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The Van Tharp Institute   -  www.vantharp.com

May 30, 2007 — Issue #323

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$700 Discount Expires Next Week on London Workshops

Article

An Unfair Deal – Just What We Like, by Steve Sjuggerud

Trading Education Peak Performance Sale Ends Tomorrow!
Trading Tip

The Big Two of Charting, by D.R. Barton, Jr.

Melita's Corner

Are You Bored or Boring?, by Melita Hunt

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Feature

An Unfair Deal – Just What We Like  

By Steve Sjuggerud

“When something is unpopular, that’s the time you want to be buying.  And that’s the reason you can get such bargains in the [this particular] market.”  --Van Tharp, Nov. 9, 2005

If you're looking for the lowest-risk and highest-potential reward opportunity in which to put your money over the next three years, forget the stock market…

Instead, you should consider doing what Van Tharp has done with his own money.  Fortunately, there’s a new way to do it where your worst-case return is a positive 15% over the next three years, and you could earn over 600% in a decade. (600% in a decade has happened before, as I'll show.)

Before I get into the details, let me make several things clear... First, you probably won't hear about this opportunity from anyone else.  This is one of the most unusual ideas I have ever come across.

Second, there's a limited amount of this investment available to the general public. The door can (and has in the past) shut at any time.

When I first learned of it back in 2005, I thought it was too good to be true. So I traveled to London to check it out firsthand, and make sure it was legitimate. It is.

It really is what I look for – and I believe what Van looks for – in an investment.  In an ideal investment, I'd like 1) all the upside potential and none of the downside risk, of course. It'd also be great if it was 2) hated by the mainstream investing public... then I'd know I'm getting in 3) super cheap. And lastly, I'd really like it to have already bottomed out, and be 4) in an uptrend.

This asset has increased in value at about 10% a year since 1954 (as far back as I have data).  And it managed to perform its best in the 1970s, when stocks did their worst.

The world's biggest money manager (Bill Gross) and the world's greatest investor (Warren Buffett) have both been involved.  However,  you'll probably never see this asset featured in Money magazine, or BusinessWeek. (If you do, it's probably time to sell!)

Believe it or not, I’m talking about rare stamps.  (I know… it’s probably not what you were dreaming of, but return and risk numbers speak for themselves.)  Van Tharp has written a few excellent articles on investing in stamps already, HERE and HERE

Now I am no expert in stamps, but I sure like the idea of no downside and unlimited upside.  And that was the deal being offered in London, by a company called Stanley Gibbons. 

In 2005 I went to London and spent three days at Stanley Gibbons. I was amazed at what I saw. The first thing I noticed was that the place was packed. The second thing I noticed was the size. Apparently, Stanley Gibbons has 3 million stamps in inventory.

I spent time with management, and got comfortable with the business.  It’s easy to get comfortable with.  It is the opposite of a fly-by-night dealer.  It’s a no debt business, with public financial statements (it trades on the stock exchange), that has been around for 150 years… and most of that time has been spent in basically the same location.

Among the items for sale are the legendary Stanley Gibbons price guides. I was interested in these, as I could create a "stamp index" just like a stock market index. This way, I could get a gauge of how stamps have performed, and how volatile prices have been.

Stamps returned 21.8% a year during the decade of the 1970s, according to Marc Faber's book Tomorrow's Gold. That's a return of over 600%. My stamp index produced similar returns to his.

What's interesting to me right now is, that while stamps are one-third below their 1980 price levels and are in an uptrend, stocks are four times above their 1980 levels…

Which would you rather own, an asset that's over a quarter below its level 25 years ago or an asset that's up four-fold?  Nobody cares. Nobody's paying attention. People like to buy what's been going up... not what could go up. Go figure.

Here’s the deal Stanley Gibbons is offering:  If you buy investment-grade stamps from Stanley Gibbons today, in three years time, you can do one of four things...

