We didn't turn out a newsletter in October "the month of crashes" because daily trading volatility was so crazy and it still is. On TV media pundits extrapolated each daily rollercoaster ride up or down way out into the future. A few days later in early November the world appeared to have flashed back to teetering on the edge of a precipice. One misstep could plunge the world into a financial crash as serious as the one triggered by the 2008 collapse of Lehman Brothers. Again every reader should realize we are all back living on the razor's edge!

For perspective I journeyed to the Harvard Club in New York City where Needham & Company Vice President of Equity Research security analyst Charlie Wolf unloaded his dark view of several intractable problems facing America in a little talk "The Economy and the Stock Market". Charlie wasn't selling anything; he was just providing his perspective to about 15 of his fellow Harvard College l955 classmates on how America got into its current mess. As long as our current intractable problems linger each will be a serious damper not only for the stock market but for our general prosperity, economic growth and continuation of the American Dream.

With a wry sense of humor and the ability to laugh at himself, Charlie began by calling himself "the accidental security analyst". After spending 18 years climbing up in the ladder in the finance division of Columbia Business School and at last becoming a professor, he decided to teach a course on security analysis. Recalling the value of real world experience in teaching his course on Capital Markets, he decided the best way to prepare would be to take a sabbatical leave of absence for a year and actually work at a brokerage firm and cover an industry like a real security analyst. He fired off several letters offering his service but only First Boston invited him to work at their firm and actually cover an industry like a real analyst so long as it wasn't one already covered by one of their existing analysts.

So he chose the brand new personal computer industry where there were only three PC public companies and which he could easily cover in one year -Apple, Commodore and Compaq. In early l985 his first pick was a SELL on Commodore Computer at $20 which obligingly crashed to zero. Next he picked up covering Apple with an initial HOLD rating during the time Steve Jobs was being forced out of the company. But after visiting Apple he switched to a contrarian BUY on then unpopular Apple Computer and it quickly became a winner. Suddenly Charlie became a guru. At the end of the year as he prepared to return to Columbia, his research director at First Boston offered him a permanent job arguing Charlie would be much better at stock picking than teaching. Gulping he gave up his precious tenure and now has been a personal computer analyst for 27 years.

In the late l980s he began his popular Wolf Bytes , now published by Needham & Co.  (www.needhamco.com) but today has narrowed its focus to smartphones and digital entertainment. He still can't resist covering Apple and also covers Nokia, Research in Motion, Netflix and a few others when necessary. He still works 60 hours a week.  

When Charlie went to Wall Street the first thing he learned was that picking stocks is really hard. "In my 27 years on the Street I've frequently been right but in almost all instances for the wrong reasons. In fact, I can only remember two calls that were right for the right reasons - an upgrade on Compaq in l992, which preceded a 30 - fold increase in the stock price and an upgrade of Apple in 2003 after it ported iTunes to Windows and unveiled the iTunes Store.

"The second thing I learned is that money is the only thing that counts on Wall Street. Coming from academia this was a revelation, although it probably shouldn't have been. The bonus meetings at Christmas were the biggest events of the year. The crazy part is that an analyst's bonus typically had little to do with his or her stock picks. It was mostly based on a client popularity contest.

"The most insidious aspect is that you had to recommend a stock if a company you covered was a client even if you did not think it was a buy. I was fortunate in that I ran into this problem only a few times. But it was brutal when I did. In 2003 former New York State Attorney General Elliot Spitzer solved the problem by constructing an iron wall between corporate finance and equity research departments."

The culture of Wall Street encouraged taking bet-the-farm risks because short-term performance was the only thing that mattered at bonus times. This was especially true for traders who could receive bonuses in the millions if they made the firm money, but were sometimes fired if they lost money.

Next Charlie spoke about the housing bubble because it illustrates the culture of greed that not only permeated Wall Street but virtually all the players in the financial markets including elected officials and regulators. Investment banks perform useful functions. They raise money for companies through underwriting of stocks and bonds. They provide investment advice to mutual funds and other institutional investors. And they enable investors to buy and sell securities in the so-called secondary market.

But Wall Street went off the track. Greed was always present. Financial engineering created a much larger playing field. In the old days a bank lent directly to people who wanted to buy a home. The borrower had to put up 25% of the price of the home. And the bank kept the mortgage on its books until the loan was repaid. So the bank cared about whether the loan was O.K.

