Larry,
I really like the article links that you have started posting on the site. Could you post some links expressing the other side of view just so we could compare what each side is saying. However I totally agree with almost all the articles that you have posted, I just like to have both sides of an argument. Now on to my main question, what exactly are derivitives and what are the dangers in them?

Thanks,
Gary

Gary,

I’m glad that you are finding value in the links to articles of interest. Every morning (I get started very early) I read about five or six newspapers, visit many financial web sites, and read quite a few articles (I used to teach an Evelyn Wood Reading Dynamics seminar, so I’ve learned to read pretty fast).

A few of the articles that I find interesting or helpful I’ll post as a link on the Web site. For example, as long as Richard Russell is writing (he’s 78 now), and as long as he’s willing to share a free comment or two for all to see, I’ll post a link to what he has to say. The man is just a fountain of wisdom and insight, and one of the half dozen greatest Dow Theorists who ever lived. People like him don’t come around very often.

I guess I rarely find a point of view that I think will damage people’s financial health to be very interesting. I frequently try to remind people in the Smart Money Report and on this forum to do their own independent research and due diligence. And if people want to know about the bearish case for gold, or the bullish case for housing, or that options are bad – whatever it may be – there are countless sites on the web where they can find an opposing point of view. I trust people are intelligent enough to know that, and I can only hope that my trust is not misplaced.

I would welcome people who find an article or a link that expresses another point of view to post it on the forum. Ben did that yesterday. He posted an article written by someone who made the conventional wisdom case for why there is no real estate bubble. It’s always interesting to have those kind of discussions.

A derivative is any kind of financial instrument who’s value depends on the value of the underlying security or commodity. Exchange-traded options and futures are derivatives. These types of derivatives are not considered dangerous because they are traded on organized exchanges and are regulated. But there are other derivatives that are private contracts between two or more parties that you would never hear about.

For example, let’s say you were looking to buy a certain house a year from now. And let’s say you think the price may go up by then and I think the price may go down. You theoretically could sell me a put on that house. I would pay you a premium, and I would have made a deal with you to sell you that house at today’s prices a year from now. If the price of the house goes up, you win. If the price of the house goes down, I win. So it works just like any other option.

Well, what I just described goes on between financial institutions and corporations all the time. They make deals with each other to engage in derivative transactions on a large scale. Sometimes they’re doing it as a true hedge, but sometimes they’re just speculating. It’s considered dangerous by some because these transactions are not regulated and there is the risk that one party or another may not be able to fulfill their part of the obligation. If enough institutions default on these kind of deals there could be widespread negative consequences.

Larry

Kind of off the investment topic... but what would you recommend for someone that wants to learn to read faster?

I also would like to learn how to read faster. I dislike reading simply because I read slow and my mind wanders.

Heath and David,

I recommend the classic Evelyn Wood Reading Dynamics course. If you do a Google search or go to eBay, you may be able to find a deal on one. There are other courses out there, and they may be good, but I’ve never tried them.

The reason that your mind wanders when you read and you have to go back and read the same thing over again is that you’re just reading at a fraction of the speed that you capable of. One of the problems is that most of us were never taught to read properly.

What usually happens is that early in elementary school they teach you to read out loud and you get used to repeating the words. When you get to be an adult you do the same thing, but you get to be a little more cool about it, so you just repeat the words in your head as you read. Evelyn Wood breaks you of that habit.

Here’s another one – you know how when you were taught to read you were taught not to use your finger? Well, Evelyn Wood makes you use your finger. So there are a lot of bad habits that you have to break, and like anything else, you have to work at it until you develop the good habits. But it’s worth it. When I first took the Evelyn Wood course, I was nothing more than an average speed reader (about 135 words per minute). The last time I was tested (which has been a few years ago), I was reading at over 1200 w.p.m. And if you think that is pretty fast, I know a lady - also an Evelyn Wood student - who reads at over 3,000 w.p.m. There are some people who can literally read as fast as they can turn pages. I’ve heard that President Kennedy was one of those people, and he had his entire cabinet take the Evelyn Wood course.

When I used to do seminars, I would have people who went to college way back when tell me that they learned Evelyn Wood in school. So there actually once was a time that they actually taught something useful in school

Larry

I also took a similar speed reading course in college and went from 300 to 800 wpm relatively fast.

Another program I recently purchased was eyeQ. You might have seen the infomercial with Pam Dawber. I have two of my kids using it (age 7 and 10)and they have about doubled their speed and actually increased their comprehension. The program keeps track of their progress. This program runs on the computer and comes with over 100 books on CD. In my opinion, well worth the money.

Larry,

Tons of thanks! I went to the local library yesterday and found a book about the Evelyn Wood Reading Dynamics course. I finished the book that day. The simple adjustment made all the difference in the world. I am going to order the audio/video program. Wish I would have known it sooner, but better now than never. Once again, thanks.

David

David, I didn't even know that there was a book on the Evelyn Wood course. That's nice to know. When you order the audio/video program, stick with it and do everything it says. Believe me, you'll be glad you did.

Larry

Peter,

It sounds like you're doing your kids a huge favor. I'm not familiar with the particular course that you're referencing, but with the results that you're getting I agree that it's a great investment. There is no telling what kind of dividends it will pay down the road.

Larry