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My father was a defense analyst, and so the conversation could get pretty intense around the dinner table.
Usually, I could follow along, but when he started talking about the "credibility gap," I got a bit lost.
Having been raised on the folklore surrounding George Washington, I just couldn't believe that a president would ever lie. And so when my father said Lyndon B. Johnson had a "credibility gap" when it came to what he was saying about the Vietnam War, it just didn't compute.
(Did I mention I was only 10 or so at this time?)
Presidents, of course, aren't the only ones who can end up with credibility problems.
We took a look at a tech company with a huge credibility gap back on Jan. 10.
We saw how they were always making excuses rather than money. And I told you to avoid any hype you heard regarding a "turnaround" in the making.
Turns out, my prediction was dead on the money. Since then, this company has been hit by wave after wave of bad news.
Investors who ignored my warning paid dearly for doing so. This once-proud company's stock has fallen by roughly 24% since.
Today, I'll show you exactly what went wrong – and why avoiding losers is so important.
In fact, if you want to make enough wealth to provide for a secure retirement, it's absolutely crucial.
Mind the Gap
On paper, Japanese tech giant Toshiba Corp. (OTCMKTS: TOSYY) looks like a safe bet.
After all, it provides business services like cloud computing and counts Microsoft Corp. (Nasdaq: MSFT) and IBM Corp. (NYSE: IBM) as key allies. It makes laptops, tablet computers, external storage devices, memory cards, flash drives, and monitors.
As a veteran tech investor, I have followed TOSYY for years. And I've done the same as a tech consumer. From the late 1980s to the late 1990s, I owned several pieces of their gear, which included my main TV monitor.
But a few years back, I began to replace those devices with those made by upstarts like South Korean giant Samsung Electronics Co. Ltd. And so did millions of other Americans, making Samsung a bona fide global electronics giant.
In other words, Toshiba lost its edge in its core markets years ago.
Since then, Toshiba has attempted big bets in other areas – and, to be honest, not all of these new forays went kerplunk.
But the ones that did were so expensive that it's like someone snuck into Toshiba's headquarters one night and set up a series of time bombs in the balance sheet…
Here Come the Excuses
For the last two years, Toshiba senior execs have been revealing problems – and then insisting that the worst was behind them.
That's what happened last year when Toshiba took $1.3 billion in losses for an accounting scandal. Around that time, I began to hear whispers that Toshiba was putting its problems behind it and could make a great "turnaround" investment.
I was not convinced. And as we know now, it was rubbish.
Recall our Jan. 10 chat. I alluded to problems with the company's big bet on the future of nuclear power, especially in the United States.
We now know that Toshiba's strategy here was nothing short of a complete financial disaster.
In fact, things are so bad that, more than a month after I warned you off Toshiba, The Wall Street Journal called the company's "accountability" into question. The nation's leading financial daily wrote a scathing review of the firm's operations. Like me, the WSJ found it appalling that Toshiba said it would write off $6.3 billion in its nuclear power units.
The headline for the WSJ's Feb. 22 story said it all: "Lessons of the Toshiba Meltdown."
When a Nuclear Deal Blows Up
Here's what happened…
Back in the mid-2000s, Toshiba made a bold investment in what seemed like a renaissance for nuclear power. Unfortunately, it overpaid when it acquired Westinghouse and its nuclear business for $5.4 billion in 2006, with CNET saying the Toshiba paid three times what the merger target had hoped to get.
Toshiba should have seen that more problems were ahead following the 2011 Fukushima nuclear accident. But it doubled down on atomic power and acquired nuclear plant construction and operations firm CB&I Stone & Webster in early 2016.
If you've been paying attention, you won't be surprised to learn that Stone & Webster had its own troubles, not least of which falling behind on several key projects. It was like the blind leading the blind – Toshiba didn't have the talent needed to fix those issues and protect shareholders from more losses.
Now you know why Toshiba recently said it's trying to raise $8.8 billion by selling most of its flash-memory chip business. The company needs money in the bank in case new financial problems emerge.
I'm sharing this with you today not so much to bash on Toshiba but because of the important issue it raises – always avoid investing in companies where you just can't trust management's word.
In other words, "Avoid Companies with Operations That Lack Credibility." It's basically a corollary to Rule No. 1 of our five-part tech wealth-building system: "Identify Companies with Great Operations."
You have to look at anything Toshiba tells you as a work of fiction. There's no way to determine the truth or, therefore, the real value of its stock.
Had you invested $10,000 in Toshiba back on Jan. 10, you would have given up at least $2,400 of your hard-earned money.
Yes, every investor will pick losers. That's just a reality we all face.
But when you put your faith – and your money – in a company you really can't believe in, you're just asking for trouble.
Toshiba's "credibility gap" makes that all too clear.
Finally, before you go, I want to share one more way you can avoid losing it all in the market.
And that's following not just me, but all the experts here at Money Map Press.
Until now, the expertise and guidance of Technical Trading Specialist D.R. Barton, Jr., was available only to his VIP paid-up members.
On March 7, at 3 p.m. sharp, D.R. is doing something he's never done before…
He's going to share a 10-minute investing secret he's used for 30 years to make millions from markets.
And he's doing it for free.
In fact, he's going to send all the details to your inbox in a report called "The Secret That Can Turn $2,500 into $1 million or More." There's no cost to you whatsoever. All you have to do is keep an eye on your inbox for all the information.
In this report, D.R. has distilled decades of experience and market success down to three simple steps you can use to double or triple your money every week.
Plus, he's launching something very special – The 10-Minute Millionaire. Twice a week, D.R. will be sending you techniques, tips, strategies, and actionable stock recommendations you can act on immediately using his 10-minute system.
The 10-Minute Millionaire will be your blueprint for putting a million dollars in your retirement
Remember, there is absolutely no charge to get The 10-Minute Millionaire. It's absolutely free.
All you have to do is click here – and then watch for it in your inbox on March 7 at 3 p.m.
I hope you check it out.
See you back here next week.
- Strategic Tech Investor: Don't Even Think About These "Tech Turkeys" of 2017
- Strategic Tech Investor Special Report: Your Tech Wealth Blueprint
About the Author
Michael A. Robinson is one of the top financial analysts working today. His book "Overdrawn: The Bailout of American Savings" was a prescient look at the anatomy of the nation's S&L crisis, long before the word "bailout" became part of our daily lexicon. He's a Pulitzer Prize-nominated writer and reporter, lauded by the Columbia Journalism Review for his aggressive style. His 30-year track record as a leading tech analyst has garnered him rave reviews, too. Today he is the editor of the monthly tech investing newsletter Nova-X Report as well as Radical Technology Profits, where he covers truly radical technologies – ones that have the power to sweep across the globe and change the very fabric of our lives – and profit opportunities they give rise to. He also explores "what's next" in the tech investing world at Strategic Tech Investor.