A10, Stock Trader Dude

All three US stock market indices are up nearly 10% on the year, with most of that gain occurring in April.

The US economic landscape is much worse now compared to 2004 and 2005 – and bear in mind that in 1994 and 1995 the DJIA was at 4000 to 5000, and in 1992 to 1993 the DJIA was 2000 to 3000, so how can anyone feel positive about natural upward market momentum?

–       Outstanding credit card balances are approximately 900 billion US dollars (How much physical US currency is there worldwide? $850 billion, as Time Magazine reported at the end of 2008)

–       Foreclosures

–       Joblessness

–       Poverty (43.6 million people are classified by the US government as below the poverty line – the highest number in 51 years of record keeping)

–       Uninsured & increasing health care costs (Over 40 million uninsured)

–       Inflation

Does this sound ideal for the US market indices to be at such high levels? Maybe, if we consider that the US stock markets do not reflect the economics of Main Street.

Average Jane Q. Public is never going to achieve wealth in the stock market, nor in real estate, or in anything else – the one thing that will make a difference for her existence is affordable or free health care. If she’s not healthy she can’t viably engage in the pursuit of happiness, nor take care of her family or community.

The average Jane Q. Public family doesn’t have the financial wherewithal to continue consumer spending – they’re still trying to pay off what they spent when times were good! And if the Q. Public family has a family member who is no longer employed, their focus is on the basics of food, other household staples, and getting around town (all of which cost them more!).

Yet we’ve still got folks marketing how to profit in the US stock markets and suggesting continued investment for your retirement security, and as a way to generate wealth. What a silly claim – even with the US stock markets registering gains for this year the value of the US dollar has declined to offset any potential rise in actual portfolio value. Why risk your money just to break-even?

Here’s an example from Tharp and his newsletter – which he promotes to get people to sign up for his expensive workshops. He claims to turn people into super traders and other nonsense. Is he a super trader? No. Does he even trade the markets? No. But he hangs out with people who trade. And he claims they have improved their trading performance from reading his literature. Oh, yeah, because trading books make people money – not!

But isn’t it possible that your “students” made money because the markets have gone up anyway, regardless of how fundamentally bad the economy is? Tharp forgets that in 2004 he was so focused on the collapse of the US stock markets that he was wrong about his secular bear market analysis being the same as a forthcoming severe market decline. And he didn’t personally achieve any of the profits to be gained from the fast declines from 2008 and 2009, nor did Tharpy have anything substantial to say to his newsletter readers during that period. So here’s what he is saying now:

General Comments

We’re in a secular bear market, which means a long term and dramatic reduction in equity valuations. Eventually, we can expect to see S&P 500 PE ratios in the single digits. Fundamentally, conditions certainly seem to support that trend even though the economy can do quite well in some secular bear markets. (Right, you found out after screaming from 2004 that we were due for a massive decline that the US markets did nothing but go up, up, and up, and register record gains in the DJIA to 15,000. That was exactly the opposite you said would happen! Remember in 2004, 2005, 2006 that’s all you could keep talking about – massive decline – massive decline – massive decline, based on your carefully crafted research – which you kept trying to push, and frankly, you make newsletters, not trading profits! You don’t directly trade or profit from any global stock market.)

He goes on to say:

The stock market is in roaring bull mode because of the Fed’s activities; however, those effects are not flowing into the economy. The economy is a disaster. The Fed’s money is just flowing into the stock market, probably largely through big banks investing the new money. Banks certainly are not lending it like the Fed intended. (The Federal Reserve doesn’t print anything. The Bureau of Engraving and Printing does the actual printing. The Federal Reserve just creates book entries as a way to become a creditor and signify they bought US government debt and thereby introduce money into the system. Does Tharpy ever discuss this? Not directly.)

