Date: 06/14/2021
Author: Kent Moors, Ph.D.
There was one realization quickly learned as I transitioned from an early facility with theoretical physics to other matters. Most of the fascinating “breakthroughs” on the frontiers of research break down when you take them out of the laboratory.
What works under controlled conditions in an experimental setting usually has less success when taken out into the back yard. There are too many variables at play in the real world, and they rarely all impact in the same way.
That means I have come to approach each new “cold fusion” or “one-million-hour battery” announcement with a jaundiced suspicion. Of course, that does not stop my continuing to poke around in people’s laboratories and workplaces worldwide in search of the next great discovery.
As you read this, I am on another short trip to review investment prospects. There are some intriguing developments afoot in a rapidly expanding interconnection between front edge technology and market usages. Some of these are already emerging in ways that can benefit the average retail investor.
The big prospects, however, remain private. One of the keys in handicapping the next generation of reformative approaches is to catch them early. But that leads to a frustrating conclusion I have experienced on numerous occasions.
Brilliant scientists usually write terrible business plans. Seems it is just not in their genes.
In the past, I have put together financing packages to “rescue” some advances from those who live for the pure science but not the application. Over the past several years, I have also advised international sources of investment interested in seeking out the next mega changes. Normally, this has little benefit to individual market investors, those buying stocks, bonds, ETFs and ETNs on public exchanges.
That is going to change soon. I have been designing a new approach that goes beyond angel investing, one that will for the first time allow regular folks to move into the single greatest opportunity for wealth I have ever seen.
But we are not quite there yet. I will unveil this money maker shortly. Today, I want to talk about why the current market is both making this approach necessary yet also impeding its development.
I have called this a “trading vice.” It develops when a new approach that could well serve a market need experiences pressures coming from two different directions – like being stuck in a vice that constricts and distorts.
Now all investment appraisals have two views of profitability in mind. One looks at bottom line projections of a target company. The other looks at the price of the company’s stock. The former emphasizes sustainability over a longer period of time. The latter, on the other hand, has a narrower return focus. True, some investors will opt to take the longer view. But most will bail if a stock does not respond in the short to medium term.
These two counter views of profitability set the stage for the vice. If a company has sufficient market cap but stagnant revenue flow, institutional and hedge fund investors will short its stock in anticipation of an impending decline in equity value.
As I have noted here before, a short is a bet that a stock will decline in value. The player borrows shares from a broker, immediately sells them, returns to the market later to buy back the shares, and then returns them to the source. If correct, the investor makes money on the difference.
Take the following example. You believe stock ABC will decline in value. It is currently trading at $10 a share. So, you borrow it from a broker and sell it, realizing the $10. Later ABC declines to $8. You go back into the market, buy it back, and return it to the broker. You pocket a $2 profit (minus whatever fee you paid for the original borrowing of shares).
This can be risky. If you have guessed the direction of the stock price incorrectly, you are in trouble. Because you still must go back into the market and rebuy the shares to return them. If ABC does not decline but instead rises from the $10 received initially to $20, you have a 100 percent loss. If it has risen higher, you may be looking at a nasty margin call.
You need to buy the shares and return as soon as possible to minimize the loss. This is known as a “short squeeze” and will always further increase the price of the stock.
Theoretically, there is no limit to how much money can be lost by shorting. This is the reason I never recommend it to any of my service subscribers. Essentially it is an attempt to profit by introducing an artificial element into the trading of stock.
However, the short squeeze has recently become a device popular by market manipulators to generate their own artificial profits. The moves initiated with crowd moves on Reddit directed to GameStop and AMC Entertainment have engineered mass short squeeze buys of a shorted stock.
Such a move is not targeting the stock at all but the people who shorted it. If the original short is considered a derivative move to acquire an artificial profit (a view I share), the opposed squeeze move is even more suspect.
I have explained to my Sigma Trader and PRISM Profits subscribers why this should be considered an illegal Ponzi scheme. Only the initiators will reap the main profits, selling as the squeeze unfolds. They continue to profit only to the extent that they can entice TSTT (“those stupider than thou”) retail investors to follow suit.
Further, once the company decides to make use of its unjustified rise in stock value by issuing new shares (AMC did it twice over the last week), only the perpetrators of the squeeze (who are now well out of the play) avoid the inevitable decline.
Meanwhile, both the short and the squeeze are outliers when it comes to performance based on genuine market forces. Both are fabricated attempts to generate an artificial profit. The old argument that shorts inject needed liquidity into trading has been invalid for at least a generation.
What the original short play (based on a company’s business profitability) and the squeeze play against it (artificially inflating stock value to make a personal profit) accomplish is putting new equity issues into the latest version of the “vice.”
This situation makes the entrance of any genuinely novel breakthrough problematic. Even if the initial market read is positive, the vice will emerge to make survival difficult. The way out of this is to organize a financial strategy surrounding the nascent discovery that insulates it from both shorts and squeeze plays.
It involves the coordinated use of finance directed at the company, its projects, forward contracts, debt, credit lines, collateral, and synthetic paper in a systemic approach filtered through 12 separate market risk hedging mechanisms. Once this is up and running, selected equity issuances should be impervious to the investment vice.
As we get closer to the formal beta testing of this approach, I will fill you in on more particulars…and how this can be structured to allow retail investors to profit.
This is an installment of Classified Intelligence Brief, your guide to what’s really happening behind the headlines… and how to profit from it. Dr. Kent Moors served the United States for 30 years as one of the most highly decorated intelligence operatives alive today (including THREE Presidential commendations).
After moving through the inner circles of royalty, oligarchs, billionaires, and the uber-rich, he discovered some of the most important secrets regarding finance, geo-politics, and business. As a result, he built one of the most impressive rolodexes in the world. His insights and network of contacts took him from a Vietnam veteran to becoming one of the globe’s most sought after consultants, with clients including six of the largest energy companies and the United States government.
Now, Dr. Moors is sharing his proprietary research every week… knowledge filtered through his decades as an internationally recognized professor and scholar, intelligence operative, business consultant, investor, and geo-political “troubleshooter.” This publication is designed to give you an insider’s view of what is really happening on the geo-political stage.
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