John Bell and Internet Frauds and Scams

Dear Audience:

Peggy mentioned to me yesterday that our mysterious “John Bell” had sent yet another e-mail.  Today, I was able to study this latest e-mail.  My comments follow copy of the e-mail.

************** the e-mail **************

When you invest two things are important:

A) The price you pay.

B) The future profits of the business you buy.

In an ideal world every investment you make
will be in a good company at a cheap price.

The price being cheap keeps your risk low
and increases your return.

And a good business will not only continue
for a long time it will also have the
opportunity for growth.

To find these opportunities (good companies
selling at bargain prices) we need to figure
out exactly what it means.

What makes a “good” business?

What price is cheap and how is it measured?

Firstly let’s discuss finding good companies.

The mark of a good business is the return
on capital.

A good business is one that can use a small
amount of money to make a large amount of
money.

Most businesses in the US earn roughly 10%
on their capital.

That’s the average.

So a good business probably earns roughly 20%
on their capital.

An outstanding business may earn 40% on
its capital.

You get the point.

The higher the Return on Capital the better
the business.

This is the reason companies like Facebook
and Google can grow so big so quick – They
have HUGE returns on capital.

I measure Return on Capital as:

EBIT/Net Working Capital + Fixed Assets

The chief advantage of owning a “good”
business is that it can reinvest its
earnings at this higher return.

The ability to invest money at a 30%
return is valuable, very valuable.

But finding a good business is only half
the battle.

You also need to buy that good business
at a cheap price.

This price part is probably even more
important than the return on capital part.

Imagine you just inherited $1m and plan
to invest that money to earn a good return.

First you consider government bonds. At
no risk you can earn a 6% return.

Not bad.

But you also notice two businesses are
for sale in your town.

Business A will cost you $1m and earn
$100,000 per year.

Business B will also cost you $1m but
will earn $200,000 a year.

Which is the better option?

Of course it’s B.

This is because the Earnings Yield is
higher.

Business B offers a 20% return (or
earnings yield).

While Business A offers a more standard
10% return.

All else being equal you want to buy
businesses with high earnings yields.

The easiest way to measure earnings
yield is the P/E ratio.

Price per Share/Earnings per Share

In summary, smart investing can be
broken down into buying above average
companies at below average prices.

John Bell,
HacktheStockMarket

************** the end of the e-mail **************

I wonder if those that have subscriptions with the “John Bell” service are experiencing excessive chagrin at about this time.  The e-mail contained absolutely no new information or concepts.  In fact, the “return on capital invested” and “earnings to price ratio” method of evaluating stocks is neither new nor particularly useful to discerning investors.  Mr. Joel Greenblatt first published his work on this problem in 2004, or perhaps 2005; Mr. Greenblatt tested the model against actual market data predating 2004 by 17 years and found that the method provided average annual gains of more than 30%.

Jammin Java Corp. is a clear case study supporting my conclusion that “John Bell” does not actually employ the magic formula investing protocol of Mr. Greenblatt.

Several weeks ago, I called the next “John Bell” penny stock scam.  GBLS: of course, I could be wrong.

I will not be defeated and I will not be deterred from my mission of exposing corruption and frauds.

Nathan A. Busch

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11 Responses to “John Bell and Internet Frauds and Scams”

  1. Did John Bell tout GBLS? I, too, received the above message from JB, but that was the first I had heard from him in a LONG time. Never received anything pertaining to GBLS. Just curious where you heard about GBLS, and what you heard. Thank you.

  2. Nathan, Im glad your website is up again. Yours is one of the brainiest and most insightful sites on the web, period. So I hope you can keep it functioning.
    I also received that strange email from JB, after months of not hearing from him. I do not know if he has already started touting another stock in the same staggered fashion as the one he used for JAMN.

  3. Dan, Peggy, George, and all of my audience.

    Our mysterious “John Bell” has not yet started his scheme of pumping GBLS and then dumping it. I found out about GBLS through careful investigation. Consider the following list of filings made with the U.S. Security and Exchange commission since 23rd August 2007 that bear the name “Shane Whittle.”

