A10, Stock Trader Dude

Even when there aren’t much positive fundamentals to promote stocks the ads on the Internet claim various stock-picking strategies, options, or Forex currency trading is the answer. Nothing is the answer… other than working on your decision- making hang-ups. All that means is considering your emotions and having a plan to deal with them to keep you out of trouble. Tharp(y) keeps going with his workshops on ETFs attempting to attract those over-thinking intellectual traders… all you’ll really get from his seminars is him asking you to look at yourself:

1. Ask yourself what psychological tendencies have sabotaged your investment returns. If you don’t understand your patterns you are doomed to repeat them.
2. Write down your beliefs about investing, then draw up a detailed investment strategy based on those beliefs.
3. List everything that could go wrong with your plan. Then, rehearse how you would deal with these catastrophes.
4. Get your excitement from other activities, not the stock market.That’s a recurring theme with his students… they like being a part of the investment or trading process, because there’s an element of action. They don’t think in terms of making a huge sum of money from one great investment. Why pay thousands of dollars for something when I can give you the overview of the process used at the workshop?

1. Personal responsibility for results
2. Thoroughly prepared
3. Disciplined psychology

Know the average profit per trade per dollar risked.Know your system – different forms of money management to achieve objective.

From an advertisement:
Most people are doing the exact opposite of what the big funds are doing and they pay a big price for doing so. For example, you put money into a stock after hearing that a fund manager really likes it. However, by the time you do, the fund manager is getting ready to sell. But what if you could see what the big mutual funds are doing with their money well before they complete a transaction so you could jump in ahead of them? (It’s called front running.)It would be a huge advantage.For example, if mutual fund managers are buying retail stocks, you would be able to get into those stocks well before they get in and profit greatly as their activity drives prices up. Imagine what an advantage you would have over other investors. And we are going to show you exactly how to do that. (I don’t believe that.) Suppose that you are managing a mutual fund and you need to move a billion dollars out of retail stocks into Internet stocks. You do not just tell your broker to sell a billion dollars worth of stock.Instead, you must give an order to a large brokerage firms that basically says, You have three days to get rid of this stock… we would like to get at least $998 million for the stock. If you can get more than that, you may keep the extra as your bonus commission. The market then slowly sees a movement out of retail stocks. And as one fund moves out, another may see the big picture and start to move out as well, thus making the underlying movement even stronger.Furthermore, as the movement out of retail stocks gets underway, the same fund manager may give instructions to buy a billion dollars worth of Internet stocks, and the broker may have a week to fill that order. Gradually, you would see retail stocks moving down and Internet stocks moving up as one or more big funds shifts positions.And the net result is that the internal conditions of the stock market shift even though the major averages may not move that much. What is interesting for you is that you can learn to see the overall shifts in cash flow as the funds start to move money around. In fact, you can spot it quickly. And you could have a huge advantage because big money tends to move slowly, but you can move quickly. In fact, when you get good at observing the flows of funds, you can start making thousands of dollars each day at your convenience. (At my convenience? What a sales pitch! I’m not buying into it.)It is not that hard. We will show you just how to do it in this and teach you how to jump in front of the big guys in their trades. (Not difficult? People I don’t know what to make me rich in the stock market? What’s in it for them? Oh right, the overpriced fees of the seminar! I’m not interested.)

A foolish marketing update from Citibank:In today’s economy, it’s more important than ever to make smart decisions with your money. How you spend it. How you save it. How you manage it. That’s why we’re introducing this periodic communication with practical information to help you make the most of your finances.Do more with what you have.
You may not think you can afford to invest, but you may be surprised. Just by reorganizing your finances, you can find the money you need to get started. Uncover new ways to achieve your goals by reading…Citibank doesn’t get it… knowing not to invest is a sign of intelligence. Of all the times to say jump in, they want you to now stretch your budget to throw away money on “investments” precisely when earnings for many companies are down and not due to rebound for perhaps several years.The most exciting time to invest (buy stocks) was during 1995 to early 2000 when a fortune could be made in the stock market… or rather when a person had a chance of catching a significant move upward.Here’s a snapshot of multiple areas of the market.Strongest sectors:
Taiwan
Gaming
Networking
Homebuilders
RetailWeakest sectors:
Pharmaceuticals
Mexican Peso
Mexico
Regional Banks
UtilitiesNone of these sectors seems particularly interesting to investors. Global Water might be where I want to be… but not yet, nothing is promising in the near term. There’s no point in buying too early and waiting… Buffet isn’t bullish for fundamental reasons… and that should be a clue… don’t let anyone talk you into investing, not even yourself.

