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

February 24, 2010 - Issue #463

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Workshops

Plan Now for the Next Four Months

Article

What’s Really Important in Your Life? by Van K. Tharp Ph.D.

Trading Education

Make Bigger, More Consistent Profits, Without the Stress

Trading Tip

End of January Market Swoon – Some Perspective by D.R. Barton, Jr.

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System Possibilities

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What Type Trader Are You? Take 3 Minutes to Find Out

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Feature

What’s Really Important in Your Life?

by 

Van K. Tharp, Ph.D.

I’m a value-oriented person. My top values are personal transformation and helping others transform themselves. I’ll probably never retire because people continue to pay me the ultimate compliment when they say, “Your work has changed my life.” As long as I can help people improve their lives, I’ll continue to do it.

Some people think life is all about money because they link money to highly valued states like freedom and happiness. For example, Robert Kiyosaki developed the Cashflow game in which you try to get out of the rat race when you generate enough passive income to cover your living expenses. If you have played the game, you may have noticed that when you finally get out of the rat race, the game can get pretty boring. 

I use the idea of “passive income being equal to your expenses” as a great definition of finan-cial freedom. Robert Kiyosaki views it as a stepping stone to wealth. You may not have known this but Robert and I did three workshops together called Infinite Wealth in the late 1990s. After he became famous from his Rich Dad, Poor Dad books, I read that he believed that someone was rich when they had a million dollars a year in income. He went on to say that super rich meant that your monthly income was a million dollars. He posted recently on his Facebook page that every morning when he got up, he looked at the Forbe's list of the 400 richest people in the world. If he wasn’t on it, then he went to work.

My reaction to reading that was “WHY?”. His next logical step would be that he keeps working until he is #1 on the list. And if he were to arrive at that position, he’d find something interesting. The relentless pursuit of money did not bring him any closer to the core values that everyone truly wants: love, happiness, and oneness. Given the “competition,” Robert will probably never get to number one on the Forbe's 400. If he did, he might find that he had become very old and still not achieved what he secretly desired. More likely, he’ll never get to number one and could miss a great lesson. 

Quite regularly, I hear people comment, “If Van Tharp is such a great trader/trading coach, then why doesn’t he just trade? He still gives workshops so he probably doesn’t have the secret of success.” Comments like this originate from the assumption that having lots of money (through trading success) is the ultimate goal in life. But it’s not, it certainly isn’t for me.

When someone says, “You changed my life,” I’m motivated in deep and fulfilling ways that lots of money could never provide. I know that our products and workshops have had an immense impact on other people’s lives. My whole staff knows that because people email or call us regularly and tell us how much better their lives are as a result of one of our workshops or products. That’s why I do what I do. I love it and can’t imagine doing anything else. 

In order to help others transform themselves, I work on transforming myself. This makes it easier for me to help others do the same. For me personal transformation means that I’m moving closer and closer toward total bliss, joy, happiness, and oneness.

Happiness is currently a very popular topic for workshops. For example, Robert Holden, an English Psychologist, now gives an 8-week happiness course in England. He’s proven that he can permanently shift people to a much higher level of happiness.

The most popular class at Harvard University now is a course on happiness. I’ve read the course based book, however, and it’s way too academic. It leaves a lot to be desired in understanding what happiness is and simply how to be happy.

And now the Van Tharp Institute has its own Happiness Workshop: Peak Performance 203. It includes three days of working on yourself to improve your happiness, including some very advanced exercises to show you how most of what you see in the “outside” world is really a projection of what’s inside. This becomes a stepping stone for being naturally happy. 

After the workshop, there is a six week home study plan to apply what you learned. The Super Traders who did the course in December are just now completing the home study portion and finding the process life changing. 

For those of you who still think, “I’m not interested in happiness, I want trading profits,” I can assure you that trading profits are much easier to come by when you raise your personal level of happiness to new heights. I base that on personal observation of and feedback from a number of our clients. Why don’t you try it and see? As usual, we give a money back offer on the workshop if you are not “happy” with the course. 

About Van Tharp: Trading coach, and author, Dr. Van K. Tharp is widely recognized for his best-selling books and his 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.iitm.com. 

Trading Education

Peak Performance Home Study 

"You don't trade the markets.  You trade your beliefs about the markets." —Dr. Van Tharp  

What does that mean?  How do you even find out what your beliefs are?  Use this course to learn how to identify your beliefs and find out which ones are useful and which ones cost you money in the markets. 

Learn More

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Trading Tip

End of January Market Swoon – Some Perspective

by
D.R. Barton, Jr.

 

The graphic on the front page of today's Wall Street Journal was striking.

In fact, it was so striking and the story so compelling and important that I “stopped the presses” on the article I was writing and wrote this one instead. Everyone needs to understand what the graph is telling us.

Let’s look at that front page image from this morning’s WSJ.

The graph shows the year-over-year change in total loan value outstanding. It simply answers the question, “Are banks holding more loans in dollar terms this year versus last?”

The answer: banks are decreasing their total loan value at a pace not seen since WWII. 

Perhaps there is an even more important conclusion from the chart: every green year meant that total lending was expanding. That is, cumulative loans have been in a positive trend since the end of WWII. With the exception of the 1990 recession, the bank loan amounts have been in a long term up trend. 

The accompanying Journal article talks about at least three factors causing the total loan value to drop at the steepest rate in the last half-century:

  1. Heightened regulatory requirements, especially the increase in the amount of cash reserves banks are required to keep on hand for each dollar loaned. (Remember that to slow down growth recently, China raised reserve requirements for their banks.)
  2. Tightening lending standards by the banks. (If you can lend less of your cash, you need to be more choosy about who gets it—and, oh yeah, you just got burned by lots of borrowers who didn’t repay.)
  3. Weak demand from potential borrowers. (No surprise here!)

So What?

The bank lending situation brings up two important items of note for traders and investors. The first relates to the broader market and the second concerns the banking sector.

In the broader market, if banks aren’t lending, then the sector of the economy that creates jobs—small and medium sized businesses—is not growing. It’s tough to see how a sustained recovery can occur in this scenario. It’s also important to note that after the lending downturn of the early 1990s shown above (which ended in 1992), the market took 27 months to make an overall gain of 10%. Today’s markets are much more volatile than back then, but this delay in market upturn is indicative of the long time it takes the economy to recover after a severe credit contraction.

Secondly, the banking sector’s recovery since the March 2009 bottom has reflected these decreasing loan numbers. Remember, banks generate their revenue from their loans. While the broader market has recovered 50% of the value lost from October 2007, the banking sector has recovered little more than 25%, as you can see in the chart below.

 

Knowing this can serve us in two ways. First, we can be fairly sure that there will be little chance for a sustained market recovery as long as bank loan amounts continue to contract. Second, there is opportunity here for a long term investment play. Banks won’t lag forever; when they finally start making up ground versus the broader market, there will be great opportunities for banking to outperform other sectors in your portfolio.

Great Trading,
D. R.

About D.R. Barton, Jr.:  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 “iitm.com”.  

Trading Education

What Type Trader Are You?

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www.TharpTraderTest.com

Learn your trader type, your strengths, challenges and solutions. 

Pass it on to your friends! It fun and it's free!

Mailbag

System Possibilities

Q: I enjoy your newsletter and articles immensely, have read many of your books and feel I understand most of the concepts.

Although I'm only a small trader and very disciplined, the area I struggle with greatly is system development. I have several systems, with SQNs ranging from 1.75 - 3.42.

The problem is that all of my systems are trend based, and no matter how much I look at price charts, I am unable to visualize any possibilities other than trend based systems.

Due to work/family/financial commitments I am unable to attend any workshops. Can you recommend books that could open my mind to other possibilities.

A: The Trade Your Way book has an excellent overview of the broad types of trading approaches/systems that exist. The most comprehensive resource, however, is the systems home study course (How to Develop a Winning Trading System That Fits You). That course covers the different trading approaches that have been proven to work. In addition, the course teaches traders how to create new trading systems that fit them and that work well in the context of their big picture—two criteria often overlooked in the search for a "great" system.

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