Phantom's Scam Artist Resigns

Finally some good news from Phantom Entertainment: Timothy Roberts has resigned from the board of directors to "pursue new business opportunities". Judging by his employment history, this means creating a new startup to bilk more naive investors. But if the SEC has their say, he will never get that chance as this resignation may mean the SEC is close to charging Mr. Roberts with securities fraud.

The SEC has an open case against Mr. Roberts for the infamous fax scam back in 2004 when Roberts profited over $400,000 in a few short trading days after Infinium Labs stock soared >10,000%. Michael Pickens, who was hired to send out these faxes promoting the now-defunct Phantom console, has since been jailed for other similar penny stock scams.

The stock is down 99.97% to $0.0005 since Timothy Roberts committed the crime.

Although this news may have come 3 years too late, it's the first step in becoming a legitimate company.

Also today, Phantom Entertainment announced a small funding deal that will aid in October's Lapboard launch. Back in April, Ione teamed up with PHEI to manufacture & distribute these gaming keyboards. This puts the launch in the hands of a more competent partner, which is great news considering PHEI's 0.000% batting average.

Could the future actually look promising for Phantom Entertainment? They have funding for the Lapboards, they have a competent manufacturing partner who is driving the launch, they have a pending Alienware order, and they no longer have the dark cloud overhead in the form of Timothy Roberts.

Let the iPhone Hysteria Begin

The only email spam I consistently read comes from Apple. Every few weeks, they always manage to come out with some new iPod add-on that I must own. I think I’ve now spent over $1000 on accessories for my $179 video iPod.

Somehow this Apple spam consistently avoids the Bulk folder of my Yahoo! Mail account (while my girlfriend’s emails get flagged as spam. wtf?). Today’s message reminded me of this Friday’s iPhone launch. Being an Apple shareholder (AAPL), you’d think I would remember such an important date. But the iPhone hype has been on overdrive for so long that it’s easy to ignore when it dominates the headlines for 6 months.

Also today, Apple & its exclusive carrier AT&T announced 6 different service plans ranging from $59.99/mo for only 450 minutes to $219.99/mo for 6000 minutes. These monthly fees are on top of the $499 price tag for the 4GB model and $599 for the 8GB model based on a two-year service contract.

The $3000 Hobby (and Other iPhone Hurdles)

Judging by today’s selloff, I think potential customers are starting to realize how expensive the iPhone will be. If you sign the mid-range $99.99/mo service plan after purchasing the 8GB iPhone model, that alone will set you back $3000 during the two-year contract (without any accessories)!

Here’s a few other potential hurdles that could prevent the iPhone from exceeding its already lofty expectations:

• You must be an AT&T customer to use the iPhone. With a market share of 20%, that means 80% of wireless customers must cancel their current contracts to sign with AT&T. Being a Sprint customer, I would have to pay a $175 cancellation on top of the $3000 price tag for the iPhone. AT&T’s exclusive contract runs through 2009.
• Only 4 & 8GB of hard drive space? My tiny video iPod holds 30 GB for less than $200.
• Recent surveys have shown that the majority of IT departments will not even consider the iPhone due to its PC incompatibilities & exclusive AT&T contract. That will dampen business spending & all but eliminate demand for the higher-tier contracts.

“Sell the News”

On Jan 9^th 2007, Steve Jobs announced the iPhone at the Macworld Conference & Expo. The stock has since been on fire rising 50% to $125, adding $30 billion to the company's market capitalization. Will the iPhone really hold that much value for Apple? This huge runup comes after a fantastic finish to 2006 after Apple’s stock bottomed out at $50 in October. Thus, nearly everyone holding Apple is sitting on huge gains.

Expect an Apple selloff following the iPhone launch. 3 similar mini-selloffs have occurred during this recent runup:

• June 26^th: Apple announces 6 AT&T service plans for the iPhone. The stock drops 3% on investor concerns over the high prices.
• June 11^th: Steve Jobs shows off the iPhone at Apple’s World Wide Developer's Conference. The stock falls 5% after investors saw no “surprises”.
• March 20^th: Apple beats 4^th quarter analyst earnings & revenue estimates. The stock falls on profit taking.

