Motley Fool’s “Brand Inside a Brand: The Next Intel”

By Travis Johnson, Stock Gumshoe, October 31, 2007

OK, so I’m starting to think that Fyodor Dostoyevsky has been reincarnated as a Motley Fool copywriter — the amount of text they throw into their teaser emails, many of them ten pages long or longer, is a bit ridiculous … I’d say they lead the industry in that category.

But more to the point, they certainly sometimes come up with a great idea … so let’s sniff out their latest teaser, shall we?

This one comes in with a healthy dose of fearmongering — as most of the newsletter pitches do these days, in homage to our uncertain times and jittery markets. “Read this before the market crashes” is certainly an effective tagline, if the dozens of readers who have frantically forwarded the email to me is any indication.

So, what is it they’re selling? It’s a subscription to the Motley Fool Stock Advisor, the brother-versus-brother newsletter at the fool, which I think is their oldest and least expensive.

The pitch for their teaser stock is that it’s maybe the “next Intel” as a “brand inside a brand”

What does that mean? It’s essentially the branding of a component part or capability for a product, and when they refer to “next Intel” it’s a reference to that company’s spectacular move to build a brand in the 1990s — did anyone ever care what the brand name of their computer chip was before the dancing clean suits and the “Intel Inside” campaign?

So this is following in those footsteps in some way, though they do clarify that it’s a much smaller company — explosive growth out of the Intel behemoth, after all, may not be all that likely at this point, not with a near-$200 billion market cap.

In the Fool’s words, “Before Intel, nobody dreamed a market leader like Dell would feature another company’s logo front and center on its top-of-the-line computers. But you see how it worked for them!”

So who is this that’s following in Intel’s footsteps? They do give plenty of clues in their long, long, long essay …

“The brilliant idea behind it was conceived by a precocious physics Ph.D. from Stanford and Cambridge while meditating in India. (He still owns about $2 BILLION worth of stock!)”

Sales are going up 20% a year on 35% margins.

They have $500 million in cash and no debt.

They are in cinema sound and electronics, and in personal stereo electronics and are the “undisputed industry leader”

And there’s some growth on the horizon, in their words: “You see, the Multiplex is just for starters. Home theaters, iPods, PDAs, and satellite car stereos… that’s where the REAL money is. And this little company’s patented technology is so powerful it could one day be used in virtually all of these products.”

There are only a handful of analysts covering this company, which they refer to as possibly the next Apple or next Dell, in addition to the next Intel.

So, worn out yet? Did you read the whole email? There’s lots of stuff in there about bear market panics, and the need to be invested in the stock market and to ignore those who chirp about the next crash … being out of the market because of fear is generally a big mistake, is the impression I get from them (and I personally mostly agree on that point).

Oh, and if you want to subscribe they’ll also send you some special reports, yada yada yada — one of those reports is for the New American Super Brand, which I wrote up in this space about six months ago for you if you’re interested.

But if you just want another investing idea without subscribing to another newsletter, then your friendly neighborhood Gumshoe is here to lend a helping hand.

This “brand within a brand” stock from Tom Gardner is, according to the detailed musings of the Cognitationizer 1700 …

Dolby Laboratories (DLB)

A couple of the fearless Gumshoe readers sent in the correct guess on this one, so congratulations to them — for the rest of you, this is a brand that’s been around in the consumer space for probably as long as Intel, maybe longer. I certainly remember the little double D logo on cassette decks from my misspent youth, and the accompanying personal conviction that Dolby was awesome without having any idea why.

There has been a lot written about this stock in the last year, given their remarkable performance since becoming a separately traded company back in 2005 — I’d recommend an article from SmartMoney to start, but you’ll find no shortage of ammunition for building whatever argument you like for this firm.

Their big technology in sound processing is the noise reduction that cleans up sound, or at least that was the start of their journey — sounds like they’ve gone quite a bit further now in adding 3D sound for multiplexes and lots of other high end widgets for the audiophiles and professionals. I have no idea what their presence is like in the iPod space, so that would be worth checking out, but they have definitely introduced a slew of impressive sounding (no pun intended) products over the last month or so and folks seem to think that they’re going to be a brand that matters in the consumer space this Christmas.