Asian Godfathers: A great book that reviews how Asian billionaires made their fortunes… the thing is, most of the modern American marketing about making a fortune in business is wrong – or rather, misses an important point in acquiring and maintaining a huge fortune. The Asian business people have monopolies or near monopolies on boring/traditional businesses by buying the influence of government officials. These businesses provide an uninterruptible supply of cash, which has been used by the Asian tycoons to expand into other, more risky endeavors. And when those new business endeavors suffer, they stay afloat through the down economic cycles by relying on their one cash-stable business. You just need one thing paying the bills, creativity is not business (as it is often hyped in the US), without cash-flow, there is no sustainable business. Know your cash-flow projections like real businesspeople do. So, while US corporations spend millions of dollars on lobbying government officials for benefits… and with former investment bankers in the ranks of the government we’re seeing a huge transfer of public monies valued in the billions being handed to Goldman Sachs and other investment insiders… but the self-help people stress anyone can build a successful company and a fortune – but now you see, creativity is valuable, it’s helping a few companies get to the government funds without it being called theft.

Buying something you shouldn’t be buying? Listening to the financial media, newsletters, or gurus? Isn’t timing a concern? These are probably the biggest risks you face at any time with your investments. And if you don’t think clearly about the investment environment — everything you are doing is a mistake.

How to play the hot foreign markets now: What a laugh, sometimes it’s best to look back over ten years in order to understand the media stock pushers and financial press today.Interview with a fund manager, 1997:1996 was supposed to be the big one for foreign stocks, but the performance of foreign funds has lagged that of domestic funds. What happened?“It’s not so much that foreign markets have done poorly as that the US market has continued to do better…”He continues his answer in a fairly well thought out way.Which regions of the world present the best buying opportunities?“I think that the major emerging markets of Latin America have finally turned the corner following their collapse from the Mexican peso crisis in late 1994…”I think not. Turkey would have been the way to go. Who would have figured that out?The hoped-for economic recoveries in Western Europe really haven’t materialized yet. Do you think they will occur in 1997?“Yes. Despite the fact that many European corporate earnings forecasts were reduced in the third quarter of 1996…”Ha.Are there any areas that you are not avoiding these days?“We’re not avoiding Japan… about 22% of our fund is invested there versus almost 40% for the Index…”Ha, ha.What about other Pacific Rim countries?“Our portfolio has more non-Japanese Asian stocks than the Morgan Stanley Index – 16% versus 10%. We particularly like Hong Kong, Malaysia and South Korea, which we feel will mend its differences with North Korea in five years or so…”Is there anything that could disrupt your relatively rosy view of foreign markets?“… Also it looks like the US recovery will go on for a while, putting investors at ease and encouraging them to take greater portfolio risk and diversify by investing abroad.”Ha, ha, ha. The recovery continued for three more years.

Source: Page three of Bottom Line Personal, January 15, 1997.

The thing about Tharp(y) and his group is that they espouse knowing yourself as the holy grail of trading and that only when you know yourself can you select the right trading strategy. For example: Applying the Concept of Mission and Intent to Improve Trading

