“Assassin’s Mace” and China’s Master Plan for the South China Sea

What's the tiny defense contractor being teased by Dr. Kent Moors for Energy Advantage as having 1,869%+ profit potential?

By Travis Johnson, Stock Gumshoe, April 22, 2018


This article was originally published on January 25, 2017. It has not been updated or revised since then, but we are seeing the same ad from Dr. Moors circulating heavily again (still with a January 2017 date), so re-post it here for your information. The stock teased has been quite volatile but currently is up about 40% since this story first ran, beating the S&P 500’s 18% return.

–from 1/25/17–

The latest bit of promotional bloviation from Dr. Kent Moors is all about national defense, and about how the US Navy can protect itself from Chinese attacks in the South China Sea.

Which is a bit of a change of focus for Moors — he has generally positioned himself as an energy industry expert, following his days studying energy policy and consulting with governments while a professor a Duquesne (he’s retired from that now, but was still working there when his first newsletters were launched a few years ago by Money Map). So he pulls out lots of claims about being a national security and intelligence insider, with medals from the government and personal experience on the ground during the Vietnam war as his bona fides.

I have no idea whether he has real expertise or unique “secret” contacts within the intelligence community or not, of, frankly, whether or not he’s really an expert on defense technology… so you’ll have to make your own call on that.

But what we can do is identify what Moors says is the Pentagon’s plan to counter China’s anti-aircraft-carrier missiles and deter China from attacking US carrier groups as the fight over borders in the South China Sea heats up (with lots of US mutual-defense-pact allies, including South Korea and the Philippines, claiming the same territory as China… partly because of the oil and gas in the area).

The big fear factor that Moors pulls out is the Chinese DF-21D missile, which is a “carrier killer” missile that Moors says is too fast to be defended by current missile defense systems like Aegis. And he says that money is pouring into small defense contractors who can provide different or better defenses. Here’s a bit from the ad:

“… behind the scenes, the Pentagon has been secretly placing big bets on a new generation of defense contractors.

“These small firms have been working with DARPA, our top-secret weapons maker, hunting for a way to obliterate the ‘carrier killer’ missile.

“And one of these defense contractors has cracked the code.

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“It’s developed something that looks like it comes straight from the pages of a science fiction novel.

“And I’ve been cleared to show you simulated footage of it in action that has never been seen before.”

That “simulated footage that has never been seen before” is, of course, on YouTube for all to see, and it’s from a few years ago. It’s also not from the “secret little company” Moors is pitching, so we’ll have to see what the connection might be.

Here’s the video courtesy of YouTube, in case you missed it:

And here’s a story about it in more detail, it’s one of the latest versions of an electromagnetic railgun… which does indeed send a projectile out of the muzzle at Mach 7 and reach targets at 200+ miles. The one that was written about here, with sea testing planned for 2016, was from BAE Systems, and General Atomics was working on delivering similar projects at least as long ago as 2011 (R&D on these weapons goes back much further than that, though interest has been rekindled in the past decade or so) — it could be that the two companies are working together, I don’t know. General Atomics describes their program here (GA is a private company, just FYI), and BAE Systems here.

The original prototype was getting people excited a decade ago, and phase II of the program from the Office of Naval Research started in 2012, with the goal of demonstrating a reasonable firing rate and improving the practical application of the technology. There seem to be some physical and electrical constraints that prevent it from being a deployable weapon just yet, though I am certainly not an expert on that — you can check out a piece from Popular Mechanics from last Summer here for a better explanation than I can provide (in addition to BAE Systems and General Atomics, that article throws Raytheon into the mix as yet another mega-contractor working on some aspect of these pulsed power systems), and it has also been covered in the past year by the Wall Street Journal, and there has even been speculation from the Motley Fool that speeding up the deployment of railguns would maybe lead to a windfall for General Dynamics, particularly if it increases the number of orders for their new Zumwalt destroyer.

