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The Investment FAQ (part 20 of 20)

( Part1 - Part2 - Part3 - Part4 - Part5 - Part6 - Part7 - Part8 - Part9 - Part10 - Part11 - Part12 - Part13 - Part14 - Part15 - Part16 - Part17 - Part18 - Part19 - Part20 )
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Archive-name: investment-faq/general/part20
Version: $Id: part20,v 1.4 2005/01/05 12:40:47 lott Exp lott $
Compiler: Christopher Lott

See reader questions & answers on this topic! - Help others by sharing your knowledge
The Investment FAQ is a collection of frequently asked questions and
answers about investments and personal finance.  This is a plain-text
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Neither the compiler of nor contributors to The Investment FAQ make
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provided to the user "as is".  Neither the compiler nor contributors
warrant that The Investment FAQ will be error free. Neither the
compiler nor contributors will be liable to any user or anyone else
for any inaccuracy, error or omission, regardless of cause, in The
Investment FAQ or for any damages (whether direct or indirect,
consequential, punitive or exemplary) resulting therefrom.  

Rules, regulations, laws, conditions, rates, and such information
discussed in this FAQ all change quite rapidly.  Information given
here was current at the time of writing but is almost guaranteed to be
out of date by the time you read it.  Mention of a product does not
constitute an endorsement. Answers to questions sometimes rely on
information given in other answers.  Readers outside the USA can reach
US-800 telephone numbers, for a charge, using a service such as MCI's
Call USA.  All prices are listed in US dollars unless otherwise
Please send comments and new submissions to the compiler.

--------------------Check for updates------------------

Subject: Trading - Can You Trust The Tape?

Last-Revised: 10 July 1999
Contributed-By: John Schott (jschott at, Chris Lott (
contact me )

Considering that there is big money involved in every trade, it is no
wonder that a great deal of effort is made to insure the accuracy and
completeness of each day's trading records.  Yet despite this effort,
there are cases where the trading tape you see on your computer,
intraday charts, and in end-of-day data is not really telling a totally
accurate story. 

To settle each day's trading obligations (shares and/or money), each
brokerage maintains a large "back office" function to ensure that each
trade is accurately recorded and reported.  In fact, months after,
Standard and Poors publishes large reference volumes that list the
official day's prices (Open,-High,-Low,-Close) and volume for each
security traded on the NYSE, AMEX, and NASDAQ.  Yet, the contemporaneous
data you get from your Internet or other data provider may not reflect
just what happened on any given day. 

