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Timothy Sykes: Penny Stock Investing, Patterns And Philanthropy

We are talking to a fireplug, a spark plug, a guy with incredible energy. I first want to start off and say if there is an explicit warning, this guy is super explicit. That is his passion coming out of him and talking about the thing that he loves, which is penny stock investing.

His name is Timothy Sykes. You're about to discover how he generated $100,000 in returns in a single day while in college and over the course of that generated $1.65 million in a few years. He's going to talk about how he did that with penny stocks, how to identify and ride the patterns and also why penny stocks get such a bad rap and he owns up to it. This industry is filled with scammers and he is looking to change that.

Even if you're a bit curious, I encourage you to check out the show to see what is possible. We also talk about in this show philanthropy and all the different things that he has done. I found fascinating and interesting how he's parlayed his penny stock obsession to now educating others, to now donating money to causes he is incredibly passionate about. If you're looking for a show to knock you off your rocker, something you might not know about investing and some good old paying it forward, then you're going to love this show.

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Dustin
Tim, you're about eighteen years old. You're a top tennis player. You're about to enter into a college when you injure your elbow, which causes you to pivot. A lot of people would think, “There goes your dreams,” but that causes you to pivot and you turned to stocks to fill the void. In college you earned $100,000 in a day, $1.65 million in a few years. How did you go from being a top tennis player into generating tons of money in the stock game?
Timothy
It's all about obsession. I was obsessed with becoming a good tennis player. I played every day for several years. I over-trained, which caused my injury. My dad calls it a million-dollar injury because it got me into stock trading. You need to be absolutely obsessed with whatever topic you're trying to master. Whether you're working out if it as something physical, if it’s stocks, it's all knowledge. For me, I was trading stocks. I was spending the majority of my time researching, reading books, learning what moves stocks and which stocks are best. I didn't have a lot of money. I started at my Bar Mitzvah money of $12,000. My parents gave me control of it. They thought I would lose it all in the market. They thought it would be, “Give the kid the money, he'll lose it all. It will be a good lesson.” That's the kind of parents my parents are.
Dustin
Were your parents into stocks? How did you arrive there?
Timothy
I'm Jewish. I'm naturally greedy. It's in my blood.
Dustin
Why not real estate? Crypto wasn't around back then.
Timothy
The stock market was going crazy. It was 1999, 2000. I was in the right place at the right time. I made nearly a million dollars my freshman year in college but then the market crashed. A lot of people who made money in 1998, 1999, 2000 lost all their money in the crash of 2000, 2001, 2002. I adapted again. I got into short selling. At first, I made my first million buying penny stock breakouts and then I adapted. I started short selling them, meaning I bet on stocks going lower. I gravitated towards penny stocks because I didn't have a lot of money. I couldn't afford the big high flyers of the day like Netscape and Yahoo. I was like, “If these companies have good internet businesses, there might be some smaller internet businesses and their stocks can boom.” That was true. That's what penny stocks are good for. They can go up exponentially and you catch a piece of the ride. I never timed it perfectly. I never ride them all like 1,000%. I take 20%, 30% gains.
Dustin
I want to first start off with dorm life or wherever you were. Were you like, “Come over and look at what I'm doing?” Were you quiet about this? What was your excitement level?
Timothy
I've always had a big mouth. My freshman year, I had three fake IDs taken away from me. My friends were all joining fraternities. I can't even get in because I can't go into any bars. I can't drink for shit. I was a bad freshman. I was downloading illegal movies on Merch. That is what I was doing and I was trading stocks. I was also going to classes. I made nearly a million dollars in a few months. The NASDAQ was on fire back in 1999, 2000. The NASDAQ went from $2,000 to $5,000 in a matter of months. That's where I had the biggest run-up, every single day stocks were spiking. I would invite people over and I didn't win 100% of the time, but I was winning 80%, 90% of the time. I was like, “I'll bet you $100 each that I can make $10,000 in the next hour.”
I was waiting for the pattern and then I would collect $100 from four freshmen. It was a video game. Back then my number one pattern, you're going to laugh at how simple it was. I never tried to predict news to this day, many years later. That's a fool's game. That CNBC, I'm sorry but this is why most traders lose. 90% of traders lose if you look at the stats because they're trying to predict what the next trend is. You don't have to do that with penny stocks and you can wait for the news to come out and because they're hated, they're underfollowed, any big news takes one to four days to get priced in. The news can come out on a Monday and the stock can spike the biggest on Thursday. It's inefficiency, which is what I love.
Dustin
Why don't they get the love? Is it because many people have wrecked it?
Timothy
There are so many scammers and there's not a lot of money. Big hedge funds can't take $10 million share positions because that's the whole company. It's a smaller game.
Dustin
What are we talking? Can I put $10,000 into something or maybe $50,000?
Timothy
Sometimes I put $200,000 and I put $1 million before. It's out of the reach of $10 million, $100 million and $1 billion. Most of Wall Street, it's irrelevant. It’s for average people, which is fine. You have to understand the scalability issues. Back then, the funniest pattern that worked almost every single time. The internet was brand new. Companies would add dot-com to their corporate names. I would buy a stock. Sportsman's Guide is an example, they sell camping equipment. They're still around. They changed their name from Sportsman's Guide Inc. to SportsmansGuide.com Inc. and put out a press release. The stock tripled over a few days. I didn't ride it the whole way up because I was like, “This is too easy. There's some trick. What is this?” I would take my 20%, 30% buying it on day two after the news, selling it on day three and making 10% to 30% overnight.
As the news spread, “This is the new dot-com. This is the hot new play.” I was waiting for companies to add dot-com to their name. I would look at the press releases and then I would buy the stock. That was the whole set up that made me my first million nearly, then it stopped working. In the year 2000, I made roughly $730,000 the first few months when the NASDAQ was spiking so much. In the last few months, I lost $10,000 because there were no more dot-coms. The whole market was crashing. That pattern was dead.
Dustin
What did you do? Did you find a new pattern?
Timothy
I would learn short selling. I was like, “Every stock is dropping. Is there a way to profit off of that?” I learned that through short selling you take a negative position, which is scary. You can take a negative position and then profit as the stock goes down. You're buying low, selling high but it's reversed. You're selling high at first and then buying low.
