Top Stocks For 2011, Best Stock Investments For 2011, Hot Stocks For 2011

Inviting a little bit of government policy to interact with private enterprise is like inviting a little family of rats to interact with a bakery. Before long, you've got more rat droppings than chocolate sprinkles atop your cupcakes. And that's just the beginning...

Every day, the rats are more numerous, more rotund...and more brazen. Every day, fewer baked goods make it from the oven to the display case. Eventually, the baker is in business to feed the rats...and there is nothing he can really do about it.

Feeding rats is expensive.

Top Stocks For 2012: China Tel (CHTL)

By Toby Smith

Growth stock specialist Toby Smith turns to a speculative micro-cap stock for his top pick for 2012:ChinaTel Group, Inc. (Other OTC: CHTL).

With the added disclosue that he personally own shares in CHTL, along with his clients at ChangeWave Research, the advisor looks to the firm's potential role in a new joint venture in the China telecom space.

"Our bullishness is based on a pending China Tel and Chinacomm joint venture as a 'basic telephone service' (BTS) licensed carrier in China. The other BTS carriers are all large companies with $10 billion+ market caps, such as China Mobile, China Netcom and China Unicom. Today's market cap for China Tel is $130 million.

"The Chinacomm/ChinaTel joint venture owns 37,000 kilometers of fiber-optic network and 3.5Ghz spectrum for wireless broadband in 29 of the biggest China cities. That infrastructure alone has a book value of over $1 billion.

"ChinaTel has su?ered a great credibility problem on the Street due to a set of failed capital raising deals that failed to close.

"But the delays in their closing equity financing over the last 18 months has turned out to be a blessing in disguise, as the potential valuation for the China Wi-Max network has at least doubled since the previous failed deal.

I've often said that my stock-picking approach can be boiled down to this mantra:

Share prices follow earnings.

I challenge you to look back through history and find even a single company that increased its earnings quarter after quarter, year after year, and the stock didn't tag along.

By the same token, try to find a company whose earnings were flat or declining year after year and the shares kept rising. It doesn't happen, even in a roaring bull market.

But is growth in earnings per share all you really need? Could it be that simple?

Of course not.

I read something this week that made me laugh out loud - though it wasn't supposed to be funny. Treasury Secretary Tim Geithner, aka Turbo Timmy, has an opinion piece in The New York Times titled "Welcome to the Recovery."

The title alone is worthy of mirth. It has a certain musical reminiscence to it: "Welcome Back My Friends to the Show That Never Ends," or perhaps "Welcome to the Machine."

"The devastation wrought by the great recession is still all too real for millions of Americans who lost their jobs, businesses and homes," Geithner begins. "The scars of the crisis are fresh, and every new economic report brings another wave of anxiety."

The opening two sentences are frank and on target. But before long, the piece quickly veers into cloud-cuckoo land. Having taken a perfunctory stab at credibility by first citing what is plain as the nose on our faces, Geithner then seeks to twist our minds and avert our eyes. It's really actually OK, we are supposed to conclude. Things are getting better.

The data points cited by the piece appear true enough, insomuch as an NYT fact-checker would not dispute them. But as some wag once said, "there are lies, damn lies, and statistics," and Timmy's rosy data points are designed to deceive.

To understand why the Geithner op-ed is a fine piece of Machiavellian craftsmanship, it's helpful to revisit Swordfish, a 2001 action flick starring John Travolta and Halle Berry. In the movie, Travolta plays Gabriel, an amoral criminal mastermind who answers to a higher calling.