"Stocks in the Spotlight"

MARKET TALK

May 29, 2008

THE MARKETS ARE "STILL" A LONG WAY FROM THE BOTTOM As recent as today I have heard some of the "bought & paid for" analyst telling us we may be ready for a turning point in the markets come summer. The problem with these guru's is, they were calling for the return of the bull. This is why I call them "bought & paid for", because they are not allowed to say what they really feel, and in some case they might really feel this way. It just goes to show that "acting" like you know something seems to be the norm. Let me give it a try (acting like I know what I am doing). I read today that the housing crisis will very probably last into next year. Personally, I feel there is a long time to go before the U.S. will be able to correct the damage done by greedy Developers, Realtors and Bankers (DRaB's). A big problem is how high the cost of a house climbed. Not only did it climb too fast, it climbed too high, and the average wages for Americans could not possibly keep pace. In short, the USA just priced itself out of the market. The house that climbed from $250K to $500K, is now worth $300K, the priced it should be in the first place. Now comes the bigger problem, all the paper wealth flushed down the toilet. Unfortunately for millions of Americans, whom borrowed against these inflated prices, are now in debt quite heavily, and with no near term fix. The house is not going to go back to the $500K level for many years. Why? Because wages can't go up that high, that fast. Another problem. Since millions of Americans cannot cover the debt by selling the house, or refinancing, as many had planned, they are stuck with high payments eating away at extra spending money. Now they have to contend with the price of milk and eggs climbing through the roof, and the price of gasoline at the pump, already through the roof, eating away more of the spending money. The average U.S. family may have reached a point where there is no extra spending money left at the end of each month. The main problem is inflation. The Feds are telling us it is low, when in fact Americans know better. Because they do not have any money left, after paying more for everything, the economy is going to be slow going for quite awhile. Not just today, but tomorrow. We are just now seeing the housing crisis spreading deeper as companies like Home Depot are slowing to a crawl. Since the markets are suppose to trade on what is happening 6 to 8 months ahead, the latest "sucker" rally could not hold, since it is climbing on what happened in the last quarter. I am just trying to put things in a layman's language. The reason for the fall in the first place is housing, not banking. The reason has to be solved before the markets will have a strong enough reason to feel better about the future. Speaking of banks. Banks are taking the free money from the Feds, but not lowering mortgage rates. Another reason it will not work. I call this latest Fed move the "Katrina of Finance" and it is being handled the same way. What this means is, just because a few big corporations announced good earnings, and in some cases, solid growth, they are relying on what happened before we found out food prices are soaring and a barrel of oil broke the $130 mark. Inflation is screaming! Define inflation: When "all" commodities continue to climb in price. Gold, sliver, coal, gas, oil, food, the euro, the pound, the yen, college tuition, wheat, corn, milk, beef, (I'm getting exhausted) and so on, all costing more. Now add a first. This is the first time we are experiencing inflation while housing is deflating. The paper loss is in the trillions of dollars and it won't be coming back for quite some time. I don't know why the Feds can't call it the way it is. I guess they feel if they if they keep ignoring it, it will go away, but they could not be further from the truth. As the Feds tell us inflation is calm, we consumers watch it scream and there is no reason to believe inflation will slow, blamed mostly on the higher cost of fuel that may have finally caught up to a point where it becomes an economic problem. As investors, it is important to look at the downside, as well as the upside. We tend to not want to hear the negatives once we talked ourselves into a certain investment. It's as though we don't want to know anything that might change our minds. Remember, all stocks are different. They trade different for many different reasons. We have to look at each investment at many angles because they are not just squares or diamonds. I look at the volume as a very important factor, but I also know that expecting strong volume from a new company is asking for too much. What I mean is, there is a time and place for just about anything. I look at the total shares floating. I need to know this so I may know what I am up against. How many bought at the low? How