What can go wrong with the data? The answer is that a variety of
factors, some of them mistakes, can put bad or misleading data into the
stream.  Consider the following cases. 
  1. After-hours trading
     Transactions after hours (trades marked .T and "as of" trades) are
     generally not included in the price and volume information that is
     published daily.  On the NASDAQ, volume data for after-hours
     trading is integrated into the statistical record next day with a
     24 hour cut-off.  Price data for after-hours trading is not
     integrated into the statistical record.  Volume data reported
     outside of 24 hours and price data are recorded for surveillance
     purposes only. 
  2. Out of order reporting
     On the NYSE and AMEX, there is only one specialist to report
     orders.  On the NASDAQ, the floor is spread electronically over the
     world.  So time stamped execution reports don't necessarily flow
     into the reporting systems in order.  Sometimes there is an
     advantage for participants in delaying a report beyond the
     exchange-mandated minimums - for example, when someone is urgently
     trying to move a big block quietly.  But most of the problems are
     simply due to the chaos that is the exchange day. 
     Stocks trade everywhere - on multiple worldwide exchanges, on
     electronic exchanges, at brokerage houses, and if two of us want,
     behind the local hamburger joints just after the 2am close.  Many
     years ago, when this diffusing trend started, the NYSE made it a
     rule that any trading by any member firm had to be reported on the
     exchange even if the trade was executed elsewhere.  And that rule
     applies today.  So the Merrill Lynch office in Tokyo, Rome or
     London can handle a trade on one if the local markets in IBM, while
     the traders in New York are still sound asleep - and report that in
     hours (days) later. 
     Eventually those trades, and others crossed in local offices of
     exchange members, filter onto the NYSE tape at some time during the
     trading day.  This would also be true of trades crossed by the
     Merrill Lynch office in Dallas during NYSE hours.  Those trades
     make the tape sometime - but not always in order of trading or
     nearly in real time.  And these trades may appear potentially
     outside the boundaries of the exchange-mandated maximum delay. 
     Trades in Nasdaq listed securities by foreign broker/dealers that
     are not NASD members are outside NASD/Nasdaq jurisdiction and would
     not be reported except if they involved some organization that had
     a trade reporting requirement under U.S.  securities regulations. 
     Some firms exist specifically to provide the large trader with
     discrete private placements which largely go unreported. 
     If you are confused, consider the poor specialist who arrives early
     only to find a variety of trade reports from Tokyo to London that
     don't match yesterdays prices nor the orders on his book - where do
     you open the stock? (See the article "Trading - Opening Price"
     elsewhere in this FAQ for more discussion of that issue.)
  3. Errors do happen
     If you every get a chance to see a live exchange ticker you will
     get to see the errors, too.  Sometimes it is merely a misplaced
     trade reported way out of order.  Perhaps it is an incorrect price
     or volume reported later as a correction.  And then there are
     trades that just didn't happen for one reason or another -
     cancellations, repudiations, double fills, etc.  They show up on
     the ticker, but some information gathering systems have no way to
     back them nicely out of the days activities.  Some are not
     discovered until days later in the back offices. 
     Simple data entry errors still happen.  Looking at an interday
     chart, one sometimes sees a single transaction far off the run of
     contemporary trades.  Quite often the offset is $3 or $30, which is
     a clear signal that someone hit the wrong row of keys on a numeric
     key pad.  Those errors show up in the interday charts all the time
     and often make the end-of-day quotes. 
     Even the floor traders get involved.  When four or five people are
     competing for a specialist's attention, it is not hard for several
     people to hear the specialists "Done 500" as a fill of their order. 
     So two orders become one or one becomes two executions.  Naturally
     they all get corrected eventually - but does the tape ever show it?
  4. Is volume really volume?
     On the NYSE and AMEX when the specialist crosses an order and
     reports 1000 shares traded, we all assume that this means 1000 sold
     and 1000 bought (even if one party to the trade is the specialist
     himself).  But there are complaints that NASDAQ reported volume may
     be far higher than the actual public trading.  It is likely that
     this is true given the multiple competing market makers, most of
     whom actively trade for their own accounts.  Sensing a trend, such
     a market maker may sell stock not owned or scarf up offered stock
     with the intention of laying off the stock on his competitors later
     - something the NYSE/AMEX specialist really can't do.  If you watch
     intraday volume, you'll occasionally see such trading pairs pass
     across the tape with a few minutes separation - some may represent
     real trading, some merely various forms of market maker transfers. 
  5. Teasing the market
     Technical analysts look for breakouts and other signals in their
     data.  And the wolves on Wall Street know that.  Occasionally they
     have a chance to push a few trades through to tip an indicator one
     way or the other.  Often this happens near the end of a quiet day. 
     Considering the spread, merely whether the last trade of the day is
     on the buy or sell side is often enough to bias the day's technical
     indicators.  Recently I tried a $12 experiment on a NYSE stock that
     had held one price for almost six hours of NYSE trading.  I wanted
     to see if the prevailing executions were on the buy or sell side. 
     My 100 share order 1/8th point off that price brought a quick
     day-ending burst of trades - at successively different prices. 
     Someone with real malevolence could do even more to trigger a
     technical move.  A dramatic example of off-exchange trading
occurred on 26 Feb 97.  After a 17-month battle, noted investor Carl
Ichan sold off his entire 19.9-million share holding of RJ Nabisco
Holdings (RN).  He did this in an after-hours deal with Goldman Sachs at
$36.75, a $1 price concession from that day's close.  It is unknown if
Goldman Sachs held the block for eventual distribution or acted for
another firm.  Trading was 2.4M shares on 26 Feb and 4.6M and 3.3M on
the following two days, respectively, likely due to other arbitragers
moving out of the stock.  Interestingly, the stock price held, closing
only 1/8th below the deal price.  So this block never showed up on the
tape nor in your TA program's data base.  Although this transaction
became public knowledge via a timely SEC filing and extensive press
coverage, other large block trades may be effectively masked from public

Perhaps there is only one real lesson to be gained from understanding
these and other forms of data inaccuracies that can creep onto the tape. 
It is that technical analysts should not regard all reports on the tape
as gospel. 