Dustin
Does this carry that stigma, the guy at the craps table that's betting against the houses? That same thing or am I off base here?
Timothy
It's true. No one on Wall Street likes short sellers. It’s a small niche strategy because everyone on Wall Street is a cheerleader from the analyst to the CNBC to the companies. Even if a company's going bankrupt the next day, they're going to be like, “Everything's fine.” Bear Stearns collapsed the day before the CEO or CFO was on CNBC who said, “Everything's fine,” the next day it was bankrupt. No one's ever going to admit failure. You're fighting the whole Wall Street machine but if you look at most companies and especially penny stocks, almost every single penny stock fails. It's not a question of if, it's a question of when. You can start to look for signs. When are this pump and dump going to crash? A lot of this is Wolf of Wall Street type stuff. Wolf of Wall Street is pre-internet. You couldn't do research back then. You get a call from this boiler room. You believe him and then you would basically buy the stock.
With the internet, you can look up the company's address and it's not a real company. There's not necessarily one Wolf of Wall Street, but there are thousands of small wolves in chat rooms on social media and they're pumping up all different things. You could even say Lyft the IPO. It opened at 90%, it's down to 60% after two days. I can't tell you how many people messaged me, “I'm putting all my money in this. They're changing the world. They're beating Uber to the market,” and I'm like, “You understand they're losing hundreds of millions of dollars. They are not a good fundamentally solid company.” It’s the same thing with WeWork. They're everywhere but they lose more. WeWork has revenue of $1.8 billion. They lose $1.9 billion. It's money being tossed into the fire but they have growth.
Dustin
It's always blown my mind. I had been from the industry of entrepreneur and there was no valuation. There was no taking my money. It was, “You sell tonight so you could eat tomorrow.” This has always perplexed.
Timothy
There are two different trains of thought. It does work sometimes. Instagram had no revenues. They got bought out by Facebook for $1 billion. Everyone thought that Facebook was crazy, now it's worth $50 billion to $70 billion. That was right. There was a business behind it, but I don't understand these money-losing businesses either. I know you have to get users, acquire the growth and everything and then you figure out a way to make money later on. It worked for Amazon. What if there's a recession and all your plans go? You can work several years and you're incrementally getting better than a recession then you're wiped out.
Dustin
Why does a company go and do a penny stock? Is it because it's too expensive to do the NASDAQ, that New York Stock Exchange thing?
Timothy
They’re shitty companies. They don't want to be shitty. No one wants to be a penny stock. I didn't want to be a penny stock trader, “I want to be universally hated. This is what I want to do in life. I love the hate. I'm messed up in the head.” Companies that can't get listed like Lyft was a big IPO even though the stock is down since it opened on the stock market, they raised billions of dollars. Insiders got rich and everyone who invested early. IPOs are big road shows. You're getting all the world's investors interested. Penny stocks are companies that have one or two products. There's little revenue if any. A lot of them are pipe dreams.
Dustin
They're raising money though.
Timothy
They're trying to raise money sometimes. That's why you become a stock. You want to raise money but you're not raising that much. The whole goal was to pump the stock price up as high as possible because then theoretically you can do financing and they do a lot of toxic financing. A lot of these penny stock pump and dump I still trade on the way up and on the way down. If you recognize the pattern, it's surprisingly simple. They go from $0.50 to $5 or $10 sometimes and then they do toxic financing when the stock is at $10. They do financing at half price because they can't get full price raising millions. At least they raise millions, they pay for the management salaries for a few years. They try to work on their marketing. A lot of these penny stocks are scams. They're promising these technologies or say, “We found gold in Peru,” and people fall for it. This is the thing. They think that is the next Microsoft, it never is. I've traded tens of thousands of penny stocks over the years. Less than a dozen have ever made it.
Dustin
Your big thing is don't get married to the stock. It's getting in and get out. How do we find those ones that are undervalued or going to get pumped up, but exit before?
Timothy
I don't try to predict the news. I don't try to get in at the bottom. I'm like, “This company has a new robotic technology that's going to revolutionize medicine.” I look for big percent gainers. Every single day there's a list. I use a software called StocksToTrade and it's a list of ten to twenty big percent gainers. The companies, the stocks are up 10% to 100% on the day because of some news. I look for these big percent gains that put them on the map for me. I'm only interested if the stock is moving because there are thousands of penny stocks. Almost all of them have some amazing technology or hype to it but the stock isn't moving. Penny stocks are a vehicle where the stock is volatile. If it moves 50% or 100% in a day and let's say sometimes these companies win big contracts. Sometimes penny stocks get validation from a big company. They start working with Apple, GE or something.
The biggest spikes don't always happen on day one. Sometimes a billionaire invests. I'll give you an example. Carl Icahn, a famous investor, invested in this one penny stock, VLTC. On the news, the stock spiked from 1% to 2%, so it was up 100%. I bought it. I have a chat room. I teach this stuff with 1,000 traders. My whole chat room is like, “Why are you buying it? It's up 100% already. You're chasing. This thing could crash.” I was like, “One of the most well-known billionaire investors invested in this company.” That's basically him giving this a certification. He could put money anywhere. He doesn’t have to invest in a freaking little penny stock. That is a big credibility boost for this company. I thought that it could run on day two to day four, it did. I made my 20%, 30% on day two. I sold the next day. I'm like, “I'm out.” A couple of weeks later it had gone from $2 to $20. It went up to 1000%. That's an extreme example. It doesn't happen, but that is the thing.
On day five to day seven, it started getting written about by Bloomberg, “Here's a little penny stock that's moving,” because the major financial media does not cover these stocks. You don't hear about them until they've moved a lot. When you start hearing about them in Bloomberg and CNBC, that's the time to sell. If you're looking very closely like I am every single day, I say, “Trade like a sniper,” I can get in before the mainstream idiots get in. When the mainstream idiots get in, that's when it's time to get out. The thing crashed and went from $2 to $20 and then back down to $2 and down to $0.10.
Dustin
Talk to me about the psychology, your mindset about getting out when enough is enough. You obviously didn't ride it all the way to the top, but you're okay with it. How do people release that attachment of, “I’m going to let this ride another day?”
