Thursday, June 24, 2010

Scott Smith's Swiss Confidential

Today's junk mail comes in the form of a newsletter/booklet "Special Alert, "Secret Gold Deal" that "could make 10 times your investment in the next 4 months."

Sounds great, right?  Well, here are a few observations:
  1. Making 10 times your investment in 4 months is, effectively, earning a 900% return on 4 months, which on an annual basis (without even considering compounding), is a 2,700% return. Sounds great!  But the reality is quite different.  Out-sized returns like that just don't happen.  
  2. Yes, the penny stock that is his hot-stock pick has just bought mining rights from another company, but:
    • This is not news (the transaction began last year and was finalized this year), and
    • The fact that a successful mining company sold mining rights to a not-yet-developed want-to-mine company, should tell you something about those mining rights [if they were so valuable, why didn't the succesful company keep them?]
  3.  The author claims "My inner circle of investors put their money into ..." and claims that they had a great return. Well, you and I could look back on many stocks and state "If only ..".  The author goes on to says that a 50 cent investment per share grew to $39.50 per share. 
    • The risk of all the investments he discusses are significant. 
    • The stock he claims to have predicted a movement for is Seabridge Gold.  It's stock history dates back to 2004 and it has never traded at 50 cents and has never closed above $38 per share. 
  4. Looking at a stock in isolation is not a good idea.  Is it appropriate for your portfolio?  Are you prepared for the risk?  The company that he is touting is a penny stock company, Constitutional Mining, CMIN.OBB.  This is a company that has not had operations -- it is in the exploratory stage.  This means: high risk, no proven track record.  Not many of us have portfolios that can handles this risk.
    The "newsletter" has lots of drama in terms of economic news, which is the usual "buy gold" fear-mongering.  He even has testimonials from investor who earned high returns.  Don't believe these returns -- this is not typical. You cannot earn out-sized returns without out-sized risk (or fraud). Just consider the investors in Madoff's scheme or any other investment fraud.

    What is he selling?  His reports, sent through email.  The "best value" is only $362.90.  And, if you act fast, you can also get a free book with your subscription.

    A few things to consider:
    1. Is the person recommending this investment a successful investor? The author claims to have worked with Credit Suisse in Derivatives, but you don't know much more than that.  Having been employed by an investment house does not make you an expert. 
    2. Is he trained in analysis?  Anyone can look back and identify great investments. If you cut out the drama in his verbage, is there substance there?  Not much.
    3. What is this person's track record with respect to the advice that he is giving?  Track his hot stock (CMIN) and any other of his pitches over the next year before you take him seriously. It is best to gauge performance over 1, 3 and 5 years.
    4. Is there any information that you can get from him that you could not get elsewhere? I doubt it. The "news" he mentions is at least 6 months old. Check out the company he is touting at www.sec.gov, using the links to the company filings, and at finance.google.com.  
    5. Should you really be in penny stocks?  The answer for most everyone is No.  These are high risk stocks and you should be prepared to lose everything you put in them.

    2 comments:

    1. SWISS CONFIDENTIAL BROKE THEIR WORD

      I, Lee R Larkey CPA EA purchased a Swiss Confidential subscription September 20, 2010 for $77.00. I spoke to Megan at Swiss Confidential 866-324-9482 on December 18, 2010, within the 90 day cancellation period asking to cancel the subscription. Five subsequent calls were made. Each time I was told that a message would be forwarded to someone. No returned call was ever received. My credit card was not credited. The latest calls made January 13th and 14th resulted in no returned call. There are words for people like this!

      llarkey@clearwire.net

      ReplyDelete
    2. yarghh My husband is a writer/author and has the same name- and once worked in financial Pr for many years- I think Harvey Milk's killer had the same name...sheesh

      ReplyDelete