Apple’s recent success has created impossible expectations. With all the mega-hype already priced into the stock, just meeting expectations will create a selloff. Longer-term investors need not worry because the future looks bright with Macs gaining market share & the iPods continuing their dominant foothold on the music industry.

Buying Your Way Into Heaven

Interesting parallel from today's energy policy to 16th century Catholicism from Economist Dennis Gartman:

"CATECHISM CLASS: Raised as good Lutherans back in Ohio, we always understood how the selling of Indulgences helped bring the Catholic Church low in the 16th Century. Indulgences were the pieces of paper sold by the Pope that allowed 'sinners' to pay down their debts they had incurred through sinning. One could sin, buy an Indulgence from the Church, and go about one's life with a sense of having done something worthwhile for the building of more churches AND in curtailing one's time in purgatory or actually buying one's way into heaven. Indeed, we learned that one of the Popes of the age, Leo X, actually sold such large Indulgences, costing such large sums of money, that he was able to finance the rebuilding of St. Peter's Basilica. Having been to St. Peter's, in retrospect, perhaps this was not such a bad idea given the stunning beauty of the church.

"But the whole notion of Indulgences is being revisited these days by the new religion of global warming, for if we consider what Mr. Gore has recently done by buying carbon offsets from those who plant trees to offset his enormous carbon footprint, or knowing what Sen. Edwards has done by buying offsets to the electricity and energy needed to power his enormous home in Chapel Hill, N. Carolina, we are hard pressed to see where this practice differs from the 16th century selling of Indulgences.

"Parishioners in the 16th century bought their way out of Purgatory and/or Hell; 21st century tree-hugging energy users can buy their conscience clear by buying offsets. We look for arguments from our global warming friends out there."

Time to Double Short the Dow?

The stock market continued its fantastic run in April finishing up 8.6% with the Dow industrials & Russell 3000 reaching all-time highs. Consider that it took seven years to move the 1,000 points from Dow 11,000 to 12,000. By comparison, the index required just over six months to run the next 1,000 points from Dow 12,000 to 13,000.

Turning bearish during this prolonged rally may sound foolish, but the market appears oblivious to the bevy of economic woes. Remember Warren Buffet’s mantra: “be fearful when others are greedy and to be greedy only when others are fearful.”

Just take a look at this week’s economic data:

• Housing starts at 7-year low
• Existing home sales largest one-month drop in 18 years
• GDP growth slowest in 4 years
• US Dollar at all-time low versus the Euro
• Consumer spending weakest in 6 months
• Consumer sentiment fallen 3 straight months to 9-month low

We haven’t experienced this much blind optimism since President Bush hung the “Mission Accomplished” banner on the USS Abraham Lincoln 4 years ago. Indices have continued to reach new highs on solid 1^st quarter earnings & expectations of a Fed rate cut. But the lack of catalysts in May should hurt the markets while investors take profits.

Evidence is starting to show that Smart Money is beginning to watch from the sidelines. “Sell in May and go away'' is a well-known Wall Street strategy as the month historically struggles. Inflationary pressures & $4 gasoline may keep the streak alive.

Call me crazy, but I entered a large position in the ProShares UltraShort Dow30 ETF (DXD). It is essentially the double inverse of the Dow Index. In other words if the DOW falls 5%, the ETF gains 10%. You can see how risky this position is! I also purchased oil futures (USO) last month with the expectation of a return to $70. And increased my holdings in First Trust’s 9% Yield ETF (FHI).

I still hold roughly half of my portfolio in equities, but all of them are from the cheaper Nasdaq. While the S&P, Russell & DOW all are at or near all-time highs, the Nasdaq still remains 50% off its 2000 highs. So if this rally continues, I should stay even.

Join the Poker Player Alliance

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Phantom's Pump & Dump

Since Tuesday's post, Phantom Entertainment has already dropped more than 64% from its highs. The timing of the press release was fraudulent curious considering the company missed their quarterly filing deadline the very next day. Phantom is now in non-compliance status & has been relegated to the pink sheets. I'll be interested to see how many insiders sold during the rally.