Dear Dr Stock

Questions below answered before 9-11-2001

Dear Dr-Stock,

I recently purchased a few thousand shares of a penny stock. I just found out that it filed a chapter 11 and was remaining in business but was unlisted. I was told the stock is worthless. Isn't it possible that the shares can go up if the company makes money? Can you advise me in this situation?
Nervous in Van Nuys

Hi Nervous,
Near the end of the year call your brokerage firm and request a "Worthless Stock Certificate". Since the stock you purchased has no value
you can't sell it, but your accountant can file the paperwork to show there was a loss incured on your taxes.
If the stock does start to trade one day and you sell it there could be a capital gain. But more then likely this stock won't trade again.
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Dear Dr-Stock,

Some of my co-workers are daytraders. I've watched them make a bundle and lose a lot. I've been saving money to become a daytrader too but have never taken the plunge. Do you think I should wait a while to see what happens or should I sink my funds into these one time stock market darlings that are down so low it should be a great time to dive into market. Do you agree?

Swimmer in The Keys

Hi Swimmer,

You better know how to swim as many stocks have "drowned". In my opinion as of the close of 8/30 I feel the markets are heading lower and you can probably get in cheaper on some stocks.

As far as daytrading is concerned new NYSE rules want you to have a minimum of $25,000 to start, in fact most daytrading firms want that much. You would be better served if you picked out individual stocks that are leaders in their sectors and buy & hold for the time being. In the meantime purchase books on daytrading learn the ins & outs and once the markets show some life then "dip" your toe in the water for daytrading.

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Dear Dr-Stock,

I know nothing about investing and never thought I would be able to afford to invest in a well know company. Recently I've been watching the stock channel and realized that I can afford to buy some stock. Everyone says the stock market is down but I'm excited because I can finally afford some of the companies that were too expensive for me in the past. I think it's a wonderful time to buy because I have enough money to buy stock I've want before but were too high priced. Is this a good time to invest or do you think the market is going lower???

Swoozy in New Rochelle

Hi Swoozy,

You are right a lot of the popular stocks have gone down but in my opinion as of 8/30 the markets look like they are heading lower. People are still getting laid-off which will help profits for the companies bottom line but their service will suffer. There will be delays in delivery, customer support etc. which will hurt in the long run.

Since you are a novice in investing I would suggest you buy books and consult with a financial consultant. Also diversify- buy some mutual funds in sectors you think have been hit hard but have good companies in them or ask someone about "index funds".
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Dear Dr-Stock,

I am really getting scared. I have my life savings in the stock market. I was thinking about selling out a few weeks ago, but everything was so low I thought it had to get better. Today I turned the TV on and realized these stocks are much lower now then they were a few weeks ago. Please Dr-Stock what would you advise me to do? I can still get some money (about 1/4 or less of what it was worth last year) , should I take it or do you think the market will get better tomorrow?

Sick in SinCity

Hi Sick in SinCity,
You should never bet or invest the whole ranch on any one entity. "Diversification" is so important when it comes to investing. I would have didvided up the money and put some in the market, bonds, mutual funds & cash on the side.

I'm assuming you made the investments on your own as you did not mention a stockbroker. In your case a financial planner right now would be a smart move. Let them analyze what you have in the portfolio and they can tell you whether you should hold some positions or dump everything.

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Dear Dr-Stock,

I see a lot of companies traded now for well under $10 and when I look at their 52 week high I am amazed to see quotes between $100 and $200. Did these companies actually fall so low or did they split a few times along the way lowering the price.

Chuck

Texas

Hi Chuck,

Most if not all are at their 52 week lows and yes did trade as high $100 - $200. Some stocks like "Oracle" were as high as $92, split 2 for 1 which would make the stock $46, is now trading as of the close of 8/29 at $13.35.

A stock such as "Juniper Networks" which did not split was as high as $244 is trading at $15.54.
The reality set in on the high tech, software and internet sectors as well as other sectors that the price of the stock did not justify the company's earnings expectations

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Dear Dr-Stock,

My broker called me a few weeks back and told me to buy this stock.
Well, I researched it and it looked like a winner. Seemed to be at it's low and I grabbed a few thousand shares. It went up immediately and I was thrilled.
Went on vacation and when I got back in town the stock was down half of the price I paid. #1-Should I hold on to it or sell? #2-Do you think my broker just told me to buy a lot to raise the price so he could sell out?
Richard
New Jersey

Hi Richard,
Since you did your research and agreed with the broker on his recommendation and price there is nothing you can do. The next time you go on vacation and the stock is in profits I would suggest to put in a "STOP-LOSS" order.
Lets say the stock you bought was $5.00 and it was at $15.00 before you went on vacation, call your broker and instruct him you want to put in a "Stop-Loss" order at $12.00. If the stock continues to go up that's great no shares will be sold, on the downside you are trying to lock in a profit.
Once the stock starts to drop and gets to the $12.00 price, the order will automatically kick in to sell at or near the price you requested. This should give you piece of mind while you're on the beach having a few pina-coladas.

