Here Are the Absolute Worst Ideas I Found at "The MoneyShow"

It was a busy weekend here in Orlando recently.

The markets were going bananas - something about millions of insanely crowded, leveraged-to-the-gills bets against volatility blowing up like "Zabriskie Point" - but I wasn't sweating it too much.

My money was in good shape, still drawing unreasonably good returns from top-flight companies I own.

But The MoneyShow was in town, so I took a break from researching everything there is to know about these firms to spend parts of Thursday and Friday there.

Though, it must be said, I've gone every year since I moved to Orlando six years ago - for at least part of the day.

Here's the thing: I don't think I have attended five of the sessions in that time. You see, I've got little to no interest in most of the topics; I've tested - and rejected - most of their allegedly "foolproof" strategies years ago.

I go for three reasons.

First, I know many of the speakers, so I go to have lunch, dinner, or just a coffee to catch up with them.

Second, I go to restock my office supplies. Most of the exhibitors are giving away pens, notepads, and other useful stuff. Yes, I'm "that guy."

Last, and most important, I go to wander the exhibit areas, and check out the hot topics of the day... and what horrific new ideas are being foisted on the investing public. I talk to folks and eavesdrop.

What I found this year was pretty upsetting, to be honest...

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First things first. The swag game at The MoneyShow was mediocre this year. I got a couple of pens, so it looks like I'm going to have to rely on some upcoming banking and private equity conferences later this year to really replenish my supplies.

In years past, the Options Industry Council would give away those giant clips that are theoretically for holding important documents together, but we all know their highest purpose is holding bags of chips and Fritos closed. My wife's not happy with the council this year because she's going to have to buy bag clips for the first time in years.

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Almost nine years into a bull market, you'd think the swag would have been a little better.

Among the exhibitors, the biggest surprise was that the stand-alone cannabis sector only had a handful of vendors.

MoneyShow

Cannabis was discussed by several speakers according to the agenda, but investor interest on the ground was not that high. The same held true for cryptocurrencies. There were a few booths, but they were not crowded at any point during my visits down to the Omni Orlando Conference Center.

Then again, The MoneyShow attracts an older demographic, and I suspect that crypto and cannabis are more popular with the late baby boomers, gen X-ers, and millennials who have grown up with digital everything and semi-legalized weed.

To my dismay, I noticed the private placement and "pre-IPO" companies pushing their products at the show.

Look - if someone has a great idea, or, as I saw this week, a "breakthrough mobile app" or "cybersecurity product," they're not raising money by sending pretty models out to an Orlando convention floor to dish out postcards to older dudes in pressed blue jeans. Instead, of course, they're pitching the Sand Hill Road crowd out west in Silicon Valley and calling on the big venture capital funds in Boston and New York.

The same goes for the real estate and oil & gas deals that are pushed at these shows.

There were several single-project private placements for senior housing being pushed, for instance.

Now, I am wildly bullish on senior housing and medical real estate. But you and I can (and most definitely should) invest in them all day with publicly traded real estate investment trusts (REITs) offered by established, registered companies sporting a fully disclosed - and low - fee structure, and that abide by best transparency practices.

Look, if I want to be in oil & gas, I can go out and buy drillers. I can own service companies and even high-yield master-limited partnerships (MLPs) with, again, complete transparency. What's more, I can actually, you know, sell them someday if I so choose.

Like I've said before, I love, love, love illiquid securities. But I'm not a big fan of illiquid, high-cost partnerships. Good grief!

If you ever find yourself on the receiving end of one of these pitches, my best advice is to do what I do, the "reverse Nike": Just don't do it.

There were lots of really nifty ways to lose all your money on display. Something for everyone.

These Were the Most Popular Terrible Ideas

Trading was an omnipresent subject, with lots of instructors and academies peddling their wares. Swing trading is a hot topic every year. The perplexing belief that folks can draw some lines on a chart and successfully trade short-term market movements from home never goes out of fashion.

