Option Trading Meetup (Part 2)

I left the Meetup fuming and doubtful about my prospects of returning in January. I texted the following to a friend:

      > I always find know-it-all type people at these
      > Meetups who are totally full of themselves.

      > Maybe I should look in the mirror and ask
      > whether I am one of these too.

      > I am somewhat dogmatic in my belief that so
      > much of this stuff cannot be known for sure.
      > Much certainty I often see displayed is
      > totally unfounded.

      > Perhaps that means I often butt heads with
      > supposed “experts” only to raise some of the
      > thought-provoking issues I believe we should
      > all explore in an effort to understand this
      > complicated stuff. There are many key
      > concepts I still struggle with after years
      > of work.

      > I guess I get irritated at seeing them make
      > definitive claims about things that I do not
      > see as definitive. Nobody else in the group
      > is going to challenge that because they are
      > beginners.

DY claimed to have been trading for 30 years and over seven figures per week. I don’t care how long someone says they have been trading options or how much they claim to have made or trade because none of this is verifiable. The world of Finance strikes me as screwy because those lauded as de facto experts are usually people with significant conflicts of interest. Given the all the financial fraud perpetrated to date, I would have great difficulty trying to argue that “financial professionals” actually care more about my performance than they do getting my business, bolstering the total AUM, and making more money for themselves.

I did not enter the room with hopes of being respected as the trading expert. I hardly think of myself that way. I did not talk about my experience or about my profits (or losses). I did find it amusing/insulting that when I posed a couple discussion questions about the first instructional video we watched, the organizer herself answered with simple, incomplete answers almost as if to placate me.

Seriously?

I’ll break this down further next time.

Option Trading Meetup (Part 1)

I wanted to report on a new option trading Meetup I attended in December.

I was excited to finally attend a Meetup dedicated to option trading not sponsored by any financial company. I have attended Meetups sponsored by a trading newsletter, a trader education company, and a financial planner in the past and every time I have encountered a potential/likely conflict of interest. While I got little/nothing out of those Meetups, the organizer always found some potential customers. That did not seem to be an issue here although reading that their November presenter was CFA at a “wealth management” firm did arouse suspicion.

With the CFA not present in December, I thought I might have a good opportunity to network with “like-minded” individuals.

This was clearly a beginner’s Meetup with the intent to teach people how to trade options. The organizer herself and husband both said they were just learning. While I don’t feel this is necessarily a problem, who was going to teach on this night?

The one like-minded individual for me to meet was a guy [I’ll call him DY] who had supposedly traded options for 30 years. He also said he trades options amounting to seven figures per week.

DY was a “know-it-all” (sound familiar?) who stepped into the expert role almost without being asked. I say almost because the organizer did seem to defer to DY for answers a few times and I surmise that was based on how things went at the first meeting in November. Outside three instructional videos shown by the organizer, a few questions were asked and some discussion was had. Involved with every exchange was DY who at times seemed to stumble over his own feet rushing in so fast to provide what he believed to be the correct answer.

I’ll continue next time.

Meetup Update (Part 2)

In the last post I mentioned that neither Meetup I attended this week provided any actionable ideas.

A discussion awaits about what “actionable” really means. For now, consider it “capable of generating trading profits.”

Tuesday evening involved a number of attendees sitting around at a bar eating and drinking. My beer was outstanding but neither that nor the buzz that followed were actionable.

Perhaps the closest thing to actionable was one guy’s experience about losing money trading Forex. He is now on a crusade to make sure everyone knows what a scam Forex is for the retail trader. His experience mirrored what I have studied about Forex so I think his advice to avoid Forex is indirectly actionable. By avoiding Forex we may avoid losses, which is akin to making money.

Much unactionable debate was had about the state of the economy, future direction of markets, and other fundamental information. I would argue that none of this provides market edge. Predictions are uncertain bets or wagers that belong in the gambling domain. People can be right if lady luck chooses to shine on them. If you believe otherwise then I would refer you to any number of intelligent minds who make incorrect predictions daily on CNBC.

Like fundamental analysis, most black box trading systems are not actionable. One attendee on Tuesday talked about a trading model he develops and sells. Since I have yet to write on this topic, I’ll reference this article as a reason to steer clear. On Tuesday I asked my new friend how his model has been validated (that’s a financial engineering term).

“By the testimonials of our customers,” he said.

Ha!

In the con-artistry game, most testimonials are confederates of the bad guy. Welcome to the world of finance. Personally, I would not consider his product actionable unless I tested it myself. That would require more resources than I have available at this time.

