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Business Plan Outline Included...
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Tharp's Thoughts
Inbox Mentoring
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Feature: Design a Plan Even
Goldman Sachs Might Envy
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Workshops: Blueprint for Trading Success in Feb in the US and Oct in London
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Tips: What We Know and Don’t Know About Tax Reform’s Effect on Stocks, by D.R. Barton, Jr.
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Peak 101 and Blueprint for Trading Success are presented back-to-back in February. This is the only US presentation of Blueprint in 2018. We encourage you to take action now. These two workshops have the potential to change the way you trade, and as so many students report, the way you live your life even aside from trading.
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Design a Plan Even
Goldman Sachs Might Envy
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Editors note: This week we are sharing an excerpt from the book, Financial-Freedom Through Electronic Day Trading. While this book has a lot of strategies which became obsolete with the decimal rule change some years back, one of its best chapters is on business planning. This is just a small excerpt of that chapter, but it should trigger some good ideas on how you can move forward with your own plan.
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“A good plan, executed now, is better than a perfect plan next week.”—General George S. Patton
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Imagine that you have several friends and they know someone who started up a neighborhood grocery store, and they’re making a killing. That sounds good to you, and you’ve always craved the independence of working for yourself, so you decide you're going to start a brand new grocery store business. But you need to borrow some money to get things going. You call a few suppliers and you find out how much your inventory is going to cost. (Stuff like milk, break, eggs and butter.) There's a small storefront on a nearby corner for rent and you figure you can rent the building pretty cheap.
Armed with this knowledge, you go to your bank and you say, “Ms. Banker, there are little grocery stores everywhere and I think I can make money in the grocery store business, too. After all, I can buy lots of basic staple items. Sometimes I can buy them for less than my competition; sometimes I have to pay a bit more. The bottom line is I think I can sell them for more than I pay for them. After all, that's how you make money, isn’t it? Also, I can rent this little building down on the corner near my house. My overhead will be pretty low because the rent is cheap and I won't have to drive very far to work. I just need some shelving, a cash register, a cooler and a telephone line. Add in some paper bags with my store name on them, and I'll be ready
to go. What I’d like to know is, would you please loan me $100,000 so I can open my grocery store?”
What do you think the chances are of the bank loaning you the money based upon your “business plan?” Good? Not so good? If you have any business experience at all, you'll understand that the banker's probably going to laugh you right out of the door. Not only will she not give you the loan, she'll probably strongly suggest that you stop wasting your time and hers. No banker will loan money for a poor, sloppily planned, totally off-the-cuff “business idea.” And yet, that's how most aspiring day traders approach their business.
They see mesmerizing ads on television, where everyone, including the kindly Granny next door, is making (it seems) a killing by day trading. They may have a friend who has done a little on-line trading. They have a little bit of money to trade, maybe $10,000, maybe $20,000. They can easily download the trading software through the Internet. It's pretty simple to open up a trading account. So, enthralled by the promise of easy riches, they open up a trading account, deposit $20,000 and they're in business!
Little do they realize that they’ve just set themselves up to compete against some of the best financed and best managed trading companies in the world--companies such as Merrill Lynch, Goldman Sachs and Morgan Stanley. Not to mention the fact that they’ll also be trading against many highly skilled private market makers and traders.
Now put yourself in this situation. What do you think your chances as a trader are against that kind of competition? Do you think your chances of survival are good or not? If you think that your chances are good and that you're going to make money, why do you think that?
You probably realize how ridiculous this proposition is. Even if you have very little practical business experience, you intuitively know that this kind of “plan” is going to fail. Your new “store” is going to get crushed by the competition. Yet, primarily because of, “success stories,” (a buddy knows a buddy that's made some money,) and because of advertising and the fact that the media has so convinced you that it’s easy to trade, you think you're going to open up your little trading shop and compete with Goldman Sachs. Well, I can tell you that you're not. At least you're not going to make any money. Not at first anyway. And especially not without a business plan and a trading plan that clearly define and explain exactly how you’ll
thrive in the face of such fierce competition.
How to Create a Dynamite Plan
One of the things that I've found is that many people really don't understand the function of a business plan. So, before we talk about what a business plan is, let’s talk about what it is not. A big misconception I often hear is that a business plan is about some new and brilliant idea… an idea that will revolutionize or change the marketplace in some way. It isn’t. We've all heard countless stories of clever people inventing new products or services and becoming hugely wealthy through this new idea. More often than not hundreds or maybe even thousands of people have already conceived the same idea. While it’s fine to have a good idea, that isn't the most important part of the plan. What is most important is the execution of the idea. And that's
what a business plan really is...a written document that shows how to turn any idea or concept into a profitable venture.
