Tharp's Thoughts Weekly Newsletter (View On-Line)

• Article Journey to French Polynesia by Van K. Tharp, Ph.D.
• Trading Education $700 Discounts on May Workshops End Soon
• Trading Tip Huge Sector Shift by D.R. Barton, Jr.
• Matrix Insight Entry: Amazing Journey by Dave

$700 Discount Ending Soon on Swing Trading Systems,

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Journey to French Polynesia

(An Article About Beliefs and Breakthroughs)

by Van K. Tharp, Ph.D.

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My wife and I recently spent two weeks in French Polynesia; that means Tahiti, Bora Bora, Moorea, etc.

In most people’s minds, French Polynesia is paradise.  It’s a lot like Hawaii, but much less developed and much less populated.   The total population of about 275,000 live on just 65 of the 118 islands which are grouped into 5 archipelagos and scattered across about 2,000 miles of the Pacific Ocean.  The total land mass of the islands is 1,609 square miles. 70% of the population lives in Tahiti and it accounts for about 400 square miles.   The capital city, Papeete, has about 75,000 residents.

So just for some perspective, let’s contrast those numbers with Hawaii.  The population of Hawaii is 1.4 million.  It consists of 8 primary islands, spread over 1,500 miles.  The total land mass is 6,419 square miles.  In addition, more people live in the city of Honolulu than in all of French Polynesia.

Wouldn’t you assume that everyone wants to visit French Polynesia since it’s a paradise?  Actually, it only gets about 250,000 visitors a year which is less than the number of weekend visitors to Las Vegas.   Hawaii gets nearly 10 million visitors each year.  I expected our 10-day cruise to be on a large cruise ship, but it was the smallest in the Princess fleet holding only about 650 passengers.

It’s quite expensive to travel there, which may be an explanation for why it gets so few tourists.  The 275,000 Polynesian residents are all French citizens.  As a group, they receive about a billion dollars each year from France.  The minimum wage is about $1,700 per month¹ and government workers get about $4,500/month as a minimum salary.  In addition, the Polynesians own the land and it’s fairly easy to live off the land, so there is little to no poverty.  That plus free medical care and education make life great for the Polynesians, but expensive for tourists.  Almost everything has to be shipped or flown in and then the price is jacked up.   Our breakfast for two at a $500/night hotel cost about $100.

Beliefs in Time and Space

One of our tour guides narrated a lot of fascinating stories.  He was an American with a master’s in Anthropology specializing in Polynesian studies.  He married a Polynesian woman and lived there.  Though I have no idea how much historical fact was in his stories, I am not focusing on their accuracy but am relating them to you to illustrate the power of beliefs.

So imagine Captain Cook sailing into Tahiti.   The Polynesians, who were expert sailors, see this huge ship with a single hull, bigger than the two-hull canoes they used, even to go long distances.  They attacked his ship with their war canoes, but one cannon shot from Captain Cook was enough to stop all of that.   The Polynesians thought, “This must be a God.”   The local leaders were brought to Captain Cook’s cabin where they saw a sextant, a telescope and many other strange things.

The Polynesians worshiped the forces of nature.   And this man indeed had many powers they had never seen.   Cook gave them strange objects as gifts which they promptly buried in the sand.   Why?  The coconut was the source of life to the early Polynesians.   They had very few resources but they managed to make material, fiber, food, water, and numerous other things out of the coconut so naturally, it represented life to them.  Since they thought that the coconut was the source of all life and the way to make the coconut grow was to plant it in the sand, why not make these marvelous gifts multiply as well?  Unfortunately, the gifts did not grow well in the sand.

The Polynesians hung Cook’s picture in their altars as a god and prayed to him as a god after he left, asking him to return with gifts.   Eventually he did return and he did bring gifts.  Thus, he had answered their prayers so he must be a god.² 

When the ancient Polynesians discovered New Zealand — a set of two islands many times bigger than anything they were used to — they attempted to plant their coconuts there to start a new life. However, the coconuts would not grow in New Zealand.