Timothy
I've made nearly $5 million on my strategies, but I always sell too soon. I take singles. If it’s a baseball analogy, singles or doubles, 10%, 20%, I say $2,000 a day keeps a real job away and it's true. I make a few hundred. I've never made a million plus dollars in any one year. I made $800,000, $900,000, $700,000, and a lot of $300,000 or $400,000 per year but it adds up. That for me is what's great. My top student has gone from $1,500 to over $8 million, but his average gain is $1,500, $2,000. It's lots of little gains added up. We usually sell too soon because you never know. I've seen many of these plays that run up and it's too good to be true. It gets halted by the SEC, then it crashes 90% because there's some promotion or something. I like getting out too soon. I wish I had more patience but I've seen too much crazy shit over the years.
Dustin
What do you say to the person that’s excited about Apple or the household name products? You're obviously advocating a different strategy. What do you say to them about this?
Timothy
If you like watching gossips like The Real Housewives, The Kardashians or TMZ, Apple is fantastic. You're watching gossip. It's not going to grow your account much. In its best years, Apple’s up maybe 50% to 100% which is fantastic. If you have $2,000 to $10,000 to your name, it's not going to change your life. I try to use these volatile stocks to grow my account exponentially. I go back to $12,000. I trade with a small amount. I donate all the trading profits to charity because I want to show my process. It's the process, not about the money. Before, I made $100,000. I made $200,000 in a day. That was fantastic. It was all adrenaline. As a teacher, I get more adrenaline from my students doing it. If I can teach them to make $1,000 in a day, you do that 1,000 times. $1,000 times 1,000 times is $1 million. Obviously we lose sometimes. Rule number one for me is to cut losses quickly.
You'll see me make $1,000, $2,000, but I have lots of losses of $100, $200. Sometimes for whatever reason, if I'm buying a stock, sometimes it doesn't run on day two or day three after the news. I cut my losses and I accept that. I've done thousands of trades. I'm right about 70% of the time but more important than the winning percentage, the dollar gains are bigger than the dollar losses. When I'm wrong, I simply do not get stubborn. I used to get stubborn. I lost $500,000 once upon a time when I got stubborn. I was like, “The technology is good. The product is good.” People have to separate the product and the technology from the stock because penny stocks might have good technology or a good product. In order to get there, they have bad debts. They have insiders with a lot of shares which are looking to unload anytime the stock goes up. There's a lot of nasty stuff hidden with penny stocks and you can't research it. They're not fully transparent. That's a little inefficiency.
Dustin
Let’s say I'm reading this episode. I'm excited. I feel your enthusiasm. I want to go do this. Are there any qualifications? Do I need to be accredited? Do I need to show up with $5,000? Who do I go talk to? How do I get started?
Timothy
Definitely not accredited. E-Trade, the minimum is $500 to open an account. I like $2,000. That's the minimum required to short sell because I like to go both ways. If a stock is spiking, eventually it's probably going to crash too. I want that flexibility to make money on the way up and money on the way down. I used to be better on the way down. I was a cynical fuck. I've gotten a little more optimistic because lately there've been a lot of penny stock short sellers, partially because of the success of my teachings. They don't necessarily follow the rules. They say, “If every penny stocks are going to crash, eventually you might as well short it.” Before, penny stocks would go from $1 to $6 or $1 to $7 and then crash.
We've seen stocks go from $2 to $50. BPTH went from $3 to $70 in two days. You have extreme upside and I don't know where it's going to stop. It might go from $3 to $1,000 even if only for a little bit, but that will be enough to wipe you out. Short selling has gotten scary. I'm more on the long side. It's frankly easier because explaining, taking a negative position to students. I want simple. I need to tell people, “Don't fall in love with these stocks. You're trying to ride it. You're trying to use this stock to make a few hundred dollars, a few thousand dollars then step off. Do not get emotional and you're not married to this stuff, which is a big problem.
Dustin
I don't know why but crypto popped in my head. What's your stance on crypto and the whole crazy ride we experienced whenever it was?
Timothy
Crypto was one of the best things for penny stocks because I traded a lot of crypto penny stocks. A lot of companies like the dot-coms would change whatever. “We're getting into crypto,” and the stocks would triple. It was the exact same pattern many years later. Kodak was a lazy, sleepy company going nowhere. The stock went from $5 to $20 in a few days when they said, “We're going to announce our own crypto coin, KodakCoin,” which turned out to be nothing. It was the same pattern. When it was going up, I rode it again selling way too soon. I didn't think Bitcoin would get up to $20,000. When it got up to $12,000 I was like, “I am out.” I didn't trade crypto itself. I traded the penny stocks related to it, but it was the same percentage increases as like the internet companies. They’re a hype. It was mania. When crypto got to $12,000 I was like, “This is insane. I'm sorry. If I had any crypto, I'd be selling.” It went up to $20,000. I put out the call to sell too early, but I protected it.
Bitcoin is down to $4,000, so selling a little too soon is okay because it at least dissociates you. I know many people that rode it all the way up and they're riding it all the way down and they said, “It will come back.” Some people say it will go to a million. John McAfee, the software guy said he would eat his own dick if it didn't go to a million. He's going to have some munchies for a little bit. People get excited about an idea and I love the whole idea of the democratization of all of this and the decentralization. I don't know supply and demand. It's such an inexact science. I want to ride the hype a little bit and then I stepped off.
Dustin
You went to other forms of investing. Are you a believer in diversification? Outside of diversification in penny stocks but real estate, crypto coins or whatever.
Timothy
I have US dollars. I've got some gold. I've got some Euros. I've got some Swiss francs. I bought my parents a nice house down in Miami Beach.
Dustin
What drives that? Why diversify?
Timothy
In case you never know, the US dollar is probably the best currency overall if you look at it around. You're trying to hedge 5%, 10%. It's good to have a few different options. I can't chase real estate. All the places I liked for myself are $20 million, $30 million, that's a little outside of my range. I'm donating millions to charities, so my priorities have changed. I'm going to wait for real estate to come down. I'm traveling. I'm in the middle of my seven cities and seven-day tour. I've already been to six countries. I'm going to try to get to the 22 in 2018, I'm going to try to do 22 again.
