Cryptocurrency stocks just had their “K-Tel” moment.

Those of us who are old enough to know what a record player looks like, or who can reminisce about playing our favorite cassette tape on the car stereo system, remember K-Tel.

The company is best known for its compilation music albums, such as The Best of Disco, the #1 Hits series, and Anne Murray’s Greatest Hits.

Those of us involved in the stock market during the dot-com bubble remember K-Tel, too. Though just a bit differently…

In mid-April 1998, during the dot-com bubble, K-Tel was on the ropes. Its sales were declining. The company was losing money. It barely made enough to pay the interest charges on its growing mountain of debt. Its stock price was languishing.

So, K-Tel’s management did the only thing it could think of to turn its fortune around… It changed its name to K-Tel.com.

The mere announcement that K-Tel was expanding its business to the internet sent the stock screaming higher. K-Tel rallied from $9 per share to $21 in just one day. It hit $34 per share one week later.

K-Tel wasn’t the only company that saw its stock rise simply by connecting it to the internet community. But it was the most flagrant, upfront, obvious manipulation we’d seen up to that point.

Internet stocks were hot. And K-Tel was going to capitalize on it.

The business hadn’t changed. The balance sheet hadn’t improved. K-Tel was still as close to bankruptcy as it had been the day before. But the stationary now said “K-Tel.com”… and that was good enough for a nearly 300% increase in the stock price.

Lots of traders I knew rushed to buy the stock because everything with “.com” in its name was on fire. They understood the stupidity. They agreed it was illogical. But, as they said at the time, the stock was running higher. It was either get on board despite the absurdity or stand aside and watch everybody else profit off the move.

Less than one year later, K-Tel shares were trading for pennies.

The dot-com bubble lasted another two years after K-Tel announced its name change. But when I think about the craziness of that time, about the insanity of valuing companies based on “page views” or “eyeballs”… about how so many investors knew they were being foolish with their money but they just couldn’t sit by while everything kept going higher… about all the money that was wiped out when the bubble popped… I think about K-Tel.

Traders will do well to remember the story of K-Tel as the cryptocurrency bubble inflates. Beware of stocks that soar in price on nothing but the promise of maybe, someday, perhaps doing something involving cryptocurrencies.

K-Tel didn’t do anything at all to change the value of its business. Management wanted a higher stock price, so it did what it had seen other companies do to pop their share prices higher. It simply changed its name.

And investors came running… for a while, anyway. Then they lost everything.

Now, consider the current story of Bioptix Inc. – which used to be a biopharmaceutical/medical device company.

Bioptix had fewer than six million shares outstanding – 40% of which were owned by company insiders. The stock hadn’t done anything all year. It started 2017 at about $3 per share – which gave it a total market capitalization of about $18 million. And it stayed at about $3 per share up until October.

That’s when Bioptix changed its name to Riot Blockchain (RIOT). And just look at what happened to the stock…

RIOT hit a high of $24 per share last Friday. That’s an eightfold increase in the market value of the company based solely on the name change.

The term “blockchain” describes the technology behind transactions in the cryptocurrency market. Companies involved in that space have been HOT. So, by merely changing its name to something that included the term “blockchain,” Bioptix manufactured over $110 million in market cap.

How much would you like to bet the insiders own something less than 40% of the outstanding shares now?

This is the sort of stuff that happens as bubbles inflate. It doesn’t mark the top of the bubble. Like I said, the dot-com mania went on for another two years after the K-Tel scam. But it is a warning sign.

So, if you’re going to dance to the classic hits of the late 1990s, just be sure to get off the dance floor before the music stops playing.

Best regards and good trading,

Jeff Clark

P.S. In the Delta Report, we don’t buy into hot stocks with little potential. Instead, we make short-term trades on proven companies… and frame these trades to make big, fast gains.

Just this year, we’ve had winners like 150% in 4 days on Toll Brothers… 139% in 5 days on Target… and 174% in 12 days on Teva Pharmaceuticals following this strategy.

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Reader Mailbag

For today’s mailbag, readers wrote in about a recent earnings trade winner…

Thanks Jeff, I hope you and your family have a wonderful Thanksgiving! Thanks to you, I will be heading into mine feeling very thankful as well…

Another fantastic earnings trade! And by releasing the recommendation when you did, I was able to get a great entry price at $1.00. I strategically took on a larger position size initially at that price, and then sold half for a 30% gain yesterday at $1.30. And this morning, I sold the remaining half (which would have been my original position on this) for $1.85. I could have held out selling for another 30 minutes or so and made even a significant amount more!

This one worked out textbook, like your algorithm was saying it should. Very nice! Thanks again!

– Ryan R.

Great call on GameStop. I almost didn’t invest as I wouldn’t think GME would be profitable. Made $1,700 overnight and had a happy Thanksgiving.

– Dennis L.

Jeff, I am a lifetime subscriber and have profited from your advice since well back into your Stansberry days. I look forward to your advice every day and really appreciate your humor, it is “terrific.”

Thank you for the two-day notice on the recent GME earnings trade. I couldn’t get into it on the first day at $2.40 and decided not to chase it. I put in an order before the market opened on the second day and was filled at $2.40. By the time I saw your $1.20 sell advice, the price had dropped to $1.00 to $1.05. I exited at $0.98. I could have missed this trade altogether by waiting for $2.40, but my point is that the second day probably allowed a lot of your subscribers to enter the trade. If allowing the two-day notice doesn’t lower the probability of success, this is a great idea.

Thank you for your perseverance and dedication.

– Keith M.

And we also heard about dealing with wild turkeys, inspired by our Thanksgiving issue, “Beware the Complacency of Turkeys”…

Here in the Diablo Valley of California, the turkeys have deduced they are fairly safe from people. If they are a nuisance on your own property, I understand they can be killed, but not eaten (per the Fish & Game Department), even though they are not the extinct western turkeys, but “invasive” eastern turkeys. Methods used, however, are regulated by your local city, which in suburbia California means mostly prohibited. There are certain times of the year when you can’t “harass” them and others when you can. They can harass you any time, although I think they’re really looking for insects, fruit, and other things to eat, and not the total destruction of your landscaping.

The time to be really careful is when the hens have chicks. My brother was running down a steep hill behind his house, and suddenly a turkey hen burst up in front of him, with her claws out to try and scratch his face. He was able to sidestep her, and only then realized that there were chicks hidden in the long grass.

In short, all may seem calm, but the flock may have a wary eye out for danger. It’s the complacency of your fellow investors you need to worry about; they act normal, but they’re worried. That’s probably a key reason why there is a pattern in the VIX of long periods of everyone trying not to disturb the status quo (or call attention to themselves while they try to feed while the eating is good) followed by panic and flight. They know it can’t last, but they keep quiet and hope for the best for as long as they can.

– Sandra K.

Some insight on trading using LEAPs…

LEAPS! Jeff, I use them only in a bullish situation. Why? It’s the best track I know of. So I can use my favorite ploy – as the stock goes up, I keep multiplying the number of contracts I control. Say, I start with 4 contracts, then 8, then 16.

It requires a lot of discipline. Don’t get caught with your pants down when the music stops. Namaste!

– Douglass G.

And finally, some more friendly English language debate…

I had to smile at Dana D.’s comment which you printed in the Market Minute on November 22. Ironically, her spelling of the word “bastardization” is the TRUE bastardisation of the English language. Best regards.

– Purvez D.

Were you trading when the dot-com bubble popped? Do you think we’ll see the same thing soon with cryptocurrencies?

Send in your thoughts… and any other questions or suggestions… right here.