The Tycoon Report

Rely on Others for Investment Advice? Never Again.

Monday, October 29, 2007 | Ben Schott

You’ve heard a lot from us about the next big thing here at Tycoon -- Chris Rowe’s Internal Strength System.

But this morning I thought I’d cut through all the marketing, the whole big dramatic build-up, and speak to you on the level about what CRISS is, and what it can do for you.

And the best way I know to do this is to talk about my personal contribution to creating this course.

As you probably know already, the Internal Strength System has been in the works for almost two years.  Taking more than 13 years of trading experience and distilling it into a comprehensive, coherent, and applicable SYSTEM doesn’t happen overnight.

Fast forward to about two months ago.  That’s about when Chris was putting the finishing touches on the book, and was hosting a film crew in his house for three weeks, committing his entire system to video.

By the time Rene (our producer) left Florida, he left with a suitcase full of every last detail of the system Chris has developed as a trader.

In that suitcase was a virtual brain-dump of every lesson Chris has ever learned as an investor, every indicator he uses to guide his decisions, and every rule he follows to be as successful as he is.

So at first we were pretty excited.  We had decided on a November 15th release date for the course, and now “all that was left” was for the video to be edited, written to DVDs, and sent back to Florida for our review.

Wow, were we naive!

This is going to shock you: when we counted up the video tapes, there was more than 55 hours' worth of raw footage.

Since we weren’t about to sell you a system that would take you the rest of your life to learn, let’s just say that we had a lot of work to do to get the video down to a manageable -- and digestible -- size, without leaving anything out.

All of a sudden, we realized that it was going to be a race to the finish if we were going to get this course to you this year ... not to mention November 15th. 

And if that weren’t bad enough, consider this: in the world of film editing -- I’ve since learned -- every 60 seconds of final product that you see on your TV screen takes about 30 minutes of editing-room work.

At this point, we had two options.  It was either delay the release of the course, or do whatever we had to do to get it done and in your hands as soon as possible.

Unfortunately (if you ask my wife), we went with option #2.

Let me explain ...

I can’t remember if I’ve shared this with you in any of my past articles, but while our headquarters are in Florida, I make my home in Northern California.

So while the original post-production schedule for the CRISS video called for a team of editors to craft a series of DVDs and send them to us for review, the sheer magnitude of the project meant that we weren’t going to have the luxury of all the time it would take for that back-and-forth process.

“Hey you guys,” I said before thinking, “I’m only a 50-minute flight from Hollywood.  What if I go down there once a week and take care of the feedback and approval in real-time?”

So about six weeks ago, I flew into Burbank’s Bob Hope International Airport for my first 2-day stint with the editing team.

I’m still here.

So let’s just say that my wife --

Sorry.  Pause.  I’m sick of saying “my wife.”  Her name is Kim.

So while Kimmy isn’t Tycoon’s biggest fan these days, and while I miss her and Hannah (my 2-year old girl) terribly, I have to tell you something:

This has been one of the most rewarding experiences in my life.  No kidding.

I’ve watched every minute of the original 55 hours.

I’ve obsessed, along with Rene and our editing team, over every single minute of the final product.  (And I pictured waltzing in once a week to approve each section as it was finished.  Ha!)

I’ve worked for 48 hours at a stretch, slept on office couches for 20 minutes at a time, and consumed more Starbucks coffee than is remotely healthy.

But the reward has been profound:

I’m no stranger to investing, and I’ve enjoyed a bit of trading success in my day. 

But what I’ve learned from Chris as I’ve helped put this course together has taken my understanding of the market to an entirely new level.

He has given me an infusion of confidence.

He has shattered all of my assumptions about why stocks move up and down, and when.

He has taught me how to time my trades more precisely than I ever thought possible -- to get in as close to bottoms as possible, and out as close to tops as possible.

And the coolest part: he’s already made me money. 

After the first week of work on the video, I couldn’t take it any more.  Every time I learned something new going through the footage, I wanted to log into Ameritrade and look at my stocks.

So the first time I got a break, I spent a few hours going through the charts of a few stocks that I’ve traded for years.

I saw things in those charts that I never even knew to look for. 

On one of them, I noticed a particular pattern that Chris teaches in the course that is a highly accurate indicator of short-term positive momentum.

Then I looked to three different indicators that I learned from Chris to confirm what that chart pattern was telling me.

I got the confirmation, and added to my stock position.  I even dropped a little bit of cash into a call option (not much ... I considered this a test of what I’d learned, after all).

I wish I’d put more into the option.

In five days, the stock was up 23%, and the option was up 130% and change.