Absolute Worst

Foreign exchange trading (forex) is always big as well. In just a few minutes a day, the highly liquid, always-awake forex markets allow you to lose three, maybe four times as much money drawing lines on charts as you can with stocks alone. You can even lose your shirt when you're asleep, when some polo-shirted mugger in Shanghai or Sydney fades you.

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You have as much chance of starting in center field for the New York Yankees on opening day as you do of making money with these line-drawing and wave-counting systems. Hope springs eternal... but when it comes to the so-called "systems," your hope of instant dollars should be treated like Rasputin: poisoned, shot, and then drowned.

Listening and talking to folks in the hallways of The MoneyShow, it is obvious that everyone is doing the same thing and expecting different results. Some people call that the very definition of insanity.

Everyone owns and trades the same handful of stocks. The majority still like covered calls in spite of all the evidence that the returns can be ho-hum.

REITs are very popular in the exhibit halls, but no one owns them because they are boring. Of course, REITs have outperformed stocks for over 40 years, but people still find them boring - they'd rather chase elusive short-term gains.

The vast majority of those I spoke with have done a very little investigation into how markets actually work. Seems like they prefer to come to these conferences and have some speaker give it to them for the price of admission.

As we've seen over the past two weeks, some folks have found some very inventive and interesting ways to lose money.

The Late, Lamented "Short Volatility" Trade Was Looming Large

I talked to one gentleman who has been selling a call against his long position in the ProShares Short VIX Short-Term Futures ETF (NYSE Arca: SVXY).

He did pretty well for a couple of years... before a "slight setback" over the past two weeks, when SVXY dropped from 138 to 10. No kidding. This guy said as soon as it settles down and he can get some more money together, he plans to go right back to it. After all, statistically, it has been a winner most of the time. Then again, statistically, you should win at Russian roulette 83% of the time - it's just that 17% can be something of a bummer.

I was asked about volatility products by some folks who recognized me in spite of my incognito tropical shirt and blue jeans.

Ideas

I told this fellow and his friends to write down what I was about to say, as it would save them more money than anything else they learned during the week.

"If," I learnedly opined, "there is algebra in the prospectus, throw the prospectus in the garbage can and walk away."

You see, in markets, algebra usually means there is a decent probability that whatever you're looking at can blow up when the math meets low-probability events.

I will continue to go to The MoneyShow if for no other reason than to find out what the charlatans and miscreants in the industry are up to so I can warn folks to stay away.

And of course, I like to know what individual investors are thinking and doing, and what mistakes are the most widespread.

Mostly, the key missteps seem to be over-trading and doing what everyone else is doing, but sometimes, as we've seen with the terrible idea of selling volatility through exotic derivatives and leveraged exchange-traded products (ETPs), folks can come up with a level of expensive foolishness that surprises me.

I'll still enjoy a couple of nice steak dinners with old friends, but hopefully the swag haul of clips, pens, and notepads improves next year.

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About the Author

Tim Melvin is an unlikely investment expert by any measure. Raised in the "projects" of Baltimore by a single mother, he never attended college and started out as a door-to-door vacuum salesman. But he knew the real money was in the stock market, so he set sights on investing - and by sheer force of determination, he eventually became a financial advisor to millionaires. Today, after 30 years of managing money for some of the wealthiest people in the world, he draws on his experience to help investors find "unreasonably good" bargain stocks, multiply profits, and build their nest eggs. Tim tirelessly works to find overlooked "hidden gems" in the stock market, drawing on the research of legendary investors like Benjamin Graham, Walter Schloss, and Marty Whitman. He has written and lectured extensively on the markets, with work appearing on Benzinga, Real Money, Daily Speculations, and more. He has published several books in the "Little Book of" Investment Series and a "Junior Chamber Course" geared towards young adults that teaches Graham's principles and techniques to a new generation of investors. Today, he serves as the Special Situations Strategist at Money Morning and the editor of Peak Yield Investor.

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