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  • 04-24-2019, 10:56 AM

    Re: Investools, Success Magazine, Phil Town

    I currently work as an engineer tech for an aerospace company and going to school. I have 2 boys (2 and 9), and my wife is starting a new job. Therefore we are spread very thin. I am wanting to do complete research on this company and truly see how legit they are and if so how I can make it work for me. I know nothing about investing but thought I may could take out of my roth ira to pay for the costs, and place some of it to start out with my own investments? Is this a good idea already being spread so thin? constructive feedback appreciated.
  • 11-10-2010, 04:27 AM

    Re: Investools, Success Magazine, Phil Town

    I am interested in hearing the advice for the last entry....I also purchased the 'first' 2-day class for $99. yesterday in Chicago.

    On one hand, it's worth $99. to learn just a few little things....but from what I'm hearing one already needs to be familiar with stocks/trading, etc.....I am the furthest from understanding the market....being a fine artist.
  • 09-21-2010, 06:43 AM

    Re: Investools, Success Magazine, Phil Town

    Interesting posts. I recently attended the seminar in Milwaukee. They were offering the two day course for only $99. I went to the same get motivated seminar 4 years ago and the course was $495.

    So if I wait another 4 years it will be $25, right?

    Can I learn one new thing for $99. I am debating on going. I usually dont fall for the seminar hype. Thoughts?
  • 04-21-2010, 10:33 AM

    Re: Investools, Success Magazine, Phil Town

    Interesting post. Did he give you any suggestions on how to learn to invest and make money? Or did he just slam his competition...yes his competition.

    I can appreciate his perspective however you are the one who feel for the sales pitch on the other side. What kind of car and house does he own. How did he pay for it.

    Let's face it stock brokers and funds make their money on fees....and they make a ton. Why is that more admirable than someone making money teaching people to trade and or invest wisely?

    Did that broker protect his clients in the huge drop in the market by utilizing protective put strategies or having a mix of shorts in the portfolio or even selling calls to bring in some additional premium as the underlying assets were taking a beating?

    I doubt it - if he did his is in the top 1% of brokers and as a result would be inaccessible to the everyday investor who could not meet his minimum requirement for assets under management.

    Who do you think made more money in the past 10 years - the owners of invest tools or JP Morgan, Goldman, or who ever. If you are going to be critical - be smart enough to look both ways before entering traffic.

    I embrace critical thinking - do you have any positive suggestions on how the average everyday investor could make some money in the markets and where he could go to learn this? Perhaps your stock broker friend could give out his number...I wonder how much he charges...and if he even uses hedging strategies other than just buying a lot of different stocks in different sectors (which all went down in the drop!).

    Let us know where we should go to learn.
  • 04-21-2010, 10:22 AM

    Re: Investools, Success Magazine, Phil Town

    How are you doing in your trading? Do you have some insight or a place to go where I could learn that is not a scam?

    Thanks for the feedback.

    Quote Originally Posted by bunglungchingdong View Post
    I say you are a scam an possibly a retard. This site is for losers just like you. How fitting
  • 04-21-2010, 10:19 AM

    Re: Investools, Success Magazine, Phil Town

    So trading 100 shares of $10 stocks and getting .65 in premium is not possible - guess you should get some advanced education...he could have been doing calendar calls as well.

    You might consider asking how he did do it as opposed to assuming it can't be done. That info could make you successful - your attitude makes it impossible to succeed. Give yourself a chance to be successful and ask people how they do it instead of showing your own ignorance and insisting they can't. What would be the worst that could happen if you asked how he did it? You would either find a great road map to success or find out he was full of crap...

    Imagine if Donald Trump just assumed he couldn't buy air rights in New York because some real estate agent told him he couldn't do it.

