One of the subscribers to the Credit Millionaire messages
recently read my post about www.LeverageDVD.com where
I talked about the amazing returns I was earning using the
"Done for me" tools of AJ Brown.
Here’s what was sent back to me.
"It’s like Texas Hold’em, it’s a zero sum game. There’s no product,
someone has to lose for you to make this gain. Good Luck and hopefully
one day you won’t be the one leaving the table a little light."
There are three major "problems" with this email response and
I will detail each. In brief they are the following:
1) The writer suggests that the "addition of a product" is important
to ensures there is a better than zero "sum" game.
2) The writer, like the rest of us, may benefit from a reminder of
passive and active, as well as, business verses investing. Because
the comments confuse semi-passive investing with active business.
and the big one.
3) The writer assumes that I cannot win without someone losing.
This is patently not true and I will show it.
I’m not sure what the author does or why specifically he reads my
emails. However, since he focuses on "Product", I wonder if he’s
more of an information marketers or network marketer?
Most real estate investors (the majority of our readers) wouldn’t
mention a lack of "product" as an objection.
However, I want to address this misunderstandings I listed
above in order.
1) The writer suggests that the "addition of a product" is
important to ensures there is a better than zero "sum" game.
Texas Hold’Em (and trading) is often a LESS than zero sum game
when you factor in taxes and transaction costs. And for the "casino"
(or investment company) there’s a fix-expected win value.
And of course most things are.
A product doesn’t in and of itself make some transaction "win-win"
or "greater than zero sum". Products do not address this objection.
For more on this see the classic "Broke Window" economic parable.
Which points out that just because the "window maker" gets business
after the pie baker has a broken window this does not mean that the
economy has "grown".
Furthermore, it would be worthwhile to point out if an "employee-
employer" relationship isn’t MUCH LESS than ZERO SUM, then it
doesn’t make sense for the employer in which case the employee
will almost assuredly lose his or her job (unless the employer is
the government)
Having brought up the issue of employment and managements,
we now have the perfect segue into the next critical point.
2) The writer, like the rest of us, may benefit from a reminder of
passive and active, as well as, business verses investing. Because
the comments confuse semi-passive investing with active business.
Passive investing is about generating wealth off your wealth without
your personal labor. Fundamentally there is not a "product" though
there may be a "service" such as lending.
However, most economic models are only "non-zero-sum" games
because of psychology. That is, the tenant sees "shelter" as worth
more than the "rent". And the property owner sees the "rent" (and
perhaps the appreciation, etc) as worth more than the risks of
ownership and the reduce rights of occupancy.
The sale of a "product" happens because the possessor of the
money sees the "benefits" of ownership as higher than the value
of the stack of money paid.
This is perceptual.
In an active business, the goal is a maximize revenue. And it
allows one to identify where there can be better-than-zero-sum
games.
However, it’s important to know that theoretically and solution
which is "better-than-zero-sum" requires increased complexity.
(For example, one community has a surplus of bananas the
other a surplus of apples. They can trade, "dollar-for-dollar"
and while on the surface it seems zero-sum, it is not. But it
also didn’t create "wealth" but rather "lifestyle"
3) The writer assumes that I cannot win without someone losing.
This is patendly not true and I will show it.
As to MUST someone have "lost" in order for me to have had
the huge wins I did, the real answer is …No actually not.
But even more, it relates to statement #2. Who said it’s a goal of
Passive Investing that "everyone win?" It’s the goal of passive
investing that my money make money for me without my efforts.
Back to this specific point.
There are two major uses of the tools you learn about in the
www.LeverageDVD.com one is for leverage (the use I think you
will most enjoy) and the other is for hedging (protecting against
a downside risk).
That is, one who makes the investment with the goal of making
money can be doing it with someone else who has the goal of
preserving a given profit level (by removing the variability of any
market pressures).
At the core, for many this kind of trading is not so much a game
of "Texas Hold’em" poker, as it’s like being able to an insurance
agent. You are paid a premium to take on some risk. And both
you the seller of the insurance and the buyer of the insurance
actually HOPE neither of you need it.