I’m telling you these stories to illustrate that beliefs have a context.  In your world and your environment, certain things are given a lot of value.   But what happens over time and with a change in location when that context is no longer available?   Then beliefs must change.

At the time that I was hearing these stories, I was reading the books of a Buddhist monk, Tarthang Tulku.  One of the primary topics of these books is knowledge — how it comes out of ignorance and is a function of time and space³.   I didn’t totally understand that concept and I didn’t want to do all the mediation exercises he recommended.  The universe, however, was kind enough to provide an anthropologist telling me stories which did explain the concept to me.

A Huge Transformation for My Wife

My wife is a little afraid of water and doesn’t swim.   Being in a huge ship miles away from land is okay for her unless she contemplates how far away we are from the nearest land or how deep the ocean is beneath us.   Somehow, an ocean that is several miles deep is scarier to her than water that is ten feet deep, even though both are equally as easy to drown in.

My wife does love fish and the cruise ship offered some water trips for snorkeling or scuba diving but those are difficult adventures for a non-swimmer.  Then I found a water activity that was okay for non-swimmers.   You would put on a helmet that has air pumped in and you go to a shallow bottom area about 12-20 feet below the surface to see the coral reefs and fish.  To me that sounded great, so I signed up both of us.

Even though she said she had nightmares about it she was game to do it in part because other people had told her that it was very safe and very fun.   So we got on a boat that took us halfway between two islands (each was about a half mile away).  There, we were supposed to climb down some stairs at the back of the boat until we were almost fully in the water.  They would then put the helmets on us (each weighing about 100 pounds) and we would go down the stairs all the way to the bottom.   There was a scuba diver there to help.  My wife said she’d go last so she wouldn’t hold anyone up and I went second to last so I could wait for her down below.

Once I was below the surface, I watched as my wife’s legs appeared on the stairs, but they she went back up.   She tried again and then she went up again.  At this point, the scuba diver waived me up because she had panicked and decided not to do it.  She said the claustrophobia from having a helmet put on her head was even worse than the fear of drowning.

So I went to the ocean floor and walked around for about five minutes feeling a bit sad that she had given up, but still okay with it.  What is is perfect.   They had given us bread in a pouch and as soon as you went down, you were surrounded by lots of fish.  I have been scuba diving before, but never had an experience like that. You could actually touch the fish.   As a result, I enjoyed myself and soon forgot about my wife.

Soon, the food was gone and there were only a few fish around me. Suddenly, I saw a person in the water surrounded by 100’s of fish.  I couldn’t see this person’s face (too many fish) but the brown legs looked like my wife’s legs.   It was then that I realized that she had made it down.

Apparently, people from the last dive had told her that everything was great and to at least go down to the bottom.  She could come right back up if it was too much so she decided just to try.   As soon as she got to the bottom, she was surrounded by the fish, she forgot all about her fears and had a big smile on her face.   Now, she describes it as one of her favorite experiences ever.   I’m always so proud of her when she breaks though a big fear like that.   And, of course, that’s part of the mission at the Van Tharp Institute, to help people get through their major issues that block them from living life to the fullest and trading well.

So, if you want a great place to visit, I recommend French Polynesia.  And a cruise might be the best way to visit the different islands.

1. I heard three different amounts from three different tourist guides, but that’s close.

2. Later unfortunately, he attempted to take the King of Hawaii hostage after the natives took one of his small ships.  This wasn’t taken too well and it resulted in his death.  Perhaps he wasn’t a god.

3. Tarthang Tulku  Time, Space, and Knowledge: A New Vision of Reality.  Dharma Publishing: Berkely, CA, 1977.

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.

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Huge Sector Shift Hits Hedge Funds and Traders

by D. R. Barton, Jr.

By the end of 2013, positioning for hedge funds and other institutional investors was quite clear.  You had to be heavily exposed to biotech and tech high flyers.  But 2014 has brought a sudden and crushing rotation out of what was just working.

Blaine Rollins, the very insightful portfolio manager at 361 Capital had this to say:

Everything that has worked so well for the past 2-3 years has been stopped dead in its tracks. I have read several investor letters and talked to many professionals running money and they have confirmed the brutal halt. Most funds are taking risk off the books, while some are even returning capital to investors and looking to shrink operations in aggressive growth investing. But a few are looking at the 20% retreat in momentum growth prices as an opportunity to double down.