The process began to unravel when some academician dreamed up securitization. Now a bank could sell the mortgage to an investment bank. They in turn  bundled it with other mortgages to create mortgage - backed securities. These were popular with pension funds and other investors because they typically paid higher interest rates.

Securitization was the crucial first step in the relaxation of mortgage lending standards. The lending bank no longer had to worry about a borrower repaying a loan because the bank no longer owned it. Everything went downhill from there.

Fannie and Freddie either bought or guaranteed the majority of home mortgages in the U.S. Private mortgage originators emerged to compete with commercial banks. These acquired sub-prime mortgages and frequently lied about the quality of the securities when they sold them. Investment banks got into the act by creating derivative mortgage securities and credit fault swaps which they packaged and sold to institutions around the world. Everyone made lots of money because the spread between the cost of the mortgage -backed securities and the price they were sold at was very wide.

The game worked as long as the demand for mortgages was insatiable and housing prices were rising. But when supply caught up with demand and housing prices began to tumble foreclosures exploded. The banks either imploded like Lehman Brothers or were bailed out by the government.

Five years later there are still no signs that housing has stabilized. The rising number of foreclosed homes and the continuing erosion of housing prices have effectively destroyed the housing industry. Looking into 2012 Charlie sees no sign of a bottom and what that does to the general confidence of the American consumer is scary!

So who's to blame? Virtually everybody. What was exposed was a culture of greed gone mad. In contrast to the good  old days of investment banking nothing of value was created. All the housing bubble did was to make a lot of people on Wall Street incredibly rich. Taxpayers ended up paying for it when the bubble burst.

In his list of intractable problems America faces today the moribund housing market already covered above is number one.

The second is the high unemployment rate. Companies are substituting capital for labor. They need fewer workers to produce the same amount of goods because of automation. And they continue to outsource jobs abroad. In addition many domestic workers do not have the training or skills to fill the new jobs created in our new economy.

A third and related problem is the burned out consumer. A lot of people lived beyond their means for years by borrowing on their credit cards or the rising value of their homes. Now they must spend less and pay down their debt which has stalled the rebound in the economy after the 2009 recession. When you are worried about the value of your home falling below your mortgage or losing your job, health care or your pension if you have one, you do not feel like going on a spending spree.

A fourth intractable problem is the mess in Washington. The extreme right and left have taken over, making compromise difficult, if not impossible. America needs an action oriented centrist leader and extremists in both parties are eliminating the  moderate leaders  the rest of us need to get things done.

A fifth problem  is the plight of state and local governments. In boom years politicians to keep in office created unrealistically generous public payrolls and public pension plans. Now at the worst moment for our general economy these states and cities can only survive by cutting back.  

Finally there is the crumbling European Union and the risk of contagion. (The next day after Charlie's talk interest rates on bonds of Italy soared.) Banks buy sovereign debt and also buy the debt of other banks. A Greek default would cause all the banks owning Greek bonds to write them off which, in turn, could destroy all of their capital and force them to default. This could spread to other banks, which own the debt of the defaulting banks.

To function fluidly, participants in the markets must have faith in the credit worthiness of the firms they do business with. If that were to evaporate, as it did after the Lehman bankruptcy, markets could freeze up and other countries, such as Italy, could experience a run on their debt, increasing the interest rates they pay to a level where they might have to default. The domino effect of these events could throw Europe into recession. And it doesn't stop there. Since a material portion of U.S. exports end up in Europe, this  Euro credibility contagion could throw the U.S. into a recession as well.

How do we solve these problems? "I haven't a clue," sighs Charlie.

Questions from the audience: Why does Charlie feel Apple Computer (Nasdaq: AAPL-388.83) is still a great buy after the death of its creative innovator Steve Jobs?

Because Apple has the momentum now that IBM and Xerox did at their peak. Its game changing products like recently released smartphone iPhone 5 are reshaping how the world communicates with each other. Cash plus cash equivalents including maturities over 12 months has piled up over $76 billion. Charlie expects a spike in iPhone sales and an increase in market share noting there were riots in Asia when some stores ran out of inventory. Looking a year out Charlie conservatively projects Apple's earnings per share at $34.50 which is a projected P/E of 11.2. "That ludicrous for such a great growth company," claims Charlie.

