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From Zero to Hero to Zero

|Includes: China MediaExpress Holdings, Inc. (CCME)

I'm dizzy from this trip. It's like one of those Magic Mountain Roller Coasters that go upside down and around. I'm pulling G-Forces in dollars, not centrifugal force.

After tip toeing back into the China small cap sector with my Big 3 current ideas, Thursday morning the investment community was reminded just how treacherous this sector can be, and the detractors are now back out in force with their message- all things small cap, China, and reverse merger are fraudulent.

And, just to clear something up- this "Reverse Merger" witch hunt is a media invention. At the very beginning there's less due diligence done a reverse merger. However, all the reporting standards are the same for any pub co, and many of these have been reporting for five years and done multiple reviewed registration statements with the SEC. That's right- the NYSE, Berkshire Hathaway, Occidental Petroleum- all reverse mergers. Fraud is fraud no matter how you were born. Enron and WorldCom weren't reverse mergers.

Two weeks ago today I attended a conference in NY devoted to identifying fraud and understanding the issues from the China point of view. It was interesting and I came away with a much better understanding of how to evaluate a potential problem and/or opportunity.

My Big 3 stocks were up about 40% each over the past 30 days- until Thursday morning. China Media Express (OTCPK:CCME), the lynch pin of the short argument, re opened for trading on the pink sheets, and reminded everyone of the dangers inherent in the China small cap world.

Apparently CCME presented its case to NASDAQ to allow for more time to get its 2010 audit done. NASDAQ wasn't buying it, and summarily took away the company's NASDAQ listing. That seems to have been the trigger point for the regulators to re open the stock for trading.

On Thursday morning CCME began trading again as a non-reporting pink sheet stock, and short sellers were handsomely rewarded for betting on the right side. I was on the wrong side and took my beating. CCME, after closing in the high $11's, reopened a hair under $5, and is now $1.80.

I wasn't at the computer right at the open, and thanks to one of my stalwart trading cohorts, I was informed and fired up the machine in time to get out at $4.60 as I was notifying subscribers. I'm happy to have this ugly incident in the books. It was like being down by 10 runs with 2 innings to go- you accept the loss and just want the game to be over so you can start a new game the next day.

All things small and China got walloped with CCME appearing back on the scene. I believe it served as a grim reminder of the past, and the short sellers were reinforcing their message to the small cap China community.

I still believe the big intra day reversal in CHBT two weeks ago marked the beginning of a resurgent belief in some of these companies with cautious optimism. The valuations are so low that you are being rewarded to take the risk, but there's still plenty of risk.

So, with my Big 3 all going into corrective phases, I've gone from Zero, To Hero, Back To Zero. This is a roller coaster ride, so eventually we'll end up completing the ride.

Believe it or not, technically I view the past two days sell off as very positive. It's hard to buy streaking stocks since you don't know when it will end. It's much easier to buy streaking stocks when they go into a corrective phase, and surprisingly easy to figure where to buy them.

Now that we're experiencing these pull backs, I'll show you exactly where you want to own these stocks- if you like the ideas. You might not. You might prefer to stay on the sidelines and watch this tug of war. That would be your call. I'm an aggressive investor, and optimist, and a risk taker, so I'm a buyer.

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Warmest Regards,

Larry Isen