Dustin
You started an education company. We're big on entrepreneurship. We like this idea of you find something that puts money in your pocket, a side hustle and then you show others how to do it. That's essentially the model of WealthFit is we're showing other people how to create wealth for themselves. What propelled you into sharing this information with others? Why not sit on this and make yourself money?
Timothy
There's limited scalability with penny stocks. The best penny stocks in the world are only making a few million dollars a year, which is not bad. You can turn well off a few million dollars a year. I saw an opportunity. When I've been doing this, I've been making a few hundred thousand dollars every year for many years. Most people think penny stocks are scams. Most of the people who teach in penny stocks or financial education are scams. It's a snake oil salesman. The whole industry is fucking scammers and liars. I'm like, “I have done this. The strategies are simple.” It's crazy. I wanted to get good information out there. It wasn't even about making a lot of money. It was getting good information out there. I was like, “If I say stuff honestly, I feel it will come back to me and maybe my business will blow up.”
These patterns have cursed my life because I see these opportunities every now and then. With penny stocks, there's not an opportunity every day. Some days there's no good place. Now, I haven't even been traded. When there is a good play, everything else tunes out because I'm like, “This is my perfect play. This is the pattern.” I missed my college graduation for a trade. I should've taken that, but I made $12,000 so it was okay. These patterns have been the gift for me, but they've also cursed me. I was like, “Let me fucking teach this stuff and destroy the patterns. If enough people are using these patterns, it will get destroyed.” It hasn't. I've been teaching for several years. The patterns are the exact same, but I've gotten richer teaching. It's good to be honest in an industry full of scammers, that's what it comes down to.
Dustin
What has surprised you about this business, the education of what you do and sharing that with others?
Timothy
How many people have been abused, people have believed in different scams, different schemes, strategies and they almost always lose? When they come to me, they're like, “You have to prove yourself. I'm like, “Fuck off.” I don't need more students. I'm already overwhelmed as it is. I only want to take students if you're dedicated. Many people think I'm either a scam or they've been abused by some scam. Even if they don't think I'm a scam, they're still hesitant. I want to show everything. That's why I have 1,000 plus free videos on YouTube. I have 8,000 blog posts. I show everything. My bestselling guide, How to Make Millions. If you go to HowToMakeMillions.com, you're going to like this. I have many haters. I was like, “Haters, here are all your free videos on YouTube. Watch them.” They don't watch them because free videos don't have perceived value. “You don't want to pay me to learn, but you won't watch the free videos.”
I'm going to create a guide that I won't make any money. I'll donate all the money to charity and at least you'll pay for it so you'll take it seriously. HowToMakeMillions.com, a 35-hour guide, my bestselling DVD guide as it turns out for roughly $300 is a good deal. It all goes to charity. This DVD has raised nearly $4 million for charity because people don't want to pay me that much, but they still want to learn. That's how much they hate me. I've sold 10,000 plus people who hate me, they don't want to pay me or maybe they want to do good giving to charity. As long as I get to teach them, I'll try anything to teach. You're asking me what questions you can ask me, I’m like, “Ask me anything.” I show my audits, I show my income taxes. I have five millionaire students. They show all their trades. It's good to be real in an industry full of scams. When you're teaching, especially with financial education, there're so many liars out there, so many newbies and so many fakes.
I'm not teaching the most aggressive strategy. I teach it overly safe. That's probably the best way to teach and the best way to trade, especially in the beginning, when you're learning. I don't want to teach someone how to grow $1 million overnight. You could do that, but you'll probably use leverage. You'll probably blow up once, twice and five times even if you do make your million and probably lose $6 million after all the leverage. I teach the safe way to trade penny stocks, which is weird, but that's the way I teach. One of my rules is trade like a coward. I have a whole DVD guide where I talk in a high pitched voice. I say like I'm a castrated choir boy, “I’m a castrated choirboy. I have no balls. I can’t trade aggressively. The stock is going against me. Rule number one, cut losses quickly.” I do this and it's like a fucked-up version of Mickey Mouse. It gets people to understand that trading like a coward in a volatile sector is good.
Dustin
There're always stories behind the story. I'm curious to know those stories of your hecklers, your haters where you flip them. You’ve got any that come to mind that was anti-you, bashing you and yet you managed to flip them.
Timothy
I love my haters. My first millionaire student, Michael Goode wrote a blog post, “Timothy Sykes is full of BS,” You Google this, it's there. I went back and forth in the comments, 60 comments and he gave my DVDs a shot and he's made over $2 million. I also spoke at a conference. I had a heckler totally random because we're asking Q&A at this conference. I went to Vancouver. Vancouver is the only major stock market that has been shut down due to manipulation. It's like a viper’s nest. It's full of snakes. There are all penny stock promoters and I was like, “I'll speak at this conference. Let's see what happens.” Everyone's like, “Why are you here?” I'm like, “I’m trying to see what's going to happen.” The penny stock promoter comes on the mic and he's like, “Tim, you are full of shit.” It's on YouTube. You can type in Tim Sykes’ heckler. Apparently, he's a penny stock promoter. He's on trial for tax evasion. He's in the Panama papers. I didn't know any of this when he was heckling me. I laughed. You'll hear me answer his questions.
I was like, “How am I full of shit when I show every trade for many years?” I probably exposed his pump or one of his friend’s pumps. I've 8,000 blog posts where I expose a lot of penny stock scams. You can look at the address. One was based out of a honey-baked ham store and I was like, “Why is this a honey-baked ham’s address?” They’re using it. Sometimes they have PO boxes, they are not even real companies. I had this doctor. You could do a search for this doctor and he got disbarred. He lost his medical license and he was claiming that he created this new medicine. I was like, “This disbarred doctor said that.” He tried to come back to me and he was like, “I don't care if Timothy Sykes is saying shit about me or the SEC.” I was like, “Did the SEC contact you? You're dumb.” I've gotten cease and desist letters from Shaquille O'Neal. He was promoting one of these pumps. He didn't know. Celebrities aren't financially aware. They have handlers.
