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Precious Metals IRA

 

Optimizing Simplicity

A hedge fund managers’ departure from the
unnecessarily sophisticated to the sophisticatedly simple.
 
Managing a successful hedge fund these last nine years has permitted me a rare insiders’ perspective to just why countless investors continue to lose more money in the stock market, than they ever make.  These common financial pitfalls were easy to pinpoint, as they affect not only a families 401(k), but also the $50 million dollars of inherited generational wealth being professionally managed. Investing in anything that is too Confusing, too Complicated, or Void any real risk management guarantees Financial Catastrophe. 
 
Identifying, “what the alternative is,” was a smidgen more involved requiring that I didn’t trade for years; personally lost more money than I wanted to admit at the time, and then ultimately surrendered my illusion that the stock market actually cared about your financial forecast, your stock predictions, or your trend lines.
 
“Success comes from making the Right decisions.  Right decisions are learned from experience.  Experience is gained thru making wrong decisions.”
 
Four years in the U.S. Navy followed by four years of staying afloat in college that I finally got around to asking myself the really important questions in life; such as, what do you really want to do with your life Kevin?  All I knew for sure was that I wanted to learn about investing and I wanted to learn how to make millions of dollars in the stock market; but I wasn’t sure where to start at.  The experts all told me that the best thing for me to do was put my money in mutual funds and forget about it; you know, “invest for the long term, rule of 72, diversify, etc.”  I thought that these experts had to know far more about investing than I did to understand all those complicated quarterly financial reports, graphs and charts.  I was obsessed with watching the financial channels and reading the Wall Street Journal, but embarrassingly enough, I still found it all very confusing if not overwhelming.  I wasn’t sure what was real; what was hype; and what was even essential at all, when it came to making money in the stock market.
“It's a mystery wrapped in a riddle inside an enigma!”
Winston Churchill
 
As part of my self prescribed self-help cocktail back in the early nineties, I found myself on the edge of my seat in a Landmark Forum seminar.  Three days of pure enlightenment followed by acute cerebral cramping.  Just when I actually thought that I was learning something, the Forum Leader told the group that, “You don’t know, what you don’t know, you don’t know.”  What the hell does that suppose to mean I thought to myself?  Well, it wasn’t till much later that, I Got It!
 
I read literally hundreds of trading books word for word, page by page, expert to acclaimed monarch expert; completed countless tape programs and video courses all promising to teach me the secrets of the professional traders.  My fifth grade math teacher, Mrs. Hayes, would have been so proud of my scholastic prowess, that she surely would have placed a Silver Star on my shirt; that she somehow neglected to do years back.
 
In due course as my understanding of trading and investing grew stronger, I went on to pay $4995.00 to attend an exclusive trader’s symposium, that’s right, a symposium this time and not one of those run of the mill seminars that the amateurs attended.  We were taught the in-depth, complex, and sophisticated analysis of what to buy, where to buy, and how to buy stocks, bonds, options, and spreads. These events included large binders filled with colored charts, confusing graphs, and expert trading tips.  This particular symposium included a limited time only, one on one coaching call to keep us motivated after the symposium.  I guess there must have been about three hundred of us attending this particular symposium; small, compared to the last one that I attended in Los Angeles, must of been a thousand in attendance there.
 
What was the end result of all this training?  Well, I had finally arrived. I was in-the-know.  I was college educated, well informed, and up to date with the most sophisticated trading techniques being taught anywhere, and I was ready to make my millions.  Detailed trading plan at my side, complete with my most desired objectives, deadlines for reaching those objectives and a daily to do list.  My confidence was at an all time high - I was ready to enter the stock market.
 