    Quote Originally Posted by moozico View Post
    That guy above stating he turned $1,200 into $30,000 in a few years with Investools is a bunch of crap. First of all with $1,200 you can't do any good covered calls. Covered calls require a lot more money than that. With that little cash, you could not buy enough stock to make anything on covered calls. Anyone who knows what covered calls are knows this.
  • 04-21-2010, 10:07 AM

    Re: Investools, Success Magazine, Phil Town

    It is great to hear that you have been successful as an options trader. I do not work for Invest Tools, in fact I have taken training from one of their competitors. They too get smeared on the internet. Allow me to ask a couple of what should be very obvious questions. How much time did it take you to find the right material to read, digest and understand the material, practice and make errors only to find that some of the information you were reading was inconsistent with other systems you were reading? How much capital did you devote and loose before you became proficient (or are you the first trader in history to make money right out of the gate)?

    Assuming you are making money right now trading how much are you making? Would you not be justified to spend even 30k if you learned just a couple of important points that could make you money. I learned some simple money management techniques that have increase my profit margins by 30%. It helps to limit my losses if a stock fails and increase my gains if a stock moves to my projected target. Shoot, if I had know it would have had such a significant impact on my trading I would have paid 100k for that piece alone. But hindsight is 20/20 isnt it.

    I think you see what I am getting at. You will have to forgive my edge in this post I hear so many people who balk at the cost of the trainings that I was stupid enough to pay for. I hear how they could do it on their own. Well I was not smart enough to do that. I had no idea who to listen to and who to avoid like the plague. But even for a smarter person like yourself what if you found 1 or 2 really good nuggets at those advanced classes that could have reduced some losses from inexperience or increased your percentage of return? People tend to forget even if you were getting 10% and learned one thing that gave you an extra 2% - that would be an extra 5k on a 250k account. Anyway, all I am saying is that I think the cost is justified to any trader I would encourage you to take some of their advanced courses. What is the downside? The cost of the class. What is the upside? An infinite return I think according to trade plan rules it is a solid investment.

    Also, I know so many people who look around for special technical indicators. They prefer to spend their money on those things because if they are right they make a fortune. If you really believe that you are going to find the holy grail with Metastock or Tradestation think again. If these special indicators really worked do you think they would sell them? No chance, once people started to use the indicator the supply and demand around purchase and sale points would correct and render the indicator useless. Instead of looking for some miracle fairy dust that you are willing to pay who knows what for look for good sound principles that will consistently improve your trading one small step at a time. In terms of cost, if you could get that kind of support you might consider paying 30k for it. It would be well worth the cost if you could improve your results consistently.

    All the best.

    Quote Originally Posted by TellItStraight View Post
    I've seen posts all over the web asking for reviews of Investools, the investor education service peddled by Phil Town at numerous Get Motivated Seminars around the U.S.. Well I have some experience with this.

    I went to a Get Motivated seminar which is produced by Peter Lowe, and yes I signed up for the $495 workshop nearly a year ago. I presently subscribe to their Investor Toolbox website, but I am looking for a different vendor, perhaps Meta Stock, Trade Station, or OptionVue.

    I've learned quite a bit about Investools, their partner Success Magazine, and how they operate. So, If you have a few minutes, I'll tell it to you straight.

    If you go to the Get Motivated seminar and pay for the $495 workshop, you are going to attend a day-long workshop which is a production of Success Magazine which has partnered with Investools. Success Magazine wants to sell you lots of expensive training. The workshop is about half educational and about half hype. They teach you quite a bit about how to analyze stocks using the Investools website, but they spend half the day telling you that if you want to make the real money, you need to learn how to trade options, and that will cost you more, much more. It had a very infomercial, get-rich-quick feel about it.

    They have three educational programs, Basic Options, Advanced Options, and Advanced Technicals for the tidy sum of $4,000, $10,000, and $16,000. The way it works is, if you buy the upper tier packages, you get the lower tiers thrown in for the price. (By the way, I'm going by memory on the prices, I may be off a little in either direction, but I think I'm fairly close)

    I didn't purchase any of the programs. Rather, I bought books by noted options experts and technical analysis experts, Lawrence McMillan, John Murphy, Bernie Schaefer, etc. I read the books again and again, and then I started trading. I would do it the same way again. I only spent a few hundred dollars on the materials, and I suspect I got a more in-depth education. If I had several thousand dollars laying around, and if I was too lazy to do it on my own, perhaps their educational courses would be the way to go. As for me, I've got more time and determination than idle cash. By the way, I am profitable in my options trading.

    Here is the real problem with Investools/Success Magazine. If you don't pay for the education programs you don't get access to the "good stuff" on the web site. That's right! When you sign up for the $495 workshop, you get "Gold" level access the site which it turns out is the lowest level of access. If you buy either of the 2 lower tier courses ($4,000 and 10,000 respectively) you get "Platinum Access", which is a little better; But if you want access to all of the advanced technical indicators you've got to ante up with the big bucks ($16,000 or so). The selection of technical indicators that is included with the platinum and gold eccess is very limited.

    What's worse is that they don't tell you that you're not getting access to the full set of technical indicators. It's kind of like buying a car only to find out that you're getting it a piece at a time. First the wheels, then the engine, but if you want a steering wheel, pay up. It all has a very "used car salesman" feel about it.

    I can tell you about their advanced technicals because, for awhile, I had access to them. I didn't know I had access to something extra until they took it away. Apparently they goofed and gave me something they didn't intend to for awhile. Now I no longer have access to the indicators that I came to rely on.

    Also, the prices for education and subscriptions seem to be a moving target. They call you every now and then with the latest great deal on a course or website renewal, and the prices seem to vary quite a bit. During one sales pitch I learned that I don't need to spend the full $16,000 to get access to the advanced technicals, I just need to spend $1,995 for a book and a few dvd's. I wouldn't get the one-on-one coaching, but I would get access to the advanced technicals. No thank you.

    This is why I'm looking for a different vendor. I know MetaStock has the technicals I'm looking for, and I suspect TradeStation does too.

    In all fairness to Investools, they do have one indicator (which they claim is proprietary) that is truly amazing. They call it their "Market Forecast" tool. I have back tested it, and it accurately calls market changes for the DOW-30 and NASDAQ almost every time. This is my only hang-up about changing to a different vendor. I use the "Market Forecast" regularly to trade .DIA options and .QQQQ options with much success. Since this tool is available on their "Gold Access" I think I'll probably drop my subscription level down to gold and look elsewhere for the rest of what I need. If I ever find anything like Investools' Market Forecast anywhere else, I'll drop Investools for good.

    One more thought, Success Magazine is the cheap back door into Investools, but you get less. For example, you don't have access to the tutorial on how to read the "Market Forecast" with the Success Magazine version of the Investools site. This is another thing I was mistakenly given access to. (They seem to make a lot of these mistakes). When everyone signed up for the workshop and got their logins for the particular workshop I went to, we were all mistakenly given access to the full Investools site. It didn't take them long to realize they had made a mistake, and then suddenly I found thay the look of the site had changed from green to blue and from Investools to Success Magazine. They tell you that both sites are the identical, but that is not entirely true.

    If you're stuck on the idea of Investools, be sure to contact them directly and compare prices with the Success Magazine version and make them get specific about what indicators you get. Which tutorials will you have access to?, etc. (You have to pay extra for the tutorials, something like $59.)

    If I had it to do all over again, I'd probably still go to the $495 workshop, just because it got me started, but I'd still stick with the books, and I'd go straight to MetaStock or TradeStation for my real analysis software and data.

    Good Luck
  • 09-15-2009, 03:36 PM

    Re: Investools, Success Magazine, Phil Town

    Re: Investools and other high priced software

    Anyone who bought into Investools hype is dumber than a Rock!!

    I spoke with one a wall street executive. Here is a summary of his conversation with me and what he said:

    " If I developed a great sofware package that can accurately predict top buys and market trends, do you think I would tell anyone about it.... let alone sell it?! I would hoard it.

    Moreover, If it really worked, I could sell it to the top wall street firms for BILLIONS and get capital gains on the sale,which means little tax too. In fact, the interest I would make on the money would exceed all the revenue that I would make trying to hawk the products at these venues.

    The problem is that these guys are very smart salesmen. They show their big house, their nice cars, show potential trades ( that didn't necessarily occur by Investools folks) and claim big bucks using a lot of emotional hype. These programs should NEVER be purchased! "

    You can get many of the same tools with online trading academy and other programs for about $50 per month. Yes, that little. The same can be said for purchasing of fourex trading software, commodities trading software etc. Yes, you will find folks who made money especially in the short term. However, long term the VAST majority of folks that he personally knows didn't make money with the software.

    He also noted, "Moreover, don't you think that folks who sponsored these big seminars make a huge piece of the sale, not to mention the commission to folks like Phil Towne, which is why the price is so high? These seminar folks look for the highest price products they can find so they can maximize their revenues. Generally, no software should EVER be purchased at these seminars."
    My friend concluded as follows: " PT Barnum said their is a sucker born every minute. These seminar folks realize he was wrong. The suckers are born every second!"

    "This is why when you go to their "training," you are primarly getting a very well planned pitch for more expensive products. Hey, you were a sucker once. Why not try it again?"
  • 07-03-2009, 02:25 PM

    Re: Investools, Success Magazine, Phil Town

    All very good info.

    This is probably not the right forum for this but for those who have invested in this system or any type of system, is there a typical minimum amount you should be willing to start with?

    This would be absent from all the advance courses. If you just wanted to use the tools they offer up...

  • 07-17-2008, 08:19 PM

    Re: Investools, Success Magazine, Phil Town

    I say you are a scam an possibly a retard. This site is for losers just like you. How fitting
  • 07-14-2008, 07:32 PM

    Re: Investools, Success Magazine, Phil Town

    Quote Originally Posted by deskjockey View Post
    Also, if anyone has additional questions on the seminar, I'd be happy to answer them. I'm sure I've left something out in this encyclopedia-length post. :sun_smiley:
    Yes...very long...thanks for ur useful info...
  • 07-13-2008, 07:51 PM

    Re: Investools, Success Magazine, Phil Town

    I posted this in the "Phil Town Investing" thread, but I thought I would put it here as well, since it's the same subject:

    I attended one of Investools' seminars a while back. I will start out by saying that I work in a sales organization, so I understand a lot about sales psychology. The Investools seminar is one big exercise in psychological persuasion. Before I get into my analysis, I will state that I do not believe Investools is a scam. There were a lot of good parts and bad parts to the seminar, but overall, I believe what they teach works.

    For anyone who is thinking about going to one of their seminars, I'm going to start off with some basics in the psychology of selling so you'll know exactly how Investools is going to sell you and how you can tune it out if you so choose. This way, you can listen to the substance of their presentation rather than the "song and dance" (as we call it in the sales world) so you can make an educated decision on whether this is right for you or not.

    One of the first things you will notice is that Investools will be running a slideshow on the screen when you come in full of quotes from various business, financial, and motivational experts. This is their first attempt to infiltrate your mind and get you to lean toward their way of thinking. The quotes deal with becoming financially independent, changing your way of thinking, becoming rich, and a host of other topics you would expect from a seminar of this type.

    The second thing you will notice is that Investools tries to get you actively involved in their sales presentation. This is an absolute must for any sales presentation. Darren Kimoto was our instructor, and from the very beginning, he was trying to get us excited and enthusiastic about the presentation. You will notice at the beginning they will have to stand up, raise your hands high, hive-five your neighbor, and a host of other things. Darren started off with the usual "Who's excited to be here and who wants to make money?"-type speech. If you didn't raise both your hands high in the air and yell, you weren't excited enough. He mocked those who only raised their hands half way. Throughout the entire two day seminar, they will constantly have you raising your hand, nodding, high-fiving your neighbor, writing things down, etc. This is to get you actively involved in the presentation. If you are just sitting back with your arms folded, you aren't open to learning or listening, and certainly aren't open to buying their additional seminars, so their aim was to keep people involved, listening, and participating the entire time.

    I would say around half of the two day seminar was the selling of additional products. It happened throughout the presentation, as well as on the breaks. One entire session of the afternoon on the first day was a presentation by a guy from thinkorswim, an online broker that Investools owns. Now who do you think they tell you should be your online broker? Look for them to subsconsciously hawk thinkorswim the rest of the time by bringing it up constantly during the seminar. They will also tell you about how great it is, of course; they tell you what to look for in a broker, and then conveniently mention how thinkorswim is the best in all five of the categories they list.