long at the low? These are all factors in how a stock will climb in price. There is no sure fire method that works for all because each is unique. It is this uniqueness that I feel we need to be spending our research time on, especially during these hard to predict times. Uniqueness is a reason for a company to succeed when others are having trouble making ends meet. New "public" companies, and young "public" companies are the best place to look when our target is in search of something different. Its basic math. If I have a young company, with no skeletons in the closet, that has a great product or concept, with increasing revenue, or a strong reason to expect revenues to increase, trading near the low, it probably deserves a much closer look. This is the kind of situation we, as investors, need to look for. Act like the markets are really looking bad, therefore, we may take the extra caution that is necessary for today's market. Don't get me wrong. I am the last one that will encourage "not" getting into the market. I feel it is the only place to invest, just learn to crawl before expecting to walk. There are always stocks to buy. Everyday we hear about one that climbed without us. It happens in all markets, but if we search hard we can do much better in bear markets than we will ever do with the bull. Think about all the investors that bought blue chips when the DOW 30 was over the 14,000 mark. It may be years before they get even again. It takes fewer "investors" to move the price higher in a low-priced stock. It takes fewer "total dollars" to move the price higher in low-priced stock. Newer companies tend to have "less exposure to world problems". Newer companies tend to have "less exposure to monetary changes". Newer companies offer more opportunities for "break-through products, or services". It takes "less of our dollars" to own a decent position in a low-priced stock. I say stick with the lower priced stocks. We can own 5, 6, 7, or more of the lower-priced stocks for what it cost to own a decent amount in one blue chip. Smaller stocks tend to offer a "more affordable way of diversification". Remember, it took years to destroy the largest economy in the world, about seven so far, with a bit more than half a year left of the same old story. Do not expect this economy to recover under the current administration. It will tend to favor "big business" all the way to the grave. Always look ahead, and it is best to look at the negatives. Without knowing why a stock is trading at a bargain price, we have no way of knowing when to jump in. Sell all rallies! I am updating a few companies below that I feel deserves special attention. Advanced Micro Devices (Computer chips) (AMD) (Recreational & Environmental Products) (news) $6.80. Advanced Micro Devices (AMD) (52 week range 5.31 - 16.19), now at $6.80. AMD has become a leading factor in the primary PC chip war. Here is a stock setting near the low with almost $2 billion in cash and a book value of almost $5 per share. Seldom do we have an opportunity to pick up stock in such a big company so close to book value. AMD is too strong of a company to have been beaten down this far. It can be played for a couple of dollars, and possibly through the entire bear market or it can be picked up for the longer term. Either way, anytime under $6 is a great bet. It only has to go back to $12 to make a great deal. The last time I placed a BUY on AMD (2003), it went from $5.50 to $43. Not too bad for a 5 year investment and I feel it may just do it again, once the bear goes back to sleep. This stock is worth a "BUY Here", but buy only when under $6. The stock priced climbed about a dollar since my last update. It will be best to hold it here, but I am quite negative on the markets and this one could drop back to a "BUY" area again. Hold here, with best entry near $5.50! A "Featured Spotlight" stock Dynamic Response Group, Inc. (DRGP.OB) (Recreational & Environmental Products) (news) $0.041 Dynamic Response Group, Inc. (DRGP.OB) (52 week range 0.028 - 0.33), now at $0.031. DRGP is our newest addition to the "Stocks in the Spotlight". DRGP is the first company we have added in over a year. Growing revenue and it would appear that the revenue will continue to grow at a strong pace, is the main reason we need to look closer here. We should hear Q1 results any day now and I would expect revenues will be strong again. Nice industry for the current times. New products need to find a way to reach people and DRG seems to know how to do just that. I have said we need to find a company with new products and growing revenue, and trading near the low end of the trading range. DRG seems to be a prescription written for exactly those symptoms. Press Release Dynamic Response Group, Inc. Announces First Quarter 2008 Financial Results Thursday May 15, 10:00 am ET Company Generates Record Revenue of $10 Million Reaches Profitability and Maintains Positive Cash Flow Reiterates Guidance of at Least $40 Million in 2008 MIAMI, Fla.