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c 1998 Forbes Inc. Terms, Conditions and Notices
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Commodity shark
By William Green
JAKE BERNSTEIN is not alone. Another prominent purveyor of hype is Ken
Roberts, a college dropout and former life insurance salesman. Roberts
convinces neophytes that they can become successful traders with a
grubstake of only $1,000.
In 1983 he self-published The World's Most Powerful Money Manual &
Course, a mail-order book that intersperses tips on futures with
platitudes about getting "everything you want (mentally, physically,
and spiritually)." He claims to have sold more than 300,000 copies. At
$195 each, that adds up to nearly $60 million.
Roberts, who touts futures trading as "the world's one perfect
business," charges $2,695 for his advanced trading seminar. He hawks
trading charts, a course on options, a newsletter and his novel, The
Rich Man's Secret.
He also owns a piece of a California brokerage firm, Main Street
Trading. It charges commissions so highù$95 a tradeùthey virtually
assure that most small active traders will lose money.
The hype has paid off for Roberts. It has brought him tens of millions
of dollars and an Oregon mansion with a cigar room. But where are the
customers' mansions? ûW.G.
<Picture> By William Green
<Picture> Management, Strategies, Trends
<Picture> From March 09, 1998 Issue
c 1998 Forbes Inc. Terms, Conditions and Notices
~~~~~~~~~~~~~~~~~~~~~~~~~~
There's one born every minute
By William Green
"I'M TEACHING YOU SOMETHING that I know works," says Jake Bernstein.
"It's real simple." Bernstein, 51, is in a Washington, D.C. hotel
meeting room mesmerizing an audience of aspiring futures traders.
Want to make a killing trading futures? All you need to know, says
Bernstein, is that many seasonal price patterns occur year after year.
Buy live hog futures on Oct. 30 and sell on Nov. 27. That's a trade
that would have made you money almost every year in recent decades, he
claims. Bet on the S&P 500 March contract to rise from Jan. 12 through
Jan. 18. For 15 years, he says, this trade was a winner 93% of the
time.
Does anyone believe his nonsense? Unfortunately, yes. Intoxicated by
the promise of easy money, audience members line up to buy Bernstein's
products, among them his books, with titles like The Seasonal Trader's
Bible and The Best of Bernstein: A Treasure Chest of Jake Bernstein's
Market Wisdom.
His monthly newsletter costs $400 annually; his weekly newsletter
costs $895 a year. He sells three other newsletters, plus video
courses and a CD-ROM ($695) that lists 60,000 seasonal trades. He
offers telephone hot lines and charges up to $2,500 per person for his
two-day seminars.
Yes, you can fool some of the people all of the time. Commodity
Traders Consumer Report, a respected futures publication, tracks the
trades Bernstein recommends in his $895 flagship newsletter. If you
had acted on these weekly tips from 1988 through 1992, you would have
lost money for five consecutive years (assuming typical transaction
costs).
Let's say you set up a $20,000 trading account in 1992 and executed
the newsletter's recommended trades for that year. Your account would
have been wiped out. In 1996 you would have lost 95% of a $20,000
account. Bernstein's response: "There are always losing periods."
He professes to be an expert on the psychology of trading. His
qualifications? In registering with the Commodity Futures Trading
Commission, the Montreal-raised Bernstein wrote that he held a
master's degree in psychology from Chicago's Roosevelt University. In
fact, he never completed his master's studies.
In the 1980s Bernstein hooked up with an outfit called Robbins Trading
and helped to manage futures accounts for investors. James Roemer, who
comanaged money with Bernstein, says: "Jake is brilliant, but he can't
manage money to save his life. . . . He'd get scared, buy at highs and
sell at lows. . . . He kept losing money."
Bernstein found an easier way to get rich. Instead of just trading
futures he would trade on investor gullibility. In 1996 he starred in
an infomercial that has aired on nearly 400 TV stations. It hypes a
video course ($180) called Trade Your Way to Riches. In it a farmer
named Harold Henkel tells viewers how well Bernstein's approach has
worked for him. Henkel, however, now admits that he lost money trading
in 1996 and 1997 while using Bernstein's products.
On his Web site Bernstein offers to set up customers with his
"personal" brokers at Fox Investments, a division of the Chicago
brokerage firm Rosenthal Collins Group.
Suppose you take Bernstein's recommendation and set up an account at
Fox with $5,000-the minimum that Bernstein says you need to become a
trader. Your commissions would be $60 to $80 per trade, about three
times more than savvy retail customers pay. Bernstein's weekly
newsletter offered 195 recommended trades last year. At that rate, a
small trader's commissions alone might amount to more than double his
or her original investment. Needless to say, Bernstein receives a
slice of the brokerage's commissions. A Fox broker appeared in
Bernstein's infomercial, touting his seasonal trading approach.
Says Bernstein: "There's no arguing with history." Say we: Where are
the regulators when you need them?
<Picture> By William Green
<Picture> Management, Strategies, Trends
<Picture> From March 9, 1998 Issue
c 1998 Forbes Inc. Terms, Conditions and Notices
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Did YOU eat your BEEF today ?
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