Table of Contents

Special Notice 4
Chapter 1 – Introduction 5
Chapter 2 – A Primer on the Stock Market 7
Chapter 3 – So What is this Loophole? 14
Chapter 4 – How to Calculate a Fair Price Per Share 19
Chapter 5 – Why You NEVER Pay a Fair Price 27
Chapter 6 – Insider Trading that is Perfectly Legal 31
Chapter 7 – Real Examples of Loophole Profits 32
Chapter 8 – Putting it All Together. A Step-By-Step Guide 35
Chapter 9 – When to Sell 45
Chapter 10 – Further Reading 48
Bonus Chapter #1 – Risk Free Profits via The 2nd Loophole 50
Bonus Chapter #2 – How to Totally Automate ALL of This! 54

How to Hack the Stock Market

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Chapter 1 – Introduction
This is my first major information product. I am not an
accomplished author or speaker, so this product will have some
flaws. If you read for style, or for literary quality, like I was saying
before, this may not be for you.
But there are paragraphs in this report – ideas in this report
– whole chapters in “How to Hack the Stock Market” that will
have you slapping your thigh and gleefully punching the air
above you.
I’m not blowing smoke when I say: This report could have you
earning thousands of dollars from the stock market - almost
immediately after you’ve finished reading it.
Here’s why:
Every 3 to 4 weeks there is a certain pattern that happens in the
U.S. stock market.
This pattern occurs every 3 weeks at most AND it only happens
to stocks listed on the NYSE and Nasdaq markets.
But when you understand this pattern you can buy shares in
little-known companies at up to 80% off their true value.
Almost religiously after you’ve bought your shares the pattern
will reverse. The stock will climb higher and higher - Allowing
you to leisurely watch as your money doubles and triples in a
matter of weeks.
After that – the hardest decision you’ll need to make is when to
sell and collect your handsome profit.
What’s more you can do it all from the comfort of your home
computer or laptop. All you need is an online brokerage account
and a live up-to-the minute intraday graph.
However, if you know how to use these simple tools and, you
have the ability to focus on the market for approximately one
hour each week… There is no limit to the amount of profits you
can make.
In case you’re skeptical, you needn’t risk a penny in testing it
out. Most online brokerages allow you to use a “fake money”
account to test your strategies.
Allowing you to watch firsthand as this pattern occurs each and
every month – And use this “monopoly money” to place live
trades and see for yourself how easy it is.
Once you’re confident – You can invest as little or as much as
you like exploiting this loophole.
For example: With just $3,000 to invest you could feasibly
generate a $10,000 monthly income.
How would an extra $10,000 a month change YOUR life?!
Of course, that’s enough to live on and then some. It actually
takes me more time to drive to my local bank and get $300
from the ATM than it does to make it using this stock market
loophole!
Right now... I’m sure you’re skeptical as hell. You may even be
thinking to yourself that you have bought the diary of a madman.
But let me make you a small promise:
Give me a few days.
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Study this report.
You will never be the same again.
Once you learn what I have to teach you... unless you somehow
lose your memory... it will be impossible for you to ever be
“ordinary” again.
It would be impossible for you to not know how to make tons of
money – And it will be impossible for you to forget about what
you read.
I hope you’ll give me the benefit of the doubt with my promise.
If you do, please read on.
But if you can’t cast-aside your skepticism, please do not waste
any more of your time reading any further. Unless you believe
in me - “How to Hack the Stock Market” will be worth nothing
to you.
Anyway, before we jump into this thing with both feet... let’s get
acquainted. Maybe I should tell you a little bit about myself.
I was born in Cincinnati, Ohio on March 14th 1978. I grew up
with a poor but comfortable upbringing - without a Father.
I was born with a mild form of Asperger’s syndrome. And this
gave me an intense passion for numbers and patterns. At about
age 15, this passion evolved into a fascination with the stock
market.
It was never about the money for me. My intense interest in
the stock market was just a manifestation of my Asperger’s
syndrome.
I spent years of my life reading copious stacks of library books
– All about the inner workings of the stock market.