    8-K/A JAMMIN JAVA CORP. 8/11/2011
    8-K JAMMIN JAVA CORP. 8/10/2011
    10-Q/A JAMMIN JAVA CORP. 6/24/2011
    10-Q JAMMIN JAVA CORP. 6/20/2011
    10-K JAMMIN JAVA CORP. 5/17/2011
    POS AM GLOBAL INDUSTRIES CORP. 3/30/2011
    10-K GLOBAL INDUSTRIES CORP. 3/9/2011
    SC 13D/A JAMMIN JAVA CORP. 1/14/2011
    4 JAMMIN JAVA CORP. 1/13/2011
    10-Q JAMMIN JAVA CORP. 12/20/2010
    4 JAMMIN JAVA CORP. 11/23/2010
    SC 13D JAMMIN JAVA CORP. 11/23/2010
    10-Q/A GLOBAL INDUSTRIES CORP. 9/8/2010
    10-Q GLOBAL INDUSTRIES CORP. 8/23/2010
    8-K JAMMIN JAVA CORP. 5/21/2010
    10-K JAMMIN JAVA CORP. 5/18/2010
    10-Q GLOBAL INDUSTRIES CORP. 5/17/2010
    10-K/A JAMMIN JAVA CORP. 4/28/2010
    8-K JAMMIN JAVA CORP. 4/22/2010
    10-K GLOBAL INDUSTRIES CORP. 4/14/2010
    10-K/A JAMMIN JAVA CORP. 3/22/2010
    8-K JAMMIN JAVA CORP. 3/4/2010
    10-K/A JAMMIN JAVA CORP. 2/2/2010
    10-Q JAMMIN JAVA CORP. 12/14/2009
    10-Q GLOBAL INDUSTRIES CORP. 11/20/2009
    10-K/A JAMMIN JAVA CORP. 11/16/2009
    10-Q JAMMIN JAVA CORP. 9/21/2009
    8-K JAMMIN JAVA CORP. 9/17/2009
    NT 10-Q JAMMIN JAVA CORP. 9/15/2009
    10-Q GLOBAL INDUSTRIES CORP. 8/14/2009
    10-Q JAMMIN JAVA CORP. 6/12/2009
    SC 13D JAMMIN JAVA CORP. 6/5/2009
    8-K JAMMIN JAVA CORP. 6/5/2009
    10-K JAMMIN JAVA CORP. 5/15/2009
    10-Q GLOBAL INDUSTRIES CORP. 5/13/2009
    NT 10-K JAMMIN JAVA CORP. 5/4/2009
    10-K GLOBAL INDUSTRIES CORP. 3/31/2009
    10-Q JAMMIN JAVA CORP. 12/15/2008
    10-Q GLOBAL INDUSTRIES CORP. 11/13/2008
    10-Q JAMMIN JAVA CORP. 9/15/2008
    8-K GLOBAL INDUSTRIES CORP. 9/8/2008
    8-K GLOBAL INDUSTRIES CORP. 8/19/2008
    10-Q GLOBAL INDUSTRIES CORP. 8/14/2008
    8-K JAMMIN JAVA CORP. 7/9/2008
    10-Q JAMMIN JAVA CORP. 6/19/2008
    10-Q GLOBAL INDUSTRIES CORP. 5/15/2008
    10KSB JAMMIN JAVA CORP. 5/15/2008
    3 JAMMIN JAVA CORP. 5/7/2008
    10KSB GLOBAL INDUSTRIES CORP. 3/27/2008
    8-K JAMMIN JAVA CORP. 3/12/2008
    SB-2/A GLOBAL INDUSTRIES CORP. 12/14/2007
    SB-2 GLOBAL INDUSTRIES CORP. 10/23/2007
    8-K JAMMIN JAVA CORP. 8/23/2007

    A study of EDGAR turns up no other filings containing his name since 23rd August 2007.

    Shane Whittle, whom it appears is one and the same as “John Bell,” allowed public knowledge of his connection with Jammin Java Corp. in that 23rd August 2007 filing of the 8-K. Exactly two months later, he also allowed the public to know that he was affiliated with Global Industries, Corporation in a Prospectus that was part of the SB-2 filing. The following statement may be found in the prospectus:

    We are extra provincially registered under the name PrivateKits.com Inc., in British Columbia, Canada. We offer a variety of home testing products, including pregnancy tests, ovulation tests, Human Immunodeficiency Virus (“HIV”), Hepatitis C tests and breathalyzer alcohol tests. We sell these tests in Canada and the United States through our websites http://www.Privatekits.com, http://www.Privatekits.net and http://www.RevealHiv.com (which include information that we do not desire to be incorporated by reference into this Registration Statement). These tests can be safely used to obtain confidential and instant results to the tests set forth above. All of the tests we sell are Food and Drug Administration (“FDA”) approved. We are a development stage company with minimal assets and no sales to date. We do not manufacture any of the products we sell, but only act as a reseller of such products. We do not currently maintain an inventory of the products that we resell.

