The 23,000% Gain That Left The Market Scratching Its Head

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Today's article is about "dumb money" vs. "smart money."

Some of what I'm about to tell you may come as no surprise to you... Some of it may shock you or make you a little uncomfortable...

But hopefully by the time you're done reading today's essay you'll understand why it's so important to have a firm grasp of why markets sometimes behave irrationally and how it causes so many investors to lose money. And perhaps more importantly, how to invest alongside the "smart money"...

But before I get to all that, let me share with you an interesting story that caught my attention a few weeks ago. It's about a little-known stock that gained a mind-numbing 23,000% in a matter of weeks.

It's the perfect illustration of the kind of insanity that routinely takes place in markets -- especially when it's continuously charging higher. And as I'll explain in a moment, this kind of market madness certainly isn't new.

The pinnacle of market-madness
If you haven't heard of Cynk Technology Corp, don't feel bad. In fact, that's probably a good thing. Only recently did the company begin to attract headlines in the financial media -- and for all the wrong reasons.

Initially to some investors, Cynk Technologies might have appeared to be another run-of-the-mill social media IPO. Its purported unique take on social networking, according to its own description on Yahoo Finance, is to connect social media "seekers" with "mavens" (i.e. celebrities, industry contacts, etc.). Users would pay a fee through its site, "IntroBiz," and would facilitate an introduction between the two parties.

There was just one problem.

Cynk calls itself a "development stage" company. It has a grand total of one employee, no corporate website, no revenue from the past three years and a grand total of $39 in assets.

It didn't matter that its total assets weren't worth even a tank of gas. Through relentless (and probably fraudulent) promotion, enough buzz was created around the stock that investors (I'm using this term loosely) were duped into chasing this worthless stock higher...

The result? What was once a stock trading at six cents a share became a company with a $6 billion market cap trading near $15 a share.


The folks at the financial blog ZeroHedge were the first to bring this story to light. They put it best when they called what was going on with Cynk "pure madness." Since then, Cynk Technologies has caught the eye of Business Insider, The Wall Street Journal, CNBC and others, who have all commented on the lunacy of what happened with the stock.

Luckily, trading was finally halted just a few weeks later on the over-the-counter exchange where Cynk's shares were traded after all of the press surrounding this story caught the attention of the Securities & Exchange Commission.

We've warned about the perils of chasing the latest market trend before. Back in May , we talked about the second "dot-com" bubble happening in tech, particularly in social media. The story of Cynk, unfortunately, is yet another extreme example of the kind of ridiculousness we were talking about.

If you even doubt me for a second, look at what's happened to Cynk since it resumed trading -- shares have plummeted back to earth, currently trading for about 60 cents a share.

Getting caught up in the market's irrational behavior is a sure way to lose money in stocks. If you're looking to invest in truly game-changing companies that can deliver triple-digit-plus gains, don't get caught chasing fairytales like Cynk. There are plenty of legitimate opportunities out there.

Here's a good place to start: earlier this month we brought you a glimpse of Andy Obermueller's " 11 Shocking Predictions for 2015 ." The report is full of companies that are revolutionizing their industries with game-changing ideas. These are all legitimate companies with developments that have billions of dollars in revenue potential. For example, in Andy's report, you'll learn about one company working with Apple to potentially develop a new electronic currency called "iCash." If they're successful, it could make your wallet obsolete. You'll also get details about another little-known energy company developing the next-generation biofuel that could end oil's reign over the energy markets.

These are the real opportunities for triple-digit gain potential. Andy should know -- his previous prediction reports have resulted in gains of 89%, 293% and even 310% just a year after he released them.

In the end, you'll get far better results by investing in companies that are working on what Andy calls "the Next Big Thing" than you will in a lifetime of scouring OTC message boards. To get more info on Andy's predictions, go here.




The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

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This article appears in: Investing , Stocks

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