They saw the product. What you’ve got to understand, one of the best things you can take away from this, if you know nothing about penny stocks or anything, you have to take a different look between the company's product and the stock. Normally, you're like, “GE, Google, Apple, we know the company's products. We know there's stock.” With penny stocks, the product is the stock, it's not whatever they're pitching. Shaq got involved with his pump. They had this wannabe Splenda. I'm sure they poured it into some coffee and Shaq tasted it and he was like, “This is good. I'll promote it.” They give him millions of shares. What happened was that if you read the SEC filing, there are two different things. SEC filings are these long boring filings, 40, 50, 60 sometimes 100 pages long. They talk about all the risks and you can see the CEO's wife is on the payroll. They disclose all this stuff but people don't read it. They read the one-page press release.
This company was fantastic. They were putting this wannabe Splenda’s in the grocery store, but every time they sold them, they would pay the grocery store, they would pay the distributor, they would lose more than it would cost. There was no way to make money. The more that they sold, the more money they would lose. Why would you do that? Why would you put it in grocery store shelves? They wanted the press release to say, “We're now in Kroger's.” The press release would pump up the stock. They would send out a mailer with Shaq's face on it like, “I believe in this,” and the thing spikes. Shaq didn't know. I wrote a whole blog post exposing the SEC filing and how it's like a pump. I got a legal letter from Shaq's team saying like, “We're suing you.” This was an early on in my career and I was like, “I'm quoting press releases in SEC filing. There's nothing I post that’s inaccurate.”
I was scared at first. I started reading the legal letter and they spelled the word egregious wrong. They said I made egregious claims. There's no A in egregious, it’s some junior lawyer who was trying to protect Shaq. This is how the world works. I breathed a sigh of relief. That was going to be on TMZ. I was talking with TMZ and they're fantastic. We went back and forth twelve times. You're not supposed to share your cease and desist letters, but I was like, “Fuck it. I didn't do anything wrong. Let me show you this.” They were about to publish it. The day that they were about to publish it, the Tiger Woods’ sex scandal broke. TMZ Sports didn't care about me. I like to say, “I'm the last person Tiger Woods fucked.”
Dustin
You bring this style. This is who you are.
Timothy
These are actual stories that have happened to me. I couldn't make this up if I try. Who knew I was going to get a cease and desist, another penny stocks sponge tech put out a press release saying, “We're suing Timothy Sykes,” because I wrote about how they are a pump and dump? I'm like, “What do I do?” I fell asleep but scared at the time. The next day the CEO gets arrested for wire fraud, tax fraud, all this stuff and I never got served. I've never been sued. I don't want to be sued. I'm trying to teach what's said. It was the best vote of confidence. I got 500 new students the next day because he put out this big press release, “Timothy Sykes is a liar,” and then he gets arrested. I was ahead of the curve.
Dustin
Everyone loves to quote Warren Buffett and he's the all-time great and all that.
Timothy
Warren Buffett was involved with penny stocks. You don't realize this early on his career, he got fined for penny stock dealings. No one knows about that. He doesn't like to talk about.
Dustin
Was Berkshire Hathaway a penny stock?
Timothy
No, before this but he was involved in penny stocks and he had to pay a fine without admitting or denying guilt.
Dustin
He's all about the long-term and great American companies and all that. Is that a strategy that does work that you believe in? Is it a different strategy? What's your thought there?
Timothy
We've had a fantastic century. There's a great book called Triumph of the Optimists, a small print book. It talks about how in the past 100-plus years had been literally the best 100 years for investors ever. Will it continue? It's never paid to bet against America, but at the same time, especially after a ten-year bull market, I don't want a long-term investment. 2010 was the lost decade because of the crash in 2001, 2002 and then 2008. If you invested for those several years, you made nothing. If you're trading like a sniper, you can make 10% to 30% in a few days. I wouldn't mind if the prices came down and if we didn't have such a tremendous multi-decade run-up. By the time long-term investing pays off, you might be able to get a new shiny titanium hip. My top students became millionaires in a few years. That’s not going to happen with long-term investing. I'm looking at volatile stocks. I'm looking at capturing the upside or trying to capture the upside.
Most people think penny stocks are scams. They think you can't turn a few thousand into a few million. When I first got started teaching, I turned a few thousand into a few million. There was a whole Reuters’ article, “Failed Hedge Fund Manager Tries Again on the Internet,” because I had lost $500,000. I tried investing. I did not know the rules that I now teach. My $500,000 loss, I’m very open about it. I talk about it in my best-selling book, An American Hedge Fund. It crushed me. It crystallized my rules about cutting losses quickly. It made me an infinitely better teacher, trader, human being.
I've had big losses. I know what it's like. I'm trying to teach a strategy that I still think is better. More and more of my students maybe not becoming millionaires, but most of my students start at $2,000, $5,000. It takes a while to build that up. They're like, “You have thousands of students. Why do you only have five millionaires?” I was like, “What the fuck? It takes time. You have to learn this stuff. You have to wait for the right place.” Luckily we had the Bitcoin boom, we've had marijuana and we've had CBD. I looked for these hot sectors.
Dustin
What's emerging? What's on your radar?
Timothy
CBD has been doing well like CBD beverages, oil, chewing gum and gummies, but it's volatility. That's what I'm looking for. I don't care about what the sector is. Ebola stocks were a hot stock sector. Once upon a time when everyone thought that Ebola was going to be everywhere and then it turns out Aaron Hernandez killed more people than Ebola did. It killed nobody, but there was a company, LAKE was a ticker. They make masks, biohazard suits and the stock quadrupled thinking everyone's going to wear a mask. Everyone’s going to be walking around in biohazard suits. It’s the new normal and it's total bullshit. There was media hype. This is another thing.
There's so much media hype, especially with politics, the whole fake news debate. This exists with penny stocks. People ask me, “What about marijuana stocks? This is the future.” I don't know. There's been so much hype. I can't dissociate between hype and what's actually happening. Marijuana is sketchy. Some states don't have it. I don't know. I focus on my chart patterns. I try not to worry about what sector is going to change the world. We’ve seen Y2K come and go. We've seen Ebola, police equipment stocks. Do you remember when the police were beating people and then there were little body cameras? Those stocks went from $2 to $30. All of these things run up and then they die out.
Dustin
I want to talk about the foundation. How did it come to be that you said, “I want to have a philanthropic arm to this?”
