Tholius Investment Group

Tholius Investments

Excellence in Investment Ideas

If you are a qualified investor, please contact us.

Tholius is currently soliciting parties looking for business expansion capital. To see if your business qualifies, please contact us.

Those Wonderful Newsletters

Ron Watkins, July 1, 2003

More than most people, we’re deluged constantly with the mail (and now email) marketing efforts of investment newsletters. There must be over a thousand newsletters out there selling for $149.95/year and each one hypes the returns made and their philosophy of the markets, the economy and the folly of the current president. If you look at these letters as a group, you’ll find that there are three groups:

A) The group telling you that the market is going up – and they have superior stock picking ability (on the buy side, using whatever mechanism (technicals, fundamentals, astrology, numerology etc.) they prove to be better than Warren Bufffet can do.

B) The group telling you that the market is going down – and they have the superior stock shorting ability.

C) The group using one or more tools such as Options, or at the very advance level, Optures and Fusions (a phrase coined when you combine a physical long or short with an option to build a synthetic long or short or partial long or short). They don’t care which way the market is heading – they’ll make you millions by following their system.

They all follow standard marketing procedures to get you to buy – The Headline (to grab your attention), The Story (to convince you they are right), The Call To Action (order now !), The Removal of Risk (money back guarantee) and Incentives (14 Free Reports). Interestingly…many have been in business for a long time.

Now I’m not saying that the information they provide is good, bad or even indifferent. I’m just making an observation. What strikes me as most compelling is that – IF A "SYSTEM" IS SO GOOD…WHY TELL ANYONE ABOUT IT? To me, this is downright silly. Take your own money, use your system and get rich quietly – show off with your new Lamborghini at the hottest spot in town and carry with you the aura of mystery.

To me (and this is only MY opinion):
If you solely want to provide "an education" – Fine, then do so in a concrete and professional manner – so that the reader actually learns something.

If you are providing "compiled information" (with or without an opinion or additional value) this is fine too (Valueline is an excellent example of great information that is hard to obtain by yourself).

If you are fishing for investors (to grow your asset management company) – and desire to present a track record – this is also fine.
But if you just do a little magical back-testing with your Trade Station program, filter out and compile the "good trades", decide that you are a genius investor, hire a marketing writer and distribution mechanism to hype up and sell your newsletter (where you send them the trades, and readers then invest in what you tell them) – then frankly I think this is fraud.

In fact, one of more popular newsletters is run by a convicted fraudster – luring you in for his newsletter cheap, but then for the real deal requiring $5,000. Admittedly, this guy is really smart, has a firm grasp of trends, world economics and the markets – but the million dollar question remains: If he’s claiming that you’d make millions following his recommendations, why would he bother to tell you? The fact is, he’s making a few hundred thousand a year getting people to buy his newsletter. Nice living for an armchair speculator -- but very frightening. I can’t imagine sending an urgent fax telling subscribers to short the S&P index in the futures market. This was the recommendation of the last fax and if you’ve done so (and haven’t received a margin call yet), you have a loss of at least $120,000 (as of the latest S&P contract to date). A cause for a big sigh.

Every so often, someone comes up with something that might be worth repeating – I copy it here – by Lynn Carpenter hyping her newsletter marketed by the newsletter marketing machine, Agora Publishing.
"Most brokers have never run a company! That’s right. Most of the eager young beavers who take your stock orders on Wall Street…who managed to DECIMATE TRILLIONS OF DOLLARS socked away in mutual funds…who make off-the-cuff, hard selling recommendations to you during cold calls…and even those pros who write up thrilling company profiles in the popular press…
Have no REAL lifetime experience in what they’re advising you about!
Don’t you find that incredible? So let me ask you…
Would you allow a heart surgeon to open your chest if he’d never held a scalpel?
Would you get in a plane with a pilot who never finished flight school?
Would you stand in front of a jury, represented by a lawyer who’s never seen the inside of a courtroom?
ABSOLUTELY NOT!!!
Yet these young punks who decide the fate of hundreds of billions of dollars in retirement accounts…have never compiled a balance sheet, never placed a parts order, never signed a payroll or have never taken out a business loan. Frankly, most of them couldn’t find their way around a corporate budget with a microscope.
On those grounds alone, it simply NOT SAFE to trust them to make your financial decisions for you!
Fortunately, I can give you a much better alternative…."

Anyway, you get the picture – and at least the author Lynn Carpenter seems to focus on the fundamentals. Still the internal monologue begins. "Feed a man a fish and he eats for a day, teach him to fish and he eats for a lifetime". I firmly believe this is true. But literally no one is really teaching you to fish. Instead, this is more like the illegal drug trade – get someone to try it, keep them hooked. What ever it is that "hits your button".

Personally, I have a long affection for fisherman – early mornings, incredibly volatile work environment and meager pay – yet it puts food on the tables of many. Somehow this remains honorable and I’ve had this philosophy since I can remember. Work hard, continue to learn, be of service to others. Your success will be in direct proportion to the level of your service to others. So to me, Ms. Carpenter above would be better off creating a fund and managing it for the benefit of others – versus selling a newsletter saying "buy or sell this stock".

Sorry, we don’t have any magic system and even if I did, then we probably wouldn’t sell it to you. WeI would use it, and we would use it to best benefit others. That being said, as a professional investment advisor, where my entire life revolves around research, study, analysis, selection and execution – we are, I believe, talented, hard working and honorable people – and our business is the investment and management of money. It’s a service business.

For those in it, it’s like being an individual fisherman with a single pole surf casting. In order to grow, you must be able to provide the same level of service (or expertise or performance) as you grow. As the company grows, the major problem is that you can’t replicate yourself so you must somehow leverage your expertise.

In the investment (service) world, (not the production and distribution of a newsletter), this is done by creating a fund – where you can pool the investment funds of many, then operate on it as if it was ONE client.

As you may have already know (as most of the readers of our communiqué are clients), we have currently two such funds:

1. A Total Return Fund – here we seek superior investments in the stock/equity and bond markets with the sole objective being a superior return. Not specific to industry, company size or filtered criteria. It is a "closed" fund – that is, we raise a pot of money, then close it to new investors – then manage the account. It has a maximum life of 7 years, it returns 80% of all profits to the investors and there is a 2% annual management fee.

2. A Royalty Interest Fund – here we seek returns that are generated by securing a percentage of the gross revenues of a select group of profitable, growing companies.

At the moment, these funds are only available to qualified investors. In fact the disclaimer which we must add by law states: THIS IS NOT AN OFFER TO SELL THESE FUNDS.

These funds are available to investors under strict SEC guidelines. The offering can only be made by the Offering Document and subscription may only be made through the Subscription Agreement. These documents can only be made available to persons who are determined to be qualified to invest through a verbal interview and by written representations made by the investor.

It is our intention as we create subsequent funds for Total Return and Royalty Interest, that at some point, we would be large enough to go through the process where the funds could be offered to the general public.

This is an arduous and costly process – and only worth going through if you are managing hundreds of millions of dollars AND are capable of handing much more. In the mean time, our intention is to best serve our investors and the measurement of our performance is a simple matter.

Site design by Landralor Productions

02653 hits since March 25, 2003