And in fact, 90% of these "policies" do expire without a "claim".
That’s actually a huge value producer. Without it, we for example
would be paying even MORE money for the food.
There are more examples that can be given here.
For now, you may want to continue your education here with
a "free training" (you actually pay for the shipping) and the
free month trial of AJ’s coaching with the www.LeverageDVD.com
provided he still has some available.
Warmly,
Paulie Sabol
If you would like to make a comment, please fill out the form below.
Great post, Paulie. I especially like your third point.
Some people use options to hedge against losses. For instance, somebody who has a crop of coffee or a lot of stock in a specific company may want to “lock in” profits through the purchase of a protective option.
Other people might accept the risk in hopes of the value of the option going up. These are investors or speculators on the opposite side of the trade.
It’s the same investment vehicle being used for two different purposes.
Ryan
Hey Paulie:
When I said it was a zero sum game I meant no wealth is created, and wealth is merely transferred from someone who bet “wrong” to someone who took the other side of the trade and who bet “right, less the house “rake”. When you go up against banks and hedging professionals who have serious mathematical training you’d better have more than a few bucks charged on a CC and a two dollar Circuit City calculator.
Insofar as AJ is concerned, nice young fllow I presume, but does his real profit come from options trading or from the sale of tutorials, or house “rake” if trades are made with his affiliates? All the “house” has to do is keep players playing in order to keep the “rake” coming in. At the end of the evening someone leaves heavier [less the house rake] at the expense of someone who leaves much lighter. It’s all just amusement and entertainment.
Just like you my friend, now that “bountiful borrowing” had dried up, does your profit come from affiliate commissions from your email data base? Just my two cents Paulie. After all you gotta keep the wolf from the door somehow.
Cheers.
Hey Investment Guru,
Interestingly enough… Trading Trainer was setup as an education business only. The purpose? By having a community of traders adopting the same philosophy when looking at the market, we can actually divide among us the labors that it takes to setup a successful trading practice. In other words, my personal portfolio grows faster when I am not a “lone ranger” out there but rather have a community to bounce ideas off of. I educate people knowing that they will stick around and trade with me.
The profits from Trading Trainer all go into my 501 (c) (3) foundation. I learned from Donna Fox years ago at a seminar in Las Vegas that if it was my goal to have a legacy go on after I am long gone, I need to put together a foundation. I learned that right after I had taken 14 inner city kids, and taught them how to trade stock options. (Eight of those kids, to this day, still trade options and have long since given up street life.) Combining that vision of giving kids an outlet through options trading, and the need to have a foundation, became the end game for Trading Trainer the education business.
Myself… my trading is what supports me.
Now, with that said, I do have to chime in about your perception on the options market…
If you look at the put call parity equation…
S + P = C + Pv(E)
The left hand of the equation represents someone who owns a stock plus a protective put. The right hand of the equation represents someone who owns a call option plus a deposit of cash which will grow to the call’s exercise price at expiration by earning the risk-free rate at the time. (Think of a deposit of cash into a Treasury Bill, CD or other guaranteed security.) This equation says the person on the right is doing the same thing as the person on the left.
This equation goes against one of the most common thoughts in options trading… that is, most people (brokerages included) view investors that buy stocks along with protective puts as being responsible conservative investors. Those same people and brokerages view those who buy long call options as being risk takers and reckless. As long as the call buyer has enough cash to buy the stock at expiration, both investors are doing exactly the same thing. So, are they conservative? Or, are they reckless?
It just shows that a lot of people are misinformed about options.
That’s the purpose of Trading Trainer to educate for the better. There is so much misinformation out there about options trading, my goal is to put what I have learned out there. And, if people align on what I put out there, to have them join me in my community, creating a win-win-win. (Win 1 - better the returns they currently make on their investment dollars, Win 2 - contribute to the community so others, including me, can benefit, and Win 3 - contribute to the foundation that one day will be a place that churns out youth that rather than weigh in on our system, contribute to our system.)
I hope that helps.