June 13, 2014
- The less you know, the more you profit
- $299 million in 4½ years: Lucrative lessons from a grimy office three decades ago
- Iraq’s shadow over the markets: Guenthner names winners and losers
- The world’s newest nation-state, and the revival of a 1,354-year-old war
- Rick Rule’s favorite sector right now
- The strike that backfired… Europe’s vacation benefits even more generous than you thought… lessons learned 34 years too late… and more!
“The less you know about trading, the more you can profit,” explained Jonas Elmerraji of our trading desk.
Or at least he was trying to explain. But your editor can be a little dense sometimes.
Then again, part of my job is to take the highfalutin concepts of our many experts and distill them into bite-size nuggets you can relate to — no matter your knowledge level or experience.
And so Jonas patiently persisted. “It’s just like the millionaire factory in Chicago in the ’80s,” he said.
The millionaire factory? Suddenly it was coming back to me.
If you already know the story, bear with us. You might even learn something new. And if it’s brand-new, strap in for the tale of how 14 people who didn’t know squat about trading managed to rack up a fortune of $299 million.
It was about the last place you’d expect to find 14 millionaires.
The paneling outside the office was dingy. The men’s room nearby, filthy. You’d never guess the people in this office were on the verge of becoming millionaires. Or that a few had hit the jackpot already. They didn’t even appear to be working very hard. Many were reading the newspaper or playing pingpong.
One was a security guard. Another, a bartender. A third, an assistant restaurant manager.
No Columbia or Wharton MBAs.
The only thing in common? They all responded to the same help wanted ad posted in The Wall Street Journal, Barron’s and the International Herald Tribune. All had just two weeks of training under the tutelage of a cocky (and very wealthy) trader who wanted to settle a longstanding argument with his business partner.
Rich started his trading career with just $400 he earned delivering pizzas in Chicago. He parlayed that $400 into $200 million. And he was convinced anyone could do what he did.
His business partner, Bill, thought that was nuts. Bill was convinced some people were just born traders. One day, Rich and Bill agreed to settle the matter by taking out a help wanted ad in The Wall Street Journal.
The ad was very clear: “Prior experience in trading will be considered but is not necessary.”
Rich recalled a trip to Asia, where he visited a turtle farm. He told Bill, “We are going to grow traders just like they grow turtles in Singapore.”
A thousand people replied to the ad. Forty scored an interview with Rich. And finally, Rich hired 14 of them to start trading… and to prove his point.
Rich — his full name is Richard Dennis — started calling them “the turtles.” He gave them just two weeks of training. Then they started trading alongside him.
In the next 4½ years, they made $150 million. In today’s dollars, that’s more like $299 million. An average $21.4 million each.
So Richard Dennis proved his point. Traders are not born; they’re made. But how did he “make” them? What was the secret sauce behind the millionaire factory?
It comes down to a simple paradox: Rich knew experienced traders who applied his techniques would fail. They already knew too much about trading. They wouldn’t follow the guidelines Rich laid out in those two weeks of training. They’d figure they were smarter than he was. Or they could “improve” on his system.
A couple of small losses and they’d start to panic. A few wins and they’d start to get full of themselves.
No, Rich needed people who came to trading with no built-in biases, no preconceived notions.
People who’d follow his system exactly… ignoring economic forecasts and government reports… simply following the up-and-down movements of prices… and taking advantage of them.
The results were indisputable. His “turtles” racked up a compounded annual growth rate of 80%.
“They followed a simple set of rules to guide them to becoming multimillionaire traders in a very short time,” Jonas told us.
And with that, we finally began to understand the logic behind Jonas’ $10,000 Trading Challenge.
“No matter if you’re working or retired,” says Jonas. “Older or younger. Broke or rich. You can become a successful trader.”
Jonas has already proven that with his satisfied readers, bagging attractive gains in a typical holding time of three weeks: “Every time I play one of these,” says a subscriber named Nick, “I wish that I had risked a larger $$ amount… This time… a 27.7% gain after commissions. I have learned a lot from your service. Thanks a bunch!”
Now Jonas is out to launch his own millionaire factory — starting tomorrow.
For five days, he’ll send a select group of readers some short, specific trading recommendations. And on the fifth day, he’ll host an exclusive live event you can watch on your computer or tablet — revealing names and tickers of his latest stock setups.
It doesn’t cost a thing to participate; but the only way to participate is to sign up in advance by taking 30 seconds to drop us your email address. Again, it all gets started tomorrow… so sign up right now to assure your spot.
To the markets today… where the chatter is once again about Iraq.
Crude has stabilized for the moment, a shade below $107. Ditto for gold, which is holding at $1,274.
And stocks are bouncing a bit after two days of losses, the S&P 500 up a hair, to 1,933.
“Airline stocks — which have been some of the best performing names on the market so far this year — took a huge hit as oil spiked,” Greg Guenthner writes in today’s Rude Awakening. “The Dow Jones U.S. airlines index dropped 5% yesterday alone. The airlines had been up as much as 45% on the year. Today, they’re up 32% year to date.
“The red-hot Dow Jones transportation index also suffered a huge hit, dropping nearly 2% yesterday. If you’ve been playing the transports (more specifically, airline stocks), you’ll want to consider booking profits now.”
And energy plays? Buy the dips, Greg says.
“Iraq is breaking up,” writes Patrick Cockburn of the London Independent.
“The long-predicted dissolution of a centrally controlled Iraq ruled from Baghdad appeared closer to reality on Thursday,” concurs Mitchell Prothero of McClatchy Newspapers.
Prothero and Cockburn are among the few reporters who’ve actually been to Iraq since U.S. troops withdrew at the end of 2011 and Americans ceased to care. They knew all about the rise of the “Islamic State of Iraq and Syria” (ISIS) when it was still just an “al-Qaida splinter group.”
We’ll give these two a bit more credence than the likes of MarketWatch, which presumes this morning to tell us “5 Things You Should Know About Iraq Right Now” — from the comfort of a Manhattan office tower.
To hear these knowledgeable reporters tell it, ISIS is in the process of forming the world’s newest nation-state — erasing the bogus border between Iraq and Syria drawn by the British and French nearly a century ago.
The new state’s borders are admittedly fluid. But the folks from the oil information service Platts show it in the lime-green section of this map… along with all the oil fields, pipelines, terminals and refineries…
The Iraqi army trained up by the Americans is melting away. Reports Prothero: “Only militias tied to Iraq’s feuding religious and ethnic groups mounted serious resistance to the southward push by [ISIS] fighters.”
If they make it to Baghdad, expect a return to the vicious civil war of 2005-07, pitting Islam’s two great factions, Sunni and Shia, against each other.
“The Shia may continue to hold the capital and the Shia-majority provinces further south,” Cockburn writes, “but they will have great difficulty in re-establishing their authority over Sunni provinces from which their army has fled…
“Iraq’s Shia may well conclude that their army has failed them and they must once again rely on militias like the Mehdi Army, which was responsible for the slaughter of Sunni in 2005 and 2006. At that time, much of Baghdad was cleansed of Sunni. The loss of Baghdad has never been forgotten or forgiven by Sunni states such as Saudi Arabia, which has long hoped to reverse the Shia dominance in Iraq.”
Meanwhile, we see Saudi Arabia’s archenemy Iran is coming to the defense of its Shia allies in Baghdad. The “Oil War” scenario described years ago by our Byron King is once again looking extremely likely. If you’re not acquainted with it, you can bone up here.
“The sector that interests me the most is the sector that’s the most out of favor,” says resource investing guru Rick Rule, “and that would seem to be the emerging and frontier markets oil and gas and prospect generator sector.
“All of the oil and gas money is going to development-stage unconventional oil and gas plays,” Mr. Rule tells the website CEO.ca, “and the conventional third-world wildcatting exploration plays are getting absolutely no love whatsoever.
“In particular, the African prospect generators… the guys who use capital to obtain on- and offshore concessions, shoot the seismic and develop the target, which they farm out, generally, to a major or supermajor… that sector is getting no love at all.
“The move in Africa Oil’s share price from 70 cents to $8 is a graphic reminder of what happens when you enjoy exploration success in frontier markets.”
[Ed. note: No doubt Mr. Rule will address that sector in detail next month at the first Sprott Vancouver Natural Resource Symposium. Sprott is proudly carrying on the tradition of our own annual event in Vancouver.
“For 16 years, it has been the finest high-end natural resources conference in the world,” Rick says. And to make sure it stays that way, he vetted 170 companies that wanted to exhibit, allowing in only 45. Speakers include Bill Bonner, Doug Casey, Frank Holmes, Paul van Eeden and, of course, Rick himself. The dates? July 22-25. For more details, check this out.]
Well, that didn’t work.
Maybe you saw an item in the news about a strike by taxi drivers this week in many European cities. They blocked traffic to express their fury about the competition from Uber, Lyft and other smartphone apps that allow you to hail a ride quickly and inexpensively, bypassing the taxi cartel.
The strike “appears to have completely backfired on the strikers,” writes Mike Masnick at Techdirt, “with Uber signups in London jumping an astounding 850%. Basically, the ‘protests’ have pissed off people at cab drivers and made them more aware of Uber…
Taxi blockade at Whitehall in London: How’s that strike thing working for ya?
“Uber had been hovering around the 100th most popular app in the U.K. over the past few weeks,” Masnick adds, “but it has suddenly jumped to No. 3.”
Heh…
Well, at least Europeans still have their generous vacation benefits — they’re good even after death!
From The Associated Press: “The European Court of Justice ruled Thursday in the case of a German man whose widow had claimed, as his heir, that she was due payment for 140.5 days of vacation he had not taken because he was on sick leave and for other reasons.”
German law says an employment contract is terminated upon the worker’s death. But European law trumps German law, the court ruled… and European law says the vacation bennies must be passed to an heir.
Wait a minute: If Europeans are so hung up on their vacation time, how did this guy manage to rack up more than six months of vacation time? Whatever…
“Let’s see,” a reader writes after our latest obesity expose yesterday, “34 years after issuing the guidelines that fat will cause my death, the settled science isn’t quite so settled.
“I anticipate that 34 years after declaring CO2 a pollutant and making plants starve and electricity, gasoline, plastic and countless other oil-based products cost who knows what, maybe the settled science won’t seem quite so settled. Does the government ever learn? Do we ever learn?”
The 5: The question answers itself.
While it took 34 years for sanity to prevail, the resulting profit opportunity could come about in only four more days.
Have a good weekend,
Dave Gonigam
The 5 Min. Forecast
P.S. Final reminder: Jonas Elmerraji’s “$10,000 Trading Challenge” runs for five days, starting tomorrow. And the only way you can be in on it is to sign up right here.