--(BUSINESS WIRE)--Dynamic Response Group, Inc. (“DRG”) (OTCBB: DRGP - News), a leading innovator of strategic marketing solutions, today announced financial results for the first quarter ended March 31, 2008. (more) DRG's move to profitability, so soon, and at the same time increasing revenues at a very strong pace, makes it the kind of company that stands out among the best in our choices of investments in these confused market times. A very affordable stock in a company that seems to have a handle at the business of growing. The "Stocks in the Spotlight" has commenced a strong investor awareness program that will be active for the next three months, which I believe, is all that is needed to accomplish a strong increase in volume and price. I am recommending a "BUY" here! A "Featured Spotlight" stock Electronic Sensors Technology, Inc. (ESNR) (Chemical Analyst) (news) $0.025 Electronic Sensor Technology, Inc. (ESNR) (52 week range 0.022 - 0.26), now at $0.05. ESNR incorporated on July 12, 2000, is engaged in the development, manufacture and sale of a product called zNose®.The zNose® identifies the chemical makeup of any fragrance, vapor or odor. The zNose® can smell anything, and it can do it in just ten (10) seconds, that's seconds, not minutes or hours. How about an early warning that nerve gas in in the area, or how about knowing a lady with bad perfume in in the area. The zNose® even smells things that we don't. Press Release Electronic Sensor Technology Announces Recapitalization Agreements Business Wire (Wed, Feb 27) NEWBURY PARK, Calif.--(BUSINESS WIRE)--Electronic Sensor Technology (EST) (OTCBB:ESNR), a leading provider of innovative homeland security and environmental solutions, announced it has signed a letter of intent from an investor to provide additional capital to the company and an agreement that would extinguish the company's existing $7 million convertible debentures. (more) The only thing in the way of this one growing has been cash flow. Now, with the debts gone and the company setting on cash, there is little reason sales will not follow soon. ESNR is a "new" company with great products, a huge market, money in the bank, a fairly small float, setting just off the low, and waiting for the big companies to start knocking at the door. Since the reason for the stock falling in the first place has been solved, the stock should move up soon. The recent new 52 week low brings ESNR to the front of the class. The worst thing that can happen is we might lose 0.025 a share, but with new cash I don't think we need to worry. If we own this one higher, now is the time to get some more to get our price down and build our position. The "Stocks in the Spotlight" has commenced a strong investor awareness program that will be active for the next three months, which I believe, is all that is needed to accomplish a strong increase in volume and price. I believe there is a giant market for this company. One to own! Buy here! A "Featured Spotlight" stock Exterra Energy, Inc. (EENR) (Chemical Analyst) (news) $0.48 Exterra Energy, INC (EENR) (52 week range 0.30 - 1.50), now at $0.49, off from $0.51 last week. EENR is our newest "Featured" Spotlight stock, and also, our newest addition to the "Stocks in the Spotlight". Exterra Energy is a new public company, became public via a merger in October, and 1st started trading as a public company just in January, making EENR the same thing as a new issue. EENR's already producing wells are in Texas and the promise of growth is stronger with this company than I have seen in many years. Seldom do we have an opportunity to get in at the low, in a young company like EENR, at a price better than those that have traded before us. A young growing company in the economically hot "oil & gas" industry with a "book value" of about 0.34. I don't know of a better bet in these economically troubled times. This is a stock we should buy and hold for the longer term, with an opportunity to make the big bucks. Don't miss out here. EENR has the ability to climb quickly with a low float and strong news expected. In my opinion, there is no better place to be for this current market and if we snooze here, we lose. I'm guessing the $1.50 high will be broken before too long. The "Stocks in the Spotlight" has commenced a strong investor awareness program that will be active for the next three months, which I believe, is all that is needed to accomplish a strong increase in volume and price. I like this one a bunch and this is a great place to go with our losers. If we have a stock we want out of, sell it and put the money here. Buy here and buy now! A "Featured Spotlight" stock Jet Gold Corp. (JAU.V) (Pink Sheets JAUGF) (Mining, Oil, Metals, Coal & Gas) (news) $0.33 Jet Gold Corp. (JAU.V) (52 week range 0.13 - 0.69 (Canadian)(Pink Sheets JAUGF), now at ¢0.33 (Canadian) (U.S. = $0.35). Jet -- was incorporated under the British Columbia Company Act on April 24, 1987. Jet Gold is an exploration and development company that has been increasing shareholder value through acquisitions and exploration. The main two reasons I am recommending Jet Gold is, the qualified management and the addition of new holdings that hold promise for millions of tons of coal. Jet Gold is the kind of company that has a growing base of loyal shareholders, we can tell because it doesn't take much buying to move the stock up. A well managed company that is growing slowly by acquiring small percentages of producing companies, while at the same time exploring a possible "very big" coal discovery. Press Release Jet Gold Closes Private Placement Tuesday April 29, 1:45 pm ET VANCOUVER, BRITISH COLUMBIA--(Marketwire - April 29, 2008) - Robert L Card, President, Jet Gold Corp. (the "Company") (TSX VENTURE:JAU - News) announces that the private placement originally reported on February 15, 2008 has been approved by the TSX Venture Exchange and has closed. (more) Jet Gold is coming into season and the above news tells us it will get a full season, improving the opportunity for big news. With the drilling program moving forward and the money to complete this next and very important phase of exploration, we might look forward to major news on the horizon. There is a strong chance that very positive news could come from this summer's exploration, meaning we have to be in the stock now, before any strong confirmation of the large coal discovery Jet Gold thinks is has it's hands on. A great bet for the current markets and the recent easing to the low 0.33 level is giving us another chance to get in. The stock has been showing much strength lately, with moves to the 0.40 level becoming the norm. The "Stocks in the Spotlight" has commenced a strong investor awareness program that will be active for the next three months, which I believe, is all that is needed to accomplish a strong increase in volume and price. Treat Jet Gold as a long term stock with a chance at a short term explosion. Buy here and buy now! STOCK ALERT ZAP (Zero Air Pollution®) (ZAAP) (Recreational & Environmental Products) (news) $1.02 ZAP (ZAAP.OB) (52 week range 0.52 - 1.33) - ZAP is in the business of making zero air pollution cars, scooters, bicycles and other electrically powered moving vehicles, along with other energy saving methods of transportation. This company is on the cutting edge of a new generation of transportation, with much success, for several years now. It appears my constant battering on you to buy this one seems to be working. I almost told all to move out last week when the stock reached the $1.20 level, but as it fell back it was not falling on the kind of volume it needed to go all the way back down, therefore, I decided to hold off. Now the stock is on the move again. This move is overdue and not due to anything so great that it will be able to hold the higher ground. My big puzzle has to do with how high it can go. Expect trouble at $1.25, but a close over the $1.25 level will set up a run to the $1.65 level, followed by $1,87, then $2.25. I don't see anything past the $1.65 level at this time, but over $1.25 and we get a chance at it. Sell on any fast rallies, since this is the history of the stock and we all know that history repeats itself. ZAP is too high to buy here, but get ready to sell it, just not here. An idea for a strong investment strategy would be to come out of ZAP (at a higher price then here) and roll the money into Exterra Energy (EENR). This way we have a strong chance to double, triple, or even more, our winnings. EENR is trading about where ZAP was last week and I would not be a bit surprised if it mimics ZAP in the not too distant future. Put your finger on the sell button, but don't push it yet. Watch close and look for signs of bigger volume on the downside. This will be our notice of a pending fall. We want to hold here just in case there is some big announcement in the works. We will know soon, since stocks that move on secrets, usually move just before the secret gets out. Hold here, but not for the long term! Visit the "Stocks To Watch" section for a brief opinion on these and additional companies. I'm J.R. Budke and this is my opinion! J.R. Budke Stocks in the Spotlight 209.383.4647 spotlite@thespotlite.net www.thespotlite.net The Stocks in the Spotlight is not an Investor Relations or Public Relations firm, but a stock market related web site with opinions and recommendations. It also has to do with equity strategy, with a desire to assist in the various methods of increasing the value in a public company. If you need assistance in equity strategy, or consulting, please contact us at the above telephone or e-mail address.