--------------------Check for updates------------------

Subject: Trading - Selling Worthless Shares

Last-Revised: 26 May 1999
Contributed-By: Art Kamlet (artkamlet at, Chris Lott ( contact
me )

If you hold shares that have become worthless, maybe because the company
has ceased operations, you are probably interested in deducting the full
cost basis of that position when you do your taxes.  And, since you're
already in the hole, you probably want to do this without throwing any
more money away.  This article discusses ways you can prove to the IRS
that the shares really are worthless. 

The simplest and best way to close out any position, of course, is to
sell it, even if you only get a dollar.  But who is going to pay you
even a lousy buck for worthless shares?

If you hold the share certificates, you can probably convince one of
your friends or (deep breath) relatives to buy them from you for $1. 
(You can give back the $1, buy the proud new owner a drink, etc.) Then
list the $1 as your selling price on your tax form.  If your friend
really wants to take official possession of the shares, he or she must
send in the properly signed share certificates to the stock transfer
agent, but of course if the company really is gone, the transfer agent
is not going to do anything (no money, no work). 

If your broker holds the shares (the shares are held "in street name"),
selling them to a friend isn't such a good deal because taking delivery
of the certificates will cost you about $25 (depending on the brokerage
house, of course).  And you sure don't want to pay a brokerage
commission to get rid of your worthless shares.  Many brokers have a
plan to let their good customers sell them worthless stock for $1 or 1c
for the lot.  If you are a good customer, and stock is with the broker,
ask.  You should be able to negotiate some solution that will be
satisfactory to both sides. 

If for whatever reason you cannot sell the worthless shares, then you
will need to obtain documentation that will convince the IRS that the
stock really, truly had no value at some point in time, and close the
position at that same time.  This will relieve you of the burden of
selling the shares.  It's very important that you can demonstrate beyond
a doubt the year that the shares became worthless.  When you do your
taxes, you would write "12/31" as the date of sale and "worthless" (or
0) as the sales price.  For example, if the company has delisted the
shares or closed down completely, a letter from your broker or even a
letter from the company might be sufficient to establish the year in
which the shares became worthless. 

Interestingly, if you had shares that became worthless, and you declared
them worthless, took the loss, yet hung on to the shares, you're OK if
they later regain value.  The IRS now anticipates that a stock you kept
while declaring it to be worthless later rises from the dead.  In that
case, no need to amend, but use the worthless date as the acquisition
date and 0 as the cost basis.  So in this regard they are pretty

Note that if a company's stock goes worthless, you should declare this
event in the year it becomes worthless.  If you have to file an amended
return (1040X) later, you have 7 years to do so, unlike 3 years for most
other 1040X filings. 

As you can see, it's far simpler to sell the shares for a pittance than
to demonstrate that they are worthless, so that's probably the way to go
if you can manage it.  Although this does not establish the year in
which the shares became worthless, it does give you a clear sale at a
very low price, and that's always simple to explain. 

One last caveat.  Don't confuse a bankrupt company with a completely
defunct company.  Many companies continue operating while in bankruptcy
proceedings, and their stock continues to trade.  So the stock by
definition is not worthless.  In the newspaper listings, the prefix 'vj'
is often used to indicate such companies.  For example, when this
article was first drafted, vjRAYtc (Raytech) closed at 4/38.  However, a
bankrupt company does not always have a low share price.  About 25 years
ago John Manville Co.  was hit with asbestos lawsuits, and filed for
bankruptcy to protect them against these suits.  Except for the
potential liabilities of the law suits, they had an enormously healthy
balance sheet and their stock continued to trade high.  More recently,
about 1991 Columbia Gas of Ohio filed for bankruptcy to get out of some
unfortunate long-term contracts they had written for natural gas
purchases.  Their stock continued to trade, generally in the $30 range,
until they finally emerged with a favorable court ruling. 

--------------------Check for updates------------------

Subject: Trivia - Bull and Bear Lore

Last-Revised: 29 Jul 1994
Contributed-By: David W.  Olson, Jon Orwant, Chris Lott ( contact me )

This information is paraphrased from The Wall Street Journal Guide to
Understanding Money and Markets by Wurman, Siegel, and Morris, 1990. 

One common myth is that the terms "bull market" and "bear market" are
derived from the way those animals attack a foe, because bears attack by
swiping their paws downward and bulls toss their horns upward.  This is
a useful mnemonic, but is not the true origin of the terms. 

