I'd like to devote a few posts to what I call the game of business. Most people think that businesses 1) are devoted to making their stockholders happy, 2) want their employees to be rewarded with the growth of the company, 3) are loyal to the country/state in which they were formed, and 4) are ethical with humanity and the planet's best interest at heart. Well, if that's what you think, you are wrong in all four assumptions.

First, businesses are devoted to making the CEO, a few insiders, and the largest stockholders wealthier. They could are less about the average stockholder. Just take a look at options awared to corporate insiders during the last 10 years. Some companies actually give options to their employees, but most only give them to corporate insiders.

Over the years I've consulted with high ranking people from inside corporations and I've asked them what they generally do -- what their objectives are. And guess what that is? Most major corporations look for which of their competitors they can drive out of business. In other words can they form some sort of alliance with other corporations, which would allow them to force another company out of the competition. And there is also another level ... how can corporations control governments?

Let me ask a question....do you think the U.S. government controls the corporations that operate under its laws or do you think corporations control the U.S. government by controlling the politicians.?

Posted by Van K Tharp at 09:59 AM | Permalink | Comments (2) | TrackBacks (0)

There is a lot of money looking for a place to go right now. And that's going to increase in the near future. For example, the government cannot afford to support a lot of people on social security. It just cannot do it. And so the alternative is to encourage people to save for retirement and that's happening now. And all that money flows into mutual funds and those funds have to be 90% invested. That's just the way it is.

I still think there are a lot of negatives around (such as our huge debt and absolutely no sign of anyone doing anything about it), and we're still in a secular bear market (meaning PE ratios will continue to trend down). But that doesn't mean that prices won't go up with inflation or a shrinking dolllar.

However, the most important point is that the stock market was in a strong uptrend. We had a big down day, but that didn't even amount to a 10% correction. And the market direction looks like it is resuming up. Listen to the market.

Posted by Van K Tharp at 04:34 AM | Permalink | Comments (1) | TrackBacks (0)

When you adopt the belief that a trading system can be described by the R-mulitple distribution that it generates, it provides some incredible advanatages. One of them, I believe, is the ability to classify and rank systems. Those of you who have looked at the 2nd edition of Trade Your Way to Financial Freedom may have noticed that I started to do this with newsletters. We'd like to continue that, but we need R-multiple distrubtions on a lot more newsletters. Perhaps we can get those with your help.

But also I'm looking to be able to rank systems by the R-multiple distribuiton. Here's where I need your help. If you'd like to participate (and share in the results as they come out), then send me a brief description of your system with some basic descriptive material plus your R-multiple distribution. In addition. I need the dates of the trading and what you were trading.

Typical descriptiopns might include:

* Trend following after a retracement.
* Swing trading after a failed test.
* Band trading with a trend folloiwng filter.

It will probably take a couple of years, but what I suspect is that we'll be able to rank and classify systems amazingly well with this data.

For example, I alrady know with newsletters that value oriented newsletters will probably be the most successful (due to some of the limitaitons of newsletters).

And I've seen some amazing results with systems. If you'd like to participate, send me info about your system at info@iitm.com (Describe it generally, tell me what you trade, how many trades you have R-multiples for, and the datas of your trading). I'll let you know if its useful or if we'll need more/different data.

Thanks,

Van

Posted by Van K Tharp at 06:36 AM | Permalink | Comments (3) | TrackBacks (0)

We'll be publishing an article in Tharp's Thoughts shortly on the NON-Random nature of the markets. It's a simple, but very effective study. If you plot the percent changes in the market, they should be normally distributed. But they are not. The curve is very steep around the mean and has huge fat tails. This means that changes that you mght expect every 100,000 years on a normal curve will actually happen every 5-10 years.

Take the big move last Tuesday. It was one of the large point moves in the DOW, but only among the top several hundred percentagewise. Nevertheless, in one day it wiped out all of the profits for the year. And it all happened because of the global interdependencies of the markets. China blew up, Europe blew up and then the U.S. blew up.

I'd also like to point out that 1) the VIX has been at historical lows. 16 of the 50 lowest readings of all time on the VIX have occurred in 2007. This means that people are extremely confident about the market. At when the VIX nearly doubled.in a few days...news commentators were saying that everyone is panicking. That makes me laugh. The all time high on the VIX is 150... and commentators are saying that people are panicing when it hits 20.

Posted by Van K Tharp at 01:47 PM | Permalink | Comments (1) | TrackBacks (0)