The Moral of This Story

Why did I decide to share my personal perspective on CRISS with you today?

Several reasons.

1.  Because I think you ought to know how much work and care has gone into this course.

2. Because I know how cynical you are about marketing ... especially when it comes to products that make all sorts of claims about profits.  I wanted to invite you into the last six weeks of my life so you’ll understand that the marketing we’re putting out for CRISS is, if anything, understating the power of this system.

3. Because, perhaps like you, I’ve been burned in the past by trusting people who supposedly knew more than I did.  When you lose money by misplacing your trust, it’s a hard thing to bounce back from ... all you want to do is make sure you don’t play the sucker again.  After going through this course as many times as I have, I know for a fact that never again will I need to take somebody else’s advice when it comes to my investments.

4. Finally, because I wanted to give you my personal and unequivocal guarantee -- having become intimate with this course over weeks of intense work -- that Chris Rowe’s Internal Strength System is going to change your life.

IT'S CHANGED MINE.

Below is a link to the signup page for our VIP “Backstage Pass” Waiting List.  If you’re interested in buying this course when it's released, it is very important that you get on this list.  It’s the only way to ensure that you’ll get an invitation on November 15th.


To your continued success,




Ben Schott
Editor in Chief
The Tycoon Report


Mark Your Economic Calendar: What's ahead for the week of October 29, 2007

Tuesday, October 30

10:00 - Consumer Confidence (for October): Consensus 100.0

Big Picture: We expect a modest rise after the 11% decline over the last two months, during which the six-year high of July turned to a two-year low in September.  The housing recession, financial (sub prime) mess, and higher oil prices are all contributing.  Keep an eye on the labor differential (jobs considered 'plentiful' or less 'hard to get'), which matched the 1-year low of 3.6 in September.

Implications: The Conference Board conducts a monthly survey of 5,000 households to ascertain the level of consumer confidence.  The report can occasionally be helpful in predicting sudden shifts in consumption patterns, though most small changes in the index are just noise.  Only index changes of at least five points should be considered significant. The index consists of two subindexes -- consumers' appraisal of current conditions and their expectations for the future.  Expectations make up 60% of the total index, with current conditions accounting for the other 40%. 


Wednesday, October 31

8:30 - GDP-Adv. (for Q3): Consensus 3.1%, Chain Deflator-Adv. (for Q3): Consensus 2.1%

Big Picture: Q2 leaves the last four quarters with average growth of just 1.9% as the Fed targets sub 'potential' growth (3%) to cool inflation pressures.  The forward risks have increased with the mortgage credit crisis and the housing sector slipping into deeper recession.  A key risk is business investment fading, given the weaker growth outlook leaving weaker manufacturing demand.  Consumer spending will remain strong, given full employment and moderate income growth, but will show weaker growth in the coming quarters.  Inventories have slimmed and shouldn't provide a strong pull as global growth remains positive, given the weak dollar and the pace of global growth.  The Fed's concern about the economic outlook should bring more easing.

Implications: Gross Domestic Product (GDP) is the the broadest measure of economic activity.  Annualized quarterly percent changes in GDP reflect the growth rate of total economic output.  The figures can be quite volatile from quarter to quarter.  Inventory and net export swings in particular can produce significant volatility in GDP.  The final sales figure, which excludes inventories, can sometimes be helpful in identifying underlying growth trends as inventories represent unsold goods, and a large inventory increase will boost GDP but might be indicative of weakness rather than strength.  The broad components of GDP are: consumption, investment, net exports, government purchases, and inventories.  Consumption is by far the largest component, totaling roughly 2/3rds of GDP.  In addition to the GDP figures, there are GDP deflators, which measure the change in prices in total GDP and for each component.  Though the consumer price index is a more closely watched inflation indicator, the GDP deflator is another key inflation measure.  Unlike CPI, it has the advantage of not being a fixed basket of goods and services, so that changes in consumption patterns or the introduction of new goods and services will be reflected in the deflator.

8:30 - Employment Cost Index (for Q3): Consensus 0.9%

Big Picture: Employment costs have been running steady, as the expected 0.9% gain would be the fifth over the last six quarters, putting the annual rate at 3.4%.  Q3 wages and salaries are expected to rise 0.9%, while benefits are expected to rise 1.0%.  Benefit costs have decelerated to the low 3% range compared to 5% yoy in mid 2005. 