But Kent Moors is not, of course, pitching General Dynamics — that’s a $50 billion defense contractor, and he’s talking up a company that he says has a market cap of $380 million. So we can conclude, quite obviously, that Moors’ claims that this tiny company has some sort of monopoly on this railgun technology fall under the category of “poppycock,” since certainly the company would have had something to do with the testing to date, or been mentioned as a key contractor by someone along the way, if it were the one contractor with a hold on this program.

But perhaps there’s something real under the copywriter’s hype. So what is the actual company being teased?

More hints:

“Today, the Pentagon Is Fast-Tracking Billions into a Series of Top-Secret Weapons Programs to Defeat the Chinese

“They’re being run through the Strategic Capabilities Office, or SCO.

“This new unit is the action arm of DARPA, the Defense Advanced Research Projects Agency.

“It’s been secretly funneling billions of dollars to the next generation of defense contractors.

“Together they are part of a modern-day Manhattan Project to prevent World War III.”

And some chatter about this superweapon:

“Off the coast of Florida, on board the U.S.S. Trenton, the Navy is field-testing an astonishing new ‘supergun.’

“It’s called the Mach 7 Cannon.

“And along with the highly advanced rounds it fires…

“This new superweapon is unlike anything you’ve ever seen before.

“Frankly, the physics involved is mind-boggling.

“Instead of gun powder, the Mach 7 Cannon works using ELECTRICTY.

“On the order of 25 megawatts.

“All discharged in 10 milliseconds.”

Which is why they can’t test it on older ships — only the most advanced new ships have anywhere near enough electrical capacity to fire these guns, and the first test was indeed scheduled to be on the USS Trenton, which is a transport ship, in 2016. I didn’t see any confirmation or official note that this test has actually started, there’s been some chatter, as in that Motley Fool piece, about skipping those tests on non-combat ships and moving the testing to a real destroyer, but I don’t know what the status is.

More on our one small company:

“This Mach 7 Cannon and the ‘smart bullets’ it fires are the future of the Navy, folks. Right here. Right now.

“And one American company less than 1/100th the size of Lockheed Martin is at the forefront of both.

“Right now its market cap is $382 million.

“And shares are trading for around $6 apiece.

“To give that even more context, General Dynamics’ market cap is $50.6 BILLION.

“And its shares are trading for north of $150.”

“At the forefront” is a nice, non-specific descriptor, no? It gives the impression of leadership, without actually stating that the company has real control of the market or owns the patents or whatever else… though Moors does go on to say that this company that “developed the Mach 7 Cannon and these ‘smart bullets’ is not even a blip on the radar,” which does go a bit further in giving this little firm credit (erroneously, as far as I can tell) for the whole railgun program.

More from the pitch:

“Over the last two years, this defense contractor initially received multiple contracts totaling $29 million.

“One was labeled as a ‘mystery contract,’ obviously due to the sensitive nature of the technology.

“It was awarded for the specific purpose of servicing a gun that uses electricity to propel projectiles at high rates of speed.

“In other words, the Mach 7 Cannon.

“They also received funding to design, engineer, and manufacture the guidance system, as well as the prototype for ‘smart bullets.’

“So it’s not hard to follow the breadcrumbs here.

“That small starter funding was just to prove this superweapon system was viable – this cash was just a drop in the bucket.

“Now, after successful tests, the size of these contracts is set to explode…

“DARPA’s ‘Strategic Capabilities Office’ is planning to spend another $800 million on this technology.”

Moors then goes through several examples that seem to argue that this one small company will somehow be assigned the contract for building all of the “smart bullets”, at $25,000 a pop, and that means that there will be a $2-6 billion opportunity even if the smart bullets aren’t used by other services, like the Army in their Paladin howitzers… and he concludes that “I believe this $382 Million Defense Contractor is in Position to Control a $45 Billion Opportunity.”

Which sounds like absolute malarkey to me — a firm that has so far gotten a couple contracts in the tens of millions of dollars, suddenly being contracted for $45 billion in munitions sales? That’s connecting a lot of dots that haven’t even been drawn on paper yet.