1) You can sell the stamps yourself. If stamp prices are up 100%, then you should be able to sell at pretty darn close to double your money. Or, if you don't want to go through the hassle of selling them yourself...

2) You can have Stanley Gibbons sell them in one of their auctions on your behalf, at no charge. Again, if the stamp prices have doubled, you should be pretty darn close to doubling your money. Or, if you're lazy and just want your cash now...

3) Stanley Gibbons will buy back your stamps at 75% of the price listed in the most current Stanley Gibbons price guide. So if your portfolio has doubled in value from $10,000 to $20,000, for example, based on the price guide, and you take this option, Stanley Gibbons will give you $15,000.

All these are your options if stamp prices go up. If stamp prices are flat to down, then there's option four... Stanley Gibbons was happy to have had use of your money for three years, and will happily give you back $11,500 (The original $10,000 plus 5% interest for each year).

In short, you bought stamps. And you get all the upside from ownership of the stamps – which could be as much as 600% as it was in the 1970s.  But if the market is flat for three years, you not only get your investment back, you get your "opportunity cost" – what you could have made on that money if you hadn't put it in stamps – back too. You get 15%.

I'd say get on this right away... Stanley Gibbons only has a limited stock of “investment grade” stamps, and the company can choose to stop making this offer at any time.  (In the past, they’ve simply stopped offering it for months at a time, as they don’t want the risk of having too many guaranteed buybacks out there).

The universe of "investable" stamps isn't that large, and stamps may not be right for you. The amount of knowledge required to buy stamps intelligently is immense.

In my opinion, the right way to do this is to work with Geoff Anandappa or Adrian Roose to put together a portfolio that's right for you. Then leave your stamps at Stanley Gibbons for the three years... as they'll store and insure them for free, and then they have them at the end of the three years for you to do what you want with them. (Important note:  I’m fairly certain you can take delivery of the stamps if you want to… they just must be returned in the condition you received them, of course.)

A few disclaimers… First, this is obviously not an investment regulated by the U.S. SEC. Far from it. You're buying stamps... in Britain. If you're not comfortable with that, then don't do it.

Second, remember that Stanley Gibbons is an English business. It deals in British pounds. So this 15% guarantee is in British pounds, not U.S. dollars.

Lastly, just last month, I again visited Stanley Gibbons in London. The company has been taking good care of my subscribers since 2005, and on this trip, Stanley Gibbons invited me to become a director of the company. I was flattered, and I accepted. I believe in collectibles as an asset class that could perform well over the next decade, and I believe this company is one of the world’s most important players in this market.

Getting back to the deal… Van Tharp and I like “unfair deals” – where our downside is limited and our upside is unlimited.  This one is even better than what we can usually find… We get a worst-case three-year return of 15%, with triple-digit upside potential.  It’s hard to beat that!

Contact Geoff or Adrian at Stanley Gibbons for all the details:  Geoff Anandappa (011) 44 207 557 4442  e-mail: ganandappa@stanleygibbons.com or Adrian Roose e-mail: aroose@stanleygibbons.com.

Good investing,

Steve

Editor’s note:  Steve Sjuggerud is a long-time friend of Van’s and a co-author with Van of the book Safe Strategies for Financial Freedom.  Steve and Van both believe collectible-type assets could outperform other “traditional” assets in the coming years, and have put their money where their mouth is.   Steve is best known for his newsletter True Wealth, at www.stansberryresearch.com.

 

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Trading Tip 

Top Notch Internet Resources

Part VIII

The Big Two of Charting

By D.R. Barton, Jr.

For readers jumping into our series on Internet resources, here’s the overview of our charting review:

The good news:  there are loads of excellent online charting sites available.  

The bad news:  there is no one site that is the best for everything.

The basic problem with online charting is that there is no site that does futures and stocks comprehensively.  We talked about the reigning champ for no-cost online futures charting – www.futuresource.com.  The lack of suitable competition made that an easy choice.  The choice among stock charting sites is not so straight forward.

