Dr. Richard Smith’s TradestopsIs there anyone who has got into Dr. Richard Smith’s Tradestops? Do you recommend it?
Jim Russell
This is a discussion topic or guest posting submitted by a Stock Gumshoe reader. The content has not been edited or reviewed by Stock Gumshoe, and any opinions expressed are those of the author alone.
I just joined Tradestops only to learn about SmartStops.net which seems to have a smarter trailing stop approach. So I joined them too. And when I went to cancel my $1500 subscription to Tradestops with their “30 day money back guarantee” , they are telling me they can’t! Seriously?! And that they can only issue me a credit to other services. I had to cancel my credit card to dispute this! Not good business. I checked with SmartStops and they say you can cancel at any time and do it online as well. And you’ll get a pro-rated refund if you signed up for their annual plan.
I bought Tradestops pro for a year starting in late 2018. I used it to identify and invest in several stock in their green zone. Unfortunately, most went red in the market drop at the end of 2018 and I didn’t know the program well enough to use it to set appropriate stops. It was helpful to teach me to use volatility to evaluate where to set stops. It recommends a 1VQ (Volatility Quotient) stop, but I prefer setting it tighter, especially for stocks with a gain. One good point they make is to reinvest in stocks with gains greater than 1 VQ which tells you to basically ride your winners.
One flaw I found was the conflict between the optimal portfolio setup based on VQ and the recommended increased additional investment recommended when a stock gain exceeds its VQ. When that stock has a high VQ it means your portfolio will necessarily take on more risk if you follow that process.
On the negative side, when buying the various stocks that were in the green zone I put too much trust in their program and did not research them as thoroughly as I should have which resulted in some questionable buys. It was a painful learning experience. Ultimately it didn’t give the performance I expected during the time I had it so I did not renew. My overall impression for Tradestops is it probably works better in an up market than one that’s trending down or sideways. I’ve had better results since cancelling by digging deeper into fundamentals like gross margins, ROIC, cash flow, etc.
The Billionaire’s portfolio sounded interesting so I took a free look, but didn’t see any value. It didn’t seem like their information was any more timely than what you could find on your own. Here’s one source that shows who bought, how much and when- https://www.gurufocus.com/stock/PLAB/guru-trades
Also, their stock picks didn’t seem that unique.
I get more value from Stock Gumshoe articles and comments. Thanks!
I compared both Tradestops and Smartstops. Found SmartStops protected more of my profits. I also liked that I could have a 2-way broker integration so not only could I import my portfolio from TD Ameritrade, with SmartStops I could also easily send my stop orders across.
I just learned the Dr. Richard Smith left Tradestops and TradeSmith. And you can tell by their website which has removed all references to him. He’s building something new at RiskSmith but can’t really tell what it will be about yet. I’m using SmartStops.net and seems to have better algo’s the Tradestops and hear they are moving into machine learning/AI for their next round of algos.
I’ve heard good things about SmartStops as well. Since I just like using the volatility-based stops as a rough guide (an improvement over basic 20% stop losses), I don’t worry too much about the precision of the trading signals.
It seems Tradestops is owned or affiliated with Stansberry Research now. After cancelling their True Wealth newsletter, I received a mail solicitation with their cover letter and a transcript of an interview with Steve Sjuggerud. It hawked the advantages of Tradestops Pro, especially how it will guide you through the Melt-up/Melt-down and could have improved the performance of a number of their newsletters. Shucks, “it’s possible to amplify the returns of your True Wealth model portfolio by more than three-to-One!”( Back tested 20 years).
The care with the more expensive Stansberry products. They will not do cash refunds, only in-house credit to their other products. Save screen shots of policies/conditions when buying any of their products.
I am getting less and less impressed with the polution that is found on the Tradesmith services and info that is provided nowadays. I believe that since the departure of Dr Smith, the thing has become another Agora type of service. I am not saying that their analysis of ARK is not without merit. It is more where this assesment is leading us after reading it. See below what was sent today, although we are open to critical analysis, to me, it looses all its objectivity when they propose a bait at the end of their analysis. I personaly am very impressed with ARK results in the past few years but my point here is not to defend ARK investments rather it is about the loss of confidence in Tradesmith’ s approach towards its clients.
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Received 23 March 2021, 1731h Eastern Time:
ARK’s Latest Tesla Target is Completely Nuts (With Zero Incentive to Be Rational)
Tesla’s share price — which closed 24% off its highs yesterday — saw a nice little bounce (though still down 24%) after ARK Investment management released its latest Tesla price targets for 2025.
The targets are not just unrealistic, they are laugh-out-loud unrealistic, almost to the point of being nonsensical. They offer three levels:
“Bear case”: TSLA reaches $1,500 by 2025 (123% gain from the March 22 close).
“Expected value”: TSLA reaches $3,000 by 2025 (348% gain from March 22 close).
“Bull case”: TSLA reaches $4,000 by 2025 (497% gain from March 22 close).
For Tesla to fulfill the ARK bull case, it would need to have a greater than $3 trillion market cap in four years. The “expected value” case is a slightly lower hurdle, suggesting a market cap above $2 trillion.
Tesla, as of this writing, still doesn’t turn a profit by making cars. Its profitability to date comes from selling regulatory credits.
Meanwhile, the market cap of Volkswagen — either the No. 1 or No. 2 automaker in the world by volume, routinely competing with Toyota — is less than $200 billion as of this writing.
Here is another way to look at it: The total market cap for the 10 largest automakers in the world by valuation, excluding Tesla, comes to about $915 billion.
