When you read the contents of link, the below starts to make sense.
dockets.justia.com/docket/court-txndce/case_no-3:2008cv01054/case_id-177907/The following fictitious dialog is a fun summary of some key ideas that have developed in the Yahoo compoundstockearnings forum, posted about a year ago.
Tom
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From: compoundstockearnings@yahoogroups.com
Sent: Wednesday, September 10, 2008 6:51 PM
To: compoundstockearnings@yahoogroups.com
Subject: compoundstockearnings CSE Seminar ... No Silly Questions!
The following client email from the September 6 2008 Cow Report revealed that Joe Hooper requires 2-day Intensive Seminar attendees to refrain from asking silly questions.
We can play a game in this topic. Let's post some sample questions that Joe would probably classify as silly / stupid.
Tom
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Joseph:
On the first slide of your two-day seminar, I believe you meant to say "No question is too silly."
Right now, it came across like
"No silly questions."
Thanks.
CS
Dear CS:
Nope, it means exactly what it says. We don't take stupid, silly questions from those attending our Seminars. Those are questions that one just wants to expound on to indicate their level of intelligence...folks attending the seminars don't care for those kind of questions that just interpreted the Seminar...people paying three thousand dollars or more for the 2-Day Intensive Seminar don't want to hear how someone made 5% over the last year.
Thanks,
Joseph R. Hooper
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From: compoundstockearnings@yahoogroups.com
Sent: Saturday, September 13, 2008 2:03 PM
To: compoundstockearnings@yahoogroups.com
Subject: compoundstockearnings Re: CSE Seminar ... No Silly Questions!
Silly Question #1:
Why has my account earned all this income, yet the Account Value has continued to decline?
Joe:
We don't take stupid questions like this anymore. We are tired of answering this question. Any moron can see that it's the monthly cash flow from selling covered calls that grows the account into millions of dollars by compounding over time.
Client:
But I have been following the CSE rules and my account Market Value has gone nowhere but down, even though I have earned 3% cash income per month. I have TSS'ed successfully on declining stocks with good income. But some of the stocks have shot up so I would need to buy back the call for a big loss. Sometimes I have been able to restructure the position with an SSR to close the position at break even, but just as often the stock has gone down again for an even larger loss. Lately I have been earning a smaller percentage income per month, even though most of my cash is invested. What am I doing wrong? Who is making money with this system?
Joe:
Look, we have told you over and over again that this system works. The "Want Proof" section of the CSE website shows irrefutable proof that thousands of CSE clients are dramatically growing their accounts every year. We have been making these returns for years in our own accounts.
Client:
So why does my account's Market Value continue to decline? I am following the rules.
Aaron:
Your problem is that you are thinking like Main Street. Your brokerage statement Market Value accounting is flawed because the calls that you have sold for cash are subtracted from the total. With this system you will not be buying back the calls so there is no need to subtract the call values. The account Market Value looks a bit sick but your asset base is worth considerably more than stated. Your asset base will continue to build from all of this cash compounding. On the rare occasion you need to buy back a call for a loss, you should add the loss to the cost basis of the stock instead of subtracting from your income gains, which will further increase your asset base value.
Joe:
Just trust us. Thousands of our successful clients can't be wrong. Once you become efficient generating cash with covered calls, you can really crank up your cash returns with LEAPS.
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From: compoundstockearnings@yahoogroups.com
Sent: Friday, September 12, 2008 11:09 PM
To: compoundstockearnings@yahoogroups.com
Subject: compoundstockearnings Re: CSE Seminar ... No Silly Questions!
Silly Question #2:
Joe, what ever happened to your CSE Fund, where you heavily promoted and boasted that you were going to take your $40,000 account and grow it to $4 or $5 million in 8 years, by using all of your own CSE trading strategies? I understand that after one year, the $40,000 account had dwindled down to approximately $35,000. Joe, what happened?
Joe:
I don't know what you are talking about. This is a stupid question ... who has a good question?
Client:
Hold on, Joe. Do you remember Herd Talk #11 that explains the CSE Fund?
Aaron:
Oh, these were stocks that were autotraded for clients. The SEC rules disallowed autotrading, so we had to discontinue the program.
Client:
That doesn't make sense. Autotrading was a different program in which you traded client accounts. With the CSE Fund, you invested your own money.
A client also captured a video from the CSE website showing Joe and Aaron promoting the CSE Fund. After CSE discontinued the CSE Fund and removed the video from its website, the client posted the video on YouTube along with the final brokerage statement showing the account value of $35,000. YouTube reports that "Compound Stock Earnings Seminars Inc" has removed the videos with a Copyright claim, however it looks like the videos have reappeared; search for "CSE Fund". Why do you not want clients to view the videos?
Joe:
This is a very silly question. Let's move on.