Long ago, "bear skin jobbers" were known for selling bear skins that
they did not own; i.e., the bears had not yet been caught.  This was the
original source of the term "bear." This term eventually was used to
describe short sellers, speculators who sold shares that they did not
own, bought after a price drop, and then delivered the shares. 

Because bull and bear baiting were once popular sports, "bulls" was
understood as the opposite of "bears." I.e., the bulls were those people
who bought in the expectation that a stock price would rise, not fall. 

In addition, the cartoonist Thomas Nast played a role in popularizing
the symbols 'Bull' and 'Bear'. 

Finally, Don Luskin wrote a nice history of these terms for on 15 May 2001.

--------------------Check for updates------------------

Subject: Trivia - Presidential Portraits on U.S.  Notes

Last-Revised: 28 Apr 1994
Contributed-By: Paul A.  Rydelek, Chris Lott ( contact me )

Just in case you were curious, here is a list of the presidential
portraits and other decoration on U.S.  Currency and Treasury

Den.  Portrait Embellishment on back
$1 George Washington Great Seal of U.S. 
$2 Thomas Jefferson Signers of the Declaration
$5 Abraham Lincoln Lincoln Memorial
$10 Alexander Hamilton U.S.  Treasury
$20 Andrew Jackson White House
$50 Ulysses S.  Grant U.S.  Capitol
$100 Benjamin Franklin Independence Hall
$500 William McKinley Ornate denominational marking
$1,000 Grover Cleveland Ornate denominational marking
$5,000 James Madison Ornate denominational marking
$10,000 Salmon P.  Chase Ornate denominational marking
$100,000 Woodrow Wilson Ornate denominational marking

U.S Treasury instruments:

Den.  Savings Bond Treas.  Bills Treas.  Bonds Treas.  Notes
$50 Washington Jefferson
$75 Adams
$100 Jefferson Jackson
$200 Madison
$500 Hamilton Washington
$1,000 Franklin H.  McCulloch Lincoln Lincoln
$5,000 Revere J.G.  Carlisie Monroe Monroe
$10,000 Wilson J.  Sherman Cleveland Cleveland
$50,000 C.  Glass
$100,000 A.  Gallatin Grant Grant
$1,000,000 O.  Wolcott T.  Roosevelt T.  Roosevelt
$100,000,000 McKinley

--------------------Check for updates------------------

Subject: Trivia - Getting Rich Quickly

Last-Revised: 18 Jul 1993
Contributed-By: James B.  Reed

Take this with a lot of :-) 's. 

Legal methods:
  1. Marry someone who is already rich. 
  2. Have a rich person die and will you their money. 
  3. Strike oil. 
  4. Discover gold. 
  5. Win the lottery. 

Illegal methods:
  1. Rob a bank. 
  2. Blackmail someone who is rich. 
  3. Kidnap someone who is rich and get a big ransom. 
  4. Become a drug dealer. 

For the sake of completeness:
     "If you really want to make a lot of money, start your own
     - L.  Ron Hubbard

Hubbard made that statement when he was just a science fiction writer in
either the 1930s or 1940s.  He later founded the Church of Scientology. 
I believe he also wrote Dianetics. 

--------------------Check for updates------------------

Subject: Trivia - One-Letter Ticker Symbols on NYSE

Last-Revised: 13 Aug 2004
Contributed-By: Art Kamlet (artkamlet at, Doug Gerlach (gerlach

Some of the largest companies listed on the New York Stock Exchange have
1-letter ticker symbols, and some relatively unknowns do also.  Not all
of the one-letter symbols are obvious, nor does a one-letter symbol mean
the stock is a blue chip, a US corporation, or even well known. 

Originally when the symbol had to be written down on transaction slips,
it was faster to write down the real big companies, like T (Telephone),
F (Ford), K (Kellogg), G (Gillette), X (Steel), and Z (once Woolworth). 
But later just anyone it seems was able to get 1-letter symbols.  Yet
when Chrysler (C) was absorbed by Daimler to become DCX, note that
Citicorp (which had just merged Citibank with Travelers) jumped to claim
the C for themselves. 

This page shows all of the one-letter ticker symbols listed on the NYSE. 
Since the US exchanges avoid overlaps, this means that only the NYSE
uses one-letter ticker symbols.  This list was current as of the
last-revised date (above), but due to changes it may be out of date by
the time you read it. 