Trading is one of the oldest concepts on the planet and that’s an advantage to your new business. You don’t have to reinvent the wheel. What you have to do now is create a written set of instructions to your brain. Instructions that will turn your concepts into cash. Think of your business plan as Cliff Notes on “How to make money by trading!” because that’s what it will be once it is completed. Since only the best traders have the discipline to make such a plan, you’ll have one of the “edges” you need to compete alongside the top market makers and traders.
For most people, writing a business and trading plan is about as much fun as having a root canal. Another issue is that most traders have very little if any b-school or business background. If this describes you, you may not have been exposed to the disciplines of writing a business or trading plan. And you may consider it pure drudgery!
But before you despair, remember that these plans are vital guides along the path to long-term profitability. Also focus on the fact that even though some traders have a trading plan, which dictates what they do day-in and day-out, they can't distinguish between daily trading and running their business profitably. They are so close to the trading activity that they can’t see the big picture. The problem is, they never step back and get a large enough perspective to see where the trading is taking them from a business standpoint, and how their trading fits into their overall mission.
To get started, here’s an outline of a good business plan for your trading business. This plan is very similar in structure to many excellent business plans you might find in b-schools or corporations large and small. It includes ALL major areas for planning and running any profitable business. Notice that it goes far beyond a typical trading plan. In fact the “trading plan” is only one subset of the overall business structure. Most business plans would include a section on “Strategy & Implementation.” Such a section might include the following subtopics: Market Opportunity, Business Strategy, Service Implementation and Marketing Strategy. Since the “Strategy & Implementation” section of a business plan is all about income production
and a Trading Plan deals with the same issues, a trader would substitute “Trading Plan” for “Strategy & Implementation.”
So what business planning for a trader really boils down to is the following…
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A business plan is a well thought out, written document which deals with the marshaling of four primary resources — time, equipment, capital, and talent. Constructing the plan involves taking an inventory of your resources and then describing in detail how you're going to use those resources to generate cash flow. And remember, having a working business plan will put you in the elite company of the top traders that are already living their promise.
This is a very brief overview of a project that requires a lot of thought from you. Every plan is unique. Here are VTIs resources for more information.
- Chapter Three from Financial-Freedom Through Electronic Day Trading.
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Business Planning For Traders and Investors, an Mp3 Audio Program in which Van Tharp interviews a variety of special guests and provides you with exercises designed to assist you in preparing your plan as the series progresses.
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The most comprehensive and thorough approach we offer is the Blueprint for Trading Success workshop. We only have this highly specialized workshop once in the US and once internationally each year. Catch this workshop in February in the US and October in London in
2018.
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Did You Miss The Cryptocurrencies Webinar?
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What We Know and Don’t Know
About Tax Reform’s Effect on Stocks
by D.R. Barton, Jr.
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The strong push up in the U.S. stock markets has everything to do with the market narrative. The narrative is the overarching theme that is the most prevalent driver of the long-term stock price trend.
I know that I sound like a broken record. I hear you saying, “D.R. — you’ve talked to us about the market narrative so many times…”
I do it for these reasons:
It keeps us on the right side of the market.
We don’t have to be smarter than everyone else and call the top.
We don’t have to sit on the sideline waiting for our market topping call to take effect.
We just follow the price action by understanding the prevailing narrative that is driving traders’ and investors’ actions.
If we have a clear understanding of the market narrative, we can avoid anticipating the top and just ride the momentum until the top shows itself.
Since early November of 2016, the Trump Growth Narrative has been the prevailing market driver. The three legs of this growth narrative are still — and have been since our original discussions — reduced taxes, regulatory reform, and infrastructure spending.
And right now, the most important driver out of this three-legged stool is the recently passed tax reform. I believe that the effects of tax reform have not yet been fully priced in by the markets. Here’s why.
The most basic fundamental analysis of a stock’s value would be that the current price should reflect the net present value of all future cash flows produced by the company.
Given that definition, when cash flow has a step-change increase (in this case from reduced tax expense), a stock’s price must, over time, increase to take into account all of the future tax benefits.
And until companies start reporting actual earnings under the new tax regime, we won’t know the all the nuances of the tax benefits sectors and individual stocks will enjoy.
Because of this uncertainty, the market has not yet fully been able to price in or “discount” the effects of reduced tax expenses.
So what do we do about that?
Let’s look at the three areas of the tax reform that I believe will have the biggest impact on stock prices:
- Companies with most or all of the tax revenue coming from the U.S.
- Companies that require large capital expenditures
- Companies with large cash hoards overseas
Let’s look at these individually, and then zoom in on some companies that I have my eye on in each category.
High Percentage of Tax Revenue from the U.S.
This one is pretty straightforward once you realize that companies by and large get taxed for their sales in the country where the sales are made. Corporate tax rates haven’t changed significantly in other countries. But they sure have in the U.S.
Since the tax reform only impacts sales that happen in the U.S., countries who get most or all of their revenue inside this country stand to benefit the most because of the drop of the top tax rate from 35% to 21%.
I was surprised to find 292 stocks out the largest 1000 U.S. stocks have all or almost all of their revenue coming purely from the U.S.
That makes for some pretty bountiful hunting. Look for banks and healthcare companies to make up a large part of those 292 companies.
Capital Spending Becomes an Expense Sooner
How a company gets to expense the cost of property — from real estate to equipment to even software has always been a complex accounting issue.
In somewhat of an oversimplification: If you put in a new piece of manufacturing equipment with an IRS imposed 20-year lifespan, you could only write that expenditure off in equal increments over 20 years.
With the generous early expensing provisions of tax reform, companies that would benefit include:
- Transportation companies (airlines, trucking and rail are favorites).
- Telecom (building out and maintaining networks require high levels of capital)
- Large national car dealers
Bringing the Cash Back Home
Companies with large overseas businesses won’t benefit as much from the domestic tax breaks, but those that have managed to accumulate cash overseas get a chance to repatriate that cash at a reduced rate that ranges from 8 to 15.5%.
The companies will then be able to return that cash to shareholders through dividends or share buybacks or better yet, invest the low-tax-rate capital in business growth opportunities. While we know Apple (AAPL) has the single largest overseas cash hoard, there are other companies that have as much as a percentage of market cap and include tech companies like Microsoft and Cisco as well as chip makers like Qualcomm. Biotech firms also tend to have large overseas cash holdings.
The market narrative is a powerful tool to keep us heading in the right direction. And with a strong market mover in tax reform, we have the opportunity to profit on many stocks as they realize the benefits of this growth-oriented tax plan.
Your thoughts and comments are always welcome — please send them to drbarton “at” vantharp.com
Great Trading,
D. R.
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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 analyst on Fox Business' Varney & Co. TV show (catch him most Thursdays between 12:30 and 12:45), on Bloomberg Radio Taking Stock and MarketWatch's Money Life Show. He is also a frequent guest analyst on CNBC's Closing Bell, WTOP News Radio in Washington, D.C., and has been a guest on China Central Television - America and Canada's Business News Network. His articles have appeared on SmartMoney.com MarketWatch.com and Financial Advisor magazine. You may contact D.R. at "drbarton" at
"vantharp.com".
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February 2018 - Cary, NC
Click the title of the workshop to see more about each.
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Presented by Van Tharp
with co-presenter RJ Hixson
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February 17-19
Saturday-Monday
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Peak Performance 101 is Dr. Tharp's core psychological workshop, and his most transformative course for over 25 years. If you want to know how great traders think, behave and act so you can achieve consistent and profitable results, without stress, then this workshop is for you. Plus, this is a qualifying workshop for traders to apply for the Super Trader Program.
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Presented by Van Tharp
and RJ Hixson
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February 21-23
Wednesday-Friday
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In just three days you’ll see how all of Van Tharp ’s strategic trading concepts fit into one seamless design for more predictable trading results. Your trading will never be the same.
This course illustrates the relationships among the steps so that the process is logical and reasonable. Moreover, you will learn how to take each step experientially, so you really get it. This workshop is filled with time-tested elicitation questions to bring forth each person’s most important issues.
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March 2018 - Sydney, Australia
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Presented by Van Tharp
with co-presenter RJ Hixson
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Presented by RJ Hixson
and Van Tharp
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March 13-15
Tuesday-Thursday
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Do you want bigger and more consistent profits from the market?
If you want consistency and would like to make profits from the market, you'll want to attend this three-day workshop. We'll show you little-known, closely guarded secrets that you're not likely to find unless you accidentally stumble upon them yourself.
Are you a low-risk investor who just wants to make small, consistent profits each month with only an occasional loss? We can show you how to develop a system that will allow you to develop a unique methodology that will give you that kind of consistency!
Are you a gutsy trader who'd like to make yearly profits of 100%, 200% or even 1,000% per year? Although risky, it is possible, and we can show you how to do it! The interesting thing is that you can do it in such a way that the only money you're risking is the money you've already made from the market. That's real leverage!
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March 23-25
Friday-Sunday
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What You Will Get In This Course
Beginning on Day 1, you’ll learn what the real Wealth Game is and, more importantly, what it isn’t. You will discover:
- Who decides the rules in the wealth game
- What money really is and why it doesn’t even matter
- What is holding you back from creating infinite wealth in your own life
- How different people think about money and why it matters
- The single greatest method for infusing positive beliefs about wealth into your being
- How to achieve infinite wealth in 7 simple steps
We’ll finish the day by playing that’s designed to get you thinking about the game of wealth in a much different way and to look at your patterns of behavior when it comes to money. You’ll learn more about yourself…your beliefs about money, and what’s possible (or not) just by playing this game
On Day 2, we’ll start with a quick review before I share with you the exact same steps I took to create infinite wealth for my family and myself. You will learn how to model my success and achieve real freedom for yourself. We begin by discovering how to:
- Become debt-free in less than 7 years, including your home, cars, credit card debt, student loan debt and more, all on your current income
- “See yourself” infinitely wealthy with the same visualization techniques my Super Traders use
- Invest in yourself to increase your income by 1000%
- Use tax expectancy to your advantage as a trader and investor
- Create inner wealth to achieve the freedom you seek
At the end of the day, we’ll again play the game to reinforce new wealth-building concepts while continuing to think of infinite wealth as a game to be played.
Day 3 begins with a review of the previous day’s notes and discoveries before we cover more in- depth inner work. Before you leave the workshop, you will know how to:
- Overcome your weaknesses while fostering your strengths with SWOT analysis
- Come back from a set-back, all with a unique mental resilience tool
- Begin each day with a clear intention, simply by removing your limiting money beliefs
- Use the matrix model to achieve infinite wealth
- Get your life purpose in alignment with your financial goals
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April 14-15
Saturday-Sunday
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Presented by Gabriel Grammatidis
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April 21-23
Saturday-Monday
Brief description available now. More info coming soon.
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Presented by Gabriel Grammatidis
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April 24-25
Tuesday- Wednesday
Registration open now. More info coming soon.
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April 27-29
Friday-Sunday
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Presented by Van Tharp
with co-presenter RJ Hixson
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Presented by Van Tharp
and RJ Hixson
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May 22-24
Tuesday-Thursday
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More 2018 Dates Coming Soon
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June: Super Trader Program Members only. Options, Advanced Options and Cryptocurrency Trading
July: Peak 101 and Modeling Great Trading Through Mental Strategies (Peak 204)
August: Day Trading Systems and Live Day Trading. Plus, Trading in a Sideways Market
September: How to Develop Winning Trading Systems that Fit You. Plus, Peak Performance 202
October: LONDON! Peak Performance 101, Peak Performance 203, Forex Trading Systems, Live Forex Trading, and, Blueprint for Trading Success
Specific dates for the above events will be released soon and the workshops will open for registration at that time.
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FREE Book!
We pay for the book, you just pay for shipping.
When you add the free book to an item already being shipped there is generally no extra shipping charge (of course, depending on your location).
Read Van’s Latest Book —
TRADING BEYOND THE MATRIX
The Red Pill for Traders and Investors
Eleven traders tell their stories about transforming
their trading results and lives, in this 400 plus page book.
Below is a brief video on how powerful this book is to traders.
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Cary, NC Workshop Information
For a list of nearby hotels for our Cary, North Carolina locations,
click here.
Book your flight arriving to the Raleigh-Durham International Airport (RDU).
When traveling to a three-day course, it's best to arrive the evening before.
To help determine your arrival and departure times, see:
Questions? Click Here to Ask Van...
CONTACT US
This is a supplement to our subscription based newsletter, Tharp's Thoughts.
800-385-4486 * 919-466-0043 * Fax 919-466-0408
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