Implications: Since the employment cost index was mentioned by Fed Chairman Greenspan in July 1996, it has risen into the upper echelon of economic reports in the eyes of the bond market.  Its lagging nature still leaves it as a less timely indicator of employment cost trends than the monthly hourly earnings data in the employment report.  But the ECI does add something to this picture: an adjustment for shifting employment between industries, and a look at benefit costs.  These additions are interesting, but typically do not alter the view of the employment cost picture which was left by hourly earnings.  ECI will be much less closely watched during periods when wage inflation is not a serious market concern.  The market focuses on the quarter/quarter and year/year changes in each of three categories: total employment costs, wages and salaries, and benefit costs.  The figures are sometimes skewed by large year-end bonuses in the financial industry; analysts often exclude the sales commission component of wages and salaries to adjust for this factor.

9:45 - Chicago PMI (for October): Consensus 53.0

Big Picture: In this volatile regional index, we've seen three 60 levels since March after the sub-50s (contraction) in Jan/Feb.  New orders and production are expected to hold in the upper 50s, while employment is near 52 after the unexplained surge to 61.6 in July.  Inventories to remain below 45 for a third month.  Prices paid should rebound higher due to energy prices, but the lack of manufacturing pricing power leaves very little inflation threat.

Implications: There are many regional manufacturing surveys, and they tend to be ranked in order of timeliness and the importance of the region.  The New York and Philadelphia Fed's surveys are the first each month followed by the Chicago purchasing managers' report on the last day of each month.  A few, such as the Atlanta and Richmond Fed surveys, are released after the ISM and are of little value.  The purchasing managers' reports are measured like the national ISM -- 50% marks the breakeven line between an expanding and contracting manufacturing sector.  For the New York, Philadelphia and Atlanta Fed indexes, 0 is the breakeven mark.  These surveys can be of some help in forecasting the national ISM.

10:00 - Construction Spending (for September): Consensus -0.3%

Big Picture: Commercial and public spending are now offsetting the continued decline in residential construction spending.  A 15th consecutive decline in residential spending results in a 16% decline from one year ago.  With commercial spending running very strong, expect September's gain to leave a 15% yoy gain.

Implications: The construction spending report is broken down between residential, non-residential, and public expenditures on new construction.  The monthly changes are both volatile and subject to huge revisions, so this report rarely has any market impact.  Only trends extending over three months or more can be viewed as significant.


Thursday, November 1

8:30 - Personal Income (for September): Consensus 0.4%, Personal Spending (for September): Consensus 0.4%, Core PCE Inflation (for September): Consensus 0.2%

Big Picture: The income gain of 0.4% leaves a strong and unchanged 6.8% from a year ago.  Core PCE prices are expected to show a seventh consecutive month of 0.1% gains, while annual growth falls to 1.7% yoy.  Overall PCE price growth will rebound to about 2.3% yoy, given the removal of the year ago decline. 
The savings rate (i.e. post-tax savings / disposable income) is expected to hold at August's 0.7%.

Implications: Personal income measures income from all sources.  The largest component of total income is wages and salaries, a figure which can be estimated using payrolls and earnings data from the employment report.  Beyond that, there are many other categories of income, including rental income, government subsidy payments, interest income, and dividend income.  Personal income is a decent indicator of future consumer demand, but it is not perfect.  Recessions usually occur when consumers stop spending, which then drives down income growth.  Looking solely at income growth, one may therefore miss the turning point when consumers stop spending.  The income report also includes a section covering personal consumption expenditures, also known as PCE.  PCE is comprised of three categories: durables, nondurables, and services.  The retail sales report will provide a good read on durable and nondurable consumption, while service purchases tend to grow at a fairly steady pace, making this a relatively predictable report, and ranking it well below retail sales in terms of market importance.

8:30 - Initial Claims (for 10/27): Consensus NA

Big Picture: Weekly initial claims can be volatile as the trends reflect some easing in the tight labor market.  Layoffs (seen in initial claims) remain subdued given the lean supply of available workers as hiring (seen in continued claims) has cooled as reflected in the 20 month high in the early September 4-week average and the slower growth in payrolls.  Claims provide a nearly real time read on layoffs and the labor market, as the low 4.7% unemployment reflects the broader combined read of layoffs and hiring.

Implications: Initial jobless claims measure the number of filings for state jobless benefits.  This report provides a timely, but often misleading, indicator of the direction of the economy, with increases (decreases) in claims potential signalling slowing (accelerating) job growth.  On a week-to-week basis, claims are quite volatile, and many analysts therefore track a four week moving average to get a better sense of the underlying trend.  It typically takes a sustained move of at least 30K in claims to signal a meaningful change in job growth.

10:00 - ISM Index (for October): Consensus 52.0

Big Picture: Current levels match September's lowest level since March.  New orders and production are expected to hold below 55, with employment just above flat in a tight range around 51, and export orders may return to a 55 level.  Inventories are expected to hold below 50 for a fifteen month.  Prices paid (input costs) may firm up back above 60, but the lack of manufacturing pricing power leaves very little effect on inflation.