I will continue in the next post.

Investing Meetup Report (Part 5)

I’ll complete this review of the Meetup from three weeks ago by discussing a couple other attendees.

One attendee was a real estate investor who stated his reason for attending was to learn more for diversification purposes. The implication was clearly that he does well with real estate and has money to invest elsewhere. Also supporting my inference is the fact that he passed his business card out to everyone present. As we were leaving, he engaged me in conversation by asking if I or anyone I know might be interested in real estate. I said “not at this time.” He quickly dismissed me soon after saying his wife had texted telling him to come home for dinner.

Speaking of ulterior motives, this is something I have also commonly seen at Meetups: people in unrelated fields looking to market their wares. Was this guy really looking to learn about stock investing to put his real estate profits to work? Maybe. I think it’s also likely he was looking to advertise his real estate experience of buying and flipping houses to a group of people eager to make money. We’re attending a stock investing meetup because we want to make money, he figures. Why not try and make money through real estate and give him our cut instead?

The last person I want to discuss is another financial advisor in attendance. He was not with the company organizing the Meetup. With conflict of interest in mind (how could it not be?), I wonder why he chose to attend. He said he loves learning about investing and finance as a whole. I then asked the pointed question: what was he hoping to learn that he, being in the business himself, did not already know? I wonder if he was just checking out his competition (other advisors) or if he was looking to network and possibly find new clients himself? I’ll found out more as time goes by.

This Meetup was typical of others I have attended: arrogance, sales, marketing, ignorance, and a lack of useful connections. At least it was an excuse to get out for the night.

Free food, too… who can forget about that?!

Investing Meetup Report (Part 4)

I left off explaining what the Meetup presenters did that left me wanting.

I just asked whether Dimensional Fund Advisors was a company like Blackrock.

For the record, I am very skeptical about the supposed “DFA advantage” that Dimensional Fund Advisors advertises. It was never my intent to argue about whose funds were better.

Rather than just saying “yes, DFA is another fund company,” they gave me an unnecessary/lackluster attempt at sales. By pooh-poohing DFA out of ignorance, they implied superiority of their product. This certainly doesn’t sound like an objective Fee-Only advisor to me. A Fee-Only advisor should do what is in my best interest and that would require knowing what else is out there! If they were going to deliver a sales pitch then they should have had a politically correct response why Blackrock is as good for me or better than DFA. Their ignorance does not mean theirs is better if they are simply fools.

And their ignorance did suggest to me that they may simply be fools. DFA has been a subject for discussion in Forbes, by CBS, on CNBC and MSNBC: they are world renowned. Their list of “Academic Leaders” (board members) is a veritable Who’s Who of options, investing, and risk analysis: Eugene Fama, Kenneth French, Robert Merton, Myron Scholes, Roger Ibbotson… are you kidding me?! How could our presenters not know about DFA? Despite my skepticism, even I am awestruck by the celebrity of DFA’s board members and the level of “expertise” they represent. To plead ignorance strikes me as utter incompetence on the part of the presenters.

I’ll wrap this up in the next post.

Investing Meetup Report (Part 3)

Last time I reviewed Mr. Know It All’s contribution to my recent Meetup experience. Today I discuss the presenters: a financial advisory team headquartered just across the street.

Yes, they were actually financial advisors! I can see your jaw on the floor so I’ll wait just a moment for you to pick that up.

One advertised purpose of this Meetup was to teach. How can they aim to teach gratis and work to financially advise us, which entails teaching for a fee? Without the fee, would they teach enough to enable us to invest on our own? No…

Another advertised purpose was for networking. Do they really want prospective investors to meet and potentially collaborate when that may preclude us from hiring financial advisors? No! Only if good feelings from meeting others translates to gratitude and perhaps the eventual hire of their company has the Meetup achieved its true marketing purpose.

For these reasons, I consider this Meetup to be a significant conflict of interest. If the organizers knew beforehand that no Meetup attendees would ever become clients then I doubt they would ever spend the money to create and fund this group.

In the presentation, one topic they discussed was “questions to ask potential financial advisors.” They discussed Commission-Only, Fee-Based, and Fee-Only advisors. They were eager to identify themselves as Fee-Only advisors. They said Fee-Only advisors have a fiduciary responsibility to the client and don’t make money off the particular funds sold. Fee-Only advisors pursue the client’s best interests at all times.