In the arena of no-cost online stock charting, we’ve looked at Yahoo!, Google Finance and Barchart.com.  All had some useful points, but for my needs, all fall short of the two sites we’ll start looking at today – StockCharts.com and BigCharts.com.

First, let’s cover the general topic of advertising.  The issue of how a site advertises is important because it certainly affects the user’s experience with a site. It’s clear that these no-cost sites are around to make money.  And they do that by drawing you to their site with useful content.  Once they have your attention, they then generate revenues by selling advertising.  In all of these sites, the advertising can vary from rather subtle to “in your face”.  Interestingly, there seems to be a direct correlation between the level of advertising and the capabilities of the charting site.  Better site = more ads.  

Of the charting packages, Google Finance, which still says it is in its beta testing phase, has literally no ads on their home page.  I guess they’ll come along when the site leaves the beta stage, but if the Google homepage is any indication, the ads will be quite subtle.  Score one for the 800 pound Gorilla of the Internet.  Barchart.com also gets good marks for fairly minimal advertising.  Yahoo! has flash-driven ads on the right of the page along with text ads, but all the ads are clearly marked and nicely segregated from the financial content.  So they get middle of the pack marks.

BigCharts.com has actually changed their evil ways in terms of advertising (at least a bit).  After they were bought by CBS MarketWatch, they had a completely invasive opening page advertisement that you had to click through to get to their real home page.  To their credit, this is gone (at least for now).  What you do get is a home page that is literally 80+% advertising.  Once you get to the actual chart page, there is much less advertising and more charting. 

StockCharts.com has only about 20% of their homepage dedicated to advertising, with the rest being content and navigation. So far, so good.  But the site uses some very tricky pop-up advertising technology that manages to get around my pop-up blockers on about half of my visits there.  While I don’t mind viewing ads at a site with such good free content, pop-ups are certainly my least favorite form of advertising because of their invasiveness. It forces me to find and close windows I didn’t ask for.  Fortunately for Stockcharts.com, their site is so good, it’s worth putting up with this annoyance.

Bigcharts and StockCharts really do stand a bit above the others in this crowded area.  However, the advantage that Bigcharts has always had (their interactive Java-based option) is losing ground – notably to Yahoo’s new upgraded charts.

Both of these sites have a fairly broad and useful suite of technical indicators that you can add to a chart.  But StockCharts gets the nod for a more complete and more customizable set of indicators.

BigCharts allows free-form trend lines to be drawn on their interactive charts.  But once again, StockCharts trumps them by having a very comprehensive annotation tool kit that can be used even in the free version.  This tool box even includes a Fibonacci retracement line tool that is as useful as any of the paid packages that I use.

Both Stockcharts and Bigcharts have a comprehensive list of symbols, though Stockcharts is limited to North America and some selected continuous futures contracts while BigCharts has many global exchanges available (though no futures).

The one key advantage that Stockcharts has over all its competitors is in appearance.  In all time frames they have clean looking charts that can be scaled in many different ways.  This is a real advantage for Stockcharts.

To be honest, the only significant shortcoming for Stockcharts is that they don’t have an application to let you see open-high-low-close data for any bar on the chart.  With that added functionality, Stockcharts would rule the web for equities.  As it is, it is still the best no-cost stock charting package out there.

Keep sending in your favorite sites to drbarton@iitm.com. And let me know if you’ve found this discussion useful! Until next week…

Great Trading!

D. R.

About D. R. Barton: A passion for the systematic approach to the markets and lifelong love of teaching and learning have propelled D.R. Barton, Jr. to the top of the investment and trading arena where he is one of the most widely read and followed traders and analysts in the world. 

He is a regularly featured guest analyst on both Report on Business TV,  and WTOP News Radio in Washington, D. C., and has been a guest analyst on Bloomberg Radio.  His articles have appeared on SmartMoney.com and Financial Advisor magazine.