The numbers do match up, and they are fairly impressive — more than $500 million in net cash, decent profit and operating margins as teased. The shares are up about 100% from last Fall, and they do trade at a significant premium to the market.

Right now, analysts (though as the Fool says, there aren’t many of them and perhaps they’re missing the story) are pegging the forward PE ratio at 34. That’s pretty high given the projected growth, but maybe they’re understating the growth — the earnings did go up by over 50% in the past year, so if there was any likelihood of them continuing that stellar success I’d certainly be willing to pay 34 times earnings for the shares.

Don’t know about that likelihood, however. Tom Gardner apparently believes that Dolby will be moving further and further into the ubiquitious consumer electronics that we all have in our homes and pockets, and if that’s the case and the “Dolby Inside” logo starts to get the same kind of traction as “Intel Inside” and the Dolby name helps these products to stand out and raise prices or increase sales the way the Intel name did, then there’s a good chance he’ll be right, in my opinion. If it remains where it is right now, as it appears to me on a cursory glance, as a brand that is cared about primarily by hard core audiophiles and theater owners, then the growth might be significantly more restrained.

So … there you have it, the next “Brand Inside a Brand” to get your juices flowing … might be a great one that you’ll see branding the outside of your car or your MP3 player in a few years, or it might be an expensive dinosaur that’s been bypassed by the iPod wave of consumer electronics. I don’t know the answer, but if you do I’d love to hear it … comment away.

And Happy Investing to all.


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51 Comments on "Motley Fool’s “Brand Inside a Brand: The Next Intel”"

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Anonymous
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Anonymous
November 2, 2007 3:27 pm

no comment

Chris
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Chris
November 13, 2007 8:37 pm

I can’t match up the price chart in the Motley Fool email with any I can find for Dolby Labs. Are you sure this is the stock the Fools are recommending?

Chris Morgan

Anonymous
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Anonymous
November 14, 2007 1:56 am

Thanks for your info. My lips get tired just seeing these hype tomes for newsletters. As I skimmed the M-F hype on its Brand-Inside-a-Brand pick, it took but a millisec to think of Dolby. Can it be true, a dinosaur Dolby becomes a Phoenix and makes us all a good return on investment?

One Guy
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One Guy
November 15, 2007 1:08 am

Chris, the only price chart I saw in that email was for another one of their teaser companies, Whole Foods (the “new american super brand”). I don’t think they included a chart for the “brand inside a brand” stock, if memory serves. Thanks for keeping me on my toes!

Anonymous
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Anonymous
November 18, 2007 7:50 am

Its DTS not Dolby.

lightning
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lightning
November 22, 2007 6:30 pm

No, it is not DTS. Motley publicly reccomends Dolby and publicly “poo poos” DTS.

DOW20000
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DOW20000
November 24, 2007 12:41 am

(DLB)Dolby shot up in stock price since Motley Recommended it.
It is now oversold..and will have to come down to about 35.00 to become fairly priced. Just my opinion.
So, Motley Fools can Short DLB for a while(they made money on the way up and are making money on the way down..on the backs of gullible investors.
(DLB) is a good investment, I think. And the company will prosper in the future, but NOW is not the time to buy. Hold off, then buy.
Just my opinion.

One Guy
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One Guy
November 27, 2007 9:10 pm
Thanks DOW2000 — I very much doubt that the Fool newsletter folks have been profiting from manipulating the stock as you imply, that’s certainly against their best interests as publishers. Many newsletter publishers prohibit their writers from owning the stocks they cover at all, and though the Fool does allow writers to own stocks they have a pretty stringent disclosure policy and long windows around publication dates when they’re not allowed to trade. I appreciate the concern — sometimes it feels like these companies manipulate stocks up and down, but in my experience talking to folks in the industry, they… Read more »
Anonymous
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Anonymous
January 8, 2008 2:06 am

Maybe we are the Motley Fools for believing them? This could be your typical Nigerian pump and dump scam. They buy stocks in a company them spam us to buy it!!! Plus they always quote figures from the past, hindsight is always 20/20.

Steve
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Steve
January 23, 2008 6:47 pm

I think that the poster was saying readers of the motley fool newsletter know there is a spike in price and a price drop with a lot of the motley fool recs, and the astute readers have a shorting opportunity. I don’t think the Motley Fool writers are shorting.