For me, the presentation fell apart when I asked about Dimensional Fund Advisors (DFA). I noticed their slides had “Blackrock” (a financial services company) in the lower left-hand corner. I asked if DFA is a competitor of Blackrock. The speaker looked around at his two colleagues and shrugged his shoulders. He explained something about how he sticks with the funds that trade in largest volume, that have the best and most experienced management, etc. He did not answer my question nor did he even acknowledge DFA.

What is wrong with this picture?

Investing Meetup Report (Part 2)

Today I continue reviewing a Meetup I attended earlier this week.

Three of the six attendees were totally new to investing. From speaking to many beginners over the years, they are often in search of “holy grail” type knowledge. As I compliment them for taking the time, they feel they are gaining edge over others who make no effort to learn. They seem motivated to soak up everything they hear and they seem to believe anyone who seems credible or authoritative.

Aside from the Organizers, Mr. Know It All seemed most credible the other night! He spoke dogmatically and two of the newbies were quite taken by his words.

Since Mr. Know It All mentioned that he trades futures, I went over to him afterward. I eventually interrupted his monologue and asked point-blank whether he makes money. He responded negatively. He said he’s retired, he does this “just as a hobby,” and he expects to lose.

This gambler’s mentality is not uncommon. Many people go to Vegas with hopes of striking it rich while expecting to lose. I hope most have a reasonable limit in mind of how much they will lose before they quit. Whether responsible or not with this limit, for someone like me who trades for a living this gambler’s mentality is appalling.

The problem I have with Mr. Know It All spouting “knowledge” to beginners is that he loses money. He clearly likes to talk and he enjoys when others listen but why should they: so they can lose money too? Unfortunately, I think people are often so ignorant about financial literacy that even if told someone loses money they will listen anyway. At the very least, beginners may figure he’s further along the path to wealth than they are so they might as well grab onto his coattails.

We really don’t know if Mr. Know It All is on the rainbow walking toward the pot of gold or whether he is caught in a vicious cycle with a mistaken belief that every subsequent loss teaches him something critically new. As an irresponsible gambler, he may be prepared to lose all his money until he starts to see gains and no beginner should ever be exposed to toxicity like this.

Investing Meetup Report (Part 1)

I have attended several trading/investing Meetups over the years. Because I perceived an inherent conflict of interest between the Organizers and the attendees, I used to be very put off by these events. I have since developed an appreciation for networking in this business, however.

The other night, I attended a new Meetup. The advertisement for this Meetup specifically included a time slot for networking. This felt different to me. For this reason and the promise of free appetizers, I decided to go.

In the end, I found this Meetup to be very typical of others in my experience. I will review the evening in this blog series.

I arrived 15 minutes early and found the auditorium to be locked. An older man, dressed business casual in a coat and button-down shirt, was also present. He was another attendee and in short order he began spouting off “knowledge” about the markets, how investments work, ETFs, etc. I didn’t ask any basic questions or do anything to suggest I was looking for him for any answers.

This guy definitely fell into the “know-it-all” classification. He started talking about “market truths.” First, everything about the markets is random. Things have a 50/50 chance of going up or down. Second, over the long-term things will go up. “Believe in the power of humanity,” he suggested. Believe that innovation and productivity will continue, earnings will grow, new inventions will be created, etc. I wonder if this guy had ever seen a dystopian movie?

His third truth was John Maynard Keynes’ “markets can remain irrational longer than you can stay solvent” concept. I asked if he was therefore a trend-follower.

“Absolutely,” he said.

“What happens when the markets revert to the mean?”

“Well sometimes when you have a fractal trading within a fractal and something gets overextended…”

I’m not kidding: he honestly started talking about a fractal within a fractal. I could virtually see the stinky brown, gushy stuff overflowing from his brain compartment.

I will continue in the next post.

How Does Business Networking Mesh with a Trading Business? (Part 3)

I have begun to discuss the title in the last two posts.  What better way to learn about networking then to start practicing it?

Today I will begin reading The 29% Solution: 52 Weekly Networking Success Stories by Ivan Misner.  This may not be the best book on networking and it certainly isn’t the only one.  I did a brief scan and came up with it.  The author is founder of BNI, which either gives him credibility or makes him suspect that the book may offer little aside from referrals to his premium organization. Time will tell as I progressively make my way through.

I will continue to post periodically with discussion of networking and/or weekly tasks from the book.  Yes, the book does assign weekly homework. Some appear to be writing tasks and those may work well as blog posts.

As always, if you have any feedback or comments then please feel free to share. Also feel free to join me on this networking adventure: especially if it is something new to you as well!