The data actually confirms Mr. Rollins’ observations about a select group treating the last pullback as a buying opportunity.  A very knowledgeable player at a boutique hedge fund research firm that we work with echoed Rollins’ sentiments:

The most recent BAML survey says that, as of last week, reductions by funds overall in technology stocks have been remarkably small; in effect, despite the quick 10% break in the NASDAQ and the much larger declines in the high octane tech issues everyone is still massively overweight this sector.  That suggests there could be far more unfinished business as regards the tech liquidation.  This has shocked me somewhat. 

Apparently then, we have two dynamics at work—money rotating out of formerly high flying sectors and a dedicated tranche, stubbornly hanging on for a return to the good old days.

So where is all of the money that has dashed out of biotech, AMZN, TSLA, TWTR and other high flyers headed? Blain Rollins has put together an excellent graphic that shows both absolute and risk-adjusted returns for various asset classes:

(To see a larger version of this chart, click here)

Looking first on the left at the absolute returns, , we can see a rotation into largely the same sectors that excelled early in 2013—utilities, energy, health care, etc.

But the more interesting chart is for the risk adjusted returns on the right.  These figures are absolute returns adjusted according to the asset class’ Sharpe ratio.  Recall that the Sharpe ratio takes into account the volatility of the instrument and then subtracts the 10-year treasury return. 

Notice that of the seven negative risk adjusted returns, three are for various hedge fund indexes!

As we move through the second quarter, we’ll see if this shift continues along these lines or what new dynamics may develop.

Your thoughts and comments are always welcome  - please send them to drbarton “at” vantharp.com Sorry for the abbreviated note this week – I’m heading into surgery in 90 minutes for a septic ankle!  Your prayers would be appreciated!

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".

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Matrix

Matrix Insight Entry:

Amazing Journey

Dear Dr Tharp,

Life sure is an amazing journey to say the least!

I’m just starting chapter 13 of Trading Beyond the Matrix and feel very compelled to write to you and say thanks. Chapter 10 was awesome. I'm so glad you wrote that the way you did.

Funny enough, I wrote to you a few years ago regarding the ‘God’/Christianity bits in ACIM being to difficult for me to accept and hence I did not continue. It did push my buttons and I just wished someone would write the same thing from a non-religious background. Anyway, I accepted that it was my problem and I had to find my own solutions, and then moved on. I had forgotten about it until yesterday and got very excited after reading your experience—how many of us share similar experiences? Well it’s definitely back on my to-do list now.

Not long after writing to you on a separate occasion where you helped me determine my system was HG, I stopped trading to better prepare my self for success. You see, I was trading with a small account and it wasn’t working so well for my psychology, even though I had made some amazing % returns on start up capital. It’s a different ball game if you need those returns to pay bills etc., and I had difficulty at times trying not to focus on the $$ which created some self sabotage trades. It was like a double edged sword — I had this great system that had fantastic results, sometimes it seemed almost at will, which then allowed me to change into the complacency/sabotage lane at times.

In the last few years your teachings have been invaluable to me out in the ‘real world’ where I had to go and find work — it’s been life changing and a connection to the Divine Guidance has been very obvious through my own observations and experiences. I’m not far away from resuming my trading journey, which, is also a spiritual journey and one path back to God for me too (I’m only just now comfortable using that word and only will use it with very few people at the moment).

Kind regards,

Dave

P.S. As a side note, in the wonder of connectedness, I found this book kind of unreal in a way because I worked on The Matrix in 1998 as a freelance GRIP and had previously made a relation between trading and the Matrix. I only went as far as to state ‘Look Through the Matrix’ on my Twitter avatar, which was opened, primarily, for a trading arena with other traders in late 2010 or early 2011. I have to admit though; I value this type of ‘coincidence’ as part of my Higher Guidance.

Thanks to all the contributors in this book. It would be great to meet some of you one day. Special thanks to Van, his team, and his Guidance.

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