Touter
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Touter
January 30, 2008 4:08 pm

I think the tipsters are paid a fee for puffing a stock, how to get a pseudo-broker’s recommendation out there without using a broker. This generates interest, movement and trading activity in a stock. Any publicity is good publicity. It’s like advertorials in newspapers. Everything’s about networking, synergies and referrals these days. Call me an old cynic

Anonymous
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Anonymous
September 24, 2008 2:26 am

once upon a time…

ONE guy bet against an Asian currency… this guy was so well regarded that every investment banker followed suit. thusly the Asian currency plummeted and the guy’s prediction became fact.

well, now that i see i’m only a few MONTHS late on this one… and with the current ECONOMIC uncertainty, i’ll just say: “butterfly effect.”

peace & 42

AT
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AT
September 28, 2008 1:37 am
We have received almost the identical email from MF (about this “Brand inside a Brand”) no less than 7 times since October 2007… each time with a different Tagline, but almost identical verbiage in the body of the email. : “Read this before the Market Crashes” (10/07); “The Real Threat Facing Investors Now” (11/07); “Read this Before the Market gets Really Ugly” (2/2/08); “Read this Before the Market Rebounds (9/20/08 and 9/27/08) I realize this doesn’t necessarily mean the MF’s advice isn’t good overall… it just seems questionable and somewhat distasteful that they’ve been sending out the SAME advice for… Read more »
Simpleton
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Simpleton
October 22, 2008 8:18 am

I am shocked that Motley Fool is sending out “get rich quick” schemes. I thought they were a reputable organization.

JD
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JD
April 4, 2009 2:28 pm

I just got that same (but updated for april 09) email……

Rich
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April 11, 2009 12:28 pm
Some teasers linger longer, this one from 2007 to 2009. DLB a $4 billion company living off royalties sensitive to next generation consumer electronic swings. ie a proxy for consumer discretionaries. At 24.52 on 11/21/2008 DLB was a good buy. Now, DLB asking 39. Where were the Motley Crew 59% ago? Worth considering Ray Dolby owns 91% of DLB voting rights. 10-K warns IRS may classify DLB a Personal Holding Company and tax it accordingly. In that case, 10-K says DLB could pay a dividend equal to unpaid income tax. Maybe that is why there are only 24 shareholders. DLB… Read more »
Mark
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Mark
June 10, 2009 1:35 pm

Questions concerning the recent email from MF.
Those that say it’s Dolby…frankly I don’t think it’s them OR MF is reusing an old article with out of date numbers.
The cash is right but the profit margins are WAY, WAY off and I don’t see where the owner owns $2 billion worth of the company when the company is worth $4 billion. Not to mention the DEBT which they state is 6.5 when the stats page has it at 8 mil.
So! Is this the REAL one or not?

Mark
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Mark
June 10, 2009 1:42 pm

Just went to the company website and searched the BOD on Mr. Dolby.
It’s verified that he is the one and in fact the company MF is pushing.

The news they have in regards to numbers is old. I do remember some time ago that MF did pump it then. Can’t remember the year though.

Z
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Z
July 7, 2009 1:17 pm
Jim Kramer got busted for pushing stock, MSN folks sit there and push their buys outright, MF is contracted with MSN and is no different. Stock co’s pay to keep their prices up with a lot of suckers. MSN news is just as bought/biased, but with newspapers dying and an idiot population, it’s no wonder they see the mega profits and take advantage of the situation. MF is riding the wave. I saw 2 MF articles on MKL this year, still waiting for it’s major swing. Instead it’s lost, lost, lost and now is a hold. MF generally says to… Read more »
Z
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Z
July 7, 2009 1:20 pm

P.S. This post is dated Oct ’07? I just got the Dolby MF letter 07/09.
Way to recycle!

AlanH
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AlanH
July 11, 2009 7:07 am
For info…. its a long blog but I will get to the point: I used to be a recording engineer in the 70’s and we were the first in europe to get Dolbys. (first album was Crosby Stills and Nash before Young arrived)They were grey boxes about the size of a microwave oven and you needed 16 of them to treat the 16 tracks on the 2″ recording tape that was dragged across the tape head producing loads of hiss.! Tape hiss was the bane of all recording. Essetially the dolby compressed the sound waves before they hit the recording… Read more »
AlanH
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AlanH
July 11, 2009 12:02 pm

PS ok, so how many people out there had any idea of what a Dolby did? Now you know, you are better equipped to know what you are investing your $ in. How many people out there still want to invest in Dolby?