Timothy
In college at Tulane, I took this one class, the philosophy of philanthropy. I was a philosophy major. I loved learning about different stuff. I suck at philosophy, but it was good at teaching me stuff. All my friends who were in business and finance were like, “What are you doing in philosophy?” I want to learn something that I don't know about. The business classes are a joke. In my marketing class, we had to take some ads out of a magazine, copy them into a presentation and be like, “What is this ad trying to tell me?” I was like, “Are you kidding me? I'm paying $40,000 a year for this fucking education.” Philosophy was thinking outside the box. It was fantastic. I learned about philanthropy. I became a Make-A-Wish granter in college. You fulfill wishes for dying children, very sad and very intense. I've always been doing a little charity, but then the haters are forcing me to do that DVD, that all goes to charity.
I have millions of dollars in charity. I was like, “Let me take this seriously.” I started building a few schools. Pencils of Promise is the main charity. I've donated $2 million, but Neil Patel built a school in Cambodia and I was like, “That man builds a school, I'm going to build a school.” I built my school next to his. Mine is three times the size. I took a video, “Here's your school. There's a janitor, beggar or somebody standing there. Here's my school and then I had all the kids cheer, 300 kids. I’m that guy.” I built a school in Cambodia and then I built two schools in Laos. I met some of the kids. When you go to these third world countries, it changes your whole perspective. These kids have nothing. These families have nothing and they're happy. They're happy to be alive. There's one little child who hugged my leg in Laos and she was so small. She looked up at me with a big bright smile and I looked down at her. She had these crushed plastic water bottles taped to her feet.
I was like, “What's going on?” I asked the translator. The mom had gotten her these shoes. They didn't have shoes, they couldn't afford it, but the ground is hot. They crush these plastic water bottles up and they acted as shoes for them. I was like, “I want to give this kid everything and the family.” I was supposed to announce a $250,000 donation because I keep donating a little bit. I was like, “Screw it. I'm announcing a $1 million donation.” It was cool in Laos. I had climbed up a mountain that morning, and I was with these Australians on the Pencils of Promise trip. They're Australians, so they're naturally in shape. I'm Jewish, I'm naturally not in shape. I'm trying to keep up on my fat ass Samwise Gamgee. I was like, “Hold on,” I was trying to keep up with them and I was sliding down the mountain. It was misty. I had all this mud all over me.
We didn't have time to go and change. When I was at this school presentation announcing this donation, I looked like I shit myself. All the kids were pointing at me. I was like, “It's mud. It's not shit.” I was making this $1 million donation covered in mud. It was a beautiful moment. I started building more schools. This is what's even funnier. I tweeted my first school in Bali. I was like, “My first school in Bali opened. Retweet this. For every retweet, I'll build another school.” Normally, my charity stuff dies on social media. People like my cars, they like my trips. I used to post stacks of $1 million. I was that guy too. That's a whole other thing. No one liked my charity stuff. I was like, “Let me try and get this blowing up on Twitter.” I thought I would get 30 retweets. I was like, “Good motivation to build 30 schools.”
It blew up. It took off. I have 8,000 retweets. People were like, “You’ve got to delete that.” I was like, “Screw it. I'll pin this.” I pinned it to the top so it keeps getting more retweets. My goal is to build all these schools. My goal is to build a thousand schools. It costs roughly $30,000 to $50,000 depending on the community to build a school. We have 52 schools built. Along the way while visiting these schools, I also found out about animals and animals need help too especially a lot of these endangered animals in Africa. Rhinos, you don't realize there are a few years left before all the rhinos are gone. Endangered species, elephants and giraffes. We're trying to help all of them.
Dustin
How long do you think it's going to take you to do the schools?
Timothy
We’re doing twenty a year. We can pick up the pace. I'm learning how to do it better. We're donating to different charities and we see which ones are more efficient. We'll keep donating. All my new DVD guides all go to charities. I keep trying to raise more. I donate my own personal money too. We had this one video on Instagram about rhinos, which showed people rhinos are getting killed for their horns. In Asian traditional medicine, they think it's going to cure cancer. They think it’s going to be like Viagra. It's all BS. Rhino horns are the same stuff in our fingernails. It's keratin. There are no medicinal properties. You're killing this entire species for these BS tales. We had to get the word out. We made this video, it went viral. We have 30 plus million views on it. I'm telling people like, “These rhinos are getting killed for no reason.” We're trying to make a video. I bought SaveTheReef.org.
Coral reefs in the marine life represent the vast majority of the oxygen we breathe. I didn't even know this before researching. You think trees create oxygen. It's true. Trees are roughly 40% to 45%. Marine life, the stuff that's underwater is 60% to 65% of everything we breathe. The coral reefs are dying because of global warming and a whole bunch of other stuff. If you buy suntan lotion, look and make sure it doesn't have the chemicals. There's a little logo that says reef safe. You don't realize it like you think, “I'm not even going in the water. I'll wash it off in the bathtub.” If you wash it off in the bathtub, it's still eventually going out to the ocean and kills the reef.
You need to get rid of these chemicals. We're starting that and then plastic. I see this stuff and I can help with social media and money. No one cares. It's ridiculous I’ve got SaveTheReef.org. We sell merchandise for the charity too like shirts, hats and stuff like that it raises a little bit more. I'm looking for Karma Reef, Coral Karma. I'm looking for cool names to buy the dot-com and then Save The Reef is available for $1,500. I was like, “Does nobody care about the reef?” We have a whole @SaveTheReef on Instagram and SaveTheReef.org. We're creating a whole documentary on that too.
Dustin
Outside of the charity work, what else are you most excited about? What are you thinking in the business world?
Timothy
Education is the next frontier. What you guys are doing, being able to learn everything over the internet. You don't need to go to college anymore. You don't need these old school institutions that charge $10,000 to $100,000. It's bullshit. Especially you see the USC, the rich people try to get their kids in. You don't even need to do that. You don't need to bribe your way into college, that’s ridiculous. Most colleges, the kids go to college, they get this meaningless degree. Maybe they make a few connections, they have a few parties that's cool. They learn how to funnel beer. Aside from that, it doesn't help. It wastes a lot of time. More people should sit at home and learn on YouTube, on social media with podcasts, with video lessons and see what gets you passionate.