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Dear Dr-Stock,

What should I do? All my stocks are down. I got use to making thousands a day (a couple of years ago) and lately I lose thousands a week! My portfolio is really ailing! What should I do? These stock certificates are now down to only a fraction of what they were once worth.
Please help before I lose my shirt and have to start stripping for my retirement.
Lola

Las Vegas

Hi Lola,
You will probably make more money stripping then daytrading. But if this is not feasible then what you should do is stick to a strategy. Here is one that I recommend to everyone: whatever price you pay for a stock take only a 10 - 20% loss, no more then that. Once a stock breaks down and is in a "free-fall" you must get out. Its never easy to do this but in the long run it will keep you in the game longer.

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Dear Dr-Stock,

I usually get my stock picks on the different chat rooms or message boards. Do you feel they are legitimate or is it a brokerage firm hyping their own stocks?

Thanks,

John B.

Virginia

Hi John,

I don't like the chat rooms or message boards as there seems to always be 70% who like the stock and 30% who dislike it. Now you may think the odds are in favor of the stock going up with a ratio like this but human nature says "NO". The reason I feel this way is because investors will never have a problem "selling" a stock. If they read one piece of negative news, whether its fact or fiction they are going to sell. Hands Down!!!!!
The message boards will get into a "pissing" match the minute someone comes aboard and "BASHES" the stock. Then it will get personal and everyone loses focus and accusations are flying.

As far as firms pumping their own product its been proven that brokers in the past have tried this. But I have to feel if the firm is one of the "majors" they should have enough buying power to keep the stock up, unless of course they are blowing out of their own "paper".

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Dear Dr-Stock,

I get a lot of newsletters sent to me via-email that I never ordered. How does this happen?

Your Truly,

Meg

Louisiana

Hi Meg,

The minute you subscribe to one newsletter the odds are good that your name will be "sold" to other financial letters. By law at the beginning or the end of the newsletter there should be an option for you to "unsubscribe".
It will be in the form of "E-mail to: ........@.....com, in subject line type: remove or you will be able to click on a link that will allow you to enter your email address and hit "unsubscribe". Sometimes it will take anywhere from 2 days to 3 weeks before you are officially removed. I will allow the newsletter at least 3 weeks after that I use "email block". If I get more newsletter the next month I notify my service provider and let them handle it.

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Dear Dr-Stock,

My broker promised me a large amount of IPO shares if I did a lot of trades with him. I averaged over 20 trades a month for the past 6 months at full commission.
A few days before the IPO came out the broker said he could give me 4,000 shares,

when I received my confirmation it stated I only had 400 shares. The IPO went up 20 points in one day!!!!!!!! Can I sue this broker?
Thanks,

Stuart,

Arkansas

Hi Stuart,

You will have to go to arbitration and prove that the broker made this promise.

If you have other accounts and it shows that you only do 1 or 2 trades a month then your lawyer may have a case. When you first open an account the application

will ask "What type of investor are you?". It will have:
Long Term, Buy & Hold (Less then a year), speculative, daytrader, etc.

If you checked "Long Term" or "Buy & Hold" you have a pretty good chance.
This will show the arbitrators your trading habits which is important.

Another way is to see if the firm "tapes" conversations between the broker/client.

If they do call the "compliance officer" as well as fax a letter to the firm with the complaint.
There could be a settlement before it goes to arbitration.

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Dear Dr-Stock,

I have a joint account with my wife which held over 15 stocks, mutual funds and bonds. We are currently separated and heading for divorce. I just found out she liquidated the whole account by selling everything and having all the proceeds wired into her bank account!!!!
Can I sue the brokerage firm?
Thanks,

Broke in Tennessee

Hi Tennessee,

You can definitely sue the pants off the brokerage firm.

When an account is joint and holdings are being liquidated at a fast rate the broker and the firm must contact BOTH parties. Usually they

would want a letter "notarized" that both of you agree to the sell of the stocks, mutual funds and bonds.

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Dear Dr-Stock,
The broker I deal with likes to "daytrade" my account. Sometimes 4 trades a day.

My broker says he is entitled to a percentage of the profits he makes for me. Is this true?

Yours Truly,

Don't need a partner

Washington

Hi Partner,
I must first ask "did you authorize your broker to daytrade the account"?

If you did that's fine just as long as you know the "risk rewards". As far as a "percentage of the profits".........................THIS IS ILLEGAL!!!!!!!!!!
The broker makes his money via commissions and CANNOT share in the profits. A broker is not even allowed to open an account with you. If he insists

you send him money I suggest you get a tape recorder, close out the account

(make sure all the funds are there) and send a copy to the compliance manager.

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