    Those that followed Jammin Java, Corp. will find some familiar concepts, if not exact language, in the above quotation from the Prospectus. The purpose of the SB-2 filing was to announce the public offering of 5,750,000, out of 10,750,000 authorized and issued shares, by a small group of shareholders of the company. These shareholders obtained the 5,750,000 shares by means of an off-shore transaction for 1¢ per share. The company, which is registered and incorporated in Nevada, has its principal offices at the following address: Suite #386 – 1917 W. 4th Ave. Vancouver, British Columbia, Canada V6J 1M7. As at August 2007,
    Shane Whittle was the Chief Executive Officer, the President, the Principal Financial Officer, the Secretary and a Director. Mr. Jason Freeman was listed as the Chief Technical Officer and a Director of the company.

    According to the SB-2 filing of 23rd August, 2007:

    Shane Whittle has served as our Chief Executive Officer, President, Principal Financial Officer, Secretary and Director since our incorporation in April 2002. Mr. Whittle served as President, Director and Secretary of Einscribe Inc., a company in the business of online document editing services for students and businesses from January 2000 until June 2005. From January 2003 to October 2004, Mr. Whittle performed investor relations services for and served as a Marketing Manager and Operations Leader for Universco BroadBand Network. From June 1994 to September 2004, Mr. Whittle served as an event planning consultant with Velvet Groove Entertainment. From February 1997 to September 1999, Mr. Whittle served as the Manager of the Cactus Club Restaurant chain.

    Mr. Whittle received a Business Administration degree from Capilano College in North Vancouver, British Columbia in 2001.

    Further, according to the Prospectus contained in the SB-2 filing,

    Jason Freeman has served as our Chief Technical Officer and Director since April 2002. Since May 2004, Mr. Freeman has worked at the Provincial Health Services Authority (“PHSA”), serving as a Senior Systems Administrator since May 2006 and as a System Administrator from May 2004 through May 2006. From May 1999 to May 2004, Mr. Freeman served as a Client Support Analyst with BC Cancer Agency, and from June 2001 to August 2002, Mr. Freeman served as a Senior Programmer with Dotpick R&D (OOB).

    Mr. Whittle received a Business Administration degree from Capilano College in North Vancouver, British Columbia in 1999.

    If you think that I made a typographical error in the last sentence of the second quotation of language from the Prospectus, you would be incorrect.

    The company disclosed that Shane Whittle, Jason Freeman, and four other people held shares of Global Industries, Corporation, as follows:

    Name of Shareholder Number of Shares Held Percent of Total
    Shane Whittle 2,500,000 23.3%
    Jason Freeman 2,500,000 23.3%
    Jack and Helen Whittle 750,000 11.1%
    David and Natasha Lietzmann 700,000 6.5%

    Of course, the statement that Jack and Helen Whittle have a 11.1% shareholding is not correct, the correct percentage is 6.97%. By 9th March 2011, Jack and Helen Whittle held 1,100,000 shares in the company.

    It is a point of interest that Jack and Helen Whittle are the father and mother, respectively, of Shane Whittle. Also, David and Natasha Lietzmann are, respectively, the brother-in-law and sister of Shane Whittle. Also, the auditors for the Prospectus were LBB & Associates Ltd., LLP, of Huston, Texas.

    One point stands clear in all of the financial reports filed with the U.S. Securities and Exchange Commission is that the company is, essentially, comatose with regard to generating revenue.

    By the 9th March 2011 10-K filing, the principal place of business of Global Industries, Corporation, had moved to 5405 Wilshire Blvd., Suite 265 Los Angeles, CA 90036 and its telephone number is (323) 330-9565. Also, Shane Whittle replaced himself as the President by “Tristin White, who spends approximately 10 hours per week on Company matters.” This sounds remarkably similar to the appointment of Anh Tran as President of Jammin Java, Corporation. Further, for a company that was incorporated in 2002, and presumably doing business since then the company stated that:

    We have not sold any products to date and therefore have no customers. Moving forward, we hope to build awareness of our website and products on the internet and begin making sales through our website. In the event that we are able to sell our products through the internet, we do not anticipate relying on a small number of customers for our sales, but hope to encourage sales from numerous individual customers in both Canada and the United States.

