New York, New York (Time Magazine), Monday, May 25, 1959, 12:00:00 EDT
RE: A Financial Documentary of the Astounding Success of Nicolas Darvas
Dear stock investor,
It was the last early summer of the 1950s.
The Darvas brother and sister dance team were as entrenched in the media then as Circe de Soleil is today. Their graceful dances delighted television viewers in Europe and America.
The Darvas name was regarded with respect in show business circles in Las Vegas, New York, Toronto and far overseas. Nicolas Darvas had cemented his name in the public conscious as one of the best dancers worldwide.
Celebrities were shocked when a full page article in Time Magazine covered Nicolas not as a dancer but as a rich stock investor "who ignores tips, financial stories and broker’s letters." This was followed with a 1960 book entitled, “How I Made $2,000,000 In The Stock Market.” The book fell out of favor when business schools began teaching that the market could not be beaten by reasoned analysis.
And by The Way, He Made $2.5 Million in 6.5 Years.
Away from the public hidden underneath arcane math exists recent evidence from the very top of investing that Darvas was correct. See ** Moskowitz, T., Cliff Asness and Lasse Pedersen, “Value and Momentum Everywhere,” Journal of Finance (2012).
World class performance comes from world class brains. Darvas studied at the University of Budapest — the most erudite of Hungary.
He was trained not just in classical dance but also as an economist.
Economics paid less than dance. But he was a brilliant scholar with precise organization.
This allowed him to precisely document his agonies and elations on a trade-by-trade basis, “I decided I had been missing a good thing all my life. I made up my mind to go into the stock market. I have never gone back on this decision.” -Nicolas Darvas
Learn What Worked from A Major State University Finance Professor!
You can read his book but will you really understand it? Not likely.
I don’t want to push your buttons. I am just pointing out that most of my adult life has been a sole minded dedication to mastering finance.
Just read my Udemy profile. I am a finance professor at a major state university — The University of Puerto Rico Graduate School of Business. We are the leading business school in the Caribbean.
Look Over My Shoulder as I Dissect Nicolas Darvas’ Secrets For You …
Thousands of MBA students grasp the deepest principles of finance in my classes. They work in diverse industries from pharmaceuticals to Wall Street.
I train these professional financial managers. And I can train you to go toe-to-toe against the wolves of Wall Street.
Level the playing field with the skills you will learn in this course. And you will improve over the years to come.
I am your ultimate financial coach. I know how to guide you through chunks of financial knowledge that are hard for all.
That’s because I have trained thousands of young adults in finance. Let me guide you through the black forest.
Here Are The 25 School of Hard Knocks Worst Challenges for Beginning Stock Investors …
Nicolas Darvas faced many of the same challenges at the start that I have. That is part of the reason that his classic book rings so true for so many stock investors in-the-know today. Here is a sample of difficulties Darvas had to overcome.
CHALLENGE #1: BLIND LUCK. The first profit in stocks Darvas landed was not from his own thought process making him naively believe investing was easy.
CHALLENGE #2: GOSSIP. Nicolas Darvas in realizing that he knew nothing about stocks seeks the wisdom of random strangers leading to a chaotic portfolio from asking “Do you know a good stock?”
CHALLENGE #3: MISFEASANCE. Neither casual acquaintances in his travels nor brokers know the secret to making money in stocks.
CHALLENGE #4: COSTS. Brokerage commissions and transfer taxes decimate the initial stock market returns of Nicolas Darvas — and he realizes he must control them.
CHALLENGE #5: OVER-TRADING. Darvas fidgets for fast profits spreading his stake between upwards of thirty stocks — degrading control and tracking while ramping up account depleting fees.
CHALLENGE #5: LOSER-LOVE. Nicolas became attached to particular stocks giving him the proclivity of holding loss exploding falling shares.
CHALLENGE #6: GAMBLERS-ANNONYMOUS. On stage this trained dancer was the pinnacle of disciplined control. Chasing a fast buck over-trading stocks was quickly losing him two hundred dollars a day.
CHALLENGE #7: GURUS. Nicolas Darvas was attracted to advisory service that made speculation sound like a snap and fed his need for urgently making money fast but recommended falling stocks. Have you been spending hundreds or even thousands on investment newsletter financial advisory services? If so, you have probably asked yourself, “where are all those hundred percent returns promised in the glossy marketing?”
CHALLENGE #8: DATES. The famous dancer does not know when to enter the market. This pulls eleven thousand dollars down to five thousand eight hundred.
CHALLENGE #9: TIPS. A broker offers up advice in the form of a safe stock based on fundamentals — that drops. Brokers are bad for advice as well.
CHALLENGE #10: PROJECTION. Darvas is quick to blame his broker for mistakes truncating his ability to learn.
CHALLENGE #11: IGNORANCE. Even the greatest dancer in the world is a dunce without an understanding of the jargon making it hard for Nicolas to communicate clearly with his broker — remember that this was before online trading and retail stock investors had to have a broker.
CHALLENGE #12: VISION. Nicolas Darvas quickly realizes that he cannot see the strongest trees in the forest and sets out to find the most strongly rising stocks.
CHALLENGE #13: LIQUIDITY. Darvas has a hard time reselling his small stocks in the chaotic discontinuously trading over-the-counter (OTC) market.
CHALLENGE #14: INSIDE-IDIOTS. The Hungarian trained economist gone world class classical dancer begins tracking inside trades of the largest executives. He quickly finds that insiders don’t know any more about the direction of the stocks of the firms they manage than you do! And we confirmed this “too-late-too-soon” factoid in Brown, S., Cao-Alvira, J. & Powers, E. (2013). Do Investment Newsletters Move Markets? Financial Management, Vol. XXXXII, (2), 315-338.
