"for whom the bell tolls, it tolls for thee"

You know things are tough when shareholder letters quote Donne. This is just the beginning of a sobering letter written by the executives of TINY to their shareholders yesterday:

"FELLOW SHAREHOLDERS:

"No man is an island, entire of itself; … and therefore never send to know for whom the bell tolls, it tolls for thee."

-John Donne, Meditation XVII from Devotions to Emergent Occasions

In June of this year, just before the end of the second quarter, we raised additional equity capital by placing 2,545,000 of our common shares at $6.15 per share (stock was $3 the day they sent this letter), for net proceeds after all offering expenses of $14,383,497 (They are essentially saying they have a sweet profit on their self short). Upon the announcement of this registered direct offering to financial institutions, we received a fair amount of criticism from shareholders, even from some of our long-standing shareholders. Some expressed their opinion that we should not have raised additional capital at all, given our debt-free status and our relatively large holdings of U.S. treasury securities prior to the offering. Others objected to our timing, wondering why we did not wait for the stock market to improve, as June of this year was the worst June in the U.S. stock market since 1930. Although we had no idea at the time that June's market tremors were just a prelude and that the world financial system would collapse in the third quarter, we raised that additional capital at the end of the second quarter because we have always believed in maintaining a balance sheet with a margin of safety."


Reposted rock blog.

The small caps are at an inflection point

As I mentioned on Friday, the market leading Russell 2000 small cap index (IWM) is clearly at an inflection or "pivot" point. You can see it in the falling wedge formation above, and note that this pattern is typically a sign that a move is becoming exhausted. The rising wedge can be an excellent topping formation, see this awesome example. In other words, the longer term decline seems to be loosing steam. On the intermediate term time frame however, the small caps are running into resistance at the upper end of this wedge as evidenced by Friday's tail. Also, volume has been declining and all the RSI and stochastic "oversoldness" has evaporated in the past week. So we are ripe for a nice sell off from here but if IWM can push a little higher it should be able to pop up to and test the 50 dma currently aty $53.79 (which would be a very good place to enter shorts). One encouraging sign for the bulls is the CCI crossover that occurred on Friday, this is a very bullish buy signal but again, volume was weak (didn't confirm). So what I'm saying is that, the market is unlikely to sit here. The most likely scenario seems to be a drop down to the lower end of the wedge around $40 with the possibility of making new lows, but a pop to $53 is certainly possible. Good luck, I'll be trying some IWM shorts tomorrow morning but if the market does break out I'll be picking up TINY calls.

A TINY pivot point (nano)

This TINY chart looks alot like IWM and maybe justly so since its market cap is pretty tiny at about $100M. Both charts have this failing descending triangle breakdown look on a daily timeframe. While I am not convinced in the sustainability of this rally based on the weak volume, this price action is very constructive. If TINY or the small caps (IWM) can push a little higher, volume should move in as technical buy signals get triggered. On the other hand, resistance at this pivot could lead to a short term top on Friday. TINY seems like a good cannidate for a quick double if/when it does break this $3.85-$4 area, just watch out for resistance at $5 and up into the lower 5's. I've got the 5yr monthly chart below, the stock has efectively been in its own little bear market since earlu 2004 after peaking at $25.


Harris and Harris Group (TINY) is a vernture capital fund which invests in nano start ups, read more about it here. This model seems like a great vehicle to me because odds are most nano businesses will fail but one could be a home run and easily pay for all the failures. Think Cypress Semi's spinoff of Sunpower. They have stakes in about 30 nanotech start ups in a variety of industries. Even as this might sound like a very high risk, financing dependent space, this stock has actually been able to hold its 2002 lows. I think it would be safe to say that among the market leading small caps, TINY is a leader. And as I see nanoscience as the future of science and technology, it makes sense that TINY would be a market leader among leaders. I hope everyone is enjoying a relaxing Thanksgiving holiday, cheers!