If Your Broker Knows It's A Fact, Not A Speculation

If Your Broker Knows What’s Going To Happen, It’s Not A Prediction

                                                                                                               Brendan Magee, 11/2/2011

I received an e-mail solicitation from a stock research and trading firm known as WealthMakers. The tag line said, “ Know exactly what will happen before and after each stock’s earnings announcement.” WealthMakers gave two example of how well their technology works.

One of which works as follows: (To spare you the redundancy, I’ll show just one of them)

On September 28^th, 2011, their prediction was that Baker Hughes Incorporated (BHI) would go up from its current price of $57.75 per share before its earnings report came. Investors should take a position to buy long. That means the investor is speculation the price of the stock will go up. As it turned out they were correct and if the investor took their advice they made a profit of 15.65%. The investor would have made out even better had they heeded WealtMaker’s next report on the 31^st of September. The stock would fall after the earnings report came out because this stock’s price usually falls after the earnings report comes out. So take a position that the stock will fall.This is known as a short sale, speculating the price of the stock is going down.

An investor would have made another 11.20% on the short sale. All tolled  for the month, the investor would have had 26.85% profit from following this advice. Claims like this are designed to do one thing to investors, seduce us into buying their programs. The unspoken promise is follow our lead and you will become wealthy. They are not too unlike the betting services we see every week in sports pages or on cable t.v. They tell you how the week before they were so successful in knowing in advance which teams were going to win and cover the spread. Just listen to us and we’ll make you rich!

I read a little more about what get out of WealthMaker’s services and the more I read the more questions I had. Again, the claim is, you will know exactly what is going to happen to a company’s stock before and after that company’s earnings reports come out.

The first claim is that as an investment advisor, I will be able to generate leads and clients by issuing white labeled predictions as press releases.  Here lies the first of several problem with WealthMakers claims. Why would we want to disguise a statement as news when it really isn't?
Secondly, If I  know exactly what is going to happen why would I call it a “prediction?” Wouldn’t be a fact? Third, if I know what nobody else knows and my exclusive knowledge is what is going to generate my huge profits, why would I share it with everybody else? Won’t my returns and that of my clients go down or disappear all together if everyone goes out and buys the stock?

Another question arises when WealthMaker claims there will be no doubt about what will happen to a stock using just two examples. How many predictions do they make in a month? How many of them are producing the results of the two stocks shown? If I made fifteen bets each week on pro football games and one or two came through, that doesn’t speak very highly for my handicapping skills.

Another question is, if I could produce returns of 26.58% per month, why would I share that knowledge with the public for between $29 and $49 per month? Sure fire results like that would command significantly more in price, wouldn’t they? Better yet, why wouldn’t I just trade for myself alone and relieve myself of the labor and costs of sending out all that information?

I also have to ask, is WealthMaker executing all the trades they are recommending and keeping all the trading costs? If so, are all the trade recommendations for my benefit or WealthMaker’s profitability?

The final question is this. Depending upon service I sign up for with WealthMakers I am going to get between two and ten predictions per day. If WealthMakers knows for fact what is going to happen with stocks,  why would I need more than one prediction? Why couldn’t they give me the one that is going to perform the best that day, week, or month and leave it at that?

The answer is, neither WealtMakers nor anyone else knows exactly what is going to happen in the stock market tomorrow, or the next day, or the next year. WealthMaker is admitting as much in their advertisement, but they hope you fall for the false promises of wealth alluded to in their advertisements. When you see advertisements like these simply delete and ignore them.

Brendan Magee is the founder and president of inevitable Wealth Coaching. With questions or comments call 610-446-4322 or e-mail Brendan@coachgee.com.