    You will also notice that throughout the seminar, they will play little mind games with you that are designed to get you to think their way and eventually sign up for their courses. One thing that will be reinforced throughout the seminar is confidence - they will tell you that you need confidence to do well in the market and confidence to better yourself and get educated enough to succeed in the market. This is obviously designed to get those who have doubts about their ability to trade stocks and options, or doubts about the company, to believe that this system actually works. You will hear it a lot. Be prepared for it.

    They will also talk a lot about fear. What they mention is mostly the fear of losing in the market, fear of risk, etc. This subject of fear is also brought up to help assuage the fear of the seminar participants who may be thinking that this is a scam or that they can't do it or it takes too much time or money. They talk about how you need to get over your fear and follow a system, and it will work for you. A big tenet of the seminar is that "fear is disabling" and you need to eliminate fear. This, of course, is designed to help you get over your fear of their system not working so that you buy their system.

    Another tool they will use is the old 95/5 theory. This theory states that 95% of people will never be successful, while only 5% will. The 5%ers control the majority of the wealth in our country, while the 95%ers have to work for someone else and will never become financially independent. They will tell you that those in the 95% category are "not financially independent," "risk averse," and "fearful," while the 5%ers are "financially independent," they "manage risk," and "fear is not an option" for them. Guess what the 5%ers do? They buy Investools' advanced courses, of course!

    Another recurring theme is creating a new financial identity. They absolutely hate people that come into the class with preconceived notions about investing, because it's harder to teach these people their system. They will do a lot of work on getting you to stop believing things you've always believed about the market, through dispelling "myths" (in their opinion) about the market, and having you write down the phrase "I am an active investor." You will write that phrase on a piece of paper and turn it in to the staff, who will post all these pieces on the wall in the back of the room. This is designed to get you to stop being a passive investor, which most people are. A passive investor is simply someone who lets someone else invest their money, or simply invests in mutual funds. The theory is that once people sign and date this commitment, they will stop investing the way they have, and commit to being an active investor through Investools' programs.

    Darren will also use two techniques designed to shame you into buying an advanced seminar: control and thrift. He will talk extensively about not being in control; of your life, your job, your investments, everything. How do you get in control? By signing up for an Investools' course. He will also tell you a story about his father and grandfather. He will mention how his grandfather was an indentured servant in Hawaii, and thus didn't have much money, leading him to be extremely frugal his entire life. This, of course, got passed on to his father, who was taught to work hard and save his entire life. Darren will tell you that this is the wrong way to do things. You should never do everything as cheap as possible. This is because the Investools' courses are not cheap, so the implied action here is that you need to invest in these expensive courses to do things the right way, because the cheap way isn't the right way. He'll also talk a lot about books. He'll tell you he read tons of books and still couldn't figure out the right way to invest. Why? Because books are the cheap way to do it, and they aren't dynamic. What is dynamic? An Investools course with coaches and trading rooms.

    Darren will also use what is called the "ascending close" throughout the seminar. What this is designed to do is get you to give him little "yeses" throughout the two days so you'll give him the big "yes" at the end, i.e. buy the advanced classes. You will notice he will always be asking you questions that you have to answer "yes" to or nod your head.

    The most prevalent technique you will see throughout the seminar is the technique of up-selling. This entire two day seminar is designed around the investing method of options - puts, calls, covered called, high probability theories, etc. They don't care a lick about buying shares of stock, and don't want you to either. They will tell you that the way to make the big money is in options. This starts out very subtle, but will get more intense and aggressive throughout the seminar. They will tell you that for each 1% gain you get through buying shares of stock, you get 10% by investing in options. Darren will ask questions like "Would you like to see how I invest?" or "Would you like to see what strategy I use?" or "Would you like to see what I did with my father?" several times throughout the seminar. In addition to getting you to say "yes," (remember, the ascending close), it's also designed to implant in your mind that the only way to make any real money is in options. Every single one of the staff there trades options, not regular shares of stock, and you will see that the seminar is heavily weighted toward this.

