s first outlined in my Strategy Report published in 1995, I concentrate on small and micro-cap stocks due to their significant out-performance (as evidenced then by the Nesbitt Burns Small Cap Index versus the TSE300 from 1969 to 1995). Independent research firm Ibbotson Associates found that microcaps beat big stocks by an amazing 218% since 1926.

Small-caps had outperformed large-caps 2.5 to 1 over this 26-year period, albeit with substantially more volatility (rates of return year over year ranged from -40% to +96%). This increased volatility in fact serves us well, as it creates significant trading opportunities that further increase profit potential.

We continue to believe that small-caps are the place to be for 2009, as readers of my "Back up the Truck" commentary last year know all too well.

To me, the numbers are clear: To make the biggest returns you need to find the best microcap stocks.

The Role of Psychology

Understanding economic and resource cycles and the underlying mass psychology is essential for identifying important long-term trends. This gives us the "big picture" framework, allowing us to determine which asset classes to buy and which to avoid, and clarifies whether we are indeed going long within a sector bull market or effectively trying to swim upstream - buying into a bear market (never recommended!).

We use technical analysis (TA); charts & indicators, to help manage the psychological aspects of buying and selling in a timely manner. This provides a framework and the discipline necessary to counteract our emotions, and will often capture key inflection points. Emotions are often at odds with a "correct" and timely trade, so TA is an essential tool in determining the optimum technical levels for share accumulation, selling-price targets and setting stop-loss orders. Without detailed and constant technical analysis, you are truly flying in the dark.

While exciting and very "hands-on", trading is only half the story. In our 1995 Strategy Report we discussed in some detail all the psychological and systemic reasons most people just aren't very good at it, and how to manage the inherent risks. Technical Analysis, both the art and the science, has proven its worth, providing discipline for taking quick losses and letting your profits run.

Our most lucrative approach, and the real backbone to what we do is "bottom-fishing". The conventional approach calls for diversification and data interpretation, and that is certainly a part of it. Our edge lies with the fact that we know the people that start the deals on a professional and often some personal level, by reputation and/or past experience. Often we can quickly find someone willing to provide additional color commentary, opinion and background.

We also understand share structure, and how access to funding and deal flow separates the men from the boys. We can usually discern the low-odds effort from the virtual slam-dunk.

Combine this with the right timing (buying near wholesale versus retail), and acquiring a reasonably large position to make it all worthwhile -- and you have a fairly strong likelihood for ultimate success. Of course it helps if you're psychologically playing with money that can be lost 100% and is un-levered. If you can't stomach a temporary 50% decline, are overly skittish or the loss of capital would change your lifestyle if things go wrong - well, you simply shouldn't be in this game! Or at least reconsider the amount of money you want to expose to such volatility.

For a more complete narrative description of the bottom-fishing philosophy please refer to my second Strategy Report published in the winter of 1995-6. Ownership, price structure and insider background are arguably the key factors for success, and those very same corporate events associated with achieving "correct" deal structure often provides us our key tell-tale market-timing signals.

Subscribers are invited to use my background in this specialized sector to help achieve their more speculative financial aspirations. I have decades of technical, psychological, and financial experience and proximity to the largest concentration of small and micro-cap companies, within one of the most regulated and transparent markets, in the world.

Our subscription base is limited to 1,000, out of necessity, in order to minimize our effect on these relatively thin markets, often lacking in liquidity during our optimum critical accumulation phase.

Join with me to position into the most lucrative market opportunity we are likely to see in our lifetime!

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