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Microcap & Penny Stocks : DGIV-A-HOLICS...FAMILY CHIT CHAT ONLY!! -- Ignore unavailable to you. Want to Upgrade?

To: Seth L. who wrote (16158)	6/28/1998 6:24:00 PM
From: ANALYST10	Respond to of 50264

Great reply. I think you understand what goes on in the business. The reason my firm will not execute such a trade even on an unsolicited basis is the fact which you mentioned about brokers getting sued. The first rule of brokering is "know your client" Unfortunately, in this litigious society everyone sues everybody. There have been a number of arbitrations simply based on the fact that the broker should not have let the client execute the trade, that the broker should have known better. Even though it was unsolicited. They look at it as the investor is a novice and the professional should know better. It simply doesn't work whereby, its your money do what you want with it. Caveat emptor (let the buyer beware) doesn't hold water in this society. This gets me to an unrelated point. In other cultures and societies, such as the English law which are is based upon, the rule is "when you sue, you lose you pay." If that were the case things would be alot different and there would be alot of out of work lawyers so don't look for that to happen anytime soon. As far as broker arbitrations they can take years. There is no speedy justice and the brokers manage to drag these things on for years wearing the investor out and making him spend money. In many cases, the cost of the arbitration is more than the money sought and unless there is some punitive or treble claims, it doesn't go anywhere. And yes even if a client buys blue chip, he must be instructed as to the risks and if he still chooses to hedge his bet on one investment, blue chip or not, a broker will get a representation letter from the client just to make sure. Clients have been known to say the broker advised me to do it. Needless to say there are brokers that advise the client on an investment and mark the ticket unsolicited which most clients don't even realize or dispute because at the time the investment is made, what is the difference. The sh-- hits the fan when the stock goes down. My only advice to someone would be for example DGIV was pennies months ago. It had a nice run. I don't care if you think it is the next INTC or MSFT, that's fine. They should book a profit and play with the house's money. Simply stated, they lock in a profit and have no downside, unless they do something silly, like averaging down when they see the stock coming in. Example: They purchased 1,000 shares at $.50 Total investment $500. Stock trades $1.00 They sell 500 shares at $1.00 Recoupment = $500 (their initial investment) They now own 500 more shares that they can forget about and put in a draw and come back in t 10 years or they can trade in and out of it. You have removed the risk from the stock since you recouped the investment. Obviously, this is a simple strategy. If they had a strong conviction for the stock, they could have averaged sales on the way up, with the idea of removing their initial investment 100 shares at $1.00, 100 shares at $2.00, etc. The problem with this though is one does not know where the stock will top tick. It could be $1 or it could be $10, if we knew, we would be sitting on an island somewhere. Anyway, that's my lesson for the day. As far as your analysis of the brokerage community you are right on. Institutional firms won't bother with investors with less than $1 million in the market and the $1 million is merely the entry point. There are some good hedge fund managers out there, that work with smaller investors, but usually a $250k min. investment is required and that is a different type of high risk investing although lucrative.