[continued from previous message]

--------------------Check http://invest-faq.com/ for updates------------------
Subject: Warning - Dave Rhodes and Other Chain Letters
Last-Revised: 6 Sep 1994
Contributed-By: Mark Hall, George Wu, Steven Pearson, Chris Lott (
contact me )
Please do NOT post the "Dave Rhodes", "MAKE.MONEY.FAST", or any other
chain letter, pyramid scheme, or other scam to the misc.invest.* groups. Pyramid schemes are fraud. It's simple mathematics. You can't
realistically base a business on an exponentially-growing cast of new "employees." Sending money through the mails as part of a fraudulent
scheme is against US Postal regulations. Notice that it's not the
asking that is illegal, but rather the delivery of money through the US
mail that the USPS cares about. But fraud is illegal, no matter how the
money is delivered, and asking that delivery use the US Mail just makes
for a double whammy.
Note that when someone posts this nonsense with their name and home
address attached, it's fairly simple for a postal inspector to trace the offender down.
Although the "Dave Rhodes" letter has been appearing almost weekly in misc.invest as of this writing, and it's getting pretty old, it's mildly interesting to see how this scam mutates as it passes through various bulletin boards and newsgroups. Sometimes our friend Dave went broke in
1985, sometimes as recently as 1988. Sometimes he's now driving a
mercedes, sometimes a cadillac, etc., etc. The scam just keeps getting updated to keep up with the times.
To close on a funny note, here's a quote from the "Ask Mr. Protocol"
column of the July 1994 (v. 5, n. 7) SunExpert magazine:

Rhodes (n) - unit of measure, the rate at which the same
annoying crud is recycled by newcomers to the net.
--------------------Check http://invest-faq.com/ for updates------------------
Subject: Warning - Ken Roberts
Last-Revised: 28 May 1999
Contributed-By: Conrad Bowers (cpbow at earthlink.net), J. Johnson
This article is a response to a message saying that the Ken Roberts
course is a good introduction to commodity trading (the message
originated on an AOL site but was quoted on the Motley Fool investment
site). According to one of the writers of that thread, Ken Roberts is
now advertising on radio with ads saying you can turn $5000 into lots of money. Some of the comments below would apply to just about any
technique if you're starting with a small amount of money.
In my opinion, Roberts does not adequately warn of the risks about
trading commodities. Most of his first course is a pep talk about how
easy it is. In reality surveys have shown that some 90% of people stop trading within about a year. Most stop because they have depleted more
of their capital than they can bear and keep on trading. Remember these differences about commodities as compared to stocks:
1. Unlike the stock market, in commodities for every dollar won there
is a dollar lost in the markets. Most lose, a few are consistent
big winners. Remember you are competing against people that have
done this a long time, people that do it full-time, and
suppliers/users that use the commodity full-time. Unless you're
sure you going to beat these pros the first time, you better trade
with money you don't need.

While you dream of what the money you hope to generate will do for
you, don't lose sight of the initial odds against you. With time I
believe an individual can learn to trade successfully. But if you
don't survive the training period, you will have had a very
expensive education.