But what about the loss of founder Steve Jobs who reinvented the phone? "What Apple lost with Job's death is an option on creating even more value. Every two years Jobs would come out with some disruptive technology to lift to Apple's revenues and earnings skyward. No matter how high Apple stock goes, it will be lower than if Steve Jobs was still there. We won't have the next products we would have had with Steve Jobs still alive. But Apple still has so much going for it which is not reflected in its current stock price it's a tremendous buy." Conservatively Charlie has a target price for the stock of Apple of $540 a share while some analysts are projecting as high as  $650.

Who will be the next President of the United States? "With the economy in such sad shape President Obama should be easy to beat," Charlie began. Obama who gives great speeches but doesn't seem to have a clue about creating jobs or growing the economy still has about a 65% chance of winning. If New Jersey Governor Chris Christy had entered the race Christy probably would have won an upset. Now Republicans are stuck with a truly depressing field of candidates. The best of this weak lot is boring highly capable Mitt Romney but Charlie is amazed at how unpopular Mitt is with other Republicans. -RJF

Bob Flaherty Rides Again! Welcome to our 27^th issue of Flaherty Special Situations. This issue we do a job everyone likes to put off: portfolio housecleaning. Our stated goal is to offer stocks we believe can increase 50% to 100% within two years. The old timer's definition of a classic special situation is simple. If your assumptions are correct and you have identified $2 worth of value for each $1 of stock market value, your stock pick should rise regardless of the direction of the stock market.

But everyone makes mistakes, and we do too. Failing to admit them creates a mediocre portfolio. Not every strategic plan goes as expected. The real world intervenes. Also it is easy to fall in love with a product or to become so involved in the struggles of entrepreneurial management to overcome unexpected obstacles that we forget our own mission-to offer our most promising buys to you readers.

I want everyone to enjoy a good 2012. So, let us focus on and stick with our potential winners and advise tax sales for those with broken concepts. We all only have so much time and energy. It is wise to stick with the winners and to concentrate on the most promising prospects if we want a profitable harvest.

All of our recent Flaherty Financial News or Flaherty Special Situation Newsletters have been opened by two to three million online investors and two over 8.2 million. We have an amazing open rate of over 25%. To be reaching millions of new investor readers fills me with gratitude and joy. All the writing effort which goes into turning out each issue would be wasted without readers. To join our financial family and receive our next FREE issues of Flaherty Financial News and also Flaherty Special Situations simply go to our website www.flahertyfinancialnews.com and opt in as a reader. You can opt out any time too.

Look beyond the crowd. Our late friend and guru Sir John Templeton felt the easiest way to prosper was to look out four years when everyone else had to look out only one year. If an institutional player had a bad year, most would be replaced in the casino like atmosphere our stock market has degenerated into. In very feverish times  momentum investors get so crazy the long term is lunch. Then even just looking out a little longer than a year is being long run.

Next, estimate or guess what a depressed stock which is selling at a bargain price today might be worth when the weather vane changes from fear to greed or if its situation brightens in the future. Observe what is happening to bring the undervalued stock back into vogue in the future. Improved management, an industry turnaround, new capital, a new product line, an acquisition, the list of catalysts which can improve a company is endless. If the changes could result in a stock price which is 50% to 100% higher, then go for it.

Sir John believed, and I agree, that equities also should be widely diversified because various sections do better or worse each year. So in addition to owning stocks in various countries and no more than 25% in your own country, he felt it was wise to diversify by industry, by company size-micro cap, small cap, middle weight and giant.

Because of the dramatic reduction in independent research, Sir John felt there was greater opportunity in stocks which had little or no independent analyst coverage. Find and buy some good bargains, then as the stock becomes more popular unload at a profit and buy another bargain.

For all companies the most important thing is good management. Check out the track record. Past successes are the most important guide to future success. So the key manager should be experienced, well educated, have good financial backers and a product or service which is unique enough or positioned to generate sizable  revenue.

Remember 90% of companies which lose money never become profitable. If you buy a profitable company which has proven it can increase revenues you will avoid 90% of the losers. You will also avoid a company which sounds great but never learns to market and sell and bring home the bacon. A concept company is only an unproven idea until it makes a profit and repeats it. Then it becomes an emerging growth company.

 

Less is More. Now I could write pages on each of the following past picks I am going to keep as an open BUY right now and the new stock I am going to add to the BUY category. However, that would hurt not help you. We all get flooded with too much information, when a really good special situation can best be summarized in a paragraph or so. If it can't be, worry about whether the concept is too complex to work. In fact, often I find in the many pages about a stock the key facts which are going to drive the stock up if the concept is correct are lost in all the detail or sometimes even missing.

