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"Stupid" Investment of the Week
Teach Me to Trade seminars
Instructor Brian Wilks was on a roll. He had explained a few investment concepts and he was trying to set the hook and sell his product.
"Don't we all know someone who is so cynical, so pessimistic that the person will tell you everything that can go wrong," said Wilks, who was pacing the room and raising his voice. "You don't have to agree with that guy. You can choose to think that everything will go right."
Thankfully, Wilks didn't ask who in the audience of the Teach Me to Trade free seminar at the Sheraton in Braintree, Mass. represented "that guy."
If he had asked, I would have had to raise my hand, because after sitting through Wilks' two-hour pitch for Teach Me to Trade investment seminars, I'd not only be the one to tell you what can go wrong, I'd be the one calling the educational program a Stupid Investment of the Week.
Stupid Investment of the Week highlights the concerns and problems that make a situation less than ideal for the average consumer, in the hope that spotlighting trouble in one case will make it easier to root out elsewhere.
While not a classic investment, consumers pay for educational programs hoping for a monetary return, which qualifies the Teach Me to Trade system — advertised nationally in infomercials — for this column.
Stupid Investment of the Week is not intended as an automatic sell signal; anyone who has paid $199 for the three-day Teach Me to Trade Workshop (and who is now paying about $40 a month for the firm's data feeds) should let their own personal results have the final say.
Based on what the company showed at its free come-on seminar, however, most customers would have had trouble doing well enough with the system to make it worthwhile.
For proof, there was the moment when Wilks showed a line pattern; the pattern's trend was obvious and simple, and yet nearly half of the 60-plus people in attendance couldn't read the chart right, saying it was time to buy when Wilks was pointing to a sell, and visa versa.
If you can't get the easy questions right in the free seminar, it's a safe bet that the more-intensive education is likely to go over your head, and that it won't get much easier when you are trading with real money on the line.
Teach Me to Trade, as explained by Wilks, combines fundamental analysis, with timing and technical analysis. The idea is to teach investors to spot stocks that show solid fundamentals, the right MACD (moving average convergence/divergence, a key indicator this type of analytical program), and a positive stochastic measure (stochastics are a computerized analytical tool designed to show if a stock is overbought or oversold).
It's not as simple as the red-light/green-light systems of some software programs, but it's less complicated than a basic video game.
The key here is that you'll learn to recognize the right pattern — the one so many audience members couldn't get over and over again — and look for three key positive or negative signs on any individual issue, so that you can then trade in it profitably.
Yet other than the testimonials found in the firm's infomercials or in the letters it sends trying to attract customers, there was not a single word said about how Teach Me to Trade does in generating real-life results.
So while you get a picture of Gerald A. of Roanoke, Va., saying, "It's easy knocking down $2,000 or $3,000 a week," you have no clue whether Gerald is the exception or the rule among students.
By comparison, an investor who sees a presentation for a stock newsletter typically can see the publication's track record, can view a model portfolio and can develop some expectation for investment performance.
In talking with audience members when Wilks was finished, it was clear that most felt they could read the lines and make good trades, even though they had no real clue as to what the indicators really meant. In short, they believed the program should be called Show Me When to Trade, giving them the short cuts rather than teaching the essentials.
Relying on a system you don't truly understand is a bad idea.
And while Wilks was warning the audience against skeptics like me, he was suggesting that a person who is living paycheck to paycheck could do very well trading options.
Indeed, it doesn't take a lot of money to trade options, but someone who has no money to save probably doesn't want to start their investment history in an all-or-nothing kind of situation. Software and education program or not, options are not Investing 101 material.
Wilks is correct that the Teach Me to Trade seminars are a lot cheaper than some of the software programs and other goods being peddled to turn ordinary folks into market-timing geniuses.
But there's a good chance the seminars spend a fair amount of time pitching something other than those monthly data feeds.
What's more, of every investment education software program or educational package I have looked at, Teach Me to Trade — part of the Whitney Information Group (ticker RUSS) — has by far the worst record with the Better Business Bureau; according to the most recent report available, the firm logged nearly 200 complaints in a 36-month period.
While a majority of those cases were resolved, the Better Business Bureau still gives Teach Me to Trade an unsatisfactory rating.
Clearly, there are customers who get exactly what they hoped for from Teach Me to Trade.
But unless the introductory seminar convinces you that your nerve and know-how will actually deliver the most out of the program, you're the kind of person who should listen to the skeptics, and keep your money in your pocket.
Chuck Jaffe is senior columnist for MarketWatch. If you have a suggestion for Chuck Jaffe's Stupid Investment of the Week, or a comment about this week's column, you can reach him at jaffe@marketwatch or Box 70, Cohasset, MA 02025-0070.
Copyright 2006, MarketWatch