Today my boss took our team from work to the “Get Motivated” seminar that was in town. It wouldn’t be my first choice of activity, but I didn’t have to pay and it got me out of the office for the day, so what the hell, how bad could it be?
In general the day is what you would expect, a bunch of rah-rah speeches about how you can do anything you set your mind to and that we’re all beautiful special snowflakes destined for greatness. However the longest presentation of the day was the one I also found the most interesting, and not exactly for good reasons.
The presentation was by Phil Town. Someone I have never heard of, but apparently is a regular on CNBC and MSNBC. He started his presentation innocently enough, he explained how his mentor was a student of Warren Buffett’s and how he was going to pass along the same value based investing strategies that Buffett preaches.
Town stated Warren Buffett’s two rules for investing success: “#1 – Don’t lose money. #2 – Never forget rule #1.” He then went on to talk about almost no mutual fund managers can out perform the S&P 500 on a consistent basis, so investing your money with them is a big waste of time. Good enough advice so far, I thought…
It wasn’t long after however, that my B.S. meter started picking up a signal. Town started preaching results of his students and their astronomical investing results… A single mom earned a 500% return over 5 years! A grandmother returned 257%! and so on.
Really?! The top fund managers on Wall St. can’t beat the market, but my grandmother can? Please, tell me the secret Mr. Town!
In order to explain these astronomical returns he started preaching the wonders of the covered call, as if it was a fool-proof millionaire making machine. Oddly enough he soon changed course completely and revealed the “real” secret.
Surprisingly enough it’s an investing strategy based around his $30/month investing software. From what I gathered from his pitch, the software screens for stocks based on some actually legit value investing principles. It then uses metrics based on insider trading activity, moving averages, MACD, and Stochastics to signal to you when to buy or sell. Essentially they are three formulas that look at a stocks past price activity and attempt to signal what it will do in the future. When the software shows you a “green arrow” on the chart for each of these metrics, you go all in and buy. You then hold the stock until the software show you three “red arrows” on the same metrics, meaning its time to sell off everything. Rinse and repeat.
From the examples he used it looks like you’ll be making 10 or more trades on a single stock in a given year. (Trade execution fees or short-term capital gains taxes didn’t make it into his presentation, weird, I know.)
Once the crowd is wowed by his presentation he offers up an invitation to his (special offer price!) $99 three-day investing workshop. Judging by the lines at the sign-up tables, I was in the minority in thinking the whole thing smelled of a scam. If Phil Town really had the secret to making millions of dollars crushing the market, I highly doubt he’d be touring the country pitching crappy books and investment software. “Those who can, do. Those who can’t, teach.” or something like that…
The most frustrating part of Phil Town’s presentation is that there were bits of legitimately good investing advice involved, and his advise is at least based in good value investing strategy at its most basic level. However what it boils down to is selling you a three-day seminar and a $30/month software subscription to get you to be come an active trader, trying to time market swings while investing in an extremely limited number of stocks. I don’t think the word “diversification” was uttered once in his entire presentation.
I don’t doubt that some people have legitimately made money trading through his system. But personally I find the whole traveling snake-oil salesman act a bit dishonest and despicable. Just another faux-expert getting rich by selling advice on how to get rich.
Selling struggling, working-class Americans the “Secrets” to crushing Wall St. will do nothing to improve the financial situation of anyone but the one selling the “secrets”. Preying on the frustrations and hopes of people in this economy is a grave disservice to everyone to the people who think they are getting legitimate financial help.
I don’t know if anyone that reads this has, or is planning on attending one of these seminars. In general the seminar was interesting enough, however be very wary of the specific financial advice given at these seminars. Especially when that advice is a lead in to a sales pitch for other products or services. There is NO secret to crushing the stock market and getting rich, and if there was, the person who had the secret certainly wouldn’t be traveling the country selling it to the masses.