He then states: Here is what is going on in my opinion:

1. The US economy is in a shambles. The debt is so big that the government cannot fix it. It is only a matter of time before it caves in. Expect the government to default on a lot of its contracts, especially social security. (I say, people need social security, there’s no viable way for their savings to significantly surpass inflation.)
2. The Federal Reserve is printing massive amounts of money to stimulate the economy, and usually that should work because the banks normally lend out three or more times as much money as they get from the Fed. But right now the rate of lending is at 0.74. The banks are not lending their money; they are putting it into the market…the big banks at least. (We went over this, the Fed creates book entries, they don’t actually print anything – I know Tharpy must know this, but he acts like a typical media reporter when he comments like that.)
3. US interest rates are very, very low right now because the government, due to its debt, cannot afford high interest rates (nor can the economy). Low interest rates, the US account deficit and our massive debt have crashed the dollar. Expect things to get even worse because one day the world will not accept the US dollar as the world’s reserve currency. (Canada is looking well.)
4. While the market is in a strong bull period, the overall gain in the major indices this year is not as big as the fall in the dollar.
5. In this climate, long term investing does not work. You must be a trader, and you must have your psychology together in order to succeed. Trading is not easy; you need to educate yourself and exercise your discipline. (Oh, you mean like you do? Wait – you don’t actually trade any stocks, right? So, you don’t have firsthand experience in actually winning in the markets or making a living from trading. Selling high priced workshops about how to trade, yes, making money in the markets as a super trader or even a competent trader, no.)

Buy a stock trader dude hat – it will keep you warm, and yet when it’s too warm it will offer shade to keep you cool. And it’s a lot more practical than fussing inappropriately with the markets… but act now before the price goes back up to $750 US.

All three hats for $97. (Questions about your order? Contact us at ordering @ stocktraderdude)

______________________________________________________

@stocktraderdude

comments @ stocktraderdude

Commodities ADR list:

I was curious to spot anything usual in the investment markets after the earthquake in Japan, but nothing unusual seems to arise, except that India appeared slightly weaker than Japan in terms of index market performance.

Silver, commodities and junk bonds have done fairly well —at least so far in April. Chinese real estate is the weakest real estate area to have been in. Bonds, natural gas and livestock are all very weak areas, but not negative. Base metals and steel are also weak.

The industrial sectors for health care, consumer staples, biotech and energy dominate everything else. However, this is different from last month when the energy related sectors were leading.

China ADR list:

The European countries are gaining strength, with some of them being ranked higher than the US indices. Belgium and Switzerland look strong. Here are the five strongest countries for April:

1. US Dow 30
2. Switzerland
3. Belgium
4. South Korea
5. Netherlands

Considering the action in the Forex market last month I was looking for any shifts in the market due to the earthquake in Japan. Here are the strongest currencies for April:

1. Swiss Franc
2. Inverse US Dollar
3. Australian dollar
4. Mexican Peso
5. Euro
6. Brazilian Real and the Canadian Dollar.

APAC dashboard:

I recently came across an ad for Schwab that stated:

I pay next to nothing for trades.

But get next-to-nothing service.

That reminded me of crappy little online only brokerage Zecco. They don’t believe in customer service. I’ve read many negative comments about them posted on their own site in the forums  so I contacted them to see for myself. Zecco customer service is horrible. And they seem cheap. When they make a mistake processing a trade they won’t even credit $50 or $60 for a small mistake. Recommendation: Avoid.

Tharpy’s newsletter took a break from September 2008 to January 2009 and there was nothing noteworthy or profitable about those particular newsletters during a very quick stock market downturn. So, all the while Tharpy’s been posturing that a trader can make money quickly during a downturn he seems to have not done anything himself, nor have any of his newsletter contributors reported that they generated small fortunes during that period – and Tharp lacked any insight about the decline and upcoming bailout. I guess it surprised him as it surprised us.

Here’s a nice quote from a lady when asked about Van Tharp and the Peak Performance home study course, “He’s yesterday’s magician, if he’s ever even been a magician at all.”

With a number of folks looking for reviews and feedback on Peak Performance home study course and position sizing I figured I’d include a couple of comments from others and relay a little about what to expect from potentially wasting your time with Tharp’s material:

Techniques for haggling with yourself are in the third volume of the Peak Performance Home Study Course: However, I would like to provide you with this introductory information about what your parts may be, their positive intentions, and how you can get to know them better. In particular, I want to explore the intentions of parts that might seem to function to lower your self-esteem by producing fear, anger, depression, or feelings of worthlessness.