But, as Moors notes in the ad, there are plenty of examples of smallish defense contractors going absolutely bonkers in the stock market when there’s a hot new rush project that sends a lot of cash their way — the one that rings a bell for me was the MRAP program for mine resistant trucks in Iraq, which sent Force Protection (FRPT) shares soaring back in 2006 and 2007 (it later collapsed dramatically, partly because of competition and partly because they couldn’t produce fast or effectively enough in the early days and saw dramatic cuts in orders as the war downshifted an defense budgets started to decline, and was bought by General Dynamics on the cheap in 2011)… but there are plenty of others.

One common denominator, it seems to me, is that the little guys rarely soar for long, they either get overwhelmed by the major competitors and dwindle back to something small, or get bought by Lockheed or General Dynamics or whoever — a little $300 million R&D-focused company is not going to suddenly become a company that can handle billion-dollar contracts when it comes to logistics, headcount, or manufacturing.

Moors also notes that this company has other programs:

“a new direct energy weapon capable of shooting down drones and disabling small attack boats…

“All for about 59 cents per shot.

“This new superweapon is armed and fully operational on the U.S.S. Ponce.”

And he runs through the fact that the board of directors for this tiny firm includes several defense experts and experienced military folks… which would make them just like exactly every other defense contractor, but also that the insiders have been buying stock over the past year or two — which is generally encouraging.

So who is it? Well, the Thinkolator can at last take you out of your misery and confirm that yes, this is Kratos Defense and Security Systems (KTOS).

Which will sound familiar to longtime Gumshoe readers — Dr. Moors’ colleague at Money Map Press, Michael Robinson, was pitching this one back in 2009 as a cyber-security pick and then again in 2012 as a politics-proof defense play with a next-generation drone program, and then Bill Patalon, also at Money Map, pitched it in 2013 as a cybersecurity stock.

Kratos has been a pretty volatile little stock, and does have some contracts that seem remotely connected to the railgun program, but certainly drones (mostly target drones, though now they have some other contracts for more advanced drones) are a large part of their business, as is cybersecurity consulting… as a small player they’ve tried to focus on small niche programs, which probably makes sense, but they have not been a great play on defense in general — over the past five years, the aerospace and defense sector in general (using the ITA ETF) is up 140% while KTOS, even after a very good surge last year, is up 23% (and KTOS is down 30% since Michael Robinson was teasing it in 2009, while the ITA ETF has returned 220%… you get the idea).

Kratos hasn’t earned a profit from continuing operations in at least five years, though they have reported positive EPS a few times since 2009. In 2015 they were profitable because of a big chunk of income from discontinued operations, which seems to be from the sale of their electronic products division that provides stuff like power amplifiers, microwave assemblies and other components for defense customers, and that seems to have also allowed them to clean up their balance sheet a little bit and pay off some debt — but they do still have a substantial debt burden, roughly $445 million on which they’re paying 7% (matures in 2019). That doesn’t seem like it should be a huge issue, but it is a lot of cash flow going to debt service — Kratos has to pay a little over $30 million a year to service that debt (and they have to pay it off with new debt by 2019, at what cost we won’t know for a while), and that’s twice as much as they spend on R&D. They do have enough cash to handle the payments for a couple quarters if they continue to be unprofitable, but they’ll have to raise money by sometime in the Summer, at the latest, if they don’t suddenly start turning a significant profit.

The bond market is not worried about Kratos, for whatever that’ worth — the bonds last traded just under par for a yield of 7.9%, which is a bit steep for a 2 year bond but not high enough that you’d read between the lines and see default worries.

There are only a couple sell-side analysts covering Kratos, but they do forecast that the company will be profitable this year and next year, so that would help — they expect 10 cents in earnings per share in 2017 and 32 cents in 2018, so at 25X 2018 earnings estimates there’s perhaps some justification for the stock in those forecasts if you can take them seriously (I haven’t looked at the analyst reports in any detail, nor do I know what KTOS is guiding for revenue or earnings, if anything)… but there’s clearly something of a leap of faith in this stock.