2. Highly leveraged; You can lose more than your entire investment if
you get in a position that's way too large for your account,
particularly if you get locked into it by 'limit moves'. These
happen occasionally in a number of commodities. (You can hedge
with options, though.) The more common problem is cumulative
losses. Someone who starts out with $5000 will have difficulty
placing stops that won't get hit by market 'noise' (short-term
fluctuations). If they place more reasonable stops, then it will
be a large percentage of their account. It's probably possible to
start with $5K, but you either have to be lucky enough to build the
account up before it gets wiped out, or you have to be disciplined
enough to trade very small positions and not the more lucrative
commodities. (Having seen my account dwindle 80%, I am trying to
rebuild it on this basis; some recovery with options, currently
pretty flat trading "small" commodities.)
The Ken Roberts course does teach how to calculate the dollar
differences a price move will profit/cost you. However, the is an
almost complete lack of discussion about the proper amount to risk. To
pitch a course to investors with only $5K with no discussion of risk
strategy is outrageous. His video repeatedly asks interviewees, would
you recommend this course for a struggling family/single parent, etc.
That is enough of a misrepresentation that I believe it should be
regulated.
I got interested in commodities through his course, TWMPMM I. I
actually didn't use his entry techniques so I won't fault those. I
fault him, the fax service I did use, and myself for my not
understanding risk control. I didn't risk a huge amount per trade
(never more than 10%, usually less) but I still overtraded enough that
my account bottomed out at less than 20% of the starting value. Of
course that's when the profitable trades came along but I couldn't take
them. Roberts' entry techniques (particularly one of the two) would
typically risk MORE than I did. If someone with a large account
followed his techniques with proper risk control in a diversified mix of markets, it might work. There is no test of his entries so I don't know
if they are profitable or not. It's sending new people off into the
markets with small accounts and no risk management training that's outrageous.
He does do a good job of stressing paper trading. However, three months
is good for introducing you to the daily process and stresses of
decision making. It is not a valid test of any strategy. Only by
testing a strategy over quite a long time of historical data, can you
tell if it works. He publishes no indication this is so. Often, people
hit a couple good trades in the paper trading stage, and they are sure they're ready to make it. I think 6 months to 1 year of reading and
paper trading is necessary. Wish I had!! For the money you can get
several much better books, rather than one course that is literally more
than half hype.
The claim that the first course is complete is false. Want to know
about options? Buy the TWMPMM II course. Want to know about entering
already existing trends? Buy a bonus pack (or get it with a one year renewal). In other words, if you're frustrated that you seem to be
losing your account just send in $95 or $195 more for the solution.
Want to learn how Ken really trades himself? Attend a $2000 seminar.
Not satisfied with a subscription? -sorry, prorated refund requests
refused (I tried).
Bottom line: If you don't know what you're doing you're gonna lose! If
you're looking for someone else to do the brain work, expect to lose!
Only you know how important your money is and how you want it to grow.
And, oh by the way, don't get greedy!
For other opinions, check out extensive discussions on the misc.invest.futures news group; if the thread is not currently active
just type 'Ken' and 'Roberts' into a Dejanews search and you will get a screenful.
--------------------Check http://invest-faq.com/ for updates------------------
Subject: Warning - Selling Unregistered Securities
Last-Revised: 29 Mar 1995
Contributed-By: Michael R. Mitchell (mitchel4 at ix.netcom.com)
Under the U.S. Securities Laws, specifically The Securities Act of
1933, the mere offer to sell a security -- unless there is an effective registration statement on file with the SEC for the offer -- via the
Internet can be a felony subjecting the offeror to a 5 year federal
prison term. See the Securities Act of 1933, Section 5(c) Of course,
sales and deliveries after sale of unregistered securities is unlawful (Section 5(a)) as is failure to deliver a prospectus (Section 5(b)).
Listen to an example from my own experience as a securities lawyer in
Los Angeles. Many years ago a young man came into my office and asked
my advice about whether he could advertise in the Hollywood Reporter for investors in a movie he wanted to make.
I explained to him that such a course would be fraught with peril for
him because it would violate the federal securities laws. He said,
"Everybody does it; there are a bunch of ads soliciting people to invest
in movies there every day." He said, "Well, I'm going to do it."
About a week later, he phoned me up and said he had got a letter from
the SEC requiring him to refund any money he had collected and requiring
him to visit the LA office of the SEC. It appears that the SEC reads
the Hollywood Reporter. It also reviews the Internet newsgroups.
Certain transactions are exempted from the prohibition (See Section 4)
and certain securities are exempted from the prohibition (See Section
3). How a security is defined is set forth in Section 2(1) -- and
includes, among other things, any note, stock, bond, investment
contract, put call, straddle, option, etc.
You can determine whether a registration statement is or was in effect
as to a security by accessing the free SEC Edgar search machine at this
URL:
http://www.sec.gov/cgi-bin/srch-edgar
--------------------Check http://invest-faq.com/ for updates------------------
Compilation Copyright (c) 2005 by Christopher Lott.

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