So, ARK expects Tesla — which had less than 1% of global auto volume in 2020 — to be worth more than double the total present value of the top 10 automakers in the world by 2025 — as an “expected value” case — and more than triple the top 10 as a bull case.
Again, this is not just outlandish — it is nonsensical.
In the past, we have joked that, in order to justify its loopy Tesla bullishness, ARK was factoring in the prospect of self-driving cars on Mars.
It turns out our joke was merely half a joke. The ARK price targets for 2025 are based on the assumption Tesla will dominate the self-driving taxi business — which, of course, does not exist yet — along with assumed production volumes of 5 million to 10 million vehicles per year.
Meanwhile, Tesla delivered fewer than half a million cars in 2020, which means ARK is assuming a Tesla production ramp-up of somewhere between 900% and 1,900% — while somehow maintaining profit margins that justify a valuation 10 to 15 times higher than Toyota’s or Volkswagen’s (automakers who can already produce 10 million cars a year) — and further assuming Tesla will beat all other competitors to self-driving dominance, while pioneering a business model that doesn’t exist yet (the self-driving taxi business), in the face of self-driving challenges far more thorny than expected not just for Tesla, but the entire industry. (At the rate we are going, it could be 2030 before self-driving cars are well and truly a thing.)
In the real world, it remains possible to fool Tesla’s self-driving software with a piece of black electrical tape applied to a road sign.
Pranksters demonstrated this by using a piece of tape to modify a sign that said SPEED LIMIT 35 MPH in such a way that Tesla’s cameras interpreted the “3” as an “8,” causing the vehicle to auto-accelerate to 85 mph in a 35-mph zone.
Elon Musk’s response to the above news on Twitter — we kid you not — was to reply with two laughing-face emojis: No text, and no sign of concern — just the two emojis.
Adding to the sense of “can this actually be real,” the wildly inappropriate Twitter response from Tesla’s CEO — or, Technoking, according to the recent SEC filing — came in the immediate aftermath of an incident in Lansing, Michigan, now being investigated by the National Highway Traffic Safety Administration (NHTSA), where a Tesla drove into a parked police car.
Here is the reporting from WLNS.com, the website of a local news station:
Michigan State Police said a Tesla on autopilot drove into a Lansing area trooper’s patrol car.
It happened around 1:10 on Wednesday morning as the trooper was investigating a car vs. deer traffic crash on I-96 near Waverly Rd. in Eaton County.
MSP said while investigating that crash with their emergency lights on, a Tesla on autopilot drove into the patrol car…
Laughing emojis indeed: This whole thing is nuts, and reminiscent of a zany comedy sketch. For those old enough to remember it, one can almost hear the “Benny Hill” theme playing in the background.
Then we remember there are true-believer investors with the bulk of their life savings wagered on Tesla, and we don’t know whether to laugh or cry (or both).
But, if you do have any money in Tesla, we urge you to erect a “volatility wall” now. ARK might need to act zany and irrational, but you don’t. Go here to start protecting your TSLA shares — and any other stocks that ARK might get their hands on.
In our view, the ARK price target is a form of rationalized insanity based on the fact that ARK is trapped.
You see, the entire ARK business model depends on the assumption that the sky-high valuations of stocks they own — not just Tesla but many others — will stay sky-high for the duration.
Not only that, in order to keep the game going, the valuations of these companies cannot just hang out around the moon; in order for ARK to keep delivering outsized returns in its ETF vehicles, those valuations have to soar well past the moon, far out into the solar system, and wind up on Mars.
As an investment shop, ARK has zero incentive to be rational.
Being rational would mean admitting that the entire speculative tech landscape got pumped up by trillions of dollars in emergency stimulus amid a “lower for longer” interest rate backdrop, via one-off pandemic conditions that will not be repeated.
Being rational would further require admitting, openly and honestly, that many of ARK’s favored names (including Tesla) could see their share prices fall dramatically from their peaks, by as much as 50 to 70% or even more.
Even the mighty Amazon saw a drawdown of roughly 95% between December 1999 and October 2001 — this is just the way of things.
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But ARK does not have the option of being rational, you see, because acknowledging rationality would effectively be the same as telling their investor base to sell, which would potentially accelerate a tech valuation collapse driven by a powerful economic recovery (real growth crowding out speculative fever) and rising long-term yields destroying the “lower for longer” case.
In a strange way, then, the ARK price targets for Tesla are completely rational — but rational relative to the situation ARK is in, not the trajectory of Tesla’s share price over the next few years.
ARK has no business incentive to be logical with respect to Tesla’s prospects, and very strong incentive to perpetuate a fantasy on the hope that things miraculously work out; and so that is what they do.
One of the reasons we pound the table on this subject is not to dunk on ARK or make hay from their folly, but because we don’t like to see ordinary investors getting hurt.
Our strong hunch is that, when all is said and done, investors in the ARK family of ETFs will have collectively lost a larger sum than they gained, in terms of total absolute dollar amounts; a result like this is possible, or perhaps even likely, because the vast majority of billions flowed in at the end, when the valuations were highest and the timing was worst.
As for why the Technoking of Tesla (Musk, per his own anointed title) is posting laughing emojis in response to existential business risks, we’ve got no answer for that one — other than the possibility he is starting to crack under stress.
Until next time,
Justice Litle
Justice Clark Litle
Chief Research Officer, TradeSmith
P.S. ARK’s valuations for Tesla are laughably unrealistic.
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