You Will Not Find the Latest “Hot” Here

Seth Godin writes:

Where’s the heat? Is that your goal? To find the next hot thing? Do you want to buy it, sell it, use it, eat it? In every industry where there’s fashion (which is every industry), people spend an enormous amount of time looking for heat. It defines the cutting edge, determines what’s in or out, what’s hot or not. Two things worth considering:

a. the hot thing isn’t always the thing that’s aligned with your goals. Sure, sometimes the most profitable item is also the hot item of the moment, but for many companies, market share or profitability or utility has not a lot to do with being on the cutting edge of fashion. And as a user, the hot item of the moment isn’t necessarily the thing that will create value or even identify you as truly hip.

b. The cycle of hot keeps getting shorter.

You can chase this, but it’s not free, and it might not get you where you want to go.

In my 15 years working with students hot is the guillotine. It’s the hangman’s noose. The death knell ringing.

Do you want a hot, fast, quick, fake, slick, imaginary, phony and fleeting investing education? You will not find it here.

There Is A Sucker Born Every Second (Not Minute)

P.T. Barnum is famously attributed the phrase: “There’s a sucker born every minute.”

That got me thinking. Let’s talk ‘algos’ (short for algorithms). As a term it has become the soup du jour of jargon used by hustlers trying to promote prediction, cycles, oscillations, etc. You know the types–they have the PERFECT entry that leads to incredible ACCURACY which of course leads to EASY riches.

Examples of such:

Discover ways to perfectly clarify ongoing movement of price within all markets & all time frames.

And:

Learn to precisely read immediate price direction, strength, trend & consolidation of any chart in real time.

And:

There exists perfect, consistent oscillations on charts every day, every week, every month and every moment.

Nonsense.

A trend trader either enters or not (and of course entry comes in overall importance of trend following trading system success after portfolio selection, money management, and exit criteria). Any entry approach needs to be robust, and straightforward. Many technical indicators will do the job.

Arcane/complicated formulas/algos imply that all types of fancy processes and elaborate number crunching takes place and when complete a trader knows precisely whether to enter or exit. This idea is worthy of P.T. Barnum’s most famous “line”–except maybe it’s not every minute that one is born these days, but every second, or millisecond.

The Polyphonic Spree of Trading Systems Makes Me…

A random unsolicited email arrived today:

Dear Micheal [sic], attached is a more precise work for the point target of DJIA performing supercycle expanding triangle. Each swing in the formation holds a type of a-b-c correction waves. DJIA is now performing the 3rd wave of c subwave of 4th (D) swing of the expanding triangle.

1) D (4th) SWING of EXPANDING TRIANGLE FINAL TARGET : 15605, (calculated by the swings of the formation)
2) c SUBWAVE of the D (4th) SWING FINAL TARGET : 15192, (calculated by the abc waves of the D (4th) swing of the formation).

Possible time frame for the final target: December 2012. Both are the forecasts of the final destination before the nightmare collapse. Please see the attached excel file for calculation and graphs. Regards, Cemal S.

Thanks. While I wait for the nightmare collapse, perhaps some sprightly hippie inspired music would help my anxiety?

102% Forex!

A random and unsolicited email just received:

Hi Paul, Wondering if you would be interested in having me work for you. My results are 102% trading Forex in the last 4 months trading with relatively low leverage. Would you be interested? Best Regards, James

No.

All Winning Months Should Scare the Hell Out of Anyone, Not Cause Excitement

Tyler writes:

Mr. Covel I am in need of your assistance. You seem very active in the investing world and you may know someone who may be compatible with I’ve developed. We’ve all heard that if something sounds to good to be true then it probably is but that is not a truth only an opinion. I have developed a trend following system unlike anything else in the world and I know it’s value. If I showed you how it works it is only “logical” that it’s for real. I have showed this to two seasoned investors and they pretty much offered me everything they had for it but they both turned out to be untrustworthy and a deal was never reached. This system has the ability to pull trillions (to good to be true?) out of the market over time. When I get big enough I can follow every asset with a quoted price globally and develop software to automatically initiate trades. I can diagnose the entire history of any stock and indicate when it would of been bought or sold for maximum gains. This is for real. The average gain is 65% and the average holding period is 13 weeks. I ran diagnostics on [name] and over the last 10 years if you followed what the system advised it would of returned 74,500% based on the rules I developed for the system. YOU CANNOT LOSE. It is illogical once you learn how the system works. You will have small losses but the rules help you minimize losses and maximize gains. I have corresponded with many Wall Street “alleged” gurus to no avail. All someone has to do is see what I have. My issue is capital I have very little and very little time to successfully utilize the system. I’m looking for someone that would be interested in starting me with a small stake and seeing what I can do. There is a pattern that every stock forms indicating the future trend and I have mastered this pattern. It may sound like crap but like I said all someone has to do is look at it and they will see how logical the system is. A 5th grader would see how easy and accurate it is. In history all top performers were overlooked many time before someone gave them a chance, took a risk and was rewarded handsomely. I am one of those people, eventually someone will take the time to see what I have and their world will be forever changed.

You don’t have losing months?

His response:

No, every time the pattern manifests it’s usually correct. However, sometimes it could consolidate after a signal. If the market is waiting on a news event or other short term economic indicator stocks consolidate for awhile and don’t really do anything.

So there are no losing months? Can you understand the points you are making don’t sound like trend following?

His response:

Well, like I said it’s unbelievable until you actually see how it works. No, losses are not sustainable because of how the equities are purchased. I put in a 2.75% stop on every trade so sometimes you can have the stock slide back and trigger your stop but the key is to continue following the stock and keep buying the higher price until it really does take off. There ;are] no losing months, but sometimes it can take time for signals to develop. Based on my research it’s right 100% percent of the time, once you see the way I record prices it becomes very easy to understand, you saw the trades right?

I don’t think we are a match here, but I wish you luck!

His response:

Don’t you understand this is the most sophisticated and accurate trend following system in existence? When I think about it, I don’t understand how others are able to capitalize in the market. When the big hedge funds come out with their recently acquired positions most of their purchases are in sustained downtrends.

Trend following doesn’t fixate on accuracy, but best of luck.

His response:

Like I said this is new & infallible.