    Every break is essentially when the hard sell comes. Darren will end the session by saying, "We're going to have a Q&A session now where you can go talk to the team members..." blah blah blah. He will also say things along the lines of "Make sure you get your continuing education form in at the break" or "Make sure to see a team member and sign up for one of our programs." This is the assumptive close; he will essentially tell you what to do. All the team members are available to answer questions, and all their answers are heavily weighted toward purchasing the additional options training. Toward the end of the day, the selling got especially aggressive. I milled around and listened to the questions and the subsequent sell from the team members. One's of Darren's selling techniques was to say "It's like I have gold buried in my backyard and there's no way I'll ever be able to dig it all up, so I'd like to share it with my neighbors. I'm not going to let you do it for free, but if you buy a shovel, you can come over and dig up some gold. Don't tell me you can't afford a shovel." The "shovel" in this story is the additional education they are selling of course. The team members behind the table would then start saying things like "Who's going to step up and buy a shovel?" at the breaks, and they would go for the hard sell if people had questions but were balking at buying the courses. They'd say things like "You really need to do this right now" or "If you can afford the PhD program, sign up for it; there's no need to start out at the basic level." They even encouraged some people to cash in their IRAs, despite the penalty you would incur if you're not 59.5 or older. Procrastination was a topic of the seminar, and of course, you shouldn't procrastinate, but should buy the program.

    So what do these programs cost? The basic one is entitled "Associate" and is $4999. The next level is the "Master" and is $11,999, and the highest program is the PhD, which costs $23,999. Obviously, the higher the level, the more you get, including more website access, more advanced options education, more coaching, access to trading rooms, additional seminars, etc. What they won't tell you is that there is a fourth option: at the very end, all those who haven't signed up for one of the advanced programs are escorted out of the room and are offered a reduced program for $999 that includes an additional three months of website access, trading rooms, and virtual coaching for six months. This is if you just want to buy and sell shares of stocks; this includes nothing about options. If you buy any one of the four programs, the next course up will be discounted by the price of the program you've already purchased. So if you want to start with the basic, and move up to Associate, they will take $999 off the $4999 price. If you move from Associate to Masters, they will take $4999 off of the $11,999, and so on.

    So outside of the psychology, what do I think of the program? I believe it works. Surprising, right? I know a decent amount about investing, and I believe what they teach works, with a couple caveats:

    Advanced options, or heck, even basic stock trading is not for the faint of heart. You have to develop a system and stick to it. You absolutely cannot let emotion get in the way, and you cannot let big gains or big losses affect you. They teach you how to avoid big losses, so listen to them, and use the strategy.

    I also believe you need to put in the work to make their strategies work for you. This is not something that you can spend a half an hour per week on and succeed at. You will need to put in study time. You'll have to read the entire manual, develop a plan, learn to use the website, learn to use an online brokerage account, and learn how to analyze stocks. This is a time-intensive process. Be prepared to put in the work if you're going to succeed at it. You can't half-a** investing; it just doesn't work that way. Learn the systems and use them the right way and you can make a lot of money, especially if you get good at options.

    Finally, this may sound mean, but I really think that dumb people will not be able to succeed at this. I think you have to be able to grasp complex strategies to make this work, especially in the realm of advanced options. I'm a pretty smart guy, but my head was spinning during most of the high probability theory presentations. I know that's their intent, since they want you to buy their additional courses, but this is NOT easy stuff, no matter what they say.

    Is it worth the money? Hard to say. In other research I've done on Investools, I've read that other trading companies like Online Trading Academy offer similar or better courses for less money. You can also get most of the charts on their website (which costs $50/month) free elsewhere online, although it is nice to have it all in one place and be able to sync it with your online brokerage account if you use thinkorswim. I did not sign up for the PhD course, so I won't be able to evaluate how effective it is. It takes two years to really get the hang of investing in options anyway, so those who discount the company after a couple weeks really have no leg to stand on, in my opinion. If I had the money, I would probably do it, because I think the support level is pretty high and what they teach seems to work. If anyone has given the advanced programs a try, and really worked at them for a long time, I'd love to hear your story.

