What’s “The H.E.I.S.T. Moneybomb” from Extreme Alpha?

Robert Williams is pitching his special report, "H.E.I.S.T.: How You Can Front-Run Trump’s 'Moneybomb' to Legally Steal a Lifetime of Wealth" ... what's he talking about?

By Travis Johnson, Stock Gumshoe, October 19, 2017

This ad has popped up several times over the course of the year, and it’s now running again with a slight variation — mostly to change the “urgent” trade date from April 15 to November 9… so I thought we should take a quick look.

The basic idea is that Robert Williams has a team of trading experts who he says will be able to provide huge returns for you if you subscribe to Extreme Alpha ($2,000 a year, nonrefundable) — but in order to discourage you from thinking too carefully about how these kinds of hypothetical returns are generated, he implies that this is somehow a secret thing that most traders don’t know about, and he pours a giant pitcher full of math on top of the hype. Agora’s website notes that the analysts for Extreme Alpha are Louis Basenese, Martin Hutchinson, and Jonathan Rodriguez… presumably the ideas pitched are theirs, but none of them are actually named in the ad, so we’ll just use publisher Robert Williams’ name to keep it simple.

The opening is a promise that President Trump will sign the “biggest tax cut in U.S. history” … and that what’s in this new tax plan “could turn every $2 into as much as $6,000 in a matter of weeks.”

Huh?  Picking the right roulette ball would only turn $2 into $70… how does a bet on the tax plan being approved turn $2 into $6,000?

Essentially, what Williams is promoting is that Trump’s tax plan will be passed, and that corporations will bring back a huge slug of cash that they’ve been holding overseas because of the “repatriation tax holiday” that’s part of the plan, and that this will spur those corporations to make huge stock buybacks and pay big special dividends to shareholders, which will make the stock market surge higher.

And he’ll recommend some kind of super-levered bet on that surge, either in some individual stock that will benefit more than others, or on the broad market. Here’s a taste of the ad so you can see the general idea:

“… the minimum up-front investment is peanuts. Just $2, actually.

“But that $2… placed with any broker in less than 2 minutes… could create a lifetime’s worth of wealth by November 9th.

“Because the world could be in for a BIG surprise starting that day:

“In Washington DC, political elites will be STUNNED when they realize Donald Trump has completely ‘hacked’ our tax system.

“On Wall Street, hedge fund managers will be SHOCKED as the stock market starts a massive bull run

“And on Main Street — and more importantly on Your Street — 300 million Americans are going to feel the bitter sting of REGRET

“Because they all missed out.”

So that’s obviously absurd — but does the Trump tax cut actually mean the market will rise? Will Williams’ trade generate a big profit and actually make sense?  Well, sort of — until you get to the math.

The “H.E.I.S.T. Moneybomb” calculation does something very familiar — it takes a win, layers some wins on top, and multiplies it by other wins, and, before you know it you’ve turned things that sound individually like they might be possible into 3,000% returns in the blink of an eye.

Newsletters do something similar all the time in promoting their options trading or penny stock strategies, using past price spikes to show examples of times when you could have turned $100 into $1,000, then used that $1,000 to turn it into $150,000, then bet that $150,000 on yet another crazy high-risk investment that returned 20X… and before you know it $100 is $3 million. Woohoo!

Except, of course, finding a string of wins like that in the present and the future is an entirely different game than finding them in the past. The former is fortune telling, which hasn’t really been perfected by anyone just yet… the latter is data mining, which any computer can do for you (“Alexa, find me a stock that went up by 1,000%”).

What Williams is doing is slightly different than cherry-picking past stock winners to give you daydreams of wealth — he’s cherry-picking the market impact of two tax changes from the past 15 years, the “tax holiday” under George W. Bush and the dividend/capital gains tax increase under Barack Obama, and predicting that both of them, with a shockingly huge dose of extra juice, will hit the stock market in very short order after Trump’s tax plan is passed… and that his levered options bet on that happening will further explode the returns.

I guess the only thing to do is go through the H.E.I.S.T. stuff line by line, even though it gives me a bit of a headache. So here we go… this is the basic pitch:

“HOW YOU COULD WIN BIG: Our proprietary trading formula shows how this historic “moneybomb” could soon be worth up to 3,436x what you put in — or more….

“President Trump has left the backdoor open for ANY American to piggyback off of this new tax policy

“Will you personally profit $442 million yourself? ….

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“Probably not, since the majority of Americans don’t have the same start-up capital as the corporations who stand to benefit….

“But according to my team’s proprietary research, by putting up the ABSOLUTE MINIMUM:

“You could turn every $2 you invest into as much as $6,872

“And every $292 you invest into a cool million

“While paying lower taxes on your profits than you EVER have before….”

So do note that even if we assume the balderdash will work out as they promote, they’re saying that $2 “could create a lifetime’s worth of wealth” but also that the very most optimistic and balderdash-y possible return on your $2 is $6,872. That’s lovely, of course, and an unheard-of windfall return on any trade, but it’s not “a lifetime’s worth of wealth.” The newsletter costs $2,000 (nonrefundable), so obviously anyone who thinks $6,872 is a ‘lifetime’s worth of wealth’ shouldn’t be even thinking about spending “30% of their lifetime wealth” on an overhyped options trading newsletter.

I’m being a little silly there, I suppose, in taking any of that seriously — but copywriters know that we are simple beings and we’re easily manipulated, and that language of “lifetime wealth” permeates all of these kinds of ads and it helps to put a veil over our eyes, so it’s worthwhile to stop and think about them for just a moment. Exaggerations and inducements that are repeated over and over lodge themselves in your brain, and after a while you start to believe them on a subconscious level, and suddenly some kid with a $50,00