Let us be clear on what I hope each of these picks can do for you. Remember over the long run the average gain for equities is about 9% annually. The ambitious goal of a Flaherty Special Situation is a gain of 50% to 100% over two years. Be patient. It can take time for the events to take place which will lift a stock. Progress must be reported in upcoming quarters so that new investors will see what you saw and become believers too. If a stock reaches the profit target, I suggest you sell. Why? I can think of so many times when my winners became losers when I wanted even more and put off selling too long. Except when we decide a stock is a rare keeper, our game plan is to try and walk away winners when we achieve our profit goals of 50% to 100%.

 

Our Surviving Buys for 2012 plus one new pick: Apple Computer.

 

Buy #1: Apple Computer (Nasdaq:AAPL-388.83) nowhas the momentum that IBM and Xerox did at their peak. Its game changing products like upcoming smartphone iPhone 5 are reshaping how the world communicates with each other. Cash plus cash equivalent including investment maturities over 12 months has piled up to over to $76 billion. Security analyst Charlie Wolf expects a spike in iPhone sales and an increase in market share. Looking a year out Apple's projected P/E is slightly over eleven. Needham & Co.'s Wolf (see above) has a target price for the stock of Apple of $540 a share while some analysts are projecting as high as $650.

Buy #2: Mediware Information Systems, Inc. (Nasdaq: MEDW): The U.S. economy may be flat but Mediware is booming, an obvious beneficiary of the billions being spent on improving healthcare like making patient and hospital medical records electronic to improve accuracy, cut costs, eliminate mistakes and, above all, save lives. Back on February 25, 2010 in Flaherty Special Situation #l8 I recommended MEDW at $8.04 and it has taken a nice 81% jump to $14.54. But it is not too late for you to join the party. Led by dynamic CEO Thomas "Kelly" Mann revenues and earnings per share continue to set new records. Mediware is a prime acquisition target in a field which is filled with promise for tomorrow. It should be able to continue to profitably grow until it commands a rich price, perhaps even double its current high. That is because it's Chairman Larry Auriana, who has had that title since l986 and was a director since l983, owns enough shares  himself to prevent a hostile takeover from being successful. Mediware was founded in Larry's venture capital days before he co-founded the first of his three Federated Kaufmann Funds but Mediware has a small float so that it is not a holding in any of them.

Financially- shrewd, shareholder-oriented Chairman, experienced solid operating CEO, lots of cash in the bank, a booming business in a growing field favored by government funding. In August 2001 I recommended MEDW for the first time and closed it out with a SELL for a gain of 122%. I think I have a good shot at an encore.

 

Buy #3: Corcept Therapeutics Inc. (Nasdaq: CORT) Besides a near term orphan drug product for Cushing's Syndrome, CORT is trying to fight the harmful metabolic side effects of morbid obesity, which include heart disease, stroke and Type 2 diabetes from the ingestion of antipsychotic drugs used to stabilize mental illness. Featured in Flaherty Financial Newsletter #28 on Sept 11, 2011 at $2.90, up 18%, CORT's effort is one of the most overlooked and important crusades in modern American medicine. In December 2008 our coverage of CORT began at a price of $0.97 a share, up 202%.

 

Buy #4: Acadia Healthcare Company Inc. (Nasdaq: ACHC) Bob Flaherty's personal March 23, 2011 Favorites of the Famous pick was PHC, Inc., d/b/a/ Pioneer Behavioral Health Group (NYSEAmex: PHC).  PHC,  also Flaherty Special Situation #21, was taken over by a private company. The combined company is now trading as Acadia Healthcare Company. The union makes it the largest pure play in in patient behavioral health and pro forma revenues through last June were $325 million. Being larger should make it possible to make bigger acquisitions and substance abuse is still one of America's largest and most neglected problems. Our goal for Acadia remains the same as it was for PHC alone: Hope Treatment! Recovery! A 100% + Profit Opportunity!

