Phil Town’s Rule #1, Part #1

As cynical as I am, there are still forms of human gullibility that surprise me. For example, I am forced to conclude that those Nigerian emails promising tens of millions of dollars must somehow snare a few people, otherwise they wouldn’t get sent. And don’t get me started on Bernie Madoff. I guess it is my dim view of my fellow man that has me scratching my head. I just can’t believe anybody is really that optimistic.

So you will understand how stupefied I am at the sales of the many books that claim to contain a sure-fire way to get rich in the stock market. Individual titles come and go, but there always seems to be a few members of this sub-genre haunting the bestseller lists. (Although at the moment they are relatively less popular. Go figure.)

Hundreds of thousands of people spend hard earned money on these books. Difficult as it is for me to contemplate, it seems inevitable that some of those people read this blog. So with uncharacteristic patience, I am going to review one of the more popular of these tomes, Phil Town’s Rule #1, The Simple Strategy for Successful Investing in Only 15 Minutes a Week. I will do this in several installments, and, just to make it clear now, I will not have anything nice to say.

Hard sales figures for books are hard to come by, but it is clear that Mr. Town has done very well by this, his first book. He can safely be put into the growing club of those who have become rich by selling advice to others on how to become rich. Somebody should tell the Nigerian scammers about this. If only they charged money for their emails.

You do not need to open Rule #1 to know that it most certainly does not contain a recipe for wealth. None of these books do. They can’t. If this is not immediately obvious to you, consider the following.

Suppