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  • Trading Video Gabriel Grammatidis: Follow-Up on Currency Opportunities
  • Ken's Class A Perfectly Executed +13R Trade After The Workshop

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vanLearning a Lesson

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One of the biggest mistakes I have ever made in my business as a trading coach relates to publicly promoting the trading performance of my Super Traders.   During the 1990s, I asked the first set of Super Traders to make statements about how they were doing as they progressed through the program and posted those statements online.   

I believed what they said as I assumed they would want more coaching if they were not doing well.  In reality, however, I had no way of verifying any statements they made about their performance.   I simply made the assumption that when someone tells me how much they have improved after I help them, that they were being honest.   I ran an education company and had never been in a position to track the money the clients were trading.  Why would they lie to me?

My big mistake was to never seriously answer that question for myself before the universe provided me with the answer.  The answer was — someone would lie about their performance improvement under my coaching in order to attract more clients or more money through my public or implied endorsement. 

I discovered this after one of the original Super Traders, with whom I had formed a very close personal and professional relationship, turned out to be a mini-Bernie Madoff with a Ponzi scheme that attracted nearly $50 million in investor money (rather than Madoff’s take in the billions).  With the exception of the amount of money lost, everything else about them seemed very similar.  

Some of the money this mini-Madoff managed came from my other clients because I was willing to relay what he wanted me to say about his performance.  I talked about his performance even though I had no way of tracking it.   I even had money placed with him.  The news about his Ponzi scheme broke and the net result was that I settled a lawsuit against me— brought by clients who had placed money with him. In addition, most of our company’s retirement funds, which had been placed with him, disappeared.  The incident nearly destroyed our company.  

I vowed to never again endorse the performance of any of our clients.   I now trade the company’s retirement funds personally and do very well with it.  Never again would I consider putting any of it with our clients because I have no way of verifying their performance to my satisfaction.  Consequently, when you read information about our Super Trader program now, you won’t see any track records or statements about how people are doing.

I do sometimes put client track records into my books as long as I can see no reason the person would make false statements about it.   For example, in my book Super Trader, I showed the track record of someone who had an SQN® score of 15 in a particular Forex trading system.   He never asked me to mention his accomplishment and he seemed sincere in communicating his gratitude for what he had learned from my materials.  I didn’t mention his name in the book so I was not that concerned about his/her performance records being inaccurate or about him benefiting from the mention.

In my new book, Trading Beyond the Matrix, I did mention the performance of some people who wrote chapters for section 1 of the book.   In each case, I was very careful to avoid implying that anyone should put their faith in the performance of one of these people; that’s always dangerous. However, it turns out I did make one mistake; one of the Super Traders wrote about his track record and I allowed him to mention his new coaching web site.  

Trading Beyond the Matrix has been out since February and I recently learned that some of my potential clients are using his coaching program in place of  the Super Trader program.  However his coaching program is not my biggest concern.   My big concern came when I saw that his trading coaching website was linked to his money management site.   Suddenly the picture changed.  Now, the trading performance he wrote about in Trading Beyond the Matrix could appear as my endorsement for his money management skills.  Gratefully, he expressed that he had no intentions to present the appearance of my endorsement and he has taken some steps to correct that.  

Let me publicly state that I have no way to verify whether the performance information any of my clients wrote about in the book was accurate or not.   Originally, this particular client was simply talking about how well he had done with his relatives’ retirement account and I wasn’t that concerned over how accurate that information was; I had no reason to be concerned at the time.  Since he has not graduated from the Super Trader program, I have not seen his trading business plan nor have I verified or approved any of the multiple trading systems his money management business now offers.   I certainly have not in any way verified his claims about his track record.   His track record statements may indeed be accurate, I just have no way to verify them one way or another.  

Please be careful.   In our Super Trader program, we have hedge fund managers, portfolio managers, financial planners, and many other competent individuals.    If, however, you ever read an implied or explicit investment return claim related to the Super Trader program or the Van Tharp Institute, please be aware that I did not verify and have no way to verify anyone’s track record. 

Furthermore, I do NOT recommend any traders as mentors or money managers.   We are a trading education company and our business is to help people become better traders/investors.   We do not provide any sort of advisory service for those who do not want to do the work for themselves. So please be careful about any claims made.

Please do not take any chapter of the Matrix book as an endorsement of any kind for an investment track record.  

The client mentioned here remains a good friend and I respect him. This is not meant to disparage him in any way.   I just want to be clear that I am not in the business of recommending other traders or coaches. Since my big lesson learned years ago from the unscrupulous client, you will notice that, other than an occasional book, I don’t endorse any products or services outside of my own: no software, brokerage service or trading platform. I may make mention of something I use, but I do not make endorsements.

Thank you,

Van K. Tharp

About the Author: Trading coach and author Van K. Tharp, Ph.D. is widely recognized for his best-selling books and outstanding Peak Performance Home Study Program—a highly regarded classic that is suitable for all levels of traders and investors. You can learn more about Van Tharp at www.vantharp.com. His newest book, Trading Beyond The Matrix, is available now at matrix.vantharp.com.


Trading Video

gabriel videoIn this six minute video, Gabriel reviews several of the short and long trades that one of his systems found in Gold over the summer. He briefly mentioned these swing trades in his article two weeks back. His system’s recent gold trades have netted >20R and he still has two profitable trades open at this point. Gabriel concludes his review with some thoughts on where gold might be going. He teaches three proven trading systems next at his upcoming workshop in Berlin in September.

Click here to watch the video.


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Trading Tip

DRShorting an Empire: Part IV

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When you first meet Chris Szymanski, it’s easy to characterize him as just another unassuming trader.  Other than a big smile that can light up a room, you probably wouldn’t notice him in a crowd.  That is, until you hear him talking about China.  When that happens, all the conversations around him stop and everyone wants to hear about his escapades with Deng Xiaoping, various U.S. presidents, cabinet members and playing golf with dignitaries in Burma (interestingly, the golf game was attended by a dozen people including one person whose sole job was “snake beater”). There is so much more to my good friend Dr. Chris Szymanski than his knowledge about China that it seems a disservice to call him just a “China Hand.”   Chris is an active trader in options, stocks and futures, so the combination of a trader with intimate Chinese knowledge made him a natural choice to consult on the Chinese economy.  That’s why I spoke with him at length yesterday — to get his insights into what’s going on in China. 

Chris was born in Rhode Island, but spent his formative years working on his uncle’s dairy farm in New Hampshire. His mother realized that his high academic potential was going largely untapped and she managed to scrape together the funds to send him to boarding school — a gesture that Chris credits as a turning point in his life. His formal education was capped by a PhD from Brown in comparative politics with a concentration on China.  During his studies, Chris spent a year in Taiwan and became fluent in Mandarin.  His dissertation covered the transitions that were happening in China in the mid-1970s and after completing his degree, he thought his future path was in academe.  He looked for positions as a college professor  but all that changed suddenly when the U.S. State Department contacted him in 1974. They asked him come to D.C. to write China analysis for none other than Henry Kissinger.  The rest, as they say, is history.

Over the next 30+ years, Chris spent 5 years in Beijing, moving there as part of the State Department’s advance team 18 months before relations were normalized with China.  After normalization, he became the U.S. embassy spokesman in China.  In the mid-1990s, Chris’ last assignment in Beijing was to serve as the U.S. Embassy’s economic minister, overseeing all aspects of U.S. trade and economic relations with China.  When his family situation required that he finally leave the Senior Foreign Service in 1998, he left with an equivalent rank of a two-star General.  Chris then opened a very successful consulting business where he helped U.S. companies gain entry into the Chinese market.  His clients included many of the largest U.S. insurance companies like AIG, CIGNA, ACE Insurance and other household names like General Motors.

Whew!  With that background, I couldn’t wait to hear what he had to say about the current state of things in the Middle Kingdom.

So What Does an Insider Think About China?

Having been on the ground since right after Mao Zedong passed away, Chris describes China’s journey from a Stalinist-like command economy coming out of the throes of the Cultural Revolution to today’s “Loose Form of Authoritarian Crony Capitalism.”  This is more important for our longer-term negative thesis than we might think.

According to Chris, cronyism makes it more difficult for foreigners to do business in China because there are so many hoops to jump through on local, regional and national levels. Business is mostly based on the strength of one’s personal relationships, with the rule of law as we know it coming in last place. The inefficiencies of doing business in this manner are apparent.  In addition, underlying corruption is rampant — there are many “palms to be greased” on almost every level — something U.S. businesses are forbidden to do by law.  Chris cited this increasingly corrupt system as a key reason he has cut back his consulting business to just a little more than a trickle; it’s tough for companies with scruples to conduct business when so much of the decision making is done below board.  The only way that cronyism on this massive scale can continue is through a thriving economy.  China’s massive GDP growth continues to overshadow systemic inefficiencies.  When that growth starts to slow in a serious way, the inefficient ways of doing business will have to be dealt with — a process that will be painful and will add to the problems of the eventual credit bubble collapse.

Dr. Szymanski also talked about the international perception of economic socialism in China.  Today’s Chinese economy is not at all the rigidly state controlled economy of Mao’s day and it hasn’t been since the early 1990’s.  They have not yet made, however, the full leap to a market economy either.  So what is the best description of the current economy?  Chris calls China, “A large, unwieldy collection of competing special interest groups.”  In short, the sole driver for those in power is to make decisions in a way that will continue to increase the standard of living for the Chinese people. This attitude had led to a sometimes fractured and multi-directional approach.  That is certainly a far cry from Chinese doctrine of even a generation ago and has also resulted in massive growth initiative along with massive spending (and debt bubble).  As a result, China has turned into a global economic power in an astonishingly short forty years.  This has been done in a fragmented way — not at all through a massive central planning effort as many outsiders assume is the driver.  What Deng Xiaoping and his successors did was to basically unleash the Chinese people’s strong cultural proclivity for business and entrepreneurship.

Another key change for the positive, Dr. Szymanski said that most westerners underestimate how efficient the information flow is inside of China.  The leadership has made great strides in this area, albeit from a very poor starting position. 

Chris went on to say that the individuals making up the ruling inner-circle and the senior levels of Chinese government are a technocratic elite consisting of bright and highly educated men — and as of last November — an increasing smattering of women.  With a small group of highly intelligent people running such a vast empire, Chris said that political stability is placed truly above all else.

This emphasis on political stability has some very interesting ramifications for the thesis that China is due for a financial/economic correction (or worse).  If unrest were to become more wide spread, it plays out like this — the Chinese ruling factions will act swiftly to tighten up any hint of political instability.  These actions would most surely exacerbate any economic problems that were the root causes of the instability in the first place.  In short, if China cannot engineer a soft landing from the current extreme excesses in credit expansion, then the current political infrastructure is most likely going to make things much worse before they get better.

The bottom line is that the politburo’s fierce commitment to political stability could lead to actions that will temporarily undermine economic expansion.  Signs of unrest are already becoming commonplace — demonstrations over factory worker pay, poor food regulation causing sickness and deaths and myriad other situations already have some China watchers on high alert.

So the view from an insider shows both deep admiration and more than a little caution as the great China economic experiment hurdles forward.

Tune in next week when we dig deeper into the financial situation of the Middle Kingdom.  Until then, your thoughts and comments are welcome — please send them to drbarton “at” vantharp.com

Great Trading,
D. R.

About the Author: A passion for the systematic approach to the markets and lifelong love of teaching and learning have propelled D.R. Barton, Jr. to the top of the investment and trading arena. He is a regularly featured guest on both Report on Business TV, and WTOP News Radio in Washington, D.C., and has been a guest on Bloomberg Radio. His articles have appeared on SmartMoney.com and Financial Advisor magazine. You may contact D.R. at "drbarton" at "vantharp.com".

Disclaimer


Ken's Class

Ken Long sent in some follow-up notes after his workshops concluded last week:  

The experiential workshops provide a formula for successful practical learning.  Specifically,  workshops:  

  • provide sound educational practice for accelerated learning,
  • train good behaviors including good execution practice, 
  • stress repetitive training under good supervision with reflective learning to lock in good habits,
  • super-saturate your brain with good patterns which can produce a crystallizing moment to bring the main ideas into alignment (which can then generate epiphanies that change your direction).

These benefits can have short term and long term effects for traders and their chosen instruments.  The price chart below with the entry and exit points came from a student who attended the Day Trading and Live Trading workshops last week.  The trade was perfectly executed and netted +13R on Friday, a few days after the student had returned home.

Ken

Click here to see a larger version of the chart above.


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August 28, 2013 #644

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