It probably sounds boring to you but these dusty old library
books literally kept me up at night.
But despite my intense passion for the stock market it wasn’t
until the age of 28 I stumbled on this stock market loophole.
I was actually working as a janitor at the time and living in rent
control housing in California.
But...
What’s most intriguing about this loophole – Is that no matter
how many people follow this technique. No matter how many
people I teach it to:
It will NEVER stop working. The loophole is literally built into
the system. Wall Street will never care about plugging this gap
because the amounts are too small for them.
A thousand here, a thousand there – To Wall Street this is like
picking up pennies from the curb. To an ex-janitor like me, or a
work at home mom – The chapters you are about to read are
gold.
One more thing...
It’s just as hard to make $100 using this loophole as it is to
make $10,000. I do not mean this in a negative way...
I mean it in the most positive way possible.
It’s just as hard to turn one dollar into three dollars one hundred
times as it is to do it ten thousand times, so why not do it to its
fullest? I sure do.
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Chapter 2 – A Primer on
the Stock Market
Before we get down to the nuts and bolts of my stock market
loophole. I need to give you a quick primer on investing. I’m
talking about “real” investing. Not taking punts on a stock
because you heard somewhere it’s “hot”.
Investing in a stock because a friend or uncle told you to is pure
folly. Likewise investing because a hot stock is about to split, or
because you liked the story is also a mistake.
In the next few pages I’m going to explain a mindset with which
to view the stock market. Don’t worry; this isn’t some Tony
Robbins-esque motivational thing. I’m not going to ask you to
chant along with me, or “believe in yourself”.
Although I do want you to do one thing.
Suspend your belief that other investors are smarter or more
intelligent than yourself. You may not believe it right now, but
just open your mind to the possibility that Wall Street is not as
smart as they’d like you to think.
Stocks are not wiggly lines.
Most investors (and especially traders) think of stocks as
wiggly lines on a chart. And these lines could wiggle upwards
or they could wiggle downwards. To them a stock is an
electronic price quote and the price is all that matters.
This fuzzy thinking is mostly true of day traders. The types
who try and predict if a stock will go up by plotting chart
patterns and levels of resistance etc.
What’s wrong with this thinking?
The stock market wasn’t setup over 100 years ago for shares
to be bought and sold based on fictional chart patterns and
so called resistance levels. Nobody could even imagine a
computer back then, so charting & day trading didn’t even
enter their minds as a use for the stock market.
Following chart patterns is in my opinion a pseudoscience,
and choosing to learn day trading instead of investing is akin
to studying acupuncture instead of medicine.
When you buy a stock you’re actually buying a fractional
ownership of the underlying business. You’re buying the
income stream, you’re buying the assets and you’re taking on
the debt.
This may sound obvious but think about what this means.
Whenever you’re buying stock you should imagine you’re
in fact buying the entire company. My point is a billionaire
investor wouldn’t buy an entire company because he heard
it was hot, or the chart pattern told him to – He would buy an
entire company because:
• He believed earnings will continue growing giving him a
high return on his investment. Therefore if Mr. Billionaire
paid a 10x multiple on today’s earnings, he estimates he
can sell in 5 years at the same 10x multiple of much higher
earnings.
• Or his reason may not be based on earnings; it may be
based on the company’s assets. Maybe the company has
15 factories on the books valued at $20 Million. Because
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 of historical cost accounting assets are never marked up in
value (even real estate). So if these factories were bought
in 1902, they could be worth $700m by now – a huge
hidden asset Wall Street has missed.
Most “at home” investors don’t even look at what they receive
in return for their money. They probably barely glance at the
assets, liabilities and earnings stream they buy – All because
they view their stock as a fast moving price quote instead of
ownership in a real, live business.
Let me give you an entirely possible (and actually quite
common) scenario. Imagine two companies trade on the stock
market, Union Book Company and Digital Books Corp.
UBC is viewed as a relic of old. This company was formed in
1937 and plods along each year selling books from their direct
mail catalog mainly to mature customers aged 50+.