What is routinely discussed is strategy from a military viewpoint but the flaw is that military planning, operations and strategy are often severely flawed, lives are lost, years are lost and often while battles can be won, wars aren’t conclusively won.The US military, considered the most advanced armed volunteer force, hasn’t won a major conflict since WWII. I think it’s inappropriate to view trading as war. It’s survival… however, let’s discuss strategy, the US locked itself up after WWII with the Cold War and the result from this strategy was increased armament that could end civilization of the modern world. So after just fighting a war and “winning“ the US population is told that the Soviet Union is an immense threat and that another conflict would be considered an end of the world scenario. So while superpowers cannot easily overcome each other they can manipulate other nations. And while institutional traders may not be able to get an edge over each other often, they do have greater resources than you, and they have an edge over non-professional investors. As we learned, get out of the Vietnam War – it’s not the best area to take a stand. The US forces also left the Korean War without winning.The point of it is, which Tharp(y) and his group doesn’t go over is that you need a filter, some strategies are ill-suited because the fundamental reasoning is wrong – don’t enter a pointless conflict. Sometimes it’s referred to as simplism, the tendency to accept simple answers to complex questions… that there’s always one right way.So, these trading missions don’t address the fundamental question. Should I even be playing this game? Should I be in it now? The stock market cannot always be the best place for your money. You’ve got to have a filter… over the very long-term all investments fail. Whenever you run out of suckers the game cannot expand… and the stock game is controlled eighty to ninety percent by institutions… so you need to benefit from someone’s mistakes. If you think Tharp(y) has insight that others don’t have I’d disagree, he’ll offer you psychological techniques, but you still have to depend on yourself which is the weakest component of your trading mission. Nobody is flying into the battle to bring you treasures. Military missions lose lives as acceptable tolerances of losses, so without your life on the line, it’s too easy to get distracted.

Here’s the kind of stuff they offer:

How to Develop a Winning Trading System That Fits You
Blueprint for trading success
Highly Effective ETF Techniques 101
Advanced ETF 202 Techniques (ETF 101 is a prerequisite)

None of that is going to address what keeps your money safe: Should I be involved in the game? Where is the best place to put my money now?I can save you $700 US… while nobody can know the stock game perfectly for long, I do know the sale of the stock game. Email for details… The whole point of it is to overcome our tendency of seeing only two sides to a question to seeing five or six.

Or investing in life: the history and future of pensionsThere are parts of the book I really like… what the numbers say are that no one really wins in the investment world other than the firms selling investments. If you are in the business, you know this to be an accurate statement – and furthermore there is no significant pension fund protection against declines in markets which pension funds are now enduring, leading to those funds to be under-funded for retirement purposes. The great game of investing is in selling investments, not in buying them!Pg 6
13 trillion US dollars in pensions compares to world GDP of 28 trillion dollars and world-wide value of stock markets of 23 trillion dollars, according to OECD figures of the previous year (1999).Three fifths of global pension assets, 7.8 trillion, were held for US policyholders, with their stakes having grown by 140 percent since 1994.At the end of 1999 there were seven million individuals world-wide with liquid assets of over 1 million. There were 2.5 million of these high net worth individuals in North America with a total wealth of 8.1 trillion, ahead of the value of US pension fund assets by $0.3 trillion.Pg 7
We will see that much of the gain reaped by funds, if not all of it, goes to these intermediaries, rather than to the holders of the pension plans who face a bemusing array of choices and whose legal rights to their share of the pot are very much less clear-cut than the right of wealthy individuals to their investments and assets.Also discussed is the telecom debt bubble and the unused capacity when the marketplace didn’t boom according to the (perhaps unrealistic) industry expectations. A book like “Pop! Bubbles are good for the economy” would say that there are benefits to society… but there could be flaws regarding the premise between hard assets and intangible or soft assets.Pg 363
Milton and Rose Friedman argued that social security comprises a payroll tax and a system of benefits which, taken separately, would be regarded as highly illogical and undesirable. The payroll tax was regressive, and functions as a tax on employment, while the benefits gave a bad deal to workers and poor citizens who tended to die earlier than those who were better off.Pg 364
As an economist, he regarded social security as a chain letter.The Milton and Rose Friedman “Free to chose” book discusses attacking influence and urging governments to protect the currency. Yet the authors insist that a currency has no intrinsic value but serves as a means of exchange and store of value simply because society, through the government, legislates that this is the case.

Timeless strategies for successful investing… except the book lacks meaningful strategies unless you consider not investing as one of them. Overall a good book that makes the point, backed by research, just like “The Great Mutual Fund Trap”, that in no uncertain terms the modern concept of investing is a farce, the individual is not going to win, and the investment markets are to be avoided.