In our Peak Performance 101 workshop, we expand on this work by incorporating exercises on an experiential level. And again this work can only be practiced in an interactive environment, such as a workshop, where student and teacher work on individual situations. But you can do the first step in the process, which is the first step our workshop students take. We ask people to do an exercise to determine what parts are in their heads. The exercise is called a “Parts Party.” I recommend you do it about half an hour before you go to sleep, while you are in bed. 

Parts Party

First, since everyone reading this is a trader or wants to be a trader, assume you have a trading part. Bring up that trading part and ask him/her/it the following questions:

1. What are you trying to do for me? What’s your positive intention for me?

2. Who are you in conflict with? What other parts give you the most trouble in your trading?

3. How does this part represent itself? If it is an image, what does it look like and how would someone else recognize it if it walked into the room? If it is a voice, whose voice is it? If it is a feeling, then describe the feeling. How heavy is it? How big is it? And so on.
Ask all your parts to come and let them know you are just giving them a chance to show up and play. But whenever you become aware of a new part, ask it the same questions.

The next morning, after everyone has done the exercise, we ask each participant about their parts. Often the discussion helps others discover additional parts that might not have shown up at the party. Here are some typical responses:

• “I had five parts show up. The trader, whose primary purpose is to make me the best possible trader I can be, and the banker, who is very conservative and in charge of risk management. The little boy, whose intention is to have fun and enjoy life. My family part, whose intention is to love and care for my family and give them lots of time; and my mother. I don’t know what my mother’s intention is, but she is always telling me what can go wrong and making me worry. I know it’s her because it is her voice I hear. The trader, at times, can be in conflict with all of the other parts.”

• “Well, I seem to have four trading-related parts. At least, that is all that showed up last night. One part, the trader whose job is to trade. The second part is the broker part of me whose job is to execute customer orders. However, he’s always giving the trader advice based on what I hear from my customers and that’s usually not productive. I also have a gambler part who really likes the action of playing the market. He is counterproductive. Then I have a part of me that is angry all the time—especially at the gambler part of losing so much money. He tends to disrupt my personal life as well.”

• “I have a skydiver part and a banker part. Neither of them gets along at all. The banker part is very business-like. It makes money by taking low-risk ideas. It manages money well. On the other hand, the skydiver part just loves fun. It loves the excitement. But what it does is very dangerous. It could kill me—both physically and financially.”

• “What I discovered is that I have thousands of parts. I have five advanced degrees and there are parts responsible for each. I’m involved in three different jobs and there are parts involved in each of those. A different part represents each family member—for example, there is not just a father part, but I have a part of me to look after each child. I could go on. And there are new parts being formed each time I want to learn something new. The problem I have is that none of these parts have enough time.”

Spend some time thinking about your parts.  It’s ok if you don’t completely grasp this concept. (I admit, I don’t fully grasp this) As I mentioned this is core material from both the Peak Performance Home Study Course and a very interactive exercise in the workshop. If you just start thinking about this concept and what your many parts may be, I believe it will be a very a positive and useful exercise in self understanding and moving closer to peak performance whether in trading or other aspects of your daily life. (Perhaps, but you won’t make any money in trading – there’s simply no direct link to trading application. What makes me say that? Tharp cannot support himself from trading activities – so practicing this particular exercise doesn’t do much for him either.)

More comments:

“…in the end, the long list of chapters becomes a voodoo ritual – do this, do that and everything will be fine. what? it did not work – perhaps you did not do it exactly as described….”

“FWIW I find Tharp’s well written and measured books at complete odds with the “become a trillionaire in 2 hours with zero risk!” tone of his web site. I am often tempted by the endorsements of PMK (etc) to buy a course but then look at the site and run screaming in the opposite direction. One of the many things I like about TBB is its total lack of such claims.”

“Yet millions flock to purchase trading advice products.” 

When a Forbes magazine journalist visited Tharpy’s seminar operation in 1997 the journalist claimed he felt it was simply taking advantage of the day trader boot camp momentum of the period, not anything substantial in terms of lasting educational value.

Don’t get me wrong, some of Tharpy’s interviews are interesting – or a least they were ten or more years ago, as he did make sense, but then again we all make sense… we just don’t make money in the investment markets… and neither does Tharp. I’ve heard about him managing the retirement account of his operation, but his advertising hype is all about how easy it is to make money in the markets once you address your psychological blocks – yet, he can’t seem to do this for himself – and if he ever did anything significant in trading over the last ten years, even making a small fortune – he would have publicized it – but there seems nothing of merit for him to mention about actual trading.