In the following list, the ticker links will take you to the appropriate
page at Yahoo! Finance with a current quote and price chart. 

Ticker Company
A Agilent Technologies (split-off from H-P; previously Astra AB)
B Barnes Group
C Citigroup (previously, Chrysler had 'C')
D Dominion Resources
E Ente Nazionale Idrocarburi SpA (ADR)
F Ford Motor Company
G Gillette
H None - formerly Harcourt General
I None - formerly First Interstate Bancorp - ostensibly reserved (see
J None - formerly Jackpot Enterprises
K Kellogg
L Liberty Media
M None - formerly M-Corp, ostensibly reserved (see below)
N Inco, Ltd. 
O Realty Income Corp
P None - formerly Phillips Petroleum
Q Qwest Communications
R Ryder Systems
S Sears, Roebuck & Company
T AT&T Corp
U None - formerly US Airways
V Vivendi Universal
W None - formerly Westvaco
X US Steel
Y Alleghany Corp. 
Z None - formerly Woolworth

The Chairman of the New York Stock Exchange has publicly said that he is
holding the symbols "M" and "I" for two companies he hopes to convince
to switch from Nasdaq to the NYSE -- Microsoft and Intel. 

--------------------Check for updates------------------

Subject: Trivia - Stock Prices in Sixteenths

Last-Revised: 22 Jan 1997
Contributed-By: DJS Highlander, infras at

The tradition of pricing stocks in fractions with 16 as the denominator
takes its roots from the fact that Spanish traders some 400 years ago
quoted prices in fractions of Spanish Gold Doubloons.  A Doubloon could
be cut into 2, 4, or even 16 pieces.  Presumably, it was too difficult
to split those 1/16 wedges any further, or prices today might be quoted
in 32'nds! Using fractions as a means of quoting prices was popular for
a couple of hundred years thereafter, and as the NYSE is more than 200
years old, there's the link!

If you really want to get specific, the Spaniards counted on their
fingers (as did everyone else, for the most part!) and did not include
the thumb in the 'low end' process because it was used to keep track of
the quarters.  Two thumbs = doubloon.  Both hands = doubloon, in eight
pieces (pieces of eight!).  You could manage all sorts of good slave
deals from this mathematical base (other deals, too, of course). 

Well, the Spaniards formulated all this as a simplification of the
decimal method used by the rest of Europe which was derived from the old
Roman way of doing things - which was taken from the Greeks - which was
taken from the Persians - who got it from the Chaldeans.  That takes us
back to about 5000 BC and an interesting coin called the Dinar - which
was parsed into tenths. 

According to the Hammarabi Code, the Dinar was worth today's equivalent
of about $325 (ie., an ounce of gold - only it weighed slightly more). 
Within their agricultural economy, it was a piece of metal (more easily
transportable) equal in value to a bushel of wheat, which, according to
the Code, weighed 1 Stone (the Sumerian Standard), which, by our
standards, weighed about 60 pounds. 

To Sumerize (pun), an ounce of gold was equal to about 60 pounds of
wheat in value.  This was established since it was obviously easier to
carry a bag of gold to the other side of the empire to exchange for a
large quantity of, say, wool, than it was to caravan several tons of
wheat for the same purpose.  And so on. 

The whole process probably dates back even farther, but the Code of
Hammarabi is basically the oldest known documentation of such things. 

--------------------Check for updates------------------

Subject: Warning - Wade Cook

Last-Revised: 23 Feb 1998
Contributed-By: G.  S.  Reedy

Wade Cook runs seminars, priced around $3,500, that explain his
strategies for investing, with emphasis on writing covered calls.  Much
of the same information is available in his book, The Wall Street Money
Machine . 

Don't be fooled by Wade Cook's book.  I read it, did some studies of
covered calls.  Most cheap covered calls are written on stocks that are
in the process of declining in price.  According to postings in
Dejanews, some people admit to having lost a bundle following Wade
Cook's trading programs.  When I read his book, some of it seemed too
good to be true.  And, as the old axiom says, "If it seems too good to
be true, it probably is."

I had a conversation with a commodity trader several years ago.  He told
me that he was continually amazed at people who had demonstrated
expertise in their respective fields, and were somewhat successful at
their work.  Then, they would read a book about commodity trading and
think that they could start making a living at it.  Basically, the same
principle applies to trading stock options.  Go slow, crawl before you
walk, walk before you run.  To use a baseball analogy, go for base hits
first.  The triples and home runs will come with practice. 

