Kirk Dolan: ‘I know you are against trading commodities. What about this literature I get from Larry Williams, who supposedly has this system to predict with high accuracy the commodities market, has become a millionaire doing it, and will show me how? He won the Robbins Cup by trading $10,000 into $1.1 million in 1 year. He sells his materials for $200, which is refundable after I try paper-trading for 3 months according to his video stuff. Sounds too good to be true.’
☞ I know nothing about Larry Williams- or the Robbins Cup – but I’ll bet that someone wins it every year.
(If Larry could grow his stake 110-fold every year – or to be conservative, let’s say just 65-fold, after taxes – then within a decade his $10,000 would have grown, after tax, to – well, to be sporting and make it fun, let’s start him off with a penny, not $10,000, because even his penny would have grown to, after tax – nah, let’s just start him off with one-thousandth of a penny – $134 billion. And heck, if you can grow a thousandth of a penny into $134 billion in a decade -after tax, no less! – imagine what you could do with real money over a lifetime, let alone in some offshore tax-haven.)
My good friend Brad Queisser recently turned $10 in quarters into $1,700 in four hours playing the slots at the casino on St. Croix.
Anyway, my point is that someone will win the contest, and that that someone may even be tempted to capitalize on his success by selling $200 newsletter subscriptions. If he does reasonably well for a few months, he gets to keep the $200. If he doesn’t, you lose $5,000 or $10,000 trying your hand at this, but you get your $200 subscription fee back(presuming he can make good the guarantee).
If you read Pulitzer Prize winning author Jim Stewart’s book Blood Sport, you will find about 60 pages on Hillary’s famous foray into commodities, wherein she turned $1,000 into $100,000 and national ridicule. Guess what? As I have written here before, it turns out that this was not a scheme,as I had assumed, whereby (unbeknownst to Mrs. Clinton) the good trades were put in her account and the bad ones in the account of a friend who was trying to help her. Rather, Jim found, she and a whole bunch of others were investing through a broker who was ‘following’ a big pork belly player in Chicago. The leverage in commodities is very great, so 100-to-1 returns are possible. But leverage works both ways. According to Jim Stewart, not long after Hillary took her chips off the table, luck turned and everyone who was following this guy got wiped out.
(Brad really did turn $10 into $1,700. But, as you might expect, he did not leave the casino with quite that much.)
Commodities speculation is a zero-sum game. For every dollar won, a dollar is lost. Except that commissions make it less than zero. And taxes, should you win, make the odds worse still.
It’s possible that you will have the commodities pros at the international grain trading behemoths, etc., at a disadvantage, with your superior knowledge (well, this guy Larry’s knowledge),even if you can’t quite match their resources. But I wouldn’t bet on it.
The real problem with commodities speculation is not that you’ll lose your $5,000 or $10,000 stake. That’s the most likely outcome; but the really scary outcome is that you’ll lose far more. With most speculations, the most you can lose is 100%. With commodities speculation, a 100% loss just scratches the surface of the potential calamity.
Tomorrow: Is the Gloom and Doom Overdone? Or Too Rare?
Quote of the Day
Very few American investors buy any stock for the sake of something which is going to happen more than six months hence, even though its probability is exceedingly high; and it is out of taking advantage of this psychological peculiarity of theirs that most money is made.~John Maynard Keynes
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