    Again, the parallels to Jammin Java, Corporation, are apparent.

    Now, why do I think that GBLS is the next “John Bell” penny stock scam. Shane Whittle was a shareholder of JAMN and, apparently, made a lot of money during the recent dramatic increase in the price of shares in that company. Shane Whittle has only two currently active companies to which he has attached his name: Jammin Java, Corporation, and Global Industries, Corporation. Jammin Java, Corporation, has had its run and the SCAM has long-since been abandoned after taking of considerable profit by Rohan Marley and Shane Whittle. Shane Whittle has a 23.3% shareholding in GBLS. Like JAMN, GBLS has no revenue, excruciatingly large liabilities, no clear plan for generating revenue, and a CEO that dedicates no more than 10 hours per week to the enterprise. This company does not even come close to qualifying as a “Magic Formula Investing” type of company. That is, the financials of GBLS are very similar to those of JAMN. Further, the structure of the shareholdings in GBLS at this point in time are very similar to that found in JAMN before 23rd December 2010. Nevertheless, in the world of penny stock SCAMS, GBLS is well positioned for a strong, but temporary, increase in the price of its shares. To conclude that GBLS is the next “John Bell” stock SCAM requires only a tiny step of logic.

    Of course, I could be wrong.

    Nathan A. Busch

  4. It looks like GBLS ceased trading around July 19. Anyone know what that is all about??? Thank you.

    • Dan:

      Thank you for your query. I have searched the SEC website, ETrade, Motley Fool, and ADVFN.com to determine whether trading of GBLS has been halted. I have yet to find anything that indicates trading of this security has been halted and nothing to indicate that it is still actively traded. I shall continue to study this issue and will revert when I have information either way.

      Nathan A. Busch

  5. Yes, thanks for any info you may have to share on GBLS!

  6. I see JB has published another missive about “Finding the Next Microsoft”. I received it this weekend. Anyone else? Is he out of the stock picks game??? Anyone have insights on this? Thank you.

  7. Today, 15th November 2011, I received another missive by e-mail from our mysterious “John Bell.” The text was as follows:

    ***********

    The price-to-earnings ratio (or p/e ratio for short) is the most popular way to measure the relative valuation of two stocks.

    It tells the investor how much Wall Street is willing to pay for $1 of earnings.

    A $10 stock with $1 EPS (earnings per share) is going to have a P/E of 10 ($10 stock price divided by $1 EPS = 10 p/e).

    You can also invert this financial ratio to calculate something known as the earnings yield.

    This will allow you to compare shares of a company to other investments such as bonds or real estate.

    The earnings yield is calculated by simply dividing 1 by the p/e ratio – in this case, 1/10 = 0.10, or 10%.

    A stock with a 10 p/e is going to have a 10% earnings yield.

    That might be very attractive if bonds are yielding only 4%.

    P/E Ratio Limitations

    One of the limitations of the p/e ratio is that it doesn’t factor in growth in underlying earnings.

    Back when Sam Walton was rolling Wal-Mart stores throughout the United States, his customers could have told you that the
    cookie-cutter formula was going to continue to be rolled out throughout the nation.

    The gains in annual profit from year-to-year were eye-popping.

    The result?

    An astronomical p/e ratio.

    Still, when factoring in future growth, Wal-Mart was one of the cheapest stocks available on a value basis because the future cash flows more than justified that level of valuation.

    After all $10,000 invested back during the IPO with dividends reinvested is now worth north of $10m and throws off at least $170k in cash dividends each year.

    The PEG Ratio to the Rescue

    There is a way to adjust for the shortcomings of the p/e ratio and it’s called the PEG ratio.

    It stands for the price-to-earnings-to-growth ratio.

    To calculate the PEG ratio simply take the p/e ratio and divide the growth in earnings per share.

    Imagine that we have two companies – Company ABC and Company XYZ.

    The first, Company ABC, trades at $20 per share and has $1.50 in per share earnings with conservatively estimated future growth of 3% per annum.

    The second, Company XYZ, trades at $60 per share, has $4 in per share earnings and has conservatively estimated future growth of 5% per annum.

    Which stock is the cheaper one?

    Using the PEG ratio we can answer that question.