You might also want to check the article elsewhere in this FAQ entitled
"Advice - Paying for Advice."

For more information, check out these sources:
   * An article by Dan Colarusso of that appeared on 16
     August 2000.
   * An article by James Surowiecki of the Motley Fool that appeared on
     Slate on 18 September 1997.
   * An article by Randy Befumo of the Motley Fool that appeared on 5
     October 1997.
   * An article that appeared in the Washington Times on 30 December
   * At one time Gary Wall maintained a collection of information about
     Wade Cook on his web site.

--------------------Check for updates------------------

Subject: Warning - Charles Givens

Last-Revised: 20 Jan 2003
Contributed-By: Jeff Mincy (mincy at, Chris Hynes, Chris Lott (
contact me )

Charles J.  Givens was a self-styled financial planner, investment
educator, and investment guru who once appeared in info-mercials on
late-night television to tell the world about the fortunes he had made
and lost, free seminars run by his associates, and the Charles J. 
Givens Organization.  He died in 1998, but one of his organizations,
International Administrative Services Inc.  (IAS), lives on. 

Givens' organization offers investment education and advice through
seminars and publications.  He wrote several best-selling books:
   * Wealth Without Risk (1988)
   * Financial Self-Defense (1990)
   * More Wealth Without Risk (1991)

As of this writing, a trial membership in his organization is offered
for about $50.  The organization publishes a monthly newsletter. 
Telephone advice is also offered to members.  Their web site address is
given below. 

Givens is regularly lauded by his fans for teaching people how to
navigate the world of personal finance and investments.  However, his
critics point out that his advice is generally simplistic and sometimes
contradictory.  All examples (below) are taken from Wealth Without Risk,
as cited in Reference (4). 
Simplistic: number 210, don't buy bonds when interest rates are rising. 
Contradictory: number 206, do not put your money in vacant land;
number 245, invest your IRA or Keogh money in vacant land. 

Givens offers quite a bit of helpful advice but contrary to the titles
of his books, his ideas can be extremely risky.  For example, some of
his suggestions about insurance, especially dropping uninsured motorist
coverage from one's automobile insurance, may leave people underinsured
and vulnerable in case of an accident unless they are very careful about
reading their policies and asking hard questions.  On the other hand,
some people are arguably over-insured, which is why Givens makes these
recommendations.  These people could certainly benefit from reading
their policies carefully and asking the insurance agent some hard
questions, but wholesale advice to drop coverage is risky. 

He also makes aggressive interpretations of tax law, interpretations
which might get one in trouble with the IRS.  Not that the IRS is
perfect, but not all people may be comfortable with Givens'

The Givens organization has lost several court cases.  For example, in
December 1993, the Attorney General of Florida issued a complaint
against Charles J.  Givens alleging that certain of his practices
violated Florida's Deceptive and Unfair Trade Practices Act.  Among the
claims challenged by the Florida AG was that Givens misrepresented that
his programs provided purchasers with successful and legal financial
strategies that would enable them to make money.  The case was resolved
in 1995 when Givens agreed to pay $377,000 to cover refunds and the cost
of the Florida investigation.  Givens also agreed to stop making certain
claims about the value of his teachings and to make full refunds to
anyone who requests them within three days of receiving his materials. 
In 1996, the Givens organization lost a class-action case in California
in which the Givens Organization was ordered to pay over $14 million to
the members of the class. 

Prospective followers of Givens must, absolutely must, read about
successful lawsuits against Givens as well as his criminal convictions
and other disclosures about him and his organization.  See below for
exact references. 

In conclusion: his advice is simply not appropriate for everyone. 


  1. Smart Money , August 1993. 
  2. The Wall Street Journal, ``Pitching Dreams,'' 08/05/91, Page A1. 
  3. The Wall Street Journal, ``Enterprise: Proliferating Get-Rich Shows
     Scrutinized,'' 04/19/90, Page B1. 
  4. The Wall Street Journal, ``Double or Nothing,'' 02/15/90, Page A12. 
  5. Superior Court of the State of California, County of San Diego,
     Case No.  667169: Cella Gutierrez, et al.  vs.  Charles J.  Givens
     Organization Inc., et al., Trial date 04/12/96. 
  6. The IAS Financial Education organization (successor to the Charles
     J.  Givens Organization).
  7. KYC News, short for 'Know Your Customer', publishes investigative
     information on financial crime in its newsletters and web site. 
     They make available a facts and findings document from the clerk of
     the U.S.  Bankruptcy Court in Orlando, Florida about Givens and
     others, dated April 2003.