So, on the one hand – come to my seminar because it is going to be very easy to make money in the markets when I show you how to handle your emotions, but I don’t have any actual results, although I’m an expert on how to overcome negative trading psychology.

I’ve been fascinated that as bad as things are that the S&P 500 index and DJIA index are as high as they are…year to date the DJIA is 11,118, up 6.62%, S&P 500 is 1,183, up 6.11%, and the Nasdaq 100 is 2,124, up 14.20%. But if the US economy is the worst it has been in the longest time with little prospect for immediate improvement why is there such confidence in future earnings?

It seems silly, yet the markets remain propped up… as if nothing that has happened (high unemployment, health insurance turmoil, sub-prime and millions of foreclosures, lack of pensions and underfunded corporate pension fund obligations, continual deficit spending, a trade deficit, bailouts, and the Census Bureau stated 43.6 million Americans are now living in poverty, which is the highest number of poor Americans in the 51 years that records have been kept) is really bad.

(***Update: and with the financial troubles in Ireland and Portugal, and changes occurring in the Near East in February, and the natural disaster in Japan, and the Federal government nearing a shutdown, and state governments unable to meet their pension obligations — there is no reason to believe in any positive momentum in the US markets. The US stock market seems artificially high. Japanese authorities did intervene in their stock market after the earthquake to prop up the market)

Unless you have a strong belief that earnings at a particular company are going to improve – what’s the point of buying equities? Who’s going to pay more for the shares you have?

Retail investors might be more educated about media manipulation and financial manipulation, but they still seem ineffective at acting productively. Inflation is real, unstoppable even in “good times.” And the US dollar relative to other currencies is still weak, so when you are looking to get out of this mess and look elsewhere you may not have the same reach. I’m guessing average Joe or Jane are concerned about current expenses, and perhaps their confidence will be shaken so that they do not fund 401K accounts, and then who’s left to mindlessly bid up the share prices?

The following chart portrays almost a 14% drop in the value of the dollar since May.  That decline in value is greater than any gains in the overall U.S. stock market during the same period.  So, investors who have focused in investments that are not dollar related, such as Forex against the dollar, commodities, or foreign stock markets, have done fine and perhaps benefited from any marketplace strength outside of the U.S.

The Australian dollar has also suffered a similar setback after an amazing upward trend a few years ago, but has risen sharply over the past year. Ever think of Australia? Buying the currency in 2009 would have turned out to be a great investment — and perhaps would have paid for your trip!

***Update:

Here’s a look at the Australian dollar from 1998 to present, which shows the current strength of the Aussie dollar against the US dollar.

A friend mentioned he had some questions about ETFs, and if he wanted to experiment with an ETF only portfolio what would be some choices with the lowest expense ratios? So I set this up as an example:

In general Focus seems to offer the lowest cost ETFs, but the other acceptable choices if you wanted US market exposure are VTI (0.07) and SCHB (0.06) . Although this is not a recommendation, I wanted to take a moment to respond and be helpful to one reader, who, earlier I claimed probably should not be involved in investing.

Here’s a global view of ETF sectors:

Strong international performance in most markets over the last thirty days, although a slightly positive US stock market is outweighed by a very weak US dollar.

I believe Kuwait and Libya had the foresight to remove the currency peg to the US dollar in 2007 and replace it with a peg to a basket of currencies, which includes the dollar. Any investor purchasing the Euro currency in 1999 and holding had better performance than buy-and-hold US stock investors during the following ten-year period.

The increases in share prices for Chipolte, DinEquity and BJ’s restaurants have risen substantially compared to the S&P 500 which has increased 6% percent for the year:

Tuesday    2010
Chipolte Mexican    $212.86    141%
DineEquity              $45.84        89%
BJ’s Restaurants    $35.13         87%
Ruby Tuesday        $12.57         75%
Denny’s                    $3.15           44%

The ratings health of this sector has seen some improvements this year from S&P, which upgraded restaurants’ credit ratings twenty-one times and downgraded thirteen times so far this year. I’m definitely surprised by the strong Chipolte gains – I know that Ruby Tuesday implemented a multi-million dollar design upgrade to its locations within the last few years, and although the ambiance in Chipolte locations is pleasant I never factored in all the times I walked by the stores and would see people eating in their establishment. But I’ve missed out before – and I’m not tempted to get on this bandwagon.

