“The $50 Billion Shadow Syndicate”

Cyber security pick from Michael Robinson

By Travis Johnson, Stock Gumshoe, October 7, 2009

Today I’m taking a look at a very florid teaser letter from Michael Robinson, who is apparently now helming Taipan’s Breakaway Investor newsletter, a service that has supplied us with a lot of entertaining ammunition over the years.

The letter builds on the fact that Robinson is apparently a “special investigative correspondent” and former mainstream journalist, and that he’s sniffed out a money-making opportunity in the government’s stimulus spending — and in particular, stimulus spending and other government spending on the hot area of cybersecurity.

Here’s how he pitches it:

“The stimulus bill is about to send an unprecedented tidal wave of federal funding into the private sector.

“Now, a bunch of the money will go to big established firms like Dell, Microsoft, Oracle and Hewlett-Packard.

“Good investments, no doubt. Problem is, these companies are already too big to make investors any real money.

“But here’s the thing:

“While much of the stimulus money will be given to the “old boys’ network” of corporate giants…

“… a major chunk of the funding has found its way into the hands of a tiny military contractor.

“I can tell you right now, this stock is the next government-backed millionaire-maker.

“The company has an exceptional product… but its real asset (as you will see in a moment) is its INSIDE CONNECTION to the U.S. government…

“… an INSIDE CONNECTION that will likely send its share price soaring very soon.”

Now … the bad news? This stock has already taken off in just a few days, on no real news at all, which means, in all likelihood, that the teaser ad is working really well and driving folks to subscribe and buy the shares.

Doesn’t mean it’s necessarily a lousy stock, though my suspicion is always that these newsletter-driven shares will come back to earth within a month or two, absent other near-term news catalysts. But let’s look at the details of this one, shall we?

“After digging into the records, I discovered that the REAL WINNER in the stimulus package is NOT infrastructure. Not by a long shot.

“And it’s NOT America’s workforce…

“And it’s NOT the U.S. economy…

“The real winner is a powerful syndicate with a very dangerous agenda… an agenda that will likely make YOU a pile of money — as much as $97,500 or more — by March 2010.”

This “powerful syndicate” is the technology industry, apparently — Robinson goes on to argue, with some evidence, that the computer, software and technology companies have the same influence in Obama’s administration that the oil companies had on George W. Bush’s priorities.

Then he throws in some argument that the tech industry is, essentially, bad for America:

“Bottom line: The government is about to rain billions down on the tech industry…

“And the tiny stock I’m going to tell you about is perhaps the biggest winner of all. I wouldn’t be surprised to see its share price soar in the next six months… making early investors very rich.

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“Now, you may be wondering… isn’t that good for America? Won’t government spending create jobs? Won’t it revive the economy?

“I realize on the surface, big technology spending sounds like a win-win situation… a good deal for everyone.

“But the truth is, technology spending will spark a ‘shadow recovery’… a recovery that LOOKS REAL at first glance… but ultimately disappears, leaving millions of Americans in severe financial pain.”

He goes on to say that the dark side of this technology spending will create more unemployment as technology steals jobs in the continuing fight for higher productivity. That strikes me as a bit of an odd endorsement of neo-Luddism, and an argument against the creative destruction of capitalism, for the editor of an investment newsletter that generally focuses on emerging technologies, and one whose business model would be much more challenging without the Internet (government funded and built, natch). But, of course, he goes on to say that though this will be terrible for the country’s economic recovery … you can still profit from it.

“And make no mistake: When this recovery disappoints, investors are going to be more frightened than ever.

“Money is going to fly out of the stock market at a record clip…

“The only companies left standing will be those propped up by massive government spending.

“That’s why I’m so excited about the tiny stock I mentioned earlier. Get in now, and this company could deliver a $97,500 payday in the next six months.”

So what is this stock? Robinson goes on to tell us that there are two ways to profit from the big technology spend — he believes that the big companies like Oracle, HP, etc. will do well but be slow and steady performers, but there’s something better:

“The key to making a fortune from today’s government spending is to hitch yourself to the “next Oracle.”

“You need to get in early… on the ground floor. That’s the exact opportunity you have today.

“You see, by following up on Branson’s tip, I’ve uncovered a tiny military contractor — a little-known stock — that I believe is the NEXT tech home-run sensation.

“In fact, if you could only invest in one company for the next five years… this would be the one. Not only does it provide a critical service… but because of its INSIDE CONNECTIONS…

“… it is looking at a virtually unlimited backlog of GOVERNMENT FUNDING… a backlog of government funding that could launch this stock by March 2010.”

This particular company is one that apparently works in cybersecurity — protecting networks and data from hackers and ne’er