--------------------Check for updates------------------

Subject: Warning - Dave Rhodes and Other Chain Letters

Last-Revised: 6 Sep 1994
Contributed-By: Mark Hall, George Wu, Steven Pearson, Chris Lott (
contact me )

Please do NOT post the "Dave Rhodes", "MAKE.MONEY.FAST", or any other
chain letter, pyramid scheme, or other scam to the misc.invest.* groups. 

Pyramid schemes are fraud.  It's simple mathematics.  You can't
realistically base a business on an exponentially-growing cast of new
"employees." Sending money through the mails as part of a fraudulent
scheme is against US Postal regulations.  Notice that it's not the
asking that is illegal, but rather the delivery of money through the US
mail that the USPS cares about.  But fraud is illegal, no matter how the
money is delivered, and asking that delivery use the US Mail just makes
for a double whammy. 

Note that when someone posts this nonsense with their name and home
address attached, it's fairly simple for a postal inspector to trace the
offender down. 

Although the "Dave Rhodes" letter has been appearing almost weekly in
misc.invest as of this writing, and it's getting pretty old, it's mildly
interesting to see how this scam mutates as it passes through various
bulletin boards and newsgroups.  Sometimes our friend Dave went broke in
1985, sometimes as recently as 1988.  Sometimes he's now driving a
mercedes, sometimes a cadillac, etc., etc.  The scam just keeps getting
updated to keep up with the times. 

To close on a funny note, here's a quote from the "Ask Mr.  Protocol"
column of the July 1994 (v.  5, n.  7) SunExpert magazine:
     Rhodes (n) - unit of measure, the rate at which the same
     annoying crud is recycled by newcomers to the net. 

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Subject: Warning - Ken Roberts

Last-Revised: 28 May 1999
Contributed-By: Conrad Bowers (cpbow at, J.  Johnson

This article is a response to a message saying that the Ken Roberts
course is a good introduction to commodity trading (the message
originated on an AOL site but was quoted on the Motley Fool investment
site).  According to one of the writers of that thread, Ken Roberts is
now advertising on radio with ads saying you can turn $5000 into lots of
money.  Some of the comments below would apply to just about any
technique if you're starting with a small amount of money. 

In my opinion, Roberts does not adequately warn of the risks about
trading commodities.  Most of his first course is a pep talk about how
easy it is.  In reality surveys have shown that some 90% of people stop
trading within about a year.  Most stop because they have depleted more
of their capital than they can bear and keep on trading.  Remember these
differences about commodities as compared to stocks:
  1. Unlike the stock market, in commodities for every dollar won there
     is a dollar lost in the markets.  Most lose, a few are consistent
     big winners.  Remember you are competing against people that have
     done this a long time, people that do it full-time, and
     suppliers/users that use the commodity full-time.  Unless you're
     sure you going to beat these pros the first time, you better trade
     with money you don't need. 
     While you dream of what the money you hope to generate will do for
     you, don't lose sight of the initial odds against you.  With time I
     believe an individual can learn to trade successfully.  But if you
     don't survive the training period, you will have had a very
     expensive education. 
  2. Highly leveraged; You can lose more than your entire investment if
     you get in a position that's way too large for your account,
     particularly if you get locked into it by 'limit moves'.  These
     happen occasionally in a number of commodities.  (You can hedge
     with options, though.) The more common problem is cumulative
     losses.  Someone who starts out with $5000 will have difficulty
     placing stops that won't get hit by market 'noise' (short-term
     fluctuations).  If they place more reasonable stops, then it will
     be a large percentage of their account.  It's probably possible to
     start with $5K, but you either have to be lucky enough to build the
     account up before it gets wiped out, or you have to be disciplined
     enough to trade very small positions and not the more lucrative
     commodities.  (Having seen my account dwindle 80%, I am trying to
     rebuild it on this basis; some recovery with options, currently
     pretty flat trading "small" commodities.)