 

Buy #5: Dynavac Technologies (Nasdaq: DVAX) Featured in our Flaherty Special Situation #13 on October 23, 2009 Dynavax stock has now doubled and still appears to be gaining momentum. It accelerated Phase III trial of its Heplisav (liver-saver) vaccine to give results to the FDA early. A recent successful secondary stock offering gives management the muscle to keep heading toward commercial reality. Dynavax's hepatitis B vaccine promises faster more effective life-saving protection with fewer doses and injections. This disease can cause deadly cirrhosis of the liver and cancer. This drug could be a blockbuster. In China alone 120 million people, about 10% of the entire population, are  already  infected with Hepatitis B and there is a desperate need for an improved vaccination.

 

Buy #6: BioSante Pharmaceuticals Inc. (Nasdaq: BPAX) The goal of Stephen Simes, CEO of our very first Flaherty Special Situation #1 issued back on December 28, 2007 is still enhancing sexual satisfaction for U.S. women. Men have three such products and it is unfair that women have been so shamefully neglected. Some even use male products which are too strong and inappropriate for them.

BioSante stock once over $10 recently sold about $2.45 up 50% over last year. CEO Simes' ambitious goal: First to market in the U.S. with a product to alleviate Female Sexual Dysfunction. This is a huge $2 billion unmet medical need. Safety testing continues and is going well.

Patience is something most investors lack today. But Simes has so far met every challenge and done as much as anyone could have expected of him. Above all, he has raised the capital in this risk adverse market to keep BioSante going toward the finish line, approval by the FDA of the first U.S. commercial product for women.

 

Buy #7: OnSecMedical (ONCS.OB) Featured in our Flaherty Special Situation #21 an experienced ambitious team with money raising know how are developing two separate technologies. One is an alternative to cancer surgery which kills cancer cells with less harmful side effects; the other uses DNA to trigger the immune system to fight cancer in spots which are unreachable or currently untreatable. Success would   improve many cancer treatment outcomes and save many lives. To flourish management needs to raise $5 million. At a recent price of $0.31 a share ONCS could be a big winner.

Buy #8 MELA Sciences: (Nasdaq: MELA), featured in our Flaherty Special Situation #11 dated August 1, 2009, is backed by legendary venture capitalist Dan Lufkin and is leading a crusade to detect deadly melanoma skin cancer earlier. Its new product MelaFind has been approved by the FDA for use by dermatologists in the U.S. and it has received its CE for use in Europe for crucial early detection of skin cancer to save thousands of lives annually because one American is dying from melanoma an hour. If MELA doesn't make it, it won't be because of lack of good backing.

 

Buy #9: Samson Oil & Gas Ltd. (NYSEAmex: SSN) Managing Director Terry Barr has given us a nice 85% gain on our pick of last year at $1.24 although the shares of his enterprise can be very volatile. Since he doesn't plan to rest until his stock reaches $10 we would stay on board for the ride. This is a sleeper to watch.

 

Buy #10 #11 #12 and #13: Harry Barr has four up and comers: Pacific North West Capital (PFN.TO), Fire River Gold (FAV.V), El Nino Ventures (ELN.V), Next Gen Metals Inc. (N.V). Featured in our June 1, 2011 Flaherty Financial News Newsletter #27. With famous mining partners, unlimited energy and a positive attitude a mining entrepreneur uses winning strategies to create hard asset values. When the global economy picks up so will Harry's stocks.

 

Buy #14: Bard Ventures Ltd. (CBS.V), featured in Flaherty Special Situation #17 February 12, 2010 follows the Templeton idea of buying straw hats in winter and so finding a bargain. Bard has found what it believes is a huge 230 million pound molybdenum resource, which could even be more than doubled. Also recovering demand for moly, which makes steel stronger and more heat resistant, is rising for use in oil pipelines, aircraft, nuclear facilities etc. A possible shortage and a price leap to over $40 a pound by 2014 is projected versus under $14 recently for this volatile metal. Bard's property is not far in British Columbia from existing properties of Thompson Creek Metals (NYSE: TC).

Buy #15: Grizzly Discoveries Ltd (GZD.V) is up 39% but it is too soon to sell. See our Flaherty Special Situation #15 December 15, 2009 and our follow up in our issue of July 2, 2010. In Canada Grizzly is next door-only six kilometers away from where Kinross Gold Corp. has opened a 1.6 million ounce gold mine across the border in the U.S. It's nice to have a wealthy neighbor! And when diamonds are again a girl's best friend, GZD.V will sparkle.

