is what drives the economy, diversifies the job base, creates the most jobs
and is lean enough to take advantage of changing times.
So I ask you America: Are all Penny Stocks Created Equal?
[http://www.pennystockjockey.com]

3. We believe that investing in well chosen, well researched penny stocks provides a superior return
to investing in mainstream equities. Our proprietary formula not only evaluates a company in the
traditional sense, but also gives importance to the stock promoter promoting the company. We
also always hire outside independent research in the form of a CFA report to ensure we've missed
nothing.
Penny stocks offer the advantages of low price, high inside ownership, the absences of the ability
to short and of derivative manipulations. In short, they are more transparent. The disadvantage of
low visibility is over come by the choice of the right promoter. Our years of experience in this
business has allowed us to identify good promoters from bad...in fact we make available a
publication that shows anyone how to "Spot a Good Promoter".
Article Source:
http://EzineArticles.com/?expert=Zach_Soloman
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