The lesson here is that all these folks who claim to be experts didn’t know about any of the severe market drops over the last ten years and I haven’t heard any of them say you can make high-returns in the 2010 stock market environment as easy as buying the shares of these companies. But, even with these high-returns if you gambled as a long-term investor you still may not be at break-even in portfolio value due to losses over the past ten years (plus inflation) or simply due to the last two years of stock market decline. Are you sure you still want to gamble?

Virtual goods – perhaps up to 20 percent of social gamers will spend real dollars for, say, birthday champagne for a digital piglet (Smart Money, Feb 2010, pg 34). That’s just an example – but at least these folks don’t consider it an investment – but virtual goods also include stocks and bonds, don’t they? In terms of social games, the sale of virtual goods, digital stuff that doesn’t actually exist helps bring in revenue on free games. These games may have an audience of millions of people – perhaps great advertising appeal as well (I’m only interested in the branded content and ad potential).
But another form of virtual goods exists in most people’s lives – investments. Book entries stating that you bought or sold something which you’ve never touched. And the only reason you’ve bought them, presumably is because you thought someone else was going to pay more for them at some point and you would benefit from the difference in price.
Should you jump in now? That was the name of an article from the Fortune December 2008 issue, pg. 26. We know the answer turned out to be no – as the US equities market as a whole sank to further lows in March of 2009. If there was a time to buy and make a quick buck – that was it. The article didn’t offer critical thinking – it was more of a question of gambling. When Fortune updated their list of 2008 stock picks they were -45% vs. -43% for the S&P 500 on their ten picks. When you lose almost 50% on an investment it will take an increase of nearly 100% to break even. And that’s not going to happen for you.
Bonds performed well last year – overall, corporate bonds returned 10 percent in the first 10 months of 2009. Junk bonds were up 51 percent (Smart Money, Feb 2010, pg. 44). Commission fees on bonds can be 1 to 1.5 percent, so you pay a much higher price than stock commissions. Based on 2009 data, fund companies stand to earn at least $2.6 billion more than they did in 2008 from sales of bond funds. It doesn’t matter if the positive momentum is over in bonds, or if positive momentum occurs in equities – you have to consider your real return which accounts for fees, commission, taxes, and inflation. So a nine percent or ten percent return can quickly get reduced to maybe two percent. Why risk your money for two percent? Inflation itself is the biggest risk without accounting for making any mistakes in the investment markets. When inflation is around six or seven percent or higher as happened in the 1970s you struggle to earn money that has less purchasing power – and conseqently, a few years of high inflation erases a few years of relatively good investment returns.
The average bond fund lost 12 percent in 2008 according to Morningstar.
On pg. 22 of that issue of Smart Money the article Slow Growth Hits Home quotes an economist who is a former UCLA professor saying that investors should expect stock returns equal to dividend returns plus one percent citing the following:
Rich economies aren’t likely to grow faster than 2 percent a year per person after inflation.
Population growth will add about one percentage point to growth.
Earnings-per-share growth should track the rate of economic growth, minus about two percentage points a year to account for dilution from new shares.

The article uses data from 1960 to 2006 stating that returns averaged 6.1 percent a year after inflation, including 3.3 percent a year in dividends. (In another post I’ve discussed that over the longer term in the stock market, such as 139 years, returns were roughly six percent, not including inflation – almost all gains in the stock market over the last 75 years or so have been attributed to inflation). The economist says don’t expect more of the same 6.1 percent returns because conditions that produced past stock market gains aren’t sustainable.

I’m just amazed that the DJIA is above 10,000 – times are certainly worse than most recession periods when the DJIA was closer to 1,000 so to me it seems artificially high.

According to the Urban Institute stock values decreased $13 trillion in 2008, shrinking retirement accounts an average of 40 percent. Smart Money, Feb 2010, pg. 52 states that when the tech bubble burst ten years ago it wiped out $5 trillion in wealth. I would note that I’m not keen on the wording “wiped out” – equity asset values decreased $5 trillion but a portion of that wealth wasn’t lost – it was merely transferred to speculators or investors who were able to exit their positions at higher values. Although it does not represent the average investor experience and certainly it affected even exceptional investors who lost value in their equity positions and gave back some profits from boom times there still are a few folks, lucky or skilled, who benefitted.

