Only a madman could end the Vietnam War...
By 1969, the U.S. had been involved in Vietnam for nearly a decade and a half. The war was costly, bloody, and vastly unpopular. And when former President Richard Nixon took office that year, he desperately wanted an off-ramp.
Nixon knew he couldn't pull troops out while the war was still raging. There didn't seem to be any end in sight. So he chose the opposite path... and dramatically escalated the fighting.
Under Operation Giant Lance, which launched that October, the U.S. deployed 18 B-52 bomber jets to patrol the polar ice caps. Each jet was armed with nuclear weapons.
While the public didn't know about the launch, the Soviets – a key ally for Vietnam – could easily see what was going on.
Or so they thought.
What the Soviets didn't realize was that they were focusing on the wrong actions. They were playing directly into the U.S.'s hands.
As I'll explain today, this lesson also applies to investing... because in order to avoid corporate money pits, you have to know exactly how to stay a step ahead of management.
With huge nuclear-armed bombers flying around, the Soviets shifted their approach... and the U.S. was watching.
Nixon and his secretary of state, Henry Kissinger, were utilizing what they called the "madman theory." They made a series of what seemed like irrational, volatile moves... and let the Soviet Union and Vietnam discover their actions on purpose.
Their goal was to convince the enemy that Nixon would stop at nothing to end the war, even nuclear annihilation. They hoped the threat of an unpredictable madman would be enough to bring all sides to the negotiating table.
Moscow and Hanoi already thought that Nixon was irrational. So it wasn't hard to convince them that he might push things further than any reasonable leader. And it was made all the more easy because the two sides were playing entirely different games.
Throughout both the Vietnam War and the Cold War, the Soviets were considered experts at "chess." They read the table and moved their pieces around to gain strategic position. They wanted to win the game in front of them.
On the other hand, U.S. leaders were playing "poker." They were reading the players across the table as opposed to playing the cards they were dealt.
The U.S. would bluff to create unforced errors from the Soviets. And it would play a risk-averse game when the enemy was more volatile. By playing poker when our opponents were playing chess, we were able to stay one step ahead of the Soviet Union and Vietnam.
This strategy doesn't only apply to war, though... It's also critical to investing.
Some of the most influential investors, like hedge-fund managers Steve Cohen and David Einhorn, are also great poker players.
These folks know better than to take data or management's claims at face value. They also look at the company's actions to gauge whether it's trustworthy.
And we aim to follow in their footsteps...
Every quarter, subscribers to our Microcap Confidential advisory receive our "Do Not Buy List." It features the worst of the worst microcaps we can find... companies that have failed multiple tests on our rigorous fundamental forensics checklist.
One warning sign we look for is an overabundance of press releases – with little to show for it. That's something we noticed with Blink Charging (BLNK), an electric-vehicle charging station company that we first added to the list in January 2021.
In each update, we take it upon ourselves to count the number of press releases Blink posts. It's at 32 so far this year. Most of them describe conference presentations, new charging stations, and new partnerships.
The company also managed to raise another $100 million earlier this year... which should give it plenty of cash to publish more press releases.
Blink spent far less time acknowledging that it has been hemorrhaging money for years. It lost $0.53 per share in the first quarter. And the stock is down 88% since we first said to stay away. All those press releases were a red flag that told us to take another look.
Corporate executives love to make lofty promises. Blink isn't alone... Plenty of other companies use a barrage of announcements to distract from "weak cards." That's why the savviest investors know how to read between the lines and call management's bluffs.
When a company announces big, newsworthy events that suggest great prospects, don't buy into it blindly. Take a closer look behind the scenes first. Remember that management carefully curates what it says to swing opinions and drive interest.
As investors, we're playing poker... not chess. Spend most of your time looking across the table at the key players. It's the only way to know whether or not they can be trusted.
Wishing you love, joy, and peace,
May 12, 2023
P.S. I just released a brand-new "blacklist" of potential microcap money traps... five of which I've also featured on the Microcap Confidential Do Not Buy List in recent years. These five are all down 50% or more since my team and I first sounded the alarm. And thanks to a critical market catalyst next month, I believe they have plenty of downside left from here.
I shared all the details about what to expect in my latest briefing – including how to access this exclusive report. Plus, I gave away the name and ticker symbol of a company that I believe could go bankrupt in the coming months. Click here for the details.