On the other hand Digital Books Corp is viewed as new and
exciting. Setup 3 years ago they sell digital books online
mainly to young, switched on customers.
It just so happens: both these companies earn $10 million per
year and both have $200 million of debt. The only difference
between the two is the cash balance. UBC has $250 million of
cash on hand whereas DBC has only $50 million.
Union Book Company. (UBC) Digital Books Corp. (DBC)
Cash: $250 Million Cash: $50 Million
Total Debt: $200 Million Total Debt: $200 Million
Net Income: $10 Million Net Income: $10 Million
Market Cap: $100 Million Market Cap: $100 Million
Union Book Company. (UBC) Digital Books Corp. (DBC)
Real Cost: $50 Million Real Cost: $250 Million
Real Earnings Yield: 20% Real Earnings Yield: 4%
Most investors wouldn’t take the cash balance into account.
They’re too busy plotting a chart, or getting swept up in the
romance of Digital Book Corp’s impressive business plan and
growth projections.
Here’s why that’s such a big mistake.
The market cap of a company is the price per share x total
number of shares. i.e. it’s the price of the entire company.
So UBC and DBC cost exactly the same amount, right? Both
have a market cap of $100m which makes sense considering
they both earn $10m per year.
This would give you an earnings yield of 10%. i.e. if you
bought the entire company for $100 million you’d be paid $10
million per year.
The problem is this common assumption is wrong.
Union Book Company really costs just $50 million; On the
other hand Digital Books Corp costs a very real $250 million.
This gives Union Book Company an even juicier 20% earnings
yield, and Digital Books Corp a 4% yield (Less than you can
get from a risk free U.S. government bond).
How so?
Because whether buying one share, or an entire company you
receive a proportionate ownership of their assets, debt and
earnings stream.
How to Hack the Stock Market
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If you bought the entire Union Book Company for $100 million
you could immediately use their $250 million in cash to pay off
the entire $200 million debt. And you’d still have $50m in cash
leftover. Since you own the entire company you can take this
money and pocket it.
E.g. Union Book Company’s Net Debt = +$50m
Instead of spending $100 million on buying Union Book
Company you’ve in fact spent just $50 million, because the
company was cash rich. And you have a steady $10 million
per year income stream giving you an earnings yield of 20%
on your investment.
You can probably see where I’m going with this.
Digital Books Corp has net debt of -$150 million ($50m cash -
$200m debt). Which means if you bought the entire company
for $100m, then used the $50m in cash to pay off debt –
You’re still left with $150m in debt.
E.g. Digital Book Corp’s Net Debt = -$150m
Which means you didn’t really buy the entire company
for $100 million like you thought, your real cost was $250
million – Because you took on $150m in debt as soon as you
acquired it. Leaving you with a rather undesirable 4% earnings
yield.
Sure when you buy shares in a company you aren’t personally
held accountable for the debt. When buying shares you can
never lose more than you invest. But this doesn’t mean you
can ignore a company’s assets and liabilities. After all the
company’s debt repayments will affect future earnings and
your share of those earnings.
My point with all this? You cannot make money in the
stock market treating shares as flashing price quotes. The
companies are real and your share of the company is real.
You wouldn’t buy a local restaurant without glancing at the
books. But this happens every day in the stock market when
day traders invest based on the pattern of a wiggling line.
Billionaire investors like Warren Buffett consistently buy stocks
like Union Book Company. Stocks where the profit is made
before they’ve sold any shares. Because…
Price is what you pay. Value is what you get.
Here’s another way of putting it:
Imagine two men, one in Columbus, Ohio (Dave) and one in
New Jersey (Adam). Both Dave and Adam are newlyweds
starting a family and need a new, cheap second hand car.
Both happen to find a car they like, and it just so happens the
cars cost exactly the same amount ($4,000).
We can all agree $4,000 is the price (or sticker price) of each
car.
But what Adam or Dave receives in exchange for their $4,000
can be drastically different.
In New Jersey, Adam visited a local second hand car dealer.
The sleazy hotshot salesman sold Adam a car he picked up
at auction just a week earlier for $1500. The car is a mess.
