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Where are all the customers Boats, Merc's and Mans

  1. stocko

    8,034 Posts.

    I'd rather see folks doubt what's true than accept what isn't. - Frank A. Clark

    One key way of telling when a guru or company that promotes a wealth building product is going to be elastic with the truth is to observe how they promote themselves. Many of the truly great investment advisers, fund managers, economic experts, real estate investors and teachers are very low key. Peter Lynch introduces himself as a retired fund manager, not bragging about the billions he once controlled. Warren Buffett is remarkably low key, and most of the true greats you probably haven't even heard of. Conversely, BS artists like a nice high profile. They are always getting into the media somehow and label themselves with grandiose titles, such as "The greatest...", "The #1...", "World-wide expert...", "The most..." etc. The average punter in the street has not ever heard of Warren Buffett, Peter Lynch or George Soros, but they do know David Bowden, Daytrader HQ and Rene Rivkin.

    Advisers that promote themselves with grandiose yet glib titles are guilty of more than just over-the-top advertising, licenced financial advisers cannot promote themselves like that at all. It is in fact a violation of the Trade Practices Act to call yourself "number one" in any form of advising unless you really can substantiate the claim with concrete evidence. Just because you've flogged a lot of seminars does not make you Australia's leading investment adviser, and media exposure won't give you the rights to claim that title either. Any specific claims, especially ones that provide a numerical statement of fact need to be absolutely justifiable by quantitative means, if they aren't then

    If a financial services provider is operating in breach of the Trade Practices Act, this is a very worrying sign. You can come to only two possible conclusions. One, the company does not care that they are in breach of the Trade Practices Act, probably because it is one of the less serious crimes they are guilty of. Or, two, the company is quite ignorant of the breach which indicates amateurishness and incompetence, one would wonder what other errors are contained in their course, deep down in all that talk of "perfectly legal" ways to minimise tax, buy property with no deposit, trade in exotic derivatives and set up new business opportunities.

    Dodgy gurus promote themselves with ostentatious displays of wealth, everyone seems to think Rivkin is a pretty sure bet because he is obviously so very very rich. You see these guys posing in front of corporate jets and luxury yachts to imply their wealth, and they draw 100% of their credibility from inciting materialistic urges in those they try to impress. Warren Buffett lives in a fairly average house for someone of his means, he hasn't moved in 40 years and as far as I know his name has never been attached to any steamy sex romps with Hollywood starlets, real, implied or otherwise in his whole life. Warren Buffett is worth thousands of Rene Rivkins and David Bowdens, but you never hear of Buffett bragging about all the deals he has made, or appearing on some news segment rubbing up against the latest Jaguar supercar like a drooling buffoon.

    The question you want to ask is, "Where are the customer's boats?" (This is a very famous question asked long ago by a disgruntled investor in a book by that same name. It is a good book, you might want to track it down and read it some time. I hear people have taken to shouting this toward Rene Rivkin's enormous luxury cruiser, to the best of my knowledge Rivkin has never issued a statement regarding his customer's yacht's whereabouts).

    The reason why BS guys promote themselves with riches is because this is a sure way to stop people doing any thinking. If all you hear is wealth, all you can see is that Ferrari you are going to be driving, if you are thinking about all those debts of yours and how finally you can get out of debt and get that car you always dreamed about, then you obviously aren't thinking about much else just then, in particular you aren't thinking what a load of horses..t this stuff really is.

    Then a BS artist has another trick to stifle criticism, to target beginner audiences. Makers of terrible rip-off black box software trading packages costing an order of magnitude more money than dozens of far superior products often flog their product via "free beginner trading seminars". Actually these seminars aren't really educational seminars at all, they are often a farcical sales pitch with such laughably inept salesmen that anyone who goes to them who is not an absolute beginner finds them comically stupid and laughs about them for months afterward. They target beginners and advertise their "seminars" in such a way as to attract beginners, while not attracting more experienced types who would of course be bored at something that is supposed to be for mere beginners.