“Just as the U.S. Marine corp. separates the men from the boys; the stock market decapitates the overly confident, from the competent.”                - Kevin Teeple
 
I precisely followed each and every “how to,” taught in these seminars, books, and tape programs, I analyzed an ocean of fundamental data with a fine tooth comb just I was taught.  Considered price and demand, with all the associated underlying factors I could read about, just as they taught me to do.  I bought on triple tops, sold when it dropped below this or that converging moving average, shorted the dogs of the Dow, hedged with spiders, diversified with ETF’s, used Elliott Wave, MACD, Bollinger bands, P/E ratios, advanced statistical regression models, ratio filtering, economic logic projection; and,  after  all  this  can  you  imagine  the millions of dollars that I made?  Nada, zilch, zero.  I ended up with a net loss as the reality of the stock market collided with my market forecast - and it was unscathed. 
 
In fact, my first real trade after paper trading several months resulted in me losing about $5,000.00 in less than 10 minutes; that was 100% of what I had invested at that time; my second and third trades?  Well, Christ himself has not forgiven me for that, and therefore I am not at liberty to discuss it.
 
“Everybody’s got a great plan until the first punch.”
-         Mike Tyson
 
Now for you traders’ out there reading this article, that are feeling your heart rate increase; your blood pressure about to explode, and have veins popping out of your forehead like trend lines on a chart - please hear me out on this; I am not bashing any management style or any trading technique here.  As my good friend and professional investor Geoff has reminded me, there is more than one way to skin a cat.  Peter Lynch averaged over 20% per year for almost 15yrs using Mutual Funds; Warren Buffett who has averaged over 20%/yr for over 30 yrs using a buy and hold approach, then there's charismatic genius Jim Cramer who changes his mind at the blink of an eye that averaged over 20%/yr at his hedge fund.  All of these are Masters without exception or debate, yet they are more the exception, than they are the rule.  All I am suggesting here for the rest of us not in the 98th percentile of IQ scores; there might be an easier way, a quantitatively simplistic method to skin that same cat.
 
 “You set enough monkeys typing and one of them will produce the encyclopedia Britannica sooner or later.”                                                 - Fooled by Randomness.
 
After losing that $5,000.00 in less than ten minutes, I’d reached my vomiting threshold and Mrs. Hayes took my silver star back. I could no longer afford to indulge in the fantasy that the stock market actually cared about my trend lines, my market forecasts or stock predictions.  Survival dictated no more daydreaming that the stock market would value my technically sophisticated, remarkably ingenious and fundamentally sound trading techniques.  I knew what the problem was then, just as most traders and investors do in similar situations.  It is the common denominator in all trades and investments – the problem was me!  It was time for me to take a step back, reevaluate, reassess my life; it was time for me to Walk on Fire! 
 
Those of us whose life’s demanded a change, and we attended a Tony Robbins event already know that above and beyond experiencing the popular picnic skill of walking across a bed of burning coals; that Tony teaches us the vitally more important life strategies, designed to enhance, and accelerate, our personal or professional lives to the next level, no matter how great our lives are already. 
 
Well, after my first fire walking experience with Tony, I kept on walking all the way to San Diego, headquarters of Robbins Research.  I left my cubicle commando job and moved there o San Diego to spend three remarkable years working for him.  
 
There are countless great reasons to work with Tony, but one reason that I found to be beyond measure, was participating in the numerous meetings and get togethers’ with Tony. Instead of an audience of say 1000 people or more, he was in a small conference room talking to about twenty of us; and as you can imagine, these experiences ensured that, life would never be the same.   Which brings me to my point which is one of Tony’s most powerful organizing principles?
 
Know your outcome; Take massive intelligent action; Have sensory-acuity to notice if you are getting the results you desire and if not; change your approach; and then continue to change your approach *until* you get your end outcome.                     
–        Tony Robbins
 
Hmmm, I suppose in hindsight that Tony felt obligated to hire me due to the fact that I got stuck in his office elevator for over an hour on the way to my first interview.  All the same, and years later, I still consider that time at Robbins priceless and paramount to my success today. 
 
Like so many unfortunate traders and investors that I know now, I was so intoxicated with the dream of what might happen in the stock market that I was all but ignoring what was happening in the stock market, as I watched my net worth diminish, one – tick – at – a – time.  Do you know any one like this? Maybe intimately?
 