Pg. 22 “After the Dow ran up 20 percent from March 2008 – its best four-week performance since 1933…” We kind of had a strong repeat rebound in 2009 after stock market values decreased to new lows from March 2009.

Now think about all the billions of dollars in compensation that go to Wall Street firms – the real money is in selling investments, not gambling haphazardly in the markets. Virtual goods are a good business for sellers – they’re based on a powerful thing called belief, but at the core, fussing with stocks and bonds can seem a lot like buying virtual birthday champagne for a digital piglet.

I’ll tell you where I won’t be – Peak Performance Seminars 101 and 203 next month. Tharpy is at it again peddling his programs. I don’t know the difference between the Van Tharp Institute compared to his IITM operation, but I do know this: I can save you at least $4999.00

Seven money-making benefits await you in a one-of-a-kind workshop. You will make more consistent profits, keep your losses smaller, and be more relaxed about your trading.　

1. Learn the three ingredients of success. You must know this information, at least unconsciously, if you are to prosper. These three mental ingredients are a must in any task you do in order to perform like a “Market Wizard.” Most people don’t even know about them, which is why success is so difficult to duplicate. But after the Peak Performance 101 Workshop, you’ll thoroughly understand how these three key ingredients can control your life. Most of all, you’ll learn how you can control them.

Dude, the “market wizards” got rich without a lot of what Tharpy preaches. And when a journalist from Forbes visited Tharpy’s seminar and training operation way back in 1997 he couldn’t find exceptional value or much substance to make an article out of… Believe me, not much has changed – and that was when market conditions were most favorable to trading independently and making a small fortune. Now it’s rather silly to compete when Tharpy’s been ranting since 2004 that we’re in a secular bear market. And for all his ranting – you didn’t make any money, nor did he make any money from the bear market prediction because he couldn’t find an effective way to trade that “belief.”

At any rate he’s already discussed his “three ingredients for success bit” in books and magazine articles – and no one wrote to the editors to say they got rich… The books are just promotional literature for seminars.

2. Understand the components of a low-risk idea. The trick to compounding your personal wealth is to trade low-risk ideas. Low-risk ideas are found everywhere—not just in conservative investments. In fact, a great deal of wealth is made from following low-risk ideas in highly speculative arenas such as options and futures. But you must understand what makes up a low-risk idea. It’s not what you think.

If there are so many low-risk ideas out there maybe you’d find it surprising to hear that he can’t come up with any of them for his email newsletter over the past six years, and he doesn’t trade the markets – so he is not able to effectively compound any personal wealth by his own direct efforts within the investment markets. If you want to make $500,000 US, all you have to do is trade 500,000 shares and if the share price moves in your favor one point and you can capture that movement you have made $500,000. Tharpy doesn’t do that; he’d rather sell 1,000 people a two seminar package for $4,999 without any of the market risk. If you make money you’ll credit him and buy more stuff. If you lose you’ll blame yourself and buy from him to get more training. That’s the kind of racket he’s got: there’s no performance measurement tied to his revenues. After years of reading his stuff – he’s never been able to directly help himself profit in the investment markets, and I don’t believe he can help me.

3. Understand why position sizing strategies are critical to your bottom line results! Few people understand this key concept. Yet it means the difference between consistent top performance and average mediocre performance for most people. We’ll teach you position sizing based trading so you will have the same risk and exposure in the market day after day. Think how calm you could be, knowing that your risk is always the same.

Dude, what he’s saying here is that investing in the markets is gambling. True. So he advocates risking one percent or less of your capital per event/trade. There’s no quality filter. Do you think this guy ever would have bet on buying Google shares in 2004 and holding on to them for two to three years? No, all he could talk about at that time was his belief about the immediate and unavoidable bear market environment – which didn’t happen until 2008 and 1st quarter 2009 – and by that time he stopped using his bear market tracker/indicator. He had no clue to focus on buying Apple Computer shares in 2004, or even Chinese stocks or other international markets before they went up 100 percent or more. This approach has nothing to do with identifying strong market forces that could move a stock far enough to make you a small fortune or fortune in a reasonable amount of time – be it a year or within several years.