All I can really tell you is that no, Kratos is not going to have a $45 billion business in electromagnetic rail guns over the next couple years — though they are “supporting” that program with some contract work (both “directed energy weapons” and “electromagnetic railgun” are in the list of “additional strategic programs supported” in Kratos’ current investor presentations). For the near future, the bulk of Kratos’ revenue will come from their “Government Solutions” division, which includes lots of different contracts in training, ballistic missile defense support, satellite communications and other areas (and, presumably, the small contracts that are in support of these pulsed energy weapons), and the small profit generated by that division is more than sucked up by the investment Kratos has been making in drones, which remains a money-losing (but revenue growing) division.

So… no magic, no $382 million company turning into a billion-dollar colossus before our eyes… but certainly there is room for some optimism in defense stocks with a fully Republican government and a President who has vowed to pour more money into defense… and, naturally, Wall Street has been paying attention and has already driven all the defense stocks up pretty sharply, so it’s not like this is a trend that has yet to emerge. Specific companies like Kratos will depend, of course, on specific contracts and performance and the choice of one weapons system priority over another, but probably the pie will be getting larger.

(And that $382 million number is a bit old, as is the $6 share price — despite the fact that the ad has a January 2017 signature from Dr. Moors, the actual share price has been above $7 and the market cap above $500 million for the past month or so, those numbers in the ad are from November.)

And with that, I’ll leave you to ponder — is Kratos interesting to you, either for their drone business or their communications security business or whatever this small piece of the possible railgun business might be? Think they’ll hit profitability soon enough to handle their debt maturity and start growing revenues? Let us know with a comment below.


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traderj44
Member
👍21

I don’t trust anything that Moors offers his latest was Sun energy and lunch energy and some solar company the name escapes me to me he is just a fraud and iris lynas energy nor lunch energy

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mike
Guest
mike

that guy drained me of 5.000.00 in about 1 month he doesnt know crap i think he is a pump and dump guy sun edison killed me

biff summers
Guest
biff summers

He’s lost me money in the past and I also don’t trust him

sunnyca
Member
👍59
sunnyca

“That’s connecting a lot of dots that haven’t even been drawn on paper yet”

Too funny, I think that sentence says it all.
Thanks Travis.

educatedron
Member
👍4
educatedron

I have lost alot of hard earned $$ following Moneymap teasers. They cover themselves with all of the fine print, but should be repremanded and punished in some way.

Mark M Mishima
Guest
Mark M Mishima

the post on BIG TOBACCO is a total SCAM. i called Washington State A.G. Consumer Protection Office they said to stay away its a total SCAM.

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Craigw
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Craigw

Interesting. Their advice on buying munnis receiving tobacco money payouts is about the only thing making me money right now.

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artie
Guest
artie

Is this the same instrument that require projectiles costing ~$50,000 each, a bit of a downer for DOD?

doug50
Member
👍24

From what I have seen of Dr. Moors picks over the past several years, he is at least as full of BS as that guy that “invented the Internet” and preaches about how we little people must cut our emissions to stop “Global Warming”, while flying in private jets and participating in huge motorcades to “Save the Planet”. ( Al Gore )

I have paper traded & shown mostly net losses from Dr Moors advice……. Caveat Emptor !

Mc4
Guest

For the record, and I’m not an Al Gore fan, he said he “created” the internet (not “invented”). And, by writing and sponsoring the legislation that gave us the internet, he’s right. Facts are facts, Al Gore “created” the internet, by legislation, from a government computer system. I’m sorry if that’s an Inconvenient Truth.
That said, I am not a climate denier, but I think his “cut carbon” solution is a bit simplistic.

ccarter
Guest
ccarter

Nice work Travis. It looks like people are finally waking up to the fact that this guy is a dirtball. A doctor of political science who has been giving bad advice on energy stocks for years and now has moved on to be an “expert” on defense systems. Take it from someone who did subscribe to one of his newsletters and was fortunate to escape with only a small loss. Moors and Money Map Press will suck you out of every dollar the can. They are dangerous to your financial well being.