Institutions are not beating the market. The institutions are the market. Professionals win points; amateurs lose points.Expert tennis: 80 percent of points are won, amateurs: 80 percent of points are lost.50 largest, most active institutions do half of all transactions in the market.In the 1970s the market became dominated by institutions that were trying to beat the market. In forty years they now do 90 percent of the business.2.85 percent a year in annual fees for fund management (factor in inflation, taxes, and commissions and it’s a loser’s game)

Working effectively is doing the right things.
Constancy to purpose!

To outperform you must be so skillful and so quick that you can regularly catch other professionals making errors – and can systematically exploit those errors faster than other professionals.In the 1960s when institutions did 10 percent and individuals did 90 percent of the trading, large numbers of amateurs were realistically bound to lose to the professionals.

Informationless trading

The 100 largest and most active institutions do 75 percent of trading.Managers that have had superior performance in the past are unlikely to have superior results in the future. Regression to the mean is a phenomenon in physics, sociology and investing.

Market timing
Selection of specific stocks or groups
Changes in portfolio structure or strategy
An insightful, long-term investment concept or philosophy

Qualified personal residence trust
Enables you to transfer ownership of your house to your children and live in your home rent-free for a period of time (such as fifteen years). You save substantially on estate taxes unless you die before the trust matures – while ownership passes to your children.Pg 148

In 1993, the Dow Jones was equal to its inflation-adjusted level in 1928. Sixty-five years was a long, long time to wait to get even.How much of the 95 years gain in the stock market came in the last 20 years? Most of it – prior to the 1980s there weren’t a lot of gains accumulated. And another consideration was that pass-through inflation accounted for a large amount of the perceived gain.

The secret world of banknote printing. A wonderful book, enjoyable for it’s coverage of what currency is and how it came to be… there is detailed coverage of the creation of the Euro currency.Preface, pg 11Paper money was invented by the Chinese. One thousand years later American colonists were the first ones in the Western world to systematically use it, even financing their revolution by issuing large amounts of dollar bills.Private banknote printing is controlled by a few European high-tech companies.Chrometophobia, fear of moneyBanknote printing often involves massive use – and often waste – of public funds.War finance is the driving force behind paper money.John law of Lauriston created the term “millionaire” around 1717.Congress in 1863 enacted the national banking act. A uniform national dollar was born issued exclusively by the Treasury department.1971 – last hurdle to fiat money cleared by Nixon taking dollar off gold standard (essentially already happened but this removed the requirement from central banks). Paper money offers authorities a cheaper way to cheat the people than had already been the case with coinage, stated liberal national economist and Nobel Laureate Friedrich A. von Hayek in essays. The best thing is to abandon it again.Pg 27
Even the health of banknotes, their hygienic condition, is tested continually and in strict secrecy at laboratories. Out of concern about carcinogenic substances, for example, the central banks had the usual animal gelatin for the surface coating of banknotes replaced with synthetic products. This prolonged the longevity of the banknotes – and raised the bacterial contamination of paper money.Pg 28
The manufacture of money consumes money – the money of the taxpayer.Pg 260
Of the 173 million dollars worth of bogus dollar notes replaced by the Fed for the year 2001, only 60 million dollars worth were traced to the U.S. homeland.Pg 261
Supernote, an illegal parallel print. A government had to be behind it because the technical and financial outlays to produce it were not affordable.Sixty percent of the 629 billion dollars worth of notes issued by the Fed are held in the 100-dollar denomination.

I don’t like the concept of the bailouts rewarding others…Is the bailout theft?
http://politicalinquirer.com/2009/01/24/the-potential-result-of-bailoutmania/#comment-19575US National Debt$11,046,247,657,049.48 (According to US Treasury Direct, 3/26/09)That is approximately 13 times the amount of US currency in circulation, according to the Treasury bulletin, which lists the amount at $853.6 billion as of December 31, 2008. When talking about $1 trillion:
For comparison, there is only about $625 billion worth of $100 bills currently in circulation, according to the US Treasury bulletin.
Pallets are double stacked with $100 bills. *Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things WorseHistorian Thomas Woods notes in this book that the Federal Reserve bears a large part of the blame for the economic downfall. Woods writes, “Critics of the market who ignore the arguments raised in this chapter are, to say the least, not being honest.” (p. 86)“You do not win friends in the political and media establishments by proposing a monetary system that cannot be exploited by governments to enrich their friends, enable their addiction to spending and looting, and fund their bailouts.” (p. 134)Two reviews that cover the book well:

