Untapped Wealth Pushes the Envelope … in a bad way

by Travis Johnson, Stock Gumshoe | May 16, 2008 4:08 pm

I’ve looked at plenty of teaser email ads from Untapped Wealth[1] over the last year or so — if you’re not familiar with these folks, this is a newsletter run by Tim Fields[2] and Eric Dickson[3], and it’s described as the “flagship” publication of Trinity Research[4], one of a half-dozen or so relatively large financial newsletter publishers.

In many ways, Untapped Wealth has been very similar to so many others — they pick some good, some bad, and they use the tease/greed impulse to get you to sign up to find out the details about their favorite investing ideas. Their teaser picks over the past few months that I’ve noted have included a geothermal[5]-energy-a-situation-you-cant-ignore.html" target="_blank">geothermal play, a WiMax investment[6], and battery[7]-makes-old-batteries-obsolete-and-invesetors-wealthy.html" target="_blank">the much-discussed “forever battery.”

Some of those were interesting ideas, some were not (at least to me) — but they did at least appear to be honest investing ideas put forward by their editors (and copywriters) to show their stock-picking prowess and whet your investing appetite.

In my opinion, they just veered over into a much more unsavory part of the business — perhaps they’ve done this before, but if so I didn’t notice it. And I get the feeling that they’ve sold whatever integrity they might have had as an independent stock-picking firm.

You see, a reader just forwarded me a message from Tim Fields that purports to share his “best 15-to-1 profit opportunity I’ve seen in years!”

The ad urges you to sign up for Untapped Wealth, and describes the spiel they provide about this favorite company as a free gift for you, to give you an introduction to the newsletter’s work. That’s not too unusual — plenty of folks, including the Motley Fool[8] for example, give away free research reports as a way to try to convince you that they have a good research product. I don’t have a problem with that.

And the information about the company seems like it’s probably mostly legit — it’s a little shoe company called Aussie Soles[9] (AUSE) that’s trying to steal Crocs’ thunder with a new plastic shoe. Sorry, not plastic, “Auslite.” Not as exciting as it might have been back when CROX was near $80 (it’s around $10 today), but still, I suppose you can make an investment case for them, and if that’s what Untapped Wealth wants to do … more power to them.

But there’s a huge problem, in my mind: This isn’t just a “free research report” that they put together to convince you that Untapped Wealth does a good job.

It’s a paid advertisement — the promoters of Aussie Soles paid someone called CFM $300,000 to run this particular ad campaign. I’m not sure how Trinity Investment Research, Small Cap Fortunes, CFM, and Untapped Wealth are related, but it doesn’t particularly matter to me — Untapped Wealth apparently received a fee of $2,000 from CFM for the editorial work, according to the disclaimer, and hopes to get new subscribers from this effort as well.

Now, this is not illegal or anything — they did disclose it, though of course the disclosure was in the small print that almost nobody reads.

(Which is another good opportunity to tell you, please, to read those disclaimers if a stock idea gets you all hot and bothered. “This is a paid advertisement” has a way of cooling the strongest greed impulse, I’ve found.)

But if you ask me, legal or not, it stinks. I have no problem with advertising. And I have no problem with investment newsletters promoting other things — stockbrokers, other newsletters, or whatever other kind of product they think might appeal to their readers. I run plenty of advertising in this space, too, and I think advertising is fine (though I strive to make sure that the advertising does not impact my editorial decisions). I’ll go so far as to say that advertising is good, since it helps enable me to spend a lot of time writing — for, one hopes, your edification and entertainment.

But this is a little different — this is using the reputation of your investment newsletter to sell the very thing that you are known for analyzing and critiquing. Without even clearly saying so in the copy of the analysis (though a few times in the long form article it does note, “Advertisement, please see important disclaimer on the bottom,” it does not say, “even though this looks exactly like hundreds of stock recommendations you’ve seen, this isn’t a stock recommendation.”

To my mind, this is sort of like Consumer Reports deciding to sell the front cover of their magazine to Ford, and to let Ford run an ad on the cover that says “Ford Explorer now Top Rated SUV in America, never ever ever had a rollover problem, gets great gas mileage, and comes in cool colors, so go buy one today! It’s much better than that Toyota thing you have your eye on!” With an accompanying article by CR’s editor in chief extolling the virtues of all Fords. And to have a note on the back page that it was “just an ad.”

So — is Aussie Soles worth your time? Or Untapped Wealth? With all the great investments in the world I would certainly never seek out one that uses a stock promoter to advertise itself like this — some such companies might be fine, but many more of them are stink bombs that exist just to be pumped and dumped by their promoters, so in my opinion there’s little reason to take the chance. I haven’t even looked at the company’s financials, there’s no point in doing so.