The time had come to subscribe to Tonys’ organizing principle, and change my approach immediately, and then continue changing it till I reached my goal of making millions in the stock market through identifying a profit pattern in the stock market.
 
Standing on the shoulders of greatness has made all the difference in my years of trading, especially in the discipline of avoiding that which is inessential and focusing exclusively on that which is essential to profiting in the stock market. “What is true vs. what I think.”  Thumb firmly pressed upon the pulse of Wall Street and finance matters everywhere, a lifetime of invaluable investment advice, commanding distinctions and acute market insight can be gained when the Masters share their wisdom with us. 
 
A clever person solves a problem.  A wise person avoids it.
– Albert Einstein
 
Kevin, let me share something with you that is common knowledge but for the most part is not truly appreciated.  The investment community has constructed a widespread and convoluted maze designed to lasso its listeners into its own brand of conventional market wisdom, mostly thru the media, print, and over the internet. Add to this the fact that change is accelerating daily, while increasingly more and more difficult to understand.  Even the smartest among us, with our best thinking, can’t figure out how these so-called experts actually arrived at their stock predictions, or market forecasts; not to mention how any of their forecasting translated into actually making money in the stock market?
 
Forecasting is not a respectable human activity, and not worthwhile beyond the shortest of periods.” – Peter Drucker
 
You have but two paths before you Kevin, before any trader or investor that wants to makes money in the market that is.  First, you can either join this
Herd-mentality that will eventually lose most, if not all, of their money trading blindly, preying that the market will turn in their favor.  Or, choose the second path and steer clear of this herd and become one of a niche-few that has actually identified a profit pattern in the stock market, and knows how to exploit it - for profit.
 

“It’s in this moment of your decision making that your financial destiny will be determined.”  Choosing the second path will all but guarantee that the next couple years of your life you will not trade a single penny, but instead, endeavor thru an exhaustive amount of time and energy in search of a profit pattern, a trading strategy that you may never find at all.  Choose wisely! 

 
Yes, these talks were initially quite curt and to the point, not to mention only minutes or so each month at best, in the beginning.  Nonetheless, it wasn’t till during those times with him, that I finally got what the Landmark Forum was trying to teach me.  He shifted my perception just enough, to teach me what I didn’t know, that I didn’t even know about trading successfully.  Then, it wasn’t too many years thereafter that these rolls were reversed on me, as a result of the most horrendous terrorists attack ever on U.S. soil; and I was the one sharing this same wisdom with others who needed to hear it. 
 
“We are all drowning in information but starving for wisdom.”
                                                            - Anthony Robbins
 
It was just days after our country was attacked by terrorists that I was honored to be an invited guest on CNN financial network, Bloomberg, and the Fox network to answer questions from callers around the U.S...  Unlike other appearances in the past where an informal, yet politically correct sound byte answer was strongly advised; this time I knew that the “politically correct,” gloves needed to come off, as this was unquestionably a time for straight talk.
 
But first and foremost we had to pay our respects; we had to see with our own eyes where the twin towers had fallen to their final resting place, somber sight.  Afterwards, I could not sleep a wink for the thirty plus hours leading up to my appearance on CNN.  I paced back and forth in my hotel room up until just minutes before going on the air; before countless Americans would be meticulously dissecting every word I said. 
 
Like so many of us then, I didn’t have a clue what the markets were going to do in the following days or weeks; and I certainly wasn’t going to insult the listeners’ intelligence by pretending that I did and giving them some pseudoscience prediction or market forecast.  I did however have an edge, I knew exactly how I was going to trade the market and therefore precisely what I was going to say on CNN and this is what I said:  “This is Not the time to invest in the stock market; this is the time to protect your money!” 
 
If you are going to error, error on the side of protecting your investments regardless of what the markets did moving forward. 
 
Everything that I’d had learned to be true up to that moment in our history, told me this was a time to set it out.  You never see a professional bull rider trying to mount a bucking bronco in the ring, so why would anyone enter the market then – the risks were far too great.  This may not have been technically sophisticated, remarkably ingenious or bold enough for some of my counterparts being interviewed that day, but the partners in my hedge fund and listeners didn’t protest at all.  After all, that month of September, as well as for the year, we finished with a very respectable ROI - and that’s all that matters.
 