http://www.amazon.com/review/R11DZG9U6SCE3C/ref=cm_cr_rdp_perm

http://www.amazon.com/review/RYJ71BSMNOEK1/ref=cm_cr_rdp_permOther comments regarding the economy:The asset prices in today’s economy, including many mortgage-backed securities, have been incredibly inflated, and a large amount of malinvestment has occurred on Wall Street. Until Ben Bernanke steps out of the way of the liquidation of malinvestments and a fall of asset prices, the ultimate rebuilding of the economy on a solid foundation of production and savings will be postponed, and all we will see is more bubbles. *Think of it this way, forget Democrats and Republicans, what, other than wasting our tax money, has the government run efficiently? The post office? Yeah right. The answer is NOTHING. We need to get them out of our lives, they should have let the AIG’s and bankers go bankrupt. Yes, there would be pain for a time, but a lot shorter than what is coming. Wake up if everyone is taking, who is going to work to provide the money to pay for it? *Bernanke and Geithner are bailing out the bankers, they couldn’t care less about you or me. Or rather, they care only to the extent that the citizens can continue to support them and their fellow crooks. I was born in the last depression, in 1937, and remember what it was like. The US dollar has lost over 95% of it’s value since I was born! *The only positive from that 60-minutes interval was Bernanke’s admission that our credit and money are nothing more than computer entries. In Bernanke’s words: “It’s not tax money. The banks have accounts with the Fed, much the same way that you have an account in a commercial bank. So, to lend to a bank, we simply use the computer to mark up the size of the account that they have with the Fed. It’s much more akin to printing money than it is to borrowing.” Now that the Fed Chairman has said so, it may be much easier for the public at large to understand that money (and credit) is simply accounts and counters. *“The cause of all panics, crashes and depressions can be summed up in only four words: the misuse of credit. When credit is not covered by tangible assets it becomes fiat credit. The final years of the long wave plateau are characterized, not only by a reckless expansion of credit, but by the widespread delusion that there is no limit to the availability of such credit.” — Freeman Tilden, ‘A World in Debt”****update**** (perspectives on fiscal manipulation – TARP)Comments*bostonwayno said:
The governments motivation for handing out TARP funds to ALL the banks was not to shield the vulnerable banks as they claim. They want to own the banks as well as the auto-companies as well as all the “private” market. This is a major play to end capitalism and instill fascism. In my humble opinion NONE of the banks (or auto companies for that matter) should be “bailed out”. If a corporation does it wrong they should be allowed to go bankrupt thereby freeing up those assets for more productive means. When they are bailed out the land, labor, and capitol is being held “hostage” and overall it weakens the economy. Keynesian economics needs to take a back seat to austrian economics.
June 3, 2009 9:22 PMsivey82 said:
that being said, it is an EASY case to make, that without a bailout the collapse of that business is too destructive to our current economy. this is 30 years of M&A, buyouts and consolidations creating institutions that are too heavily relied on, as they have gobbled up everyone in their path of growth. such is a capitalist imperialist society. its a competition, that we lose by winning
June 5, 2009 2:38 PMdlender said:
I think there is a move underway to break up Citi bank. This
is a good idea and anti trust laws should be expanded to include
the banking sector. AIG and Citi were too big too fail wich
means they were too big, period. The Obama govt is looking
to set up a system risk evaluator. Thats good too. Regarding
TARP, Fed Chief Bernanke said he would be out with a list of banks
who can repay tarp next week. Why wasnt this covered like
Geithners PPIP plan was? The financial media must be hiding
something. I am expecting the market will rally when banks
start paying back the TARP as that will relieve inflation
fearmongering as it reduces the debt.
June 5, 2009 9:06 PMGoldStandard said:
“not only were these healthier financial institutions – JPMorgan Chase, Morgan Stanley and American Express sold billions in stock to raise money to repay TARP”If they’re so healthy, why are they selling stock to repay money they were given that should still be there? Maybe they have another agenda…
June 8, 2009 11:27 PM