I'm exploring the charity world one thing at a time. I didn't mean to do this. I'm not a charitable person naturally. I like eating shellfish. I want the shellfish to be good. That's why I want to save the reef because I want to eat fish. I don't want to eat plastic. I'm doing it selfishly, but I've clicked everywhere and I let my mind run. More people should do that. I know there's a whole thing, use less social media, stop living digitally, look up. Look down. This is your future when we use these tools correctly. The internet turned 30, but I think it's early days. This is the caveman era. Like in the art world, cavemen used to paint on caves. I’m sure the caveman was like, “This is a masterpiece,” and it was like a fucking red dot. That’s what social media and education are. In the next many years, the applications we're going to create, this is nice to be able to do this.
This is the beginning. This wouldn't have been possible several years ago. You can learn within a few minutes, sometimes live, the video is going to get better and we're looking at all this shit. I'm a little two-inch screen like, “What is he holding? What is that? I can't even see.” The screens are going to get bigger and you have holograms. If you start learning and training your brain to focus, the best thing I've ever done is being adaptive. Making a lot of money after my tennis injury, making money going long then adapting when there's no more opportunity. Making money going short, starting the hedge fund, trying to invest, learning a tough lesson and using that lesson to teach. I was also on a TV show called Wall Street Warriors. That's what got me into teaching. I didn't want to get into teaching. The TV show was a hit. I was drunk in every episode, so it was funny.
There're a bunch of boring, uptight, finance people. There's one guy throwing a stick to his dog on this beach and he was like, “This is my dream.” I was like, “That's boring. This is terrible TV.” I got trashed. We're filming this golf scene, everyone's playing golf trying to hit it perfectly for the cameras. I was like, “I suck at golf. Let me own it.” I purposely hit it into the water, took off my shirt and jumped in the water. I picked up some random ball for the TV cameras. I was like, “I found my ball,” and I got one or two emails a day from golf fanatics being like, “You're disrespecting the game.” It was the TV show I did several years ago and they fucked over it. I tried different stuff. That got me into teaching, being real in an industry full of scams. I recognize inefficiency with penny stocks, realizing you don't have to spot the breaking news with other sectors. If you look at Google or any big company that's widely followed, you have to be there the minute, the hour, the news breaks, otherwise you're late. Penny stocks are the opposite. You shouldn't be there when the news breaks because you'll probably chase it if you recognize the inefficiencies. I'm adapting. I’m recognizing inefficiencies and I’m seeing what happens.
Dustin
I want to move us into WealthFit Round, which is a fancy name for rapid-fire questions. What ‘s your most worthwhile investment ever?
Timothy
Yourself, your education and your future. Everyone asks like, “What's the best investment I can make? It's always investing in yourself and becoming self-sufficient. Don't give your money to somebody else. Learn it yourself and you do that, you never have to worry. If you lose money, it's on you because you're self-sufficient.
Dustin
What's that investment you don't want to talk about?
Timothy
I lost $500,000 on this company called Cygnus eTransaction. I believed in the technology. They basically invented print at home ticketing. It was my best friend's dad company, so I was emotionally involved. I was personally attached. They invented this fucking technology. I was there. They won the contract with Six Flags. I was there shaking Mark Shapiro's hand. Mark Shapiro was the head of Six Flags at the time. He's also the guy who built ESPN and he was shaking everybody's hand saying, “This print at home ticketing is going to change the world.” The founder of ESPN is saying this little technology. I put in another $100,000 a day. The technology paid off, but the company went bankrupt due to debt, due to bad management. This is how slimy it is. This is a good lesson.
The new CEO said, “Don't worry, Tim. Before bankruptcy, everything's fine. You invested in a good comedy. The technology’s solid. I'll make sure it’s okay.” A few weeks later, it’s bankrupt. It wiped out all the debt holders and shareholders like me. I was like, “Lesson learned. That sucks.” Little did I know he bought the company personally back in bankruptcy court, held on to all of the contracts, Steven K. Brown. He bought the company in Bankruptcy Court, held on to Six Flags and a whole bunch of other contracts. He rebranded the company. Later it got sold for the equivalent of $60 million. I would have made $5 million or $10 million. I don't know about the dilution, but he bankrupted the company wiping out original investors like me. He looked me in the eye. I remember his initial, otherwise you can google Steven Brown and there's a million. Steven K. Brown looked at me in my eye and he said, “Don't worry, you made a good investment.” He bankrupted it, bought it in and that was a legal thing.
Dustin
When you're not encountering Steven K. Brown, life is good and you're winning.
Timothy
I thank Steven K. Brown. He taught me a valuable lesson much more than the $500,000. I would pay that. This is how you should look at losses too, whether it's real estate or stocks. If you have a loss, you learn what not to do. You don't want to pay everything but sometimes the bigger the loss, the more poignant it is. Here I remember that exact moment when he's looking at me in the eye. This was over several years ago. I can't get over it. That was a valuable lesson. It cost me roughly $500,000. It cost me at the time validation in the industry because my hedge fund lost 30% even though we had made 20%.
We finished up overall over a few years. When you lose 30% as a hedge fund manager, you did something bad. I believed in him. It was a good lesson. You have to pay market tuition. You can learn through podcasts and stuff like that, but until you have a big loss, whether it's $500,000, $50,000, $5,000 and you remember and it sticks. Once upon a time, I also had this guy. I was a hedge fund manager at a college and I was going around trying to raise money. This guy said, “I love your strategy. I love your personality but you haven't had a big loss yet.” I was like, “What does this guy know?” That was right before my big loss. The big loss sting but they mold you and I'm eternally grateful. I learned what not to do and I pass this down. Don't trust anybody. You'll never be disappointed.
Dustin
When you're winning, you're making great returns and you want to treat yourself to something, what's your guilty spending splurge?
Timothy
Food and travel. When I had my $100,000 day freshman year in college, I took my entire dorm out to dinner. I took my whole dorm out. We were all freshman. No one can drink. It was only $800, but it was an amazing thing to make six figures in a day. I sold it too soon as I normally do. The next day would have been about $200,000 but I had never had even a $50,000 gain at that time. It opened my mind. I also bought cars. I bought a Lamborghini, I bought Ferrari, I bought Rolls Royce, McLaren, but the cars are boring. I'm going to give your audience a little preview. I'm getting rid of all my cars. I'm excited about that. I'm going to be more environmentally-friendly. I'm learning about the environment, so I'm adapting. I don't need these cars and frankly, they've lost their hype for me. My first Lamborghini, I was like, “I can't wait.” My second I was like, “Why am I not feeling as good?” The luxuries you learn over time don't make you happy. A lot of rich people are unhappy because they base everything around the money they make and the things they have, not the experiences.