“Track Record is everything.”
– Warren Buffet
 
If you find yourself nodding your head yes right now, then we probably have a lot in common when it comes to investing our money.By leaving our emotions, opinions, and the news outside our trading office during that terrifying time in our Nation’s history, it made all the difference in our hedge fund’s success.  Avoid obsessing over the confusing and complicated, and rely solely on what you’ve identified earlier, as being true, your strategy. 
 
Today, we can thank God above for our men and woman in the armed services whose brave and selfless service to our nation has prevented another terrorist attack.  Yet, how many of us find ourselves again overwhelmed with how to proceed with our investments?  We find that the only decision we make, is not to make a decision at all - which can be very costly. 
 
There is the mortgage meltdown to consider and analyze. Rising inflation, the slowing economy, the presidential debates and who can overlook the increasingly uncertain future of our U.S. currency.  Anyone of these alone can be a smidgen too confusing, too complicated and to risky for even the smartest of us, with our best thinking, to base our investment decisions off. So, how to proceed?
 
 “The definition of insanity is trying the same approach over and over hoping for a different result.”                                                                         – Benjamin Franklin
 
 
First, Never ever never “play the market.”  When you enter the stock market today, it’s only slightly different than you entering the coliseum in ancient Rome in 80 AD; as you watch in terror as a gladiator rushes you.  Just as the gladiators back then had one intention when they entered the arena – too kill; professional traders are not too much different in that regards.  Professional traders have one objective, and that is to make money – they never play the market.  Fortunately for the losers in this modern day coliseum, they are seldom killed, but to a certain extent, they are financially decapitated or crippled.
 
Second, abandon any preconceived opinions you might have about where you think the market will or will not go – Trying to convince the stock market that you are right can be very expensive.
 
Third, realize that the markets are in fact a zero sum game, in order for you to make money - someone else will have to lose it so prepare yourself thoroughly.
 
Fourth and most importantly, know that every word discussed here is absolutely useless, without the proper money management supporting it. 
 
Bulls make money, bears make money but pigs always get slaughtered!
-         Wall Street truism.
 
So, what did I learn from all of this?  What alternatives were identified that allowed us to profit in the most difficult of times?  How specifically does an investor/trader today, depart from the unnecessarily sophisticated, and engage, the sophisticatedly simple? 
 
Kevin’s Rules of Engagement for the stock market.
 
I.                 First and foremost, identify causality.
 
An investor or traders’ ability to objectively and precisely identify causality in the stock market; to recognize sequential profit-patterns is in fact the most important skill-set that ultimately separates the profitable investors/trader from the herd.
 
Causality defined as the directional relationship between one event (cause) and another event, (effect) which is the consequence of the first.  Just as we have all observed this cause and effect in motion, as we’ve watched billiard balls sequentially striking each other as; A causes B, causes C, and so on; there is a parallel causality in the markets, where one event, such as the NASDAQ trending in a certain direction, causes an event which sequentially causes another that can be exploited for exceptional gains.
 
How do we as investors and traders objectively and precisely sift thru the incomprehensible ocean of data, to construct a quantitative trading strategy, to make the incomprehensible, comprehensible?
 
II.    You optimize:
 
Science explains how our brains are designed to filter, generalize and seek meaning from our sensory input. The result of this is often that our perceptions are distorted and or emotionally biased causing us to make decisions that are less than productive, less than profitable. 
 
Computers on the other hand are a series of binary tools that are designed for absolute objectivity and preciseness. Computer technology can distill a lifetime of market experience into mere moments of processing time, enabling us to search for profit-patterns that have occurred over the last 30(+) years; across an unlimited number of global markets.  Profit patterns that have occurred hundreds if not thousands of times during a time period (large sample size); and which correlates to a predefined “what is true,” marker, that allows for high probability entry and exit points.
 