Buy #16: RENN Global Entrepreneurs Fund: (NYSEAmex: RCG) Over the last few years the investor flight from risk has accelerated and with it micro-cap stocks have taken a beating. That means we can find bargains. Now let us turn the negative flight from risk into a positive for us. Most micro-cap and small cap stocks are all depressed and have trouble raising growth capital. When confidence returns, the survivors' stocks will again soar and become overpriced. Yet buying just one right now is risky. Why not buy the portfolio of an entire venture oriented fund, especially one where there is a discount of over 20% between recent price and net asset value? What sells at a discount when investors are driven by fear often commands a premium when they are filled with greed.

The last time I recommended RENN Global Entrepreneurs Fund it consistently went up in price while annual dividends and capital gains reduced our purchase price until we had a gain of over 800%. Then more distributions completely erased our original purchase price and we had a return of infinity, which is what you get when you divide a positive gain by zero.

RCG is managed by my old friend Chairman Russell Cleveland, who is doing his best to sail through this year's choppy waters. But he has a portfolio filled with many undervalued bargains. Russ prefers companies that have achieved revenues and hopefully profits over more risky start- ups when he invests. In venture funds it is often not the number of winners you have but how big your gainers are. In the past some of RCG's gains were positively explosive. For example, we covered Laserscope, which rose from $3 to over $80 where it was acquired in a cash tender offer. When the economy improves, there is no reason to expect RCG shareholders won't get some new fireworks.

 

Buy #17: Strategic American Oil Corporation (SGCA.OB): Here is our Flaherty Special Situation #20 on SGCA a BUY at $0.20 issued on July 2, 2010 and updated on October 13, 2010. This tiny turnaround is a play on developing America's vast forgotten onshore oil and gas reserves. With promising foothold operations in Texas, Louisiana and Illinois, management is knowledgeable about those local areas. The team should identify and acquire low-risk high-reward domestic oil and gas projects by using modern 3D seismic technology and develop mature projects to their fullest potential and bring hundreds of dead domestic wells backs to life. Many were shut down when the technology did not exist to recover energy economically and the price of oil was dramatically lower. So far SGCA stock has gone down not up but reserves are rising and the best is yet to come.   

 

Buy #18: ITEX Corp. (ITEX.OB) featured in our Flaherty Special Situation #5 continues its 8 year turnaround under the current management. A few ITEX presidents ago, ITEX was booming and the then CEO wanted to grow even faster. So he did a toxic convertible and ITEX not only lost its momentum but almost went under. Under the current management team, ITEX has enjoyed eight consecutive profitable years and is in the best financial condition in its history in spite of this horrible economy. ITEX even pays a dividend. Success should come from developing its wonderful position in the barter business.

Buy #19: South American Gold Corp. (SAGD.OB) Featured in our Flaherty Special Situation #26 in June 8, 2011 this very early stage gold development company is in South West Columbia where FARC guerrilla are still active so it landed a prize property. Now management must raise enough capital to get moving.

Buy #20: ComCam International (CMCJ.OB). Featured in our Flaherty Special Situation #25 management stated it had three major growth opportunities - U.S. Mexico border surveillance, franchising warehouses and stores and in Europe health care in hand anti septic sanitizing for doctors and nurses. So far CMCJ has strengthened its low tech prison monitoring core business and improved its balance sheet. However, management has failed to raise the growth capital to exploit its more significant opportunities and upgrade its technology so its progress has been less than anticipated. Let's give CMCJ another year.

Most of our mistakes had intriguing stories but revenues did not come in as expected. Rather than searching for reasons and asking why, let us admit the original concept was wrong. Let the managements solve their own problems and if revenues or other positives perk up, we can always step in again. But time is money so let us say goodbye. As we prepare for 2012, let us stick with our winners! -RJF

 

SELL and take tax losses on any other old BUYS. So often we look at companies simply as investments. But most are much more than that. For example those pushing back the boundaries of health care their success or failure involves much more than money-human life.

SELL Universal Gold Mining Corporation: UGDM.OB. Flaherty Special Situation #22 Universal seemed to have everything going for it including the rising price of gold which did soar. This tiny junior miner became a classic case of trying to do too much too soon. It began with an early  contrarian gold investment in newly pacified Columbia beside Anglo Gold Ashanti's colossal 12 million ounce gold discovery. Management in Columbia had a super past track record of success, properties with huge potential, top draw backers! Then financiers decided also to go after a property in India to reopen a privatized mine closed when the price of gold was only $300. Alas the key manager in Columbia and the India backers clashed and he withdrew. Necessary financing did not materialize and the key company making opportunity in Columbia had to be sold to Rio Novo Gold (RN.TO) leaving investors with a sigh for what might have been.