    Also, if anyone has additional questions on the seminar, I'd be happy to answer them. I'm sure I've left something out in this encyclopedia-length post. :sun_smiley:
  • 11-07-2007, 11:35 PM

    Re: Investools, Success Magazine, Phil Town

    So is investools a scam or does it actually work? and speaking of trading seminars what about optionetics or better trades? Has anyone read the report at ?

    How do you know what works and what doesn't?
  • 08-23-2006, 11:21 PM

    Re: Investools, Success Magazine, Phil Town

    That guy above stating he turned $1,200 into $30,000 in a few years with Investools is a bunch of crap. First of all with $1,200 you can't do any good covered calls. Covered calls require a lot more money than that. With that little cash, you could not buy enough stock to make anything on covered calls. Anyone who knows what covered calls are knows this.
  • 04-05-2006, 07:23 PM

    Re: Investools, Success Magazine, Phil Town

    Sometimes, a little perspective goes a long way. I remember a day in 1987 when the stock market "crashed", losing something like 10% or 20% of its value in a single day. That was the famous "Black Thursday" that most everyone else seems to have forgotten. I myself may be somewhat sketchy on the exact numbers involved, but I was at an MIT Seminar with, of all people, Mitch Kapor (the founder of Lotus) and Isaac Asimov, the science fiction writer. The ostensible topic was "Thinking about the Future," but everyone was talking about the stock market crash and what had caused it.

    The culprit, as we soon learned from Kapor, were a set of automated trading programs being used by some of the biggest brokerage houses on Wall Street. The problem was that the software that each of these companies were using were essentially identical, so that they were all reading the buy and sell signals the same way.

    This being the case, all of these software programs issued automated sell orders at the same time, forcing the market to shut down for the rest of the day because they couldn't handle the volume.

    The New York Stock Exchange banned programmed trading almost immediately, and it is now part of the canon on Wall Street (where I was once employed as a bond analyst) that you cannot use these automated programs to issue buy and sell orders because it is universally acknowledged that computers can't see the bargain opportunities that are inherent in a sell-off. (Remember that J.P. Morgan made a huge fortune in sell-offs that preceeded the 1929 stock market crash because he was buying up companies left and right at bargain prices as everyone else sold off their holdings. He was buy against the prevailing sell signals because he was able to make an intellectual decision that this was the right thing to do for himself and for the country. Finally, on Black Friday, he decided he couldn't do it any more and refused to buy the market back to a stable condition...triggering the Great Depression, which would have happened sooner or later, but happened sooner because Morgan decided it was time.)

    If you operate on Town's Rule #1 (Don't Lose Money) it is ultimately impossible to make money. The law of averages will eventually catch up to you, as it does at any honest crap table. You will make money for awhile, but eventually, the pendulum's cycle speeds up to the point where you will get caught napping, and lose what you've gained.

    In the meantime, what people never stop to realize is that for every winner there has to be a loser. If I buy a stock just as it is about to take off, I am buying it from someone who is losing that oppportunity to make the same profit. When I sell off a stock as it is starting to drop, then I am putting someone else in a position to take a lose as they buy the same stock on the way down. software is nothing more or less than the same program trading software twenty years later, the same concept, only faster and more accurate because it can handle greater detail. In 1987, this software was running on mainframes. The personal computer hadn't yet developed to the point where it could handle that much data. We were still writing code for 640 K pages back then, or at least I was. Because it was running on mainframes (or maybe minis; I seem to recall DEC having something to do with the development of this software), ONLY the big Wall Street firms had the ability to run the software and therefore they were the only ones that had access to the data.

    What made Black Thursday such a scandal (and I am going off memory here, not having done the research...this is ancient history as far as the internet is concerned) was that the program trading systems were trading the Brokerage houses own positions in the targeted stock....because there wasn't time to contact thousands of customers to get sell orders from them. If you didn't have stop price sell order on file for any of the stocks in question, you were out of luck.