Implications: The ISM report is a national survey of purchasing managers which covers such indicators as new orders, production, employment, inventories, delivery times, prices, export orders, and import orders.  Diffusion indexes are produced for each of these categories, with a reading over 50% indicating expansion relative to the prior month, and a sub-50% reading indicating contraction.  The total index is calculated based on a weighted average of the following five sub-indexes, with weights in parentheses: new orders (30%), production (25%), employment (20%), deliveries (15%), and inventories (10%).  The ISM is one of the first comprehensive economic releases of the month, typically preceding the employment report.  Though it covers only the manufacturing sector, it can often provide accurate hints regarding the tone of subsequent releases.  During periods of inflation concerns, the prices paid and vendor deliveries indexes often determine the bond market's reaction to the report.

17:00 - Auto Sales (for October): Consensus 5.1M, Truck Sales (for October): Consensus 7.2M

Big Picture: A 3% decline leaves the slowest pace in three months, with both auto and light trucks expected to drop 3% to the lowest levels since July.  Domestic sales are running at a 12.4 mln average pace year to date from 12.8 mln in 2006.  Imports are gaining market share:  running at a 23% average in 2007, up from 22% in '06 and 20% in '05.

Implications: Auto and Truck Sales measure the monthly sales of all domestically produced vehicles.  They are considered an important indicator of consumer demand, accounting for roughly 25% of total retail sales.  Demand for big ticket items such as autos and trucks tends to be interest rate sensitive, making the motor vehicle sector a leading indicator of business cycles.  Each auto maker reports sales individually.  The reports are typically released over the course of the first three business days of the month.  Using the individual reports, a total annual sales pace can be calculated after applying Commerce Department seasonal factors.  It is this annual sales pace that the market refers to when discussing auto and truck sales for the month.


Friday, November 2

8:30 - (All for October) Nonfarm Payrolls: Consensus 90K, Unemployment Rate: Consensus 4.7%, Hourly Earnings: Consensus 0.3%, Average Workweek: Consensus 33.8

Big Picture: Nonfarm Payrolls show the smallest gain since June, while another set of declines in construction and manufacturing leave a seventh consecutive decline in good producing payrolls.  Total figures are being led by health and professional business, while a decline is expected in financial services.  The unemployment rate is expected to hold at 4.7%, which is the highest since August 2006.  There is risk is that it clicks higher to 4.8% (5% rate generally considered to be inflation neutral full employment -- i.e.  NAIRU).  Hourly earnings expected to leave an unchanged 4.1% yoy gain after reaching a six year high of 4.3% yoy in December.  Average workweek is expected to hold at 33.8 hours, having shown some small variation over the last half year from 33.7 to 33.9 hours. 

Implications: The employment report is actually two separate reports which are the results of two separate surveys.  The household survey is a survey of roughly 60,000 households.  This survey produces the unemployment rate.  The establishment survey is a survey of 375,000 businesses.  This survey produces the nonfarm payrolls, average workweek, and average hourly earnings figures, to name a few.  Both surveys cover the payroll period which includes the 12th of each month.  The reports both measure employment levels, just from different angles.  Due to the vastly different size of the survey samples (the establishment survey not only surveys more businesses, but each business employs many individuals), the measures of employment may differ markedly from month to month.  The household survey is used only for the unemployment measure -- the market focuses primarily on the more comprehensive establishment survey.  Together, these two surveys make up the employment report, the most timely and broad indicator of economic activity released each month.

10:00 - Factory Orders (for September): Consensus 1.0%

Big Picture: An 0.5% decline follows August's 3.3% drop, after a previous 4.4% two month gain.  Ex-transportation orders are expected to rise 0.6%, which would be the fifth gain over the last seven months.  Durable goods were reported as -1.7%, while nondurables are expected to rise 0.8%.  Core capital goods (read business investment) are up an annualized 3% over last 6 months, -6% yoy.  The early year lift has faded: Factory orders are just above the level of six months ago, which is in turn lower than year ago.

Implications: Factory orders consist of the earlier announced durable goods report plus non-durable goods orders.  The report is very predictable with nondurables the only new component.  Nondurables consist of such items as food and tobacco products which grow at a fairly consistent monthly rate, so that market forecasts for this report are far more accurate than for the durable orders report.  In addition to seeing nondurables for the first time, the market also watches for revisions to the durable orders data, which can be significant.  At present, durable goods orders sum to about 54% of total orders.


Source:  www.Briefing.com