CHALLENGE #15: OVER-CONFIDENCE. Fundamental filtering as is done widely with Value-Line leads Nicolas into the limbo land of false-hope.
CHALLENGE #16: REGRET-AVOIDANCE. If Darvas were alive today, he would be glued to the screen for fear of a loss on his stock. He wastes massive amounts of energy over-monitoring his equity returns.
CHALLENGE #17: TOPPING-OUT. Buying into the very top of a run burns Nicolas out so he focuses on price consolidations he terms “boxes.”
CHALLENGE #18: EXHAUSTION. Chasing stocks just because they rise brings his attention too late by the time the broker calls.
CHALLENGE #19: COIN-FLIP. Making more on profitable trades than is lost on losers becomes his mantra as he realizes that he is never better at picking a winner than a simple coin toss — but that is pretty darn good!
CHALLENGE #20: DATA. Darvas realizes that he must have access to high quality data on not just price but also volume.
CHALLENGE #21: PAPER-TRADE-THIS. Nicolas eventually figures out that paper trading gets him nowhere — he has to be emotionally involved.
CHALLENGE #22: DIONYSUS. In embracing the central truth that stocks owned and watched make unexplained price collapses — and in so realizing understands that he is as knowledgeable as any guru.
CHALLENGE #23: TAX-PARALYSIS.
Many people hold on to stocks for more than a year for a lower tax rate on capital rather than short-term gains. He decides that he has to sell even if the taxes on his gains will he higher.
CHALLENGE #24: BUY-&-CRUMBLE. Holding stocks for very long periods of time doesn’t work for Nicolas Darvas — buy-&-hold strategies he decides are for gamblers,
CHALLENGE #25: CYCLE. Nicolas notices that stocks cycle from small to large in and out of fad creating even less predictability.
Darvas was gifted enough to find his own way up and out into the light from deep within his initial darkness in Plato’s cave with secrets he willingly shared to those even unborn who could understand.
Here’s 15 Cures for The 25 Worst Challenges for Stock Investors …
CURE #1: TABLES. Tracking the relationship between volume and price allowed Darvas to identify stocks with sudden explosions of volume.
CURE #2: MOMENTUM. Simply buying stocks that are rising saves Nicolas Darvas.
CURE #3: TRADING-VOLUME. The highest money makers are stocks with fast rising prices on accelerating volume.
CURE #4: BUSINESS. Darvas treats his stock investing as a business by giving it the required attention.
CURE #5: CHANNELS. Trend consolidations map entry and exit points for Darvas.
CURE #6: BUY-STOP. Runaway stocks are captured from above by a simple limit stop buy order.
CURE #7: SELL-STOP. A simple sell limit stop-order saves Nicholas Darvas from being wrong half of the time.
CURE #8: TEST-PURCHASE. Test purchase of 4 or fewer stocks work for Nicholas Darvas like risk cutting little experimental oil wells in wildcatting.
CURE #9: GODZILLA. A slumping stock market can stomp out even the strongest stock with the same dynamic as when Bambi Meets Godzilla in 1969 — watch the classic movie on YouTube for more.
CURE #10: BOTTOM-LINE. Sharply up trending earnings foretell the strongest of the strong rising stocks on pumped up volume.
CURE #11: NEWCOMERS. Overtime the most important hunting ground for Darvas is new industries — these are more important than specific products within those sectors.
CURE #12: MARGIN. Leverage dramatically increases the portfolio beta and the gain for Nicolas Darvas — today we use deep in the money call options.
CURE #13: SAFETY. A critical rule becomes the resolute decision to never feed passive losses with active income.
CURE #14: ENTITY. Nicolas Darvas could have used a corporate structure to reduce taxes — learn more inside.
CURE #15: ISOLATION. Independent thought becomes the saving grace for Darvas he can only find through solitude as he stops all gossip and chat calls.
Once Darvas understood what worked he began to reap huge benefits…
Nab These 5 Advantages of Curing the 25 Worst Stock Investing Challenges
ADVANTAGE #1: SCHOOLED. Develop a broad financial vocabulary to condense investment data into your Holy grail to finding the fastest rising momentum stocks.
ADVANTAGE #2: CONCENTRATION. Focusing on no more than ten  stocks at a time kept Nicolas Darvas attentive to just his most worthwhile finds.
ADVANTAGE #3: PROFICIENCY. Mastering a compact group of essential skills gives you massive advantages as was so for our dancing economist.
ADVANTAGE #4: PEACE. Maturity as a stock investor brings the wisdom of simply reversing, and learning from, mistakes. This gives you an unexpected benefit of having your safety net in place.
ADVANTAGE #5: WORTH.
And just as Akhrot becomes the richest man in Babylon so did Nicholas Darvas continue to enrich himself with the knowledge herein.
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“I started by taking a finance refresher with Robert Schiller’s openYale course on Financial Markets. Then through a book recommendation for How I Made $2,000,000, I came across your Nicholas Darvas course which I thoroughly enjoyed. I think its your teaching style coupled with the simplistic message of volume, earnings, and making decisions as an individual that intrigue me. My finance courses in the past would teach you about equations and fundamentals, but you never encounter any real coaching on how to effectively invest.” -Gavin Ripley, MBA North Carolina; March 15, 2015
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Time Waits for Nobody!
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This material will take you time to learn. The longer you wait to learn this the more opportunities you will have missed.
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Dr. Scott Brown, Associate Professor of Finance of the AACSB Accredited Graduate School of Business of the University of Puerto Rico
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