    As a result, the brokerage houses made fortunes in the sell off but a lot of individual investors got burned.

    Today, just about everyone who wants it can get access to essentially the same information because, if they work properly, all of the various software programs designed for this purpose, must be issuing approximately the same buy and sell orders at approximately the same times. Since everyone back tests their programs against historical data, this is one thing that you can be assured of: the programs will issue the same signals at the same times.

    Now, follow what that means to the market and everyone in it.

    With due respect to Phil Town, who believes otherwise, a couple of hundred thousand people using this software at the same time, are going to settle on the same companies over time, because, over time, only a limited number of companies will meet all of the criteria for purchase and then for a subsequent sale. Town doesn't believe that the users of this software, whether it is Investools or someone else's version of investools, will together become the ninth mega-mutual fund because different individuals will focus on different stocks....which is true up to a point.

    But, as people sort out the winners and losers over time, the users of this system will become concentrated on a small number of stocks that are out-performing the rest of the market. After all, that's what this software is designed to do....ferret out the winners and separate them from the losers. Gradually, as more LESS skilled people entered the market, using this software to do what they could never do on their own, the market will become more unstable.

    When the manager of a major mutual fund decides to dump GM, and he's holding, let's say, 2 million shares of GM, he doesn't place a sell order on all 2 million shares at once. He sells them off slowly, over several weeks, because if he dumps them all at once, the price will plumet.

    Now, let's say that for some stupid reason 10% of the 2 million people using this software have GM, and they all decide to sell it at the same time on the basis of the selling signals. Let's stipulate that each of those 200,000 traders have 100 shares of GM. Together, they hold the same 2 million shares...but they are all going to sell off those shares all at once, rather than in drips and drabs, because, after all, it's only a hundred shares, and because it will cost them too much money to sell them off in several different batches, since each sale represents a separate commission charge from the broker.

    The net result will be that all 2 million of those GM shares held by small investors using these trading systems are going to hit the market at the same time, and force GM's share price down.

    Multiply this scenario by 50 or 60 of the most traded stocks and you will get a rapidly fluctuating stock market with huge transaction volumes. The combination of fast movings and an over-burdened trading system will spell disaster for many small traders who simply won't be able to liquidate their positions fast enough to avoid potential losses.

    If this is all true, why hasn't it happened already?

    It probably has, and we just aren't seeing it. Once upon a time, a 100 point fluctuation in the stock market was the lead story on the evening news. Now, it receives little or no attention at all.

    The impact of programmed trading is growing slowly but, as seminars like the Get Motivated program, continue to popularize this trading system, more and more less and less qualified people will become traders. The way that the investools system is being pitched appeals most specifically to people who don't have much money and are trying to trade their way to financial security.

    The fact that this system is attracting more investors with less financial strength has dire consequences for the market, because they will have less patience and less discipline than people with more funds at their disposal. When you are playing with other people's money, you are less likely to make emotional decisions than when you are playing with your kid's college fund.

    None of my comments should be construed to suggest that investools or Peter Town are evil or even stupid. The simple fact is that you have to have been through numerous cycles in the market....I started as a bond analyst in 1968, which gives me almost forty years of background....before you are able to see these trends.

    Town is right that the mutual funds are a bad idea, but he's wrong when he says that they have only recently become a bad idea. A detailed study of the history of the mutual fund shows that mutual funds never perform as well as individual investors, either in good times or bad, and that they only seem good in the good times because the really good investors keep their mouths shut and THERE ARE NO STATISTICAL TOOLS THAT DOCUMENT THEIR PERFORMANCE ONE WAY OR THE OTHER.

    Okay. I am running out of steam here. Gotta sell some money.
  • 11-28-2005, 02:19 AM

    Re: Investools, Success Magazine, Phil Town


    Can someone advise me of the price of Investools (went to the seminar) but have seen conflicting info since then. I'd also like to know if the software is worth the cost? Seems that I just read that it was $995 vs what I saw at the seminar for $2995. I'm also concerned about what else needs to be expensed.


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