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peamike
Member
👍7
peamike

A truer statement has never been made and I wish my loss was as small!

thinairmony
Guest
thinairmony

Kent Moore puts out theses things, China-US News Why a Novel on War With China Has the Pentagon Talking By Joshua Philipp, Epoch Times | July 28, 2015 AT 7:00 AM Last Updated: July 29, 2015 9:02 pm P.W. Singer speaks at the U.S. Navy Current Strategy Forum on the real world lessons from the novel, “Ghost Fleet.” The Pentagon and defense communisty are discussing the book, which details a realistic war between the United States, China, and Russia. (ghostfleetbook.com) P.W. Singer speaks at the U.S. Navy Current Strategy Forum on the real world lessons from the novel, “Ghost Fleet.”… Read more »

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James Roth
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James Roth

I’ve read several of his “can’t miss”, “you’ll be a millionaire” pitches over the years. I haven’t invested in any. Invariably they fizzle out if you watch them.

dave
Guest
dave

Mr Moor’s record is ‘questionable’ to say the least as his calls on oil & gas are more gas than solid fact. Mr Moor has not cottoned on to the observation that most self-blown trumpets only advertise the amateur holding it. Electro-magnetic railguns were researched by the Royal Navy many decades ago and have found favour again recently as some of their inherent limitations ( from memory; heat, efficiency, cycle time etc ) have yielded to improved technology. I read Mr Moors fluff and from it he seemed to tout the in-flight control of the kinetic ( solid ) warhead… Read more »

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SoGiAm
Member
👍11365

Off topic: Brokerage Firm Charged With Gatekeeper Failures Related to Pump-and-Dump Scheme http://www.sec.gov/news/pressrelease/2017-33.html

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Karl
Guest
Karl

Meanwhile, the stock is up 49.8% over the last 3 months…
I will keep an eye on it.

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SageNot
Guest
SageNot

https://finance.yahoo.com/quote/KTOS?p=KTOS

You need t/b real nimble (lucky even) to get a 50% rise like that. Good luck with Moors, he’s a loser in my eyes!

thinairmony
Guest
thinairmony

Moors needs to get some morals.

Fabian
Guest
Fabian

As a general rule I’m wary of people who claim to have contact with government officials, particularly the military and the secret services, here and abroad, or claim former military experience, to legitimize their expertise.

Conned Too Many Times by Dr. Kent Moors
Guest
Conned Too Many Times by Dr. Kent Moors

I’d like to strap Dr. Kent Moors to one of those missiles and blast his fat ass clear out of the universe so he can do no further harm to any of us.

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Ed
Member
👍15
Ed

LOL!

John
Guest
John

I don’t like anything about this company. A short position makes more sense.

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tomtom73
Member
👍24
tomtom73

If there is money to be made on the rail gun, General Atomics will get most of it. As it’s private, is there an indirect way to get into it? Are there some financial backers that are stock companies or hedge funds that one can buy into?

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ggrail
Guest
ggrail

I was almost scared enough by the headlines to swap some gold bars for the stock, but I couldn’t remember the combination to get out of the bunker to get to the vault. Lucky for me it seems. These fear mongers posing as stock/newsletter shills get us all riled up with their “ready, fire, aim” picks when all they are doing in preying on the sum of all our fears (of being broke, of missing the boat, of the red scourge or the yellow peril). But they are entertaining as long as you don’t buy. Pretty soon they will all… Read more »

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Stephen Ettinger
Guest

Mr. Moors has burned so many people over the last few years including me 2x on his sensationalism including that damn SunEnergy Stock he told all of us to hold eve4n while they were getting ready to go bankrupt. He is a fraud, I pulled the plug on his energy rag he touts and embellishes on. there should be a law that prevents a man like this to sensationalize a dog stock to pull pump and dumps for people inside buying low, and selling on his pump. I lost thousands of dollars with his bull Sh-t. He brags about his… Read more »

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geneh
Member
👍8
geneh

Couldn’t agree more. Why do they continue to give the man a platform?

