The Altucher Effect

Includes: FH, NEON
by: Paulo Santos

Something curious has emerged in the last few months. I call it "The Altucher Effect". It goes like this: James Altucher, a famous blogger, entrepreneur and seemingly, speculator, writes about a low liquidity, low share price stock. The stock explodes in a sea of wild-eyed speculation. There's no doubt that the catalyst for these moves are Altucher's articles, and it's really quite amazing how much of a difference they make.

Here are the latest two instances of this effect:

Vringo (VRNG)

The day was March 30 2012. Vringo, a new patent troll company, was a sleepy backwater stock trading around 200-300k shares per day on around 14 million shares outstanding (soon to triple with the deal that made it a patent troll). That was the day before the Altucher impact. The stock closed at $1.65 that day.

Then Altucher hit. During March 31 2012, Altucher published "Why Google Might Be Going to $0" in Techcrunch, a widely read tech blog. All hell broke loose. In the next 2 sessions VRNG traded 18 and 22 million shares, both well above the existing outstanding shares. The stock went from $1.65 to $3.25, and touched as high as $4.05. A single Altucher article, based on information that was for the most part, public (the patents coming in and Google lawsuit were already known), was enough to set this off. You have to be amazed. I was, because I bought into it as well - getting out when Mark Cuban took it for another giant ride.


Fast forward to May 29 2012. Neonode was another sleepy stock, licensing touchscreen technology to other players. It was trading less than 200k shares per day at that point, on around 33 million outstanding shares. That day it closed the session at $4.78.

That was also the day Altucher published his piece, "Did Steve Jobs Steal The iPhone From This Potential $30 Stock?". The piece came in after the market closed, so it didn't impact the market that day. But it sure impacted it the day after. NEON went on to trade 4.8 million shares in the next session, and ended up 28%. All of this, again, was due to the Altucher effect.


This effect has two consequences:

  • One is that you can't ignore James Altucher. You just need to follow him. You need to follow him because what he writes is interesting and because you might get the chance to get into one of these speculative trains in the day he sets it in motion;
  • The second is that you might not want to board those trains in the days afterwards, given how filled with speculative passengers they'll be.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.