I haven’t looked much at Tobin Smith and his ChangeWave services over the past year or so — I think the last teaser of his that I looked at was hyping Sigma Designs back in April of 2008, which he promised would be a huge gainer within a year. Of course, that didn’t take into account that the financial world was about to explode and bring down nearly every stock with it — to be fair, my portfolio and the picks of most experts didn’t predict the carnage, either — but SIGM did do reasonably well over that last year or so, compared to the market (it’s down 20%ish).
Smith is fun to watch in a bull market, and just after the market peaked, in the Winter of 2008, he was predicting great things for his favorite microcap stocks — tiny guys like Raptor Networks, SpareBackup, and Oculus Innovative Sciences, which he said were “99% sure things” to double when the market recovered. That was 18 months ago, and of course the market is far from recovering to that point — I haven’t checked all of those stocks, but one that he pushed most ardently was Raptor Networks, and it was around 80 cents at the time (he touted it for at least a year or so before then, often moving the stock significantly as he went). It did better than double after it hit bottom, but the low wasn’t 80 cents in February of 2008, the low was about ten cents in April of this year (Raptor trades right around 20 cents now).
His basic premise may well be right, that the smallest and most sensitive stocks do best in the early stages of a recovery — but that doesn’t necessarily give you any better chance of picking the price right before that recovery begins (or avoiding a far worse collapse than you expected).
So it seemed like the breathless teaser ads for Smith’s ChangeWave Microcap newsletter dried up a bit during the market crash — even if that might have been a good time to get in on little speculative picks, that certainly is not the time when those kinds of picks get potential subscribers excited.
That’s not to say that this is unusual — we are all, of course, our own worst enemies when it comes to investing, and the newsletter publishers know just what is likely to get us excited. After the market crashes, we want to hear about bear market bets, but after it recovers, we want to hear about booming growth stocks — witness the fact that among many of my readers, Martin Weiss was hailed as a hero for a while last Summer and Fall for predicting the next depression and betting on inverse ETFs, but after missing the Spring rally he’s now sometimes derided as a dangerous fool. And of course, gold stock teasers almost disappeared when the price fell below $900 an ounce, but are out in force when gold nears $1,000 and makes headline news — the human tendency to buy high and sell low is almost unavoidable.
But you don’t want to hear my philosophizin’, you want a stock pick, yes? Toby Smith is claiming that the biggest billionaire-builder industry is wireless telecom (you can certainly back up that point, at least in the developing world), and he tells us that he’s got a tiny stock that will help you join their ranks … or at least make a lot of money. He’s looking for “millionaire-maker” stocks, and the promise here is that he’s found one in a Chinese 4G wireless company.
Here’s the big picture pitch:
“China is the next frontier where fortunes are about to be made in wireless.
“And I want to introduce you to the best name in the space.
“It’s NOT any of the widely recognized China telecoms. In fact, it’s actually an American-based venture, working in partnership with the Chinese government to deliver what all the big names have failed to provide:
“Dependable, fast, wireless broadband technology needed to complete China’s entry into the modern world. The guys behind this story will be the next wireless billionaires.
“And China’s incredible demand for broadband connectivity is your ticket to creating millions in new wealth for you and your family.
“Legacy wealth. Retire and travel the world wealth. Tell the boss to ‘kiss off’ wealth.
“This is THE stock. The time is now. And I have a free report, explaining all the details for you online. Make Your Millions in the New China Wireless Boom is ready for you now.”
So, sounds pretty appealing, no? Here’s a bit more of the company story:
“Your investment has the ‘full backing’ of the Chinese government — the partnership is actually 51% state owned.
“The Communist party has a lot riding on this — not just money, but also in terms of prestige. If Bank of America and Citigroup were deemed ‘too big to fail’ here at home, this partnership may be linked too closely to government interests not to succeed.
“You see, high-speed wireless rollout has been pretty much a failure so far.