What I get a kick out of is when these guys come up with make 6899% or some such number. He”s not the only one that does this. I wonder, haven’t they ever heard of rounding?

And how are those Texas wells that he sold to individuals doing?

liberallez
Member
👍54
liberallez

1-He sells subscriptions (which means the entire company is corrupt.)
2-Weird numbers sound like someone actually analyzed something.

KATTS
Guest
KATTS

I thought was the case for a long time since I’ve used his micro-cap in addition to what his services are when your a full Passport Club member. KENT MOORS SEEMS MORE LIKE A PUMP AND DUMP THAN ANYONE I’VE HAD THE PLEASURE OF. I’ve lost money on almost all recommendations except one. If you use normal brokerage accounts, your stop loss is there for the taking. If you use IB w/SMART, you have a better chance but the rule of thumb should be no trailing stop loss intraday…only after the bell. That way, you can do a better job… Read more »

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Andrew
Guest

Wow, that’s a lot to take in, hmmmm, looking at the regionhttp://eqibeat.com/top-20-asian-adrs-by-dividend-yield/

archives2001
Irregular
👍89
archives2001

Thanx a lot Travis…Par Excellence gumshoeing as usual!

Kurt
Guest
Kurt

To further muddy the talk, which the first few seconds of this video. It refers to an EU mach 10 canon, with a BAE Systems logo on it. Google finance has a listing for a BAE in France with stock price 7.01 last close.

https://www.youtube.com/watch?v=ZvbLij4AaPE

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liberallez
Member
👍54
liberallez

Here’s a more relevant/informative video than that one…
https://www.youtube.com/watch?v=3vsQ_KByQ_U

vivian lewis
Guest

BAE Systems is British and you can trade its ADR in the USA where many of its security applications are under development. But being British it also pays a nifty divvie because that is how things are done across the pond. I see that Travis has already said this but I don’t see that he mentioned our recommendation of iis stock. I guess it is because we don’t do teaser pump-and-dump mailings. BAESY is an okay stock for us. we made 10% on it since I tipped it in Jan. 2016 at $29.40 despite Brexit and other horrors in Britain… Read more »

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v4t1n4
Member
👍49

Wow! Someone still doesn’t “get it”.

johannes
Member
👍8
johannes

Keith Fitzgerald recommended this stock in last year. I know it is up since then, but did not buy.

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Slysix
Guest
Slysix

I have owned KTOS since May-2016 at $4.43 cost basis and it is currently trading in the $8.00+ range for a nice gain. I have been looking at adding to this position recently and have been waiting for a pullback which has not occurred since the election. KTOS seems to be procuring contracts in many of their business segments which is encouraging considering the size (market cap) of the company. Looking to keep and build on this position as a core position in the Defense sector in my non-dividend paying (growth) portion of my portfolio. Looks to be a good… Read more »

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KATTS
Guest
KATTS

Na, in my opinion, hold, wait for pull back if u want but as someone that has some sense with investing/trading, since no div., I would , depending on how many shares you have, take a little profit. If I had 100 shares at just over 8 bucks and it hit $16/share, I’m taking AT LEAST 25% IF NOT 50% shares off the table to utilize the houses money. Heck, if it hits $13, I’d take 20% at least.

Jack15T
Guest
Jack15T

This guy needs to go to jail for bieng a scam artist.

chetstuff
Guest
chetstuff

As a former subscriber to the Moor’s “Money Map” report, none of his whacky, “break-away” insider stocks ever turned out to be much of anything positive. He’s an outright fraud and I’m embarrassed to admit I was persuaded to try a subscription to that useless report.

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Larry Cook
Guest
Larry Cook

As soon as somebody sinks low enough to display his medals in an attempt to gain credibility it’s a warning to keep my credit card in my wallet and turn off the video. I get a creepy feeling around anyone who seems so desperate to sell me his advice. If his advice is that good, why would he want to share it for any amount of money? And this terrible method of selling a service by running a teaser video long enough to make the viewer want to commit hari-kari should be a warning all by itself, even though it’s… Read more »

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vonster
Member
👍7
vonster