4. Learn 15 ways to develop rock-solid discipline in your trading. Discipline really means controlling your mental state. Unfortunately, most people allow their mental state to control them. In contrast, real winners maintain discipline that allows them to charge ahead of others in the field. If you play in a zero-sum trading game, like futures, you need to know every trick. These are the real secrets that separate successful traders and investors from the average person.

The reason Tharpy has discipline is because he doesn’t trade – his objective isn’t to make a fortune trading – it’s to make an income giving you an education. And that’s the safest bet for him because if he loses his own money in the markets he loses credibility. Dude, people cannot easily become disciplined in any area of life, dieting, exercise, improving in hobbies/projects that interest them, etc. and it would be foolish to think that when you throw in the element of money – gambling in the markets, that it allows for constant improvement in tackling your impediments to discipline. What he doesn’t explain is that the markets by their very nature are based on the majority of people not performing well or losing money to allow for the overachievers. The original “market wizards” are no longer the wizards they used to be or were purported to be because the market environment changed and they couldn’t maintain their performance, while the newer market wizards lost money during the 2000 to 2002 stock market decline and those that hung on as a going concern did so because they had sufficient money left to trade with and were able to adapt to the shift in the marketplace. And if self-made independent market wizards who had years of experience and good systems had trouble competing and trading profitably – what makes you think some silly seminar is going to turn you into a trading star?

Looking back on the February 2010 Smart Money magazine (the Wall Street Journal magazine) is good for a laugh… and a bit of a scam.

From the cover:

Fuel your own rally: 5 great energy stocks p.56

Health Care Reform: how to profit from it p.22

Make money with twitter p.46

Where to find winning stocks p.13

The new toolbox for investing is what they illustrated on the cover – but it’s just junk for the uninitiated. The concept of the toolbox isn’t explored, so no tools are presented.

How about those midsize energy companies they recommended? Bargain-hunting in the oil patch (p. 59):

Consol Energy (CNX) $45: briefly up for a week or two and then dropped ten points; currently $40.

FMC Technologies (FTI) $54: rose to $75, then dropped to $50; currently $72

Petrohawk Energy (HK) $22: dropped to $15 at the end of April and into May; currently $17.70

Plains All American Pipeline (PAA) $52: currently $64

Pride International (PDE) $32: down to $22 at the end of April and into May; currently $32

How about Health Care Reform and how to profit from it? The half-page article really didn’t deliver anything of substance. It mentions UnitedHealth Group, Amerigroup and WellPoint but not how to specifically profit from Health Care Reform so that when you get to the article on page 22 it has been renamed Learn to Love Your HMO. That qualifies as misleading. The share price of UNH dropped and recovered to around where it was when the article was released, AGP went up 15 points, and WLP is recovering from a drop from the $60 range to the $50 range.

How about that make money with twitter article? “The online phenomenon Twitter delivers 8,000 financial-advice messages every day – in tiny, often confusing chunks.” We don’t need an article for something so obvious – boring – and the article discusses Twitter, not making money with Twitter which makes the cover of the magazine look like a liar after seeing the article on page 46 renamed “bite sized advice.”

Where to find winning stocks? “Our Picks – When the market starts rewarding higher quality companies, these firms could shine, according to some pros.” So it’s a list of four companies… but it is stretched out to a page and a half so they can call it an article.

Pfizer (PFE, $18) Currently $17.77, but dipped to around $14 in June/July which is the same price it traded for in June/July of the prior year.

IBM (IBM, $129) Currently $141.20, but for most of May, June, July and August it traded for $125 (or less from time to time).

First Cash Financial Services (FCFS, $21) Currently $28.17, traded at $21 up until part of July.

JPMorgan Chase (JPM, $41) Currently $38.87, in April it briefly rose to between $47 and $48 before dropping to $36 where it traded for June, July, and September.  

The editors hope you’ve enjoyed reading the issue rather than feeling like you wasted time in their edition of Smart Crapper magazine. Of course, on the cover we’ll call it something else so keep a look out on the newsstand for the next issue of Smart Crapper magazine, although it will continue to be labeled as Smart Money for graphic design purposes.