    The Safety In The Market package sold by David Bowden is a very basic Gann course, their sales material goes on and on and on about all the amazing forecasts Bowden makes, but in fact the SITM package is a classic bait and switch, for $1,000 you get a few posters, a videotape or two and a little book that teaches you a simple trend following system called a "swing chart", that in fact is not unlike the Kagi charts drawn by software like Metastock. There isn't a hint of forecasting involved, just a trend following system and a pretty basic course on commodity trading. However in the sales promo material you are told that this is everything a beginner needs to know about trading, a complete course, all inclusive. If the promo material only talked about trend following I would let them alone, but the tapes and newsletters they send out advertise a product for trend forecasting, in fact the product they sell as the SITM package is for trend following, and is really just a way of getting you onto their mailing lists so they can try to get you to attend their staggeringly expensive "trading incubators" and participate in their outrageously priced conference calls.

    You might want to talk to some of the participants in the futures discussion groups like the ones at Yahoo Groups. Many people there seem to be quite familiar with the package, many in fact have bought SITM and attended Bowdens incubators. Comments made in that group about SITM are invariably negative, you won't find too many people there that thought the package was either good value for money, or particularly original.

    Bait and switch is a very common sales method for dodgy outfits, when you first hear about Safety In The Market you are told that $1,000 is all you need to spend and this is an entirely self-contained course, you also hear a lot about David Bowden calling the stock market years in advance and how everyone in the business thinks he's the biggest guru going and all of Wall Street quivers with excitement when he speaks. They don't actually tell you that SITM doesn't contain any forecasting techniques, they don't actually tell you that SITM is the tip of the iceberg as far as their products they want to sell you, and most of all they don't tell you that Bowden hasn't actually called the stock market accurately since about 1986, when he made a few calls based on a well known cyclical anomaly that occurred in the All Ords for a little while up till then but stopped working in the mid 80s. He has not put a foot right since then, but you don't hear about that in his silly Ticker Tape newsletter he sends out to anyone who has ever made an enquiry. All Ticker Tape contains is praise for Bowden, praise for Gann, a lot of photos of Bowden's car collection and luxurious country house, some totally generic trading advice which supposedly comes from Gann and trader profiles full of bright, happy campers who are now just rolling in cash because they learned all the good stuff at a trading "incubator" from Bowden.

    Dodgy gurus also give a lot of motivational speeches, dressed up as investment advice. Now a bit of motivation does some good, but it can be very harmful when it takes the place of judgment and rational thinking. People like Robert Kiyosaki, author of the best-selling Rich Dad, Poor Dad series, stand up there and give a very inspirational "we're all going to be really rich" talk that whips the crowd into a feeding frenzy as they rush to the back to buy tapes, but as one respectable real estate guru in America said of him, "The guy was extremely arrogant, and gave us no information about Real Estate or notes or how he made his money. He seems to have come up with one idea about investing in assets and is riding that pony to lots of best sellers. I have never been so appalled at a speaker's ability to talk for over an hour and share no substantial knowledge." A high content of motivational, showman type stuff is often the surest sign that a guru is dodgy. Real investment professionals do not leap onto the stage in a shower of pyrotechnics and spend the next 50 minutes hyping up the crowd and talking about how rich they can all be, they usually just talk about investing. If a person is properly educated then they don't need to be motivated by some guy jumping around with a stirring rock and roll soundtrack, it would be far better just to tell them about stocks and real estate instead.

    Amway are also masters of this, apart from their obvious appeal to greed whenever a speaker appears, inevitably wearing fabulously expensive clothing and jewels and throwing in anecdotes about all the crazy things that they did last summer while hanging out with the Sultan of Brunei, they also have a "tape of the month" club and recommend various books (including Kiyosaki, who endorses multi level marketing). I was once courted by Amway guys three times in several weeks, I was doing direct sales during my school holidays and of course they could see the potential for someone like me to go very far in this "business". Each time I was lent tapes and books to read, they contained nothing but the usual generic platitudes about wealth and an endless insistence on slavish following of the "system" (which, among other things, meant paying big bucks every month for their motivational tapes and books, attending meetings and of course buying lots and lots of Amway for personal consumption). They contained investment advice, which was roughly as useful as anything Kiyosaki says, and the rest was just an appeal to pure greed.

    BS artists also like to talk in purely political terms. They label the rich as one monolithic group with great fundamental money sense and the poor as a bunch of failures. Anyone who talks in a negative way about the product is dismissed as a cynic and a variety of insults are used, "chicken littles" and "bean counters" being among Kiyosaki's favourites. They use grand, but meaningless slogans like "don't work for money, make money work for you!!" and pepper their talk with lots of little jokes and put-downs for those unable to see what those present in this room know.