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From: compoundstockearnings@yahoogroups.com
Sent: Sunday, September 14, 2008 8:06 AM
To: compoundstockearnings@yahoogroups.com
Subject: compoundstockearnings Re: CSE Seminar ... No Silly Questions!
Silly Question #3:
I have subscribed to the CSE "Covered Call / LEAPS Selections" email service. I understand that these managed trades are executed by CSE in your own accounts. Are you trading in real-money or virtual accounts?
Joe:
Well of course we are trading real money. This is a stupid question. Frankly, I am offended by your question. We put our money where our mouth is and walk the talk.
Aaron:
One caveat ... if we are fully invested and spot an opportunity, then we send out the email on a virtual position.
Client:
Please forgive me, but I have monitored the CSE trades in the optionsXpress "Time and Sales" record. I am usually unable to locate the CSE option trades in the record at the stated price or time. All of my trades appear in the record, so why are the CSE trades missing?
Joe:
Uh, okay, maybe it's not such a stupid question after all. Mark Sormberger trades the CSE selections. Mark, why don't you answer the question.
Mark:
That is an interesting question, but due to the large sum of money that I have in the market, I trade on what is called the dark book. Most public traders only see what is published and is shown as far as the bid and ask quotes. While I still trade by those quotes, most of my trades now execute on the dark books via special software. This allows me to make trades that the market never sees or records. If I were to put out a normal trade of 10,000 contracts on the open market, it creates a pricing problem. So the dark book is held out only to high net worth people and institutions. There is some talk about opening some of this to more people in the future.
Client:
Okay, let me get this straight. All trades of CSE clients are visible in the "Time and Sales" record, but none of the CSE trades are visible, due to this "dark book" trading. I think that CSE's real-money trade demonstrations would be more convincing if trades were done out in the open without the dark book, the way that all CSE clients need to trade.
I have also observed numerous instances of trades that would be impossible with a real-money account. A call that was sold, bought back, and then bought back again a few days later. A covered call position was opened and the stock was sold a few days later, before the call expired and without buying it back.
Joe:
Uh ... I don't know what you are talking about. Show us the data and we can get back with you.
Client:
Okay, but I have talked with Aaron before about CSE trading errors. He has stated that he would look into it, but I never heard back from him.
Do you publish a historical summary record of the CSE trades so clients can observe and learn from them, and see for themselves how your accounts are growing?
Joe:
Well, no. But we do publish a summary of closed LEAPS positions in the weekly Cow Report.
Client:
What about publishing the status of the open LEAPS positions?
Joe:
That would be stupid. The open positions are not important since we never sell a position for a loss.
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From: compoundstockearnings@yahoogroups.com
Sent: Sunday, September 14, 2008 6:39 PM
To: compoundstockearnings@yahoogroups.com
Subject: compoundstockearnings Re: CSE Seminar ... No Silly Questions!
Silly Question #4:
The CSE TSS management technique involves selling a Deep-in-the-Money call with far out expiration and low time value decay, with the goal to buy back the call at a lower stock price. Isn't this very similar to sell the stock and buy back the stock at a lower price?
Joe:
I am rolling my eyes and shaking my head about your Main Street thinking. This is the kind of speculative mindset that Wall Street losers do all the time. The TSS method is vastly superior. With the CSE rules, we never sell a stock for a loss.
Client:
Yes, but if we sell the stock and buy it back at a lower price, then we have earned income and we still own the stock. The sale and buy points are the same as the TSS. This "Stock TSS" method seems a lot simpler and just as profitable compared with the TSS. What am I missing?
Joe:
Selling and buying stock is speculative. The TSS technique sells a call to the speculator and we benefit from time value decay.
Client:
However, the chosen call has very little time value decay. We are depending primarily on stock price action, the same as selling and buying back stock. Also, the call has a lower delta so we benefit less from a decline in the stock price, and the call sale & buyback has a larger bid/ask spread to overcome before becoming profitable.
Aaron:
With the TSS we do not care whether the stock goes up or down. If the stock price shoots up after we have entered the TSS, then we have the SSR management technique to recover.
Client:
The SSR technique is also compatible with the "Stock TSS" technique. If the stock price shoots up after we have sold the stock, we can easily transition to an SSR position. The reposition operation involves selling the stock and buying a DITM call with the available capital. The Stock TSS method has already sold the stock, so it is easy to transition to SSR at any time.
Another advantage of the "Stock TSS" is if the stock price falls steeply, we would eventually activate a single stock sale, which we would maintain until the Biased V forms for a stock buyback, no matter how low the stock price were to fall. This gives us the advantage of a sort of "stop loss", with the expectation that we would continue to monitor the stock price for a buyback at the lower price.
Joe:
The TSS is the foundation CSE management technique. You can't mess with it. The training for how to manage a position with the TSS is the main reason you clients are paying $3250 to attend the 2-day Intensive Seminar. Who are you to suggest such a stupid idea?
Client:
Well that sounds like a silly question.