It was involved in a collision and put back together at some
point. Of course, Adam wasn’t told about this – He was in awe
of this fast talking, sharply dressed salesman.
Meanwhile Dave bought a $4000 car from his neighbor. The
How to Hack the Stock Market
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neighbor, an elderly man had bought the car just a year earlier
for $8000 but had suddenly run into financial problems and
needed cash fast. He sold this fine car at a knock down price
and accepted the loss. His loss was of course Dave’s gain.
In both cases the sticker price was the same - $4,000.
But the VALUE was much different. You cannot put an exact
amount on value because it isn’t written anywhere and the
figure is subjective. But it’s plain to see Dave got much more
than $4,000 in value while Adam received much less than
$4000 in value.
This same thing happens in the stock market every day.
Companies with exciting stories (like bio-technology) sell at
sticker prices well above their true value.
Meanwhile boring & stoic companies like manufacturers sell at
sticker prices well below their true value.
You’ see, every company trading on the stock market has
an “intrinsic value” – Nobody knows what this exact value is
because companies are complex ‘machines’ with thousands
of variables.
But, right now there will be hundreds of stocks trading at 50%
or less of their true value. In other words dollar bills selling
for 50 cents. And you’re much more likely to find these 50-
cent dollars amongst the boring and unloved than the exciting
stocks Wall Street loves.
But I hear you ask, if boring companies are always valued
at say 7x earnings while exciting companies are always
valued at, say 20x earnings – How can I realize a profit on the
difference, how can I sell my shares in a boring business for a
more sensible 10x or 11x earnings.
The Only Universal Truth
This is the only point I’m going to need you to accept a
universal truth. Here it is:
In the short-term stocks can sell at any price (cheap, fair
or expensive). But in the long-term the price always moves
towards fair (where value roughly equals price). In the long
term (1 – 3 years) the stock market is efficient, in the short
term it can be hugely inefficient.
To use the same analogy. The same can be said about
the second hand car market. Say you want to buy a 2006
Ford Mustang. At any point in time there will be some 2006
Mustangs selling very cheap, some very over-priced BUT on
average, most 2006 Mustangs will sell at a fair price.
The market for second hand cars as a whole (the market’s
fictional hive mind) will have a fair price in mind for a good
condition 2006 Mustang. But there will always be outliers.
The elderly neighbor selling in a hurry or the sleazy salesman
squeezing out every last dollar.
Likewise most stocks sell at a fair price. Your job is finding the
outliers. The one’s selling very cheap.
Most often (like the elderly neighbor) these cheap stocks are
neither sexy nor exciting. Funeral homes, tobacco processors,
DIY megastores etc.
As opposed to the fast & exciting new bio-tech with a miracle
patent on the brink of curing cancer. It has no revenues, let
alone profits – But just think of the possibilities!
How to Hack the Stock Market
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One you’ve bought shares in what you consider a fifty-cent
dollar you hold onto the shares and wait. And you’ll only
consider selling when they eventually reach your estimate of a
fair price.
But it’s not always plane sailing. Sometimes after you’ve
bought a stock it can drop – no matter how cheap it is.
Let’s say you value a stock at $13 per share. If after you’ve
bought this stock at say, $6 it suddenly falls to $4 you do not
sell in a panic induced haze. You should in fact be happy; the
market has offered you more “$13 bills” for the even bigger
bargain price of $4 each.
If you liked it at $6 you should love it at $4. And if you have no
more money to invest, you just sit tight and wait for the market
to crawl up to a more sensible $10 - $13 per share.
Mr Market.
Now, just in case a few of you still haven’t “got it”. I’m going to
explain it yet another way.
Imagine you are partners in a private business with a man
named Mr. Market. Each day, he comes to your office or home
and offers to buy your interest in the company or sell you his
(the choice is yours).
The catch is, Mr. Market is an emotional wreck. At times, he
suffers from excessive highs and at others, suicidal lows.
When he is on one of his manic highs, his offering price for the
business is high as well, because everything in his world at
the time is cheery. His outlook for the company is wonderful,
so he is only willing to sell you his stake in the company at a
premium.