 

SELL Tri-Valley Corp. (NYSEAmex: TIV) featured in our Flaherty Special Situation #10 dated June 8, 2009, has a strategic long-term plan to unlock a bonanza locked up both in its tight sands projects and its prolific upper Vaca Tar Sands project. Because much of the exploration in California's San Joaquin occurred years ago above 12,000 feet but sediments go as deep as 45,000 feet, TIV believes going deep can result in a bonanza. Untapped domestic energy! But TIV has been problem prone and reported figures have been messy. So let us go to the sidelines until TIV is back on track. Long run I think TIV will be O.K.

 

SELL USCorp. (USCS.OB) featured in Flaherty Special Situation #4 dated June 1, 2008 is a 39 year effort to hit pay dirt by mining executive Bob Dultz with gold properties in Arizona and California. Bob has a never give up attitude. After some setbacks he has relations with a new company to help develop his treasure. Ultimately his persistence should pay off but our two year period has passed.

SELL The Brainy Brands Company (OTCBB: TBBY). Featured in Flaherty Special Situation #24 May 11, 2011 their concept was that a powerful new infomercial would bring in big revenues and profits from parents and grandparents who wanted to give their toddlers a head start. Alas the projected revenue has not come in so far.  

SELL  PEGG Capital (PGU.DE) This Isle of Man-based venture firm failed to deliver what was expected of it.

 

Disclaimer and Safe Harbor Statements:

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Disclaimer: This Flaherty Special Situations Newsletter contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties, and actual circumstances, events or results may differ materially from those projected. We caution readers not to place undue reliance on any forward-looking statements and to supplement this newsletter with specific company SEC filings and their own research. Please be aware that there is risk in every company stock that you buy. Coverage or other mention of a stock in this newsletter is neither an offer nor solicitation to buy or sell any securities mentioned. We are not investment dealers or investor advisers registered with the SEC or State Security Authorities. We do not guarantee all the information in this newsletter is correct or will be updated. Remember some errors will be inevitable. Reproduction without written permission is forbidden.  Our policy forbids editorial from buying or selling a featured stock until this issue is out at least ten business days after its issue date of November 16, 2011. Flaherty Financial News Inc. did not receive any compensation for naming our new pick this issue or renewing our BUYs on the older selections. For sponsored payments received when some were originally chosen please see each individual Flaherty Special Situation report archived on our website www.flahertyfinancialnews.com . In cases where a report or profile is subsidized, readers should consider such subsidized articles as paid advertorials and understand that sponsored material will not be as objective as unsponsored editorial. As FNN editor I always reserve "Final Copy Responsibility" on what to include and what to leave out of every issue. We have tried to be objective, but may have failed. We are not security analysts or stockbrokers engaged in buying or selling, but financial journalists with all the many failings of that profession. You readers must decide the merits of each company yourself and whether to invest. -Bob Flaherty, Editor

Flaherty Financial News Inc. (FFN) and its newsletters Flaherty Financial News and Flaherty Special Situations Newsletters are not registered as broker dealers or investment advisers with the U.S. Securities and Exchange Commission or any state securities authority. Our newsletters and their information and content providers make no representations or warranties of any kind in connection with the subject matter, performance or suitability of the information contained in the publications for any purpose and are not liable for the timeliness, accuracy or completeness of the information. The information is provided for general information purposes and is not a substitute for obtaining professional advice from a qualified person or entity familiar with your personal circumstances. Please seek the help and advice of professionals as appropriate regarding the evaluations of any specific security, report, opinion, advice or other content. FFN is not responsible for trades placed by recipients. All opinions expressed, information and data provided are subject to change without notice. FFN, its officers and its employees may have positions in and may from time to time make purchases or sales of the securities discussed or mentioned by FFN. (However, we will avoid front running and the buying or selling of any security about to be discussed until ten business days after our particular report is released to the public.) FFN shall have no liability for any newsletter that is lost, intercepted or not received in a timely manner, or not received at all, for any reason.-RJF

Flaherty Financial Newsletters Because They Work!

Happy Thanksgiving! May we all be grateful to live in America where we are free to make our dreams come true.

 

Sincerely,