“Government Ordinance 458: Guaranteed Profits”

By Travis Johnson, Stock Gumshoe, September 18, 2007

That’s the way this teaser begins: “Government Ordinance 458 Guarantees Your Profits on the New “General Electric” of China”

This is an ad not for a subscription, but for a special report from Michael Lombardi (who writes the free newsletter Profit Confidential) — the special report costs $95. I don’t see these very often, probably because most people would prefer to pay for an ongoing service that holds their hands through investment decisions, and because publishers are also quite keen on ongoing annual revenue and automatic credit card renewals.

But still — $95 is quite a price to pay for a single report … one hopes that there’s more to it than just the name of the company. After all, the Gumshoe is fixin’ to figger’ out the name of that company for you, gratis.

So …. what do we learn from the teaser?

We learn that “Ordinance 458” in China is going to benefit this particular company.

The ad compares this company with General Electric, which is clearly a bit of a stretch no matter what the company is, but it does make an interesting point: They claim that GE didn’t really become a huge success until the government mandated the use of electric streetlights as a replacement for gaslights.

I have no idea whether or not that’s true — my knowledge of GE history only goes back about to the time they built my toaster oven. But it’s an interesting point: It’s certainly true that rapid changes in demand for a particular product can be caused by government mandate.

Whether that’s good or bad, I’ll leave for the libertarians and liberals to argue over …. that’s not the Gumshoe’s turf (though I’ve probably got a few doses of both those L words in my bloodstream).

Anyway … we’ve got a teaser to solve here, let’s get moving. He also compares this to being in on the ground floor of several other industries, investing in Ford at the beginning of the auto industry, RCA at the beginning of radio, Zenith at the launch of the television, IBM for computers, etc. etc.

We get it, if we had a time machine we’d be really, really rich. He didn’t mention what it would have been like to invest in one of the other several hundred car companies of the first half of this century, or Digital Equipment instead of IBM … well, you get the idea. And that probably reinforces the point: You need to be in the right company sometimes to get the benefit of a huge new industry, we often look back with what they call “survivor bias” and forget about all of the failed, bankrupt and long gone companies that contributed to building a new industry.

But back to the point, Lombardi thinks he’s got just the company for you.

“It’s a once-in-a-lifetime opportunity to invest in a company that makes products that the Chinese government requires businesses to purchase!”

This is some kind of video surveillance company, because they note that this Ordinance 458 requires cafes and entertainment centers and discos, etc. etc., to install video surveillance equipment.

And specifically, the teaser indicates that those businesses that are in Shenzen (the big city just across the border from Hong Kong) will be required to buy from this particular company … and immediately.

“Just like Edison’s GE, the government has enacted a law that requires businesses to purchase a certain type of equipment. That’s important because they’re mandated to purchase it from this company.”

And just to interject here — I didn’t see any evidence in my brief sleuthing exercise that this is true, that the government is specifically directing people to buy from this particular company. It could be so, but I certainly can’t confirm that.

The teaser notes that there are “more than 2 million” entertainment halls that will need to purchase this video equipment.

And, another bit that seems to me to be a bit of extra hyperbole:

“This company’s success (and possibly your profits!) is guaranteed by the Chinese government.”

I always get nervous when people talk about anything being guaranteed. That’s a pretty strong word, no? I think my palms would have stayed drier had he said that the Chinese government’s policies make success more likely for this company … but that doesn’t make you want to throw children and dogs out of your way as you rush to the phone to call your broker, does it?

Anyway, there’s more:

“The Chinese government recently passed another ordinance that requires surveillance equipment to be installed in coal mines, justice departments, and cities throughout China.”

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