“What can be done with fewer assumptions is done in vain with more.”                                                                                                             - Occam’s Razor
 
III.        Simplify by finding what is true
 
Defining “what is true” in an ocean of incomprehensible data to analyze is an exercise in stubbornness and persistence, as you will surely identify what is not true, infinitum, before ever arriving at – what is true.  Nevertheless, one significant example of what is true is, “the traded price;” that pivotal “aha” moment in an ocean of incomprehensible analysis.
 
What can be simpler to analyze than the traded price?  What is truer, than the mirror reflection and decisive finale of when sellers meet buyers in the stock market? 
 
“Things should be made as simple as possible, not simpler.”        
- Albert Einstein
 
IV.        Quantify, Systemize, before a penny is invested
 
Once you’ve identified what is true, then technology allows us to mathematically isolate the market conditions that correlate and lead up to highly profitable trades by quantifying the highest probability entry and exit signals. (The historical tendency of one thing to move in tandem with another.)  
 
These Profit Patterns are identified when, and only when, you know the following:
 

·        What to buy.

·        When to buy.

·        When to sell.

·        Amount of profit made historically.

·        Amount of losses incurred, historically.

·        And, your market weightings and exposure. 

 

This is vitally important to any investor because by being so selective in entry points, you accomplish three things.  First, you filter out the confusing, complicated, or undefined risk. Second, you save your money for the trades that have the best chance of winning.  And third, you never irrationally place trades when you don’t know if the odds are in your favor. 
 
These predefined surgical-strikes are quantitative and systematic with no discretionary overrides eliminating the discretionary or emotional investments and trades.
 
“Whether you’re playing blackjack or trading, your profitability depends on your edge and how many times you get to apply that edge.”  - Blain Hull
 
V.   For your adult consideration:
 
“The United States sneezes and whole world catches a cold.” – Author unknown
 
Can we really deny the fact that we are in an international economy? Some even suggest that we are moving towards an international state - while commenting on the latter is beyond my pay grade; commenting on the first is not.  Just as the same level of thinking that got us to where we are now, isn’t the level of thinking we need to get us where we want to go; conventional market wisdom appears lacking in a global perspective where market traction, trumps, market theory.  Where (d)iversification in the amateurese translation means diworsification; and (D)iversification, for those of us whose sensory acuity is  responsive enough to change, can mean, diversification into different countries not simply different mutual funds.  Different currencies, and not just different banks, and different approaches, not just what worked last year.
 
“It’s not the strongest of the species that survives, nor the most intelligent, but the ones most responsive to change.”            - Charles Darwin
 
Generational wealth can only be maintained thru the constant monitoring and management of short term capital preservation.  Getting lazy once, or experiencing the “deer in the headlights,” syndrome in a bad trade, bad investment, or from bad advice, is all it takes to undo the efforts and profits of the last 50 years or more; as confirmed by one infamous rogue trader named Nick Leeson, as he overextended his trades in the Nikkei 225 causing the collapse of the Barings Bank.
 
Investors may be willing to take risks in order to achieve their wealth; but once it is achieved, experience has taught us all that our risk tolerances decrease exponentially.  And for that reason, the primary objective of any trader, investor, or money manager must be to minimize risk, first and foremost, before looking to maximizing profit
 
Avoid the confusing, the complicated, the void of any real risk management and focus solely on what you’ve identified as true, and your strategy to exploit the profits from it.
 
 - Carpe Diem,
 
Kevin Teeple
President and Chief Investment Officer
KTM Funds, Inc.
This email address is being protected from spambots. You need JavaScript enabled to view it.
 
DISCLAIMAIRNeither Kevin Teeple nor KTM Funds are licensed stock brokers; registered investment advisors, or certified financial planners and therefore do not render any financial advice whatsoever. The sole purpose of this article is for informational and educational purposes only. The opinions, statements, and experience expressed in this article are meant to be educational only for your adult consideration, and not to be considered financial advice whatsoever.  None of this is meant to substitute for your own counsel with certified financial professionals as we adamantly suggest you always seek counsel before undertaking any investment or trade.
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