 

Melita’s Inspirational Corner

 

Are you Bored or Boring?

by Melita Hunt

It is early Monday morning and I am writing this article from the top deck of a beautifully restored 65ft power boat, which was originally made in 1948. It is awesome, as is the spring weather, the water and everything about this moment. There are even wild ponies over on the beach. Yep – I’ve managed to create another beautiful relaxed day – in less than two weeks!

I got here today through a casual comment on the weekend. A friend said that his company boat was not being used over the Memorial weekend holiday, so I encouraged him to find out for sure if it was free and when that was confirmed, a group of us shifted gears, grabbed bags of clothes, did food shopping and headed out to the dock in Morehead City. It was a late Saturday night decision so we didn’t actually arrive until close to midnight and subsequently slept on the boat while it was docked.

Early the next morning we headed off, starting with a tour along the channel so that I could see some of the beautiful homes along the coast in North Carolina, then we ended up at Cape Lookout for the next 24 hours among dolphins and even a sea turtle. My friends are regulars in this area and before long we had people from three other boats joining us including some of their relatives! Sunday ended up being filled with friends, family, kids, water sports, beach walks and plain old relaxation. We had a big crew of people join us for a pot luck dinner as the sun went down and in just one day it felt like I had been on vacation for a week. 

And that brings me to today’s subject, which just happened to pop into my head as I was sitting up here alone on the boat, early morning, sipping on my coffee. How could anyone possibly be bored on this planet at any given time? There is so much to see, do, experience and learn in any given moment. I think that it would take me a thousand lifetimes to uncover, discover and experience just a fraction of the mysteries and delights of this world. I realize that I really don’t know much about boats, the history of this area or even kayaking – which are just three of the many things that I experienced yesterday.

My “shift in plans” on Saturday night was actually after attending a friend’s 65th birthday party earlier that day, with whom I was going sky diving on Sunday. Yet the choice to go out on the boat instead was definitely the right one (and for the record, yes she is 65 and both she and I have already jumped out of a plane, so it wasn’t fear – it was a choice between the beach, water and boating on an 85 degree day, versus a long sleeved jumpsuit and 30 minute thrill on an 85 degree day).

My point is, there are always plenty of things to do, but right now, my friends are paddling towards me after an hour out in the kayaks and I have been sitting here doing nothing, yet boredom has never crossed my mind other than to wonder how and why people get bored.

Do you get bored? Or are you just choosing to be boring?

I believe that there is never ever a moment to say that we are “bored” – and if we do, then it’s time to look at what we really mean by that. If you aren’t enjoying the time that you have here right now, then maybe it’s time to look at what you’re focusing on and what you’re doing with your time and your energy. Make the choice to start doing things that don’t “bore you” or better than that, make a list of things to do that you can refer to whenever that boring feeling shows up.

Or, do you feel bored sometimes because you are waiting for someone else to make the decision or to tell you what to do with your time? Ouch. That seems like a recipe for disaster. You will probably end up doing a lot of things that you hate to do and then blame them for the fact that you’re waiting around or doing something that you really don’t want to do.

Now I am not suggesting that you stop compromising and refuse to get involved in activities that support and nurture your relationships, your family or your well-being, I am just saying that no one is responsible for your boredom or your happiness. The choice is ALWAYS yours as to how you view everything that you do or don’t do. 

As for me, I have a list of 101 things to do before I die, and the list never gets any smaller because I replace a “thing” each time that I mark one off. I don’t know when I’m going to die so I just keep finding new things to interest me and its fun working through the never-ending list. 

So I encourage you to make a list of your own, it could include topics you want to read about, ideas to explore, places to visit, things to experience or learn, classes to attend. It could even include reminders to slow down; or maybe to not speak for a whole day (like Gandhi did every week - I haven’t managed to do that one yet), or just to relax without guilt…

I guarantee you, if you keep referring back to your list, you won’t have time to be bored and you certainly won’t be regarded as a boring person.

Now, back to watching those wild ponies on the beach…

You can contact Melita at mel@iitm.com

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