The Ken Roberts course does teach how to calculate the dollar
differences a price move will profit/cost you.  However, the is an
almost complete lack of discussion about the proper amount to risk.  To
pitch a course to investors with only $5K with no discussion of risk
strategy is outrageous.  His video repeatedly asks interviewees, would
you recommend this course for a struggling family/single parent, etc. 
That is enough of a misrepresentation that I believe it should be

I got interested in commodities through his course, TWMPMM I.  I
actually didn't use his entry techniques so I won't fault those.  I
fault him, the fax service I did use, and myself for my not
understanding risk control.  I didn't risk a huge amount per trade
(never more than 10%, usually less) but I still overtraded enough that
my account bottomed out at less than 20% of the starting value.  Of
course that's when the profitable trades came along but I couldn't take
them.  Roberts' entry techniques (particularly one of the two) would
typically risk MORE than I did.  If someone with a large account
followed his techniques with proper risk control in a diversified mix of
markets, it might work.  There is no test of his entries so I don't know
if they are profitable or not.  It's sending new people off into the
markets with small accounts and no risk management training that's

He does do a good job of stressing paper trading.  However, three months
is good for introducing you to the daily process and stresses of
decision making.  It is not a valid test of any strategy.  Only by
testing a strategy over quite a long time of historical data, can you
tell if it works.  He publishes no indication this is so.  Often, people
hit a couple good trades in the paper trading stage, and they are sure
they're ready to make it.  I think 6 months to 1 year of reading and
paper trading is necessary.  Wish I had!! For the money you can get
several much better books, rather than one course that is literally more
than half hype. 

The claim that the first course is complete is false.  Want to know
about options? Buy the TWMPMM II course.  Want to know about entering
already existing trends? Buy a bonus pack (or get it with a one year
renewal).  In other words, if you're frustrated that you seem to be
losing your account just send in $95 or $195 more for the solution. 
Want to learn how Ken really trades himself? Attend a $2000 seminar. 
Not satisfied with a subscription? -sorry, prorated refund requests
refused (I tried). 

Bottom line: If you don't know what you're doing you're gonna lose! If
you're looking for someone else to do the brain work, expect to lose!
Only you know how important your money is and how you want it to grow. 
And, oh by the way, don't get greedy!

For other opinions, check out extensive discussions on the
misc.invest.futures news group; if the thread is not currently active
just type 'Ken' and 'Roberts' into a Dejanews search and you will get a

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Subject: Warning - Selling Unregistered Securities

Last-Revised: 29 Mar 1995
Contributed-By: Michael R.  Mitchell (mitchel4 at

Under the U.S.  Securities Laws, specifically The Securities Act of
1933, the mere offer to sell a security -- unless there is an effective
registration statement on file with the SEC for the offer -- via the
Internet can be a felony subjecting the offeror to a 5 year federal
prison term.  See the Securities Act of 1933, Section 5(c) Of course,
sales and deliveries after sale of unregistered securities is unlawful
(Section 5(a)) as is failure to deliver a prospectus (Section 5(b)). 

Listen to an example from my own experience as a securities lawyer in
Los Angeles.  Many years ago a young man came into my office and asked
my advice about whether he could advertise in the Hollywood Reporter for
investors in a movie he wanted to make. 

I explained to him that such a course would be fraught with peril for
him because it would violate the federal securities laws.  He said,
"Everybody does it; there are a bunch of ads soliciting people to invest
in movies there every day." He said, "Well, I'm going to do it."

About a week later, he phoned me up and said he had got a letter from
the SEC requiring him to refund any money he had collected and requiring
him to visit the LA office of the SEC.  It appears that the SEC reads
the Hollywood Reporter.  It also reviews the Internet newsgroups. 

Certain transactions are exempted from the prohibition (See Section 4)
and certain securities are exempted from the prohibition (See Section
3).  How a security is defined is set forth in Section 2(1) -- and
includes, among other things, any note, stock, bond, investment
contract, put call, straddle, option, etc. 

You can determine whether a registration statement is or was in effect
as to a security by accessing the free SEC Edgar search machine at this

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Compilation Copyright (c) 2005 by Christopher Lott.

User Contributions:

Gerri Pisciotta
My employer accidentally advised the company handling the 401k investment that I had been terminated, when in fact I had not. As a result, withdrawals discontinued from my pay and I missed a couple years of contributions. Since I never withdrew from the plan, is my employer liable for making up these contributions? If I made a lump sum catchup contribution,could they do the same?
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