    We would simply plug in the numbers to the PEG ratio formula and get the following:

    Company ABC: $20 per share divided by $1.50 = 13.33 p/e ratio divided by 3% growth = 4.443

    Company XYZ: $60 per share divided by $4.00 = 15.00 p/e ratio divided by 5% growth = 3.000

    In this case, Company XYZ appears cheaper at $60 per share than Company ABC does at $20 per share despite having a higher p/e ratio as a result of the future growth in earnings.

    The guideline to use is that the lower the PEG ratio, the cheaper the stock.

    Optimism is Your Enemy

    The biggest danger in the PEG ratio approach is that humans are naturally optimistic.

    By banking too much on the promise of the future, a stock that would otherwise be worthless might appear to be a great bargain.

    This is what you had in the days of the dot-com bubble.

    Everyone was convinced that each new Internet business that went public would become the next Microsoft or Cisco.

    The difference: Both of those companies had very real earnings, and very real earnings growth.

    There were rumors years ago that Warren Buffett was once reviewing projections for future growth at Blockbuster.

    After looking at the figures, he mentioned that if you thought rationally about the assumed growth rate, every man, woman, and child would need to rent two videos per day, 365 days per year to make those estimates come to fruition.

    That isn’t going to happen.

    You need to frame your growth assumptions in this same way – ask yourself the underlying implications.

    This mental discipline can protect you from the downside of the PEG ratio, while still letting you take advantage of its basic premise.

    John Bell

    ***********

    Each time that I receive an e-mail missive from our “John Bell,” I wonder what those who gave him huge piles of hard earned money for his “stock picks” must be feeling. Are they angry, chagrined, humiliated, frustrated, feeling taken. Well, if one gives his money to, what I consider to be, a thief and SCAM Artist, then one should not be surprised as to the result.

    “John Bell” has taken a couple of concepts straight out of the writings of Joel Greenblatt, mashed these together with some twisted and incorrect machinations and provided his reader with absolutely no useful guidance or information. To be specific, he has attempted to argue that by using the anticipated growth of the price to earnings ratio, one can obtain some guidance as to the price of shares at some point in the future. This is complete nonsense as such logic necessarily assumes a particular macroeconomic structure and that technology and evolution of society will not make the products of the company obsolete.

    I have been studying Philip Fisher lately. Whilst he does not specifically state whether projections of future earnings growth is a useful measure of the future price of the shares of a company, his teachings do indicate that such a tactic is risky at best. He does, however, clearly indicate that historical patterns of share prices and earnings cannot form a reliable basis from which to predict the future price and earnings of a company. Joel Greenblatt has, in effect, stated the same principles, only in different terms and language. Based upon my study of the the work of Mr. Fisher, it is my understanding that one can only gain a guide to future earnings of a company by collecting and studying information about how the company is currently being operated, including: the quality of the executive staff of the company; the strength of the sales staff; the research and development efforts of the company; the debt load of the company; and a plethora of other indicators. Above all else, Mr. Fisher appears to indicate, that the best guide as to the future prospects for the company is the “scuttlebutt” about the company. This information is best collected not from the employees of the company; rather it is the information obtained from employees of companies in competition with the company of interest.

    When Mr. Fisher was writing his book Common Stocks and Uncommon Profits, he did not have the benefit of the nearly infinite amount of information currently available by means of the Internet. Nevertheless, he might have appreciated the power of the Internet for collecting information, including “scuttlebutt,” and financial data about companies of interest. In fact, in the day of Mr. Fisher, merely obtaining the regular filings of the company was a major undertaking. Now, one can obtain any filing made by the company to the Securities and Exchange Commission within 20 seconds. I even have a netbot that will not only obtain the documents, but will rip these apart for the relevant information. There is, therefore, no reason that we cannot take advantage of the instant availability of vast amounts of information to make rational judgments about the prospects for any company of interest.

    I hope that this helps.

    Nathan A. Busch

  8. Yes, I got this recently. My initial inclination was to post if anyone had also received it, but I decided that the John Bell tempest had faded into oblivion and I said nothing. However, I cannot help but echo your observation: Mr. Bell promised stock tips and picks. This is simply a few theories about investing strategies. And as you suggest, nothing that hasn’t been written about in the past decade or so. Maybe today’s market is just too volatile even for the volatile Mr. Bell? Thank you for sharing this, Nathan.

    • Dan and my audience:

      Thank you for your comment. Whilst this “John Bell” is, for all intents and purposes, history, he does serve a useful purpose. That is, his continuing missives provide a motivation for continuing to think about investing, finances, and how markets actually work.

      Nathan A. Busch

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