Dustin
Do you have any special routines or rituals you do to get you in a state?
Timothy
As I've been traveling a lot, I got into coffee. Thirty-seven years, no coffee.
Dustin
Were you this crazy without the coffee? When I say crazy, I say it affectionately. Your energy level, has it gone up or gone down? Is it the same?
Timothy
No, it modulates it because I’m in different time zones. People ask me like, “How do I deal with jet lag?” It's all about sleep and coffee. I don't sleep that much because I don't have time. I have too many companies, too much to do. I manage all the social media for Save The Reef, Karmagawa and Timothy Sykes. I don't let anybody touch that shit. If you DM me, you're talking with me. I get in fights with some people, they were like, “This isn't Tim Sykes. You’re one of his interns.” I was like, “This is me.” They’re like, “Prove it.” I take a picture of myself. I was like, “What do you want from me? You're arguing with me because you don't think it's me.” That's another thing. More people should do their own social media. You learn so much, not about the likes, the comments or the engagement. You learn. Social media is one giant science experiment. You can see what content. It's my mission, not to donate millions to charity, but to get people to love charity the way I do. It's gradually working with the rhinos.
Dustin
Do you experience overwhelm?
Timothy
I'm too ambitious because I've had big losses and I'm prepared for mistakes. If I screw up, so what? Too many people are afraid of failure, they're afraid of being overwhelmed. It's another thing I have to deal with. If something doesn't get done the right way, I'm going to try to figure it out. I might not get it done as quickly as I would've liked, but I'm going to do it. There're things I want to do. It's not a question like, “I failed to this, I'm going to give up. I'm going to try it a different way. I'm going to attack another way.” With charity, we built 52 schools but my followers have built fourteen because they've seen my pictures and videos. It’s cool with Bali Children's Project, this charity we donate to in Indonesia. They're getting reached out to by my students. This one student, Brian, rest in peace to his wife, but he donated a school in her name when she died. His company found out that he donated a school and the company matched it. It became two schools in the wife's honor. You start spreading different ideas and you see how it plays out and it's pretty cool.
Dustin
What do you procrastinate on?
Timothy
I have three unwritten books because I'm overwhelmed and I have many things. I’m a juggling act. This book, Karmagawa, about the charity and it's about a third done. I have a follow-up book to my original book, An American Hedge Fund, where I talk about the next ten years since I began teaching and it's a chronicle. An American Hedge Fund was my first ten years in the business. This is the second ten years. I also have a third book, which is a pure strategy. Each one is partially done. I don't know which one to do. I take little nibbles out of each, but more stuff happens. I need to do better. My student Jamil got tired of my lack of organization, he was like, “Tim, I love your teachings but you're a disorganized mess. Let me write a book on organizing.” I was like, “Fantastic.” He wrote The Complete Penny Stock Course, which is based on my teachings, but he's an engineer. It's all organized and there’s the academic formula. That thing has become a bestseller. It sold 20,000 copies in the first year.
Dustin
Thank goodness for people like that.
Timothy
This is a beautiful thing. When you share everything, people come to you. Different charities are reaching out to me, different influencers. They want to get involved with the charity. When you share everything online, it comes back to you. This is why our logo is an infinity sign. You put stuff out there, it comes back and it's amazing. We're so much more connected than anybody realizes.
Dustin
What’s your biggest defining moment?
Timothy
It would be the $1 million donation that builds twenty schools with Pencils of Promise. That was fantastic. The fact I did that, it made me feel good. It's not one defining moment. Buying my parents their place in Miami Beach, seeing my mom cry because I moved them down from Connecticut because Connecticut sucks. Now, they're in Miami Beach. Treating your parents, giving your $1 million away. The third defining moment, which is the biggest is when my rhino video went viral. I posted maybe two or 300 charity videos, they all do terribly. There's one rhino video, I hired the best influencers. I don't pay anybody anything. They do it because they want to help. This one guy, Sam Kolder, he's a talented filmmaker and he took a look at the rhino situation. He crafted a film, he put together a YouTube video. We've got 500,000 views, but he put together a one-minute summary and did an Instagram video. That took off. I'm getting messages from teachers. This one teacher, amazing DM, she said, “What’s Karmagawa?” That's the name of my charity foundation. She was like, “What about rhinos?”
I had five students switch their class topic to saving rhinos. These are five students who never cared about the planet or of animals before. That video got through to people and helped me realize, “We need to be meticulous with the way we share this and get other people to share it, create a viral loop and it's working. We're gradually changing charity into something that's good. Charity in penny stocks are the two most hated subjects. I didn't think charity was hated. There are many scams, there are many bad charities and you don't know where the money's going. I was like, “Why do I gravitate towards these shady industries like penny stocks and charity. I'm trying to be real.” It's funny how it comes to me. Penny stocks, there is a way to trade them safely if you have the rules. There is a way to give to the right charities and then spread it. I'm trying to do it, learn and teach.
Dustin
Tim, thanks so much for being on the show. You've mentioned a lot of things that you’re up to. Where is the best place for someone that wants to follow you or get involved in?
Timothy
You could google Timothy Sykes. I'm on every social network. I only have one account by the way. I have imposters, which is pissing me off to no end. They're pitching binary option and schemes. I have one account and the accounts are verified. It's not like the username is in Timothy Sykes Verified. Some people literally come up with these crazy usernames. Verified is like this little blue badge with a little checkmark. I said in interviews, “I'm Timothy Sykes and I'm verified.” Somebody created a Timothy Sykes verified account and I was like, “That's not my user name.” They don't even know. They're pitching binary options, forex and option bullshit. If you go to TimothySykes.com that's where everything is.
Dustin
Is your charity stuff there as well?
Timothy
That's Karmagawa.com, that's separate. The charity got such bad engagement. It was hurting my engagement. I had to separate it.
Dustin
Thanks big time for being on the show.
Timothy
Thanks for having me.
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