    They make it all seem so easy, never mind that the professionals out there got to where they are today by extensive postgraduate study and years of hard work in some back-office of a stockbroking firm, these guys tell you that all you need to become a master trader or investor is to take some weekend crash course or buy their easy to use point and click software. No mention is made of the substantial risks, instead you are told that this firm has a complete, bullet-proof system that reduces all risk to practically nothing, as long as you unquestioningly follow the system.

    They paint themselves as master entrepreneurs. You are told that people who work for a living are losers and idiots, real wealthy guys like this do deals, or make spectacular killings on sophisticated futures trading strategies that you can only hear about if you buy their stuff. They say you don't need money to make money, a true master can go from zero to hero by his wits alone. While a genuine master trader could in theory do a few masterly plays on the futures market and get back into business, or a great negotiator could set up some great development deals, these people are few and far between, and most likely they are actually out there trading or doing deals, not appearing on early morning TV infomercials or selling seminars to beginners. If these guys were as great as they say they are they would be employed as fund managers. Peter Lynch had a salary of over 15 million dollars for running his Fidelity Magellan fund, and you can buy his books for about $20 in paperback. If a guru really was motivated by a sincere desire to educate the masses and level the playing field as they say they are, they would not be selling tape sets for $1,000 and weekend trading seminars for the cost of a small car, nor would they slap a gag on everything they write about with clauses about disclosure of copyright material, and banning taping of the seminars.

    On the subject of banning taping, I know of no reputable organisation that doesn't allow you to tape or film their lectures for your own scholarly use. (Seek permission out of courtesy, don't then try to sell the tapes though). Typically cameras and tapes are not allowed by dodgy organisations, and you often have to sign confidentiality agreements. This is all supposedly to stop piracy of their system, but that hardly holds water as with or without a tape you can always rip them off by your lecture notes alone. The reason they don't want cameras and tapes is that such things make them look bad in court, and take away the whole "his word against mine" defence, the whole thing is just a gag. If you are asked to sign a confidentiality agreement when you walk into a seminar, use a fake name or leave.

    Any system profitable enough to require big blokes and heavy doors to defend the "secrets" most likely would not be advertised for sale in the newspaper or ads in the back of magazines. Think about it! These vendors are not philanthropists, if they just wanted to help people they would make masses of money themselves and set up charitable foundations like Sir John Templeton did, or they would tell people about their systems for free. Any system worth paying money for would be practically priceless. Any system sold to the general public would be practically worthless. What is the deal with these $10,000 black box packages? Nothing but a scam!

    One of the big features of shonky advice is that people insist you can use their system even though you have no money and bad credit. Most of the get-rich-quick suckers are pretty broke, this is simple salesmanship in overcoming the "but I don't have cash to invest" objection. Leverage is a wondrous thing in the hands of the skilled investor, although Ben Graham taught never to invest in shares on borrowed funds, Warren Buffet often does, which is partly why he was able to make so many billions. No investor can use leverage without substantially increasing risk however, as Buffett well knows. A guru that advises you on how to become a gazillionaire on a $150 a week Centrelink pension is either being totally unrealistic, a liar, or is advocating something illegal or supremely risky. They claim that it isn't money that is a barrier to becoming wealthy, it is fear and ignorance in the masses. No one has ever really invested their way from rags to riches, along the way they had to create the cash to invest somehow and this either meant going for broke with speculations or getting a higher paying job. Thrift is of course very important, but it helps to be thrifty and well paid instead of thrifty but still only on a couple of hundred dollars a week.

    If you want to know how to make a billion dollars, learn about it from someone that actually did. Look at the books section of this FAQ and notice that the most you'll pay for those books would be $70 for the really big thick tomes in hardback, not a couple of thousand for a booklet and some tapes. Warren Buffett's annual reports for Berkshire Hathaway are archived and available for free download from Berkshire's web site. You can even get away with not buying any Warren Buffett books if you study all his reports, as Buffett's reports are tremendously educational, and tell you plenty about his investment philosophy.

    Investment is one of those fields where the very most expensive material is necessarily the worst available. Smart people don't overpay for advice, and so those that charge the most are necessarily looking to prey on the ignorant. Since the audience absolutely lacks sophistication a dodgy guru can feel quite free to give advice that merely sounds impressive. As long as the relevant disclaimers are given to advise that no investment is free of risk, people can get away with telling people any old thing and charging whatever the market will bear.

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