And I can say, after hearing all the 1,000%+ gains promised from newsletters everywhere, that if AUSE goes up 1,000% or more in the next year or two, as they say is “possible” in the ad, I’ll eat my hat. At least one in five of the newsletter ads I’ve covered promises the potential for 500%, 2,000% or higher gains — and no stock thus covered has ever done better than 400% at any point, with the majority of them actually having gone down or stayed more or less the same since they were touted. Something like 3-5% of them have made it as far as a 100% gain at any point during the past year. And those are the stocks that are touted for their investment potential (and, to be fair, their attractiveness as “stories” that can be sold to you), not those that are touted for a fee (as far as I know).

I would have said, if you had asked me yesterday, that Untapped Wealth has made some decent recommendations, and I know it has some satisfied customers — but after their decision to participate in this particular ad, I’m much more suspicious of everything they do. If I were a subscriber (I’m not, I don’t subscribe to any investing newsletters because it would be hard to write fairly about the business if I did), I would cancel that subscription today, along with anything else published by Trinity.

Perhaps in a bit of “coincidence”, they’ve apparently slashed the subscription price of the newsletter in conjunction with thi ad — the normal price is $99, last time I checked, but it’s offered for $19 on the special landing page for this particular ad[10]. So maybe they’ve given up on the “independent stock newsletter” game and are going to just be paid touts now, with a $19 subscription price as window dressing. Or maybe this is just a crazy test to troll for new subscribers in a new way, though that doesn’t make it any more acceptable in my mind.

That’s all just a guess, they didn’t claim that the stock in this “ad” was directly part of the Untapped Wealth portfolio, and I certainly don’t know what their plans are (if they want to share them with me, I’ll let you know).

Here’s a little excerpt of what Tim Fields wrote for AUSE, in case you’re interested:

“Stop whatever you’re doing and check the stock price of Aussie Soles, symbol AUSE. If it’s still selling under $2 or 3, move fast!

“Here’s what’s up…

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“Aussie Soles, previously with sales of just $1 million annually, has been diligently preparing for what will be one the biggest global rollouts in shoe business history.

“They could easily get a 100 to 200 fold increase in sales. And early shareholders could see a 15-fold increase in their investments.”

And here’s the longer form ad, which also includes a video clip[11]. Makes a somewhat compelling case, if you believe that the analysis and the “Untapped Wealth Buy Signal” is unbiased. The $300,000 takes away that belief for me.

Here’s the part of the disclaimer that caught my attention — in small print at the bottom, naturally:

“This featured company sponsored advertising issue of Untapped Wealth does not purport to provide an analysis of any company’s financial position, operations or prospects and this is not to be construed as a recommendation by Untapped Wealth or an offer or solicitation to buy or sell any security. Aussie Soles, hereon AUSE, the company featured in this issue, appears as paid advertising, paid by Sujon Limited to provide public awareness for AUSE. Sujon Limited has approved and signed off as “approved for public dissemination” all statements made herein regarding AUSE’s history, assets, technologies, current as well as prospective business operations and industry information. Untapped Wealth and Capital Financial Media (CFM) have used outside research and writers using public information to create the advertisement coming from Untapped Wealth about AUSE … CFM has received and managed a total production budget of $300,000 for this and other online advertising efforts and will retain any amounts over and above the cost of production, copywriting services, mailing and other distribution expenses, as a fee for its services. Untapped Wealth is paid $2,000 as an editorial fee from CFM and also expects to receive new subscriber revenue as a result of this advertising effort.”

Sorry to bore you with all of this — I rarely post articles here when I don’t have an interesting investment idea to dissect, but I was, perhaps naively, very surprised to see this ad. Investment newsletters have nothing to stand on except their integrity as stock pickers, and their push to provide good advice to their subscribers (and, of course, their ability to market themselves) — many of them aggressively argue that they are the real independents in a world that is awash with conflicts of interest.

If that integrity is for sale, and they’ll promote companies for cash, then I can’t imagine why anyone would subscribe to that newsletter. It’s certainly not true that any one newsletter has been proven over time to be the absolute best, and to be the best match for every subscriber (though there are several that have consistently good long term records, according to Hulbert … Untapped Wealth is not covered by his service).
I know many of you hate the marketing tactics of lots of these newsletters, even the best ones, and their consistent up-selling and their “special offers” for great products from their colleagues, all of whom seem to be owned by the same umbrella businesses. Some of you hate the ads that run in this space, too, and that’s certainly your right. I can see how all of that is an irritant.

But I also think that almost every newsletter editor would jealously protect his independence and impartiality when it comes to actually recommending stocks under his own name for his (or her) subscribers and potential subscribers. But recommending and touting a stock in exchange for money from that company puts you down at the bottom of the pile, in my opinion, down there with Marl the stock picking robot and the gang at promostockpicks.com. There’s a lot of company at the bottom of the pile, sure, but that doesn’t mean it’s where you want to be.

Happy Investing, everyone.

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