Monday, October 28, 1996
Been To Canada, Eh?
or
My Luggage Liked Vancouver, Too
by MF Runkle

Well, I am now back from Canada, and as usual, I displayed typical American ignorance of geography in my last Fribble. I was visiting Comox, which looked just a teensy weensy way from Vancouver on the map. It was teensy weensy by British Columbia standards, but that is still a five-hour drive (two hours of it on a ferry). You know, they do have bear problems in town, not polar bears, but black bears. They also have trouble with cougars. Not only that, I could have actually gone sunbathing on the beach. The weather is quite comfortably warm because of its proximity to the ocean.

Although I only visited Vancouver's airport (for a four-hour layover), I did do a little bit of research on the VSE. Comox has a mall with about, oh, 15 stores or so in it, and one of them was a bookstore. I got this real good book by a retired Mountie who worked in the Northwest Territories. He had a lot of good stories about life up there, and some of the people he met had mining companies, probably listed on the Vancouver or Alberta Stock Exchanges. Well, that really doesn't qualify as research, does it? The only investing books were about a half dozen titles, like "Front End Loaded Mutual Funds For Complete Idiots" and things like that. Nothing on the VSE.

I checked the local paper for news about the VSE, but there was only the usual business articles. They did list the VSE stock sales though (I would hope so, the paper was published in Vancouver). The volume is listed in the 1000's (three zeros) and still some stocks only showed single digits. These are issues selling for less than $0.50 for the most part (Canadian). Since you can get $1.35 Canadian for a U.S. dollar, except here at Pittsburgh International Airport, where it's $1.28, that isn't a whole lot of money in transactions. There is also a part on the stock pages listing companies that didn't trade.

The locals didn't seem to care about the VSE; they are more into fishing. Next summer when I return, at least four people have promised to take me. Oh, I did learn something. Did you know that the Indiana Jones episode where he finds the Holy Grail was filmed at Petra in Jordan? I met a Canadian Air Force officer who was there and showed me some pictures. He knew all about Mideast culture, Syria, Lebanon, Jordan, and Israel, but he didn't care about the VSE, either.

I was losing. Finally, at Comox airport, I found a British Columbia business magazine. It had all the usual articles, but there was a profile of a guy who mined diamonds. His company had originally started trading at $0.50 a share, and now was, adjusting for splits, at $50.00 a share. No wonder people buy penny stocks. This was better than the lottery.

What are your odds of finding a company like this? Well, you have to sift through all the outright scams and poorly thought out risky ventures on the VSE. Real research is needed. Forget about the penny stock letters; many of them are subsidized by the companies they cover, and there isn't any way to determine which ones are legit. I haven't found any credible publications that seriously cover these stocks; even the Vancouver press seems to ignore them.

You could try visiting the companies themselves. The book I got by the Mountie might help you there. A lot of these mining outfits are up in the Northwest Territories, where hardly anybody lives but native peoples and miners. The temperature gets down below -60 degrees Fahrenheit, which is cold enough to make licking a metal pole very very difficult. You'll need good snow tires. Dog sleds by the way are no good when it gets really cold; the snow no longer is slippery, and it gets like sand.

Don't like cold weather? One of the companies I found on the VSE has mining operations in Honduras. I've been there too. It's nice and sunny. You don't need snow tires, but people drive at either 10 mph or 90 mph. You can tell the dangerous spots on the road by the crosses on the side. Have you ever been in a bus going up a mountain turn and passed a car? I have. This is what driving in Honduras is like. That's if there is a road where you are going. It is the first and only place I've been where the locals refer to a road as "ugly," and ugly many of the roads are.

Well, I guess visiting these places isn't like a Sunday drive to Roy, Utah to count cars in the Iomega parking lot (if that is your idea of fun). Makes research kind of difficult, doesn't it? Heck, I couldn't find anything on penny stocks even in Penny Stock Kingdom.

So here's the rub about penny stocks. Sure, there are ones that could make you fabulously rich. No wonder you can always find somebody in a chat room suckering out for these things. However, the nature of what these companies are doing makes them phenomenally risky. Even in the Northwest Territories, do you know what your odds are of an individual oil well or gold mine making a strike? Real slim. Big oil companies and mining companies balance out the risk by exploring numerous areas at once. One find makes up for all the losses. What happens if you can only afford to explore one area? Chances are you'll lose.

Worse yet, the potential for fraud is huge. Just like in the gold rush, there were the honest prospectors searching for riches in the hills. But there were also legions of card sharks, thieves, con artists, robbers, and other dubious sorts that found mining money from those seeking to mine gold was much easier, and much more profitable. As easy as it is to start your own publicly traded company on the VSE or ASE, why mine gold? Get a geologist report from the Canadian government, and mine the chat rooms.

So, take my advice. Forget about the VSE; everybody I met in British Columbia has. If you must mess around with Vancouver, go fishing, or ride one of those ferries. Even the airport is pretty nice, except getting through security took forever. Also U.S. Customs didn't want to let my colleague back in the country. Saying his birthplace was Bangkok, Thailand didn't help either. They did let him through, but my luggage spent an extra day there. Well, now I know geography a little better. Next week I'm going to Puerto Rico, I think it's somewhere off the Alabama coast.

Transmitted: 10/28/96