At other times, his mood goes south and all he sees is a
dismal future for the company. He arrives dejected and pale,
tie loose around his neck. He is so concerned, he is willing to
sell you his part of the company for far less than it is worth. All
the while, the underlying value of the company may not have
changed - just Mr. Market’s mood.
The best part of this entire arrangement: you are free to ignore
him if you don’t like his price. The next day, he’ll show up at
your door with a new one. For your interest, the more manic-
depressive he is, the more opportunity you will have to take
advantage of him (don’t worry, he doesn’t have feelings or
mind being taken advantage of.) As long as you have a strong
conviction of what the company is really worth, you will be
able to look at Mr. Market’s offers and reject or accept them...
the choice is yours.
This is exactly how you should look at the stock market -
each share that is traded is merely a part of a business. Each
morning, when you open up the newspaper or turn on CNBC,
you can find Mr. Market’s prices. It is your choice whether or
not to act on them and buy or sell.
If you find a company that he is offering for less than it is
worth, take advantage of him and buy as much as you want.
Surely enough, as long as the company is fundamentally
sound, one day he will come back under the sway of a manic
high and offer to buy the same company from you for a much
higher price.
By thinking of stock prices in this way - as mere quotes from
an emotionally unstable business partner - you are free from
the emotional attachment most investors feel toward rising
and falling stock prices.
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Before long, when you are looking to buy stock you will
welcome falling prices. The only time you want to invite high
stock prices is when you are eager to sell your shares for
some reason. Thankfully, in most cases (except those caused
by “Life”), you are free to wait out Mr. Market’s emotional roller
coaster until he offers a price that you consider equal to or
higher than true value of your shares.
This mindset is your greatest advantage in investing.
The Dividend Fallacy
There’s one other thing I need to address. The fallacy of
dividends. When telling friends or family you live off your
investments they’ll often say something like “so you own
dividend stocks”. Uninformed investors believe receiving a
dividend is “something extra” a freebie.
They can be forgiven for thinking this. During the first half of
the twentieth century, Wall Street believed that companies
existed primarily to pay dividends to shareholders. The past
fifty years, however, have witnessed the acceptance of the
more sophisticated notion that the profits not paid out as
dividends that are reinvested in the business also increase
shareholder wealth.
Profits not paid out can be used for expanding the company’s
operations through organic growth and acquisitions or
strengthening the shareholder’s position through debt
reduction or share repurchase programs.
Whether a company you’re invested in pays out 80% of
earnings as a huge dividend each year or retains all earnings
to be reinvested. In real terms, you’re no better off either
way as long as the company doesn’t have egotistical or
inept management who will squander the money (overpriced
acquisitions being the biggest culprit).
However dividends are good for providing a floor on a stock
price. Notwithstanding some big accounting scandal a healthy
dividend will keep a stock above a certain level. On the other
hand a big dividend is a message from management that they
don’t believe they can invest excess cash at good rates of
return. Instead they’re giving the money back to shareholders
so it can be invested elsewhere. This is often indication of a
company late in its life.
In short: Whether you own one solitary share or the entire
company - earnings are earnings. At the end of the year
you’re richer because the company made an economic profit,
not because you cashed your dividend check.
Lesson Over
Now, you have a burning question. I can tell. Let me take a
guess.
You’re thinking if it really is this easy to make money in
the stock market. Why isn’t everyone doing this, surely the
Harvard MBA types on Wall Street with the 180 IQ’s would
know about this and any profit would have been “competed
away”.
After all, Wall Street is a cut throat industry. Where the
smartest whizz kids are hired straight from college, and
provided with teams of analysts, research and computing
power.
What would be left for little old you and me with a laptop
computer and pocket calculator?
How to Hack the Stock Market
11
Oh, ye of little faith. Read on down to Chapter 3 where I
explain exactly why Wall Street MBA types are not competing
for these easy profits and why in fact they’re the ones you’re
“stealing” from!

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How to Hack the Stock Market

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