The person/people running In the Money Stocks put on quite a show. He posts a daily YouTube video which does some technical analysis on the happenings of the day. I find the videos more entertaining than Mad Money. He sounds like quite the day trader. Have a listen:

I happen to think technical analysis is a bunch of baloney — most change happens from sudden, unpredictable events, events likely to make this kind of guy trading with massive leverage bankrupt — but I find the analysis nonetheless intriguing. If you are interested in the flow of money, this guy can serve as a sort of SportsCenter for stocks. The 10 minute videos are definitely worth watching, for his east coast, 1,000 word per minute speaking style if nothing else.

Be aware that the free videos, while entertaining and potentially educational, are mere commercials for the product he is selling. All the information is just a teaser, trying to convince you of his wisdom so you will want more, which he would love to share with you for a nominal fee.

In other words, his actual business is convincing people like you and me to pay $100/month to enter a chat room.

That seems rather expensive; it is a front loaded $1,200 annual fee. Even if you have a spare $100,000 of capital to throw around day-trading stocks — and I hope you are either Bill Gates or else not that careless — that is still a 1.2% annual fee — a fee compounding monthly against you. Worse, he has no direct incentive to make you money: he gets the same fee whether he takes your $100,000 to $1,000,000 or $20,000.

Instead of spending all day in his chat room waiting to get the tip to move, you could just hand your money over to a professional money manager’s mutual fund for a lot less. You can get index fund’s with expense ratios below 0.3% — and you should. That is four times cheaper for an investment you need to look at a few times a year instead of hours every day.

This is the same sort of thing the Motley Fool, TheStreet.com and other such places do. They never tell you all of what they know without first trying to get you to pony up some cash. For example, the Energy and Capital site has some great advice for investing in fossil fuels, but to get it, you will need to attend a once in a lifetime $800 seminar. Ha!

People who fall prey to such tactics will almost certainly lose their money. Think about it. It takes a lot of work to create a 10 minute video and post it to YouTube every day. It is very expensive and time consuming to organize a seminar. Clicking “buy” and “sell” takes far less effort. Anyone who outperforms the market consistently will just shut up and invest his massively compounding gains from an island in the south pacific.

The fact that someone is giving advice means one of the following things is true: he can make more money now suckering you into paying for his premium services than following his advice; his advice only works when he makes large numbers of people believe in it; he is just starting to apply his working theory and he will either start charging more (see the first option) or retire soon (see previous paragraph); he is already so successful and rich that helping other people become successful and financially secure is far more personally valuable than increasing his abundance of wealth any further (?).

Whatever you do, do not invest using leverage. That is an extremely dangerous and absurd thing to be doing in this (and any, if you ask me) market.

Keep the faith, and good luck.

This entry was posted on 2007-8-21 at 1:35 and is filed under Economy. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.