Everyone of you knows the inside story on your own sector. So spill the beans so we know what ‘magic’ we should/shouldn’t invest in. Whats hot and whats not? Its a two way street !!

AlanH

AlanH
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AlanH
July 11, 2009 12:17 pm

PPS You dont need to say buy/sell xyz product….. there are too many products to comment them all. All you have to say is ‘I know x sector’ Send your questions and I’ll answer all as I see it. In return others will reply to your questions ‘as they see it’…. or they can muck off from this blog.

AlanH

AlanH
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AlanH
July 11, 2009 12:31 pm

ppps Just reply ‘Im in xyz sector. My email’s qwerty.com’.

I’ll build the database and we can all get the inside track.

AlanH

A.M. Deist
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A.M. Deist
February 8, 2010 3:25 pm

DLB fundamentals aren’t as entising as DTSI, which has a much better price to sales, gross margin and quarterly revenue growth. That said, if you believe as I do that baby boomers are going to start exiting the market as they retire for better security in their retirement, it doesn’t bode well for either DLB or DTSI.

love it
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love it
March 17, 2010 7:06 pm

Just received the newsletter again in 2010. Does motley fool always push stale recommendations?

Jason
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Jason
May 2, 2010 7:11 pm

Just got this myself… AlanH, do you really believe that all Dolby does is peddle obsolete technology from the 70s? And you call yourself an "industry insider"?

I have no idea if Dolby is a good buy right now, but I do know that you're buying more than tech developed to reduce noise in tapes. They own the most commonly used surround sound codec included on DVDs, and is similarly entrenched in Blu-Ray. Odds are, if you're dealing with surround sound, you're either dealing with Dolby technology or (as mentioned here in the responses) DTS.

TTBoss
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TTBoss
December 4, 2010 11:34 am

Hi,
I just received the same mail today. Their offer now is $79.00 discounted rate for the subscribtion. It says it is $120.00 off, can someone who has previous membership comment if it is worth $79.00? How are their other stock picks fairing so far?

AnotherUser
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AnotherUser
December 8, 2010 8:01 am

I'm interested in knowing exactly what @TTBoss has asked.

I recently signed up for some email and received a similar email just a day or two ago. The same "brand inside a brand" and the deal for $79 for the first year (or $150+ for two years).

Isabelle
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Isabelle
January 1, 2011 10:04 am

Wow, so this Motley fool email has been around for 4 years now! Just received it today 1st of Jan 2011… Glad I've found this page.

nick
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nick
January 1, 2011 12:06 pm

Me too.. they must be taking us for a motley bunch of fools to not sniff around after getting today's mailshot…4 years old? Pah!

Leah 1
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Leah 1
January 3, 2011 7:13 pm

wow i do not know who to believe …i think i just invest in bricks and mortar at least i have control not some greedy 2 billion man ( Ray Dolby )having control of my mloney !!!!!

Sandra
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Sandra
January 4, 2011 4:08 pm

Anyone have any comments about the Martin E. Weiss/Money and Markets newsletters? Valid investment info or valid scams?

@METROmilwaukee
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January 8, 2011 10:22 pm
Actually, as of today JAN 8, 2011 the brand-in-a-brand to pay attention to is NVidia (NVD). Every microcomputing device is being used and marketed for use with "multimedia" i.e. Audio & Video. The demands for processing power has moved from the CPU to the GPU. Read the Sunday inserts for any Best Buy or Office Depot retailers selling microcomputing devices and you'll all see exactly what I mean. I know about NVidia from my days in CAD and architecture after a period of consolidation they were left standing with the most powerful graphics cards that became to-die for. Now they… Read more »
@METROmilwaukee
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January 8, 2011 10:23 pm

Silly me, the correct symbol is NVDA

Guest
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Guest
January 22, 2011 11:32 am
The best question to ask yourself when given these "surefire winners" is… how come these guys are being so nice to me? Why don't they just take their advertising dollars, leverage up and buy the stock themselves? There are three possible answers, and not one of them is "they are just really nice guys who want to help me out". 1: They've already bought it, need it to rise so they can take their winnings. That's been around a long time – "pump and dump". 2: They haven't got a clue, but they know they can make money if they… Read more »
hank
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hank
January 22, 2011 11:36 am

Hi!

Just got this email from MF –
Watch This Before the
Market Crashes!
"Is Another Market Crash Coming?"
— The Wall Street Journal http://www.fool.com/fool/free-report/18/sa-mktcra

Joe Kelly
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Joe Kelly
January 22, 2011 12:22 pm

I got the same one. I stopped listening to them long ago. They're just drawn out sales pitches for another advisor.

The only site I've paid money to join is this one because Travis works hard and there's no BS.

Jim Cantor
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Jim Cantor
March 12, 2011 4:36 pm

Just got the same, video ad.

Peter Hamilton
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Peter Hamilton
March 13, 2011 4:21 pm

Can't believe they are beating this same horse 175 weeks later, now just in a slightly differnet format, not an email, but a video/audio "letter"

Inquisitor
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Inquisitor
March 14, 2011 6:27 am

As per Peter Hamilton … roll out the same 'ol same 'ol,,

Caveat Emptor

nofool
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nofool
July 1, 2011 10:38 pm

3 years later motley fool is still using the same video for this brand in brand stock.3 years later. They must have made a ton selling their snake oil

Charlie
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Charlie
July 13, 2011 2:23 pm

Yeah, I just wasted 10 min or so watching this stupid video and then I see they did the same thing 3 1/2 years ago!!!! Pisses me off. Thanks for keeping this article up! I appreciate it. Now, I think I'll poke around this site for a while…;-)

Harriett
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Harriett
July 19, 2011 11:38 am

I found this blog trying to find out what stock MF was talking about without having to download their "report" . (Dolby was my guess.). After reading all the comments I clicked the unsubscribe button on the MF email. Thanks!

Blaise
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Blaise
August 2, 2011 4:29 am

Wow – I also received the email today – 4 years after your report! Terribly long, boring and empty video on market threats. Yuck!

Sam Freedom
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August 24, 2011 4:24 pm

MF probably isn’t actively beating that advertisement dead horse. I know from marketing online that often we set up a lot of mini sites, put them on autopilot, occasionally stoking them with a little paid advertising and then going on to something else, forgetting about their existence for years… that’s what internet marketing can do for those who know how… set and forget… or set and ALMOST forget.

I’m sure that’s not the only thing they’ve forgotten about that’s still running on its own

David
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David
December 19, 2011 4:37 pm
If you read the bullet points further down in the email, it sounds to me like they’re talking about Corning and Gorilla Glass: “Founded in New England as a glassworks business, it created the casing for Thomas Edison’s first electric light bulb in 1879. In the ’30s, it was instrumental in moving the television cathode-ray tube from concept to commercial production–a development that eventually put a TV in every living room in America. In the late 1960s, as automobiles were getting both faster and easier to afford, this company came up with a thinner, lighter, but tougher glass for windshields–you… Read more »
Gravity Switch
Admin
11
June 10, 2009 2:00 pm

I haven’t seen this ad in awhile, but it wouldn’t be surprising if they were circulating it again. This article I wrote about it is about 18 months old and I don’t think it circulated before that, but I have seen some of their ads repeated with few changes for several years. If it works, they’re loath to bother coming up with a new one, I imagine.

Lee
Guest
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Lee
July 16, 2009 6:04 pm

Yes, I am a former subscriber to the fool, that is the rec.

Gravity Switch
Admin
11
December 8, 2010 11:26 am

I'm not a subscriber, but we do have comments from many of them here: http://www.stockgumshoe.com/reviews/motley-fool-s

And as for performance, I just checked Hulbert's numbers and he says Stock Advisor has beaten the market pretty soundly every year since 2003 (when they began tracking) except for 2008, when their decline was pretty much exactly the same as the decline in the Wilshire 5000.

gman
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gman
January 4, 2011 8:04 pm

I took his newsletter a few years ago. His stock picks were hit or miss, mostly miss. He did however correctly call the housing bubble. I wouldn't recommend it…

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