August 18, 2010 | In: Uncategorized
SIRI: The Funniest Stock in the World
Unless you’re a die hard Howard Sterns fan and you pay money just for a good laugh, you should stay clear from this stock. Take a look at its chart. Every day it’s the same story: I see peaks and valleys, everywhere, the stock goes a up a cent, and then 5 minutes later, it goes down a cent. Of course, there is the occasional 2 cents up and 2 cents down, but that’s really about it. Naturally, the Ask Price is always 1 cent higher than the Bid Price. So let’s say you’re buying 10,000 shares of this worthless stock, and assuming that the stock has an Ask of 1.01 and a Bid of 1.00 (so it’s really trading at 1.00). You buy those 10,000 shares and the stock price goes up by a cent (this stock can be manipulated on very low volume), so it’s now trading at 1.01. You’re happy because you think you’re making money. Now someone sells his 10,000 shares, and now the stock is down by a cent. So if you want to sell it you’ll be selling it for a cent less. Of course, every other day you may be lucky and the stock goes up by another cent, so you can sell your 10,000 shares which you locked for 2 days, and make a $100. Assuming you pay $10/trade, then you’ll be making $80. But then, of course, there is the potential that this stock goes down another penny, and then you’ll end up losing money, so you just have to get out or just wait a bit until the stock goes up to a level where you can sell it again, which might be never.
If there’s a stock out there that is used and abused it’s this stock. Sirius is a service providing satellite radio, and similarly to Netflix, it doesn’t have any real competition. Not that there’s a lot of people would care about competing with them.
If Howard Stern ever decides to stop doing his gigs, expect Sirius to become bankrupt. Sirius has about 3.89 billion shares. I guess it takes a lot of suckers to fund a business model based on Howard Stern.