Wall Street Money Machines

Our local business radio affiliate, 730 AM in the DC-Metropolitan area, makes all of its money selling airtime to investment advisers, brokers, banks and other financial organizations. A guy named Wade Cook has bought a heck of a lot of airtime recently to promote his new book, the Wall Street Money Machine, as well as his package of seminars and booklets on everything from evading taxes by having your family become a Nevada Corporation to making millions in real estate.

What is particularly interesting about Cook's claims is his stock market success. Apparently, Mr. Cook has been generating gains of 20% to 40% per month in the stock market using various techniques. He says he has been doing this for years and getting annualized gains of 320%, doubling his capital every two to four months. Not bad, right? And all he is doing is stuff he calls rolling stock and dividend capture, the shortest of short-term strategies to play a stock when it trades in a specified range for a while or jump from stock to stock to stock about to pay a dividend.

This all had me scratching my head, though, as I am not sure that Cook knows what his claims really suggest. With gains of 20% to 40% per month, the compound rate of growth would be absolutely tremendous. Let's assume that Cook has been doing this for the following time periods: five years, ten years and twenty years. Let's also be reasonable and say he only started with $1000. Finally, let's split his claim down the middle and say he does 30% per month. In five years at 30% monthly compounding, $1000 turns into $6.864 billion. In ten years, 30% monthly compounding turns into $47,119.6 billion. In twenty years, 30% monthly compounding turns into $2,220 *SEPT*tillion, which is roughly about 100,000 times the national debt of four trillion.

If Cook has been doing this for any amount of time with any amount of capital, he very quickly would have surpassed Mssrs. Buffett and Gates on the Forbes 500 -- something which he has not done. Quite honestly, he probably would have given up his seminars and hard-sell over the radio long ago with anything near this amount of capital, in order to buy his own island in the Caribbean and retire in style, much like Sir John Templeton. As Cook continues to push his books, I've gotta wonder whether or not his claims are all that they are made out to be. Investors should take exaggerated performance claims with a grain of salt unless they see some sort of supporting evidence, as returns on the order of Cook's would cause anyone with a reasonable amount of capital to become a billionaire in five years -- something that just does not happen that often.


SEAGATE (NYSE: SEG) will manufacture removable Jaz drive cartridges for IOMEGA CORP.'s (NASDAQ: IOMG) Jaz drive, pushing shares of Iomega up $1 3/8 to $23 3/8. Earnings for Iomega are released Thursday after the bell.

News that WORLDCOM (NASDAQ: WCOM) was going to redeem all of its convertible subordinated debt at 103.5% of principle bouyed shares of the telecommunications provider up $1 1/8 to $23 3/4 this morning.

Internet database specialist RED BRICK SYSTEMS (NASDAQ: REDB) wowed the Street with its second quarter earnings today, reporting $0.05 EPS versus all of a penny a year ago. The stock rose $4 3/4 to 24 3/4 this morning.

A new chief financial officer and a private placement apparently convinced some investors that PANDA PROJECT (NASDAQ: PNDA) would not go belly up, pushing the shares up $1 to $10. Many still remain skeptical about the development stage company's ability to bring its technology to market.

SMITHKLINE BEECHAM PLC (NYSE: SHB) has signed an agreement with MERCK KGaA of Germany to use HUMAN GENOME SCIENCES's (NASDAQ: HGSI) genomic technology to develop "novel human pharmaceuticals." Human Genome rose $3 1/4 to $28 1/2.

GALILEO ELECTRO-OPTICAL (NASDAQ: GAEO) surged $1 1/4 to $20 1/4 this morning after reporting third quarter earnings of $0.22 EPS versus $0.06 EPS in the year ago period, a penny above expectations.

Packaging giant CROWN, CORK & SEAL (NYSE: CCK) showed the wisdom of its acquisition of French packing concern CanardMetalBox when it reported earnings this morning, posting a gain of $0.77 EPS this year versus $0.58 EPS last year, a full six cents above consensus estimates. It ain't too often that you see a packaging company post 33% year-over -year EPS gains -- kick back and enjoy it if you are holding the shares. Crown Cork & Seal surged $2 3/8 to $44 3/8.


OFFICE DEPOT (NYSE: ODP) reported flat quarterly earnings in line with expectations, but apparently investors saw something deeper in the numbers when they sold shares of the specialty retailer this morning, dropping the stock $4 1/8 to $14 3/8. Prudential cut its rating to "neutral."

ARCHER-DANIELS MIDLANDS (NYSE: ADM) dropped $3/4 to $16 5/8 when the Wall Street Journal reported that the government will indict two executives in an anti-trust probe. The son of the Archer-Daniels chairman will be one of the executives to face the Feds.

Apparently, COMPUSERVE (NASDAQ: CSRV) is not moving fast enough to keep up with a changing online services marketplace. The online service provider dropped $3 5/8 to $11 7/8 when it said it would report a loss of $0.15 EPS to $0.20 EPS in the current quarter due to flat subscriber growth. H&R BLOCK (NYSE: HRB), which owns 80.1% of CompuServe will spin off its stake and buy back up to 10 million of its own shares with the proceeds from the sale of the first 20% of CompuServe.

QUINTEL ENTERTAINMENT (NASDAQ: QTEL) shed $1 7/8 to $6 1/4 this morning after reporting dramatically lower earnings for its fiscal second quarter yesterday, netting only $0.04 EPS versus $0.17 EPS a year ago.

AMERICAN BUSINESS INFO (NASDAQ: ABII) reported flat earnings of $0.21 EPS, three cents below consensus expectations. The stock fell $3 1/4 to $12 1/4.



Randy Befumo (MF Templar), a Fool

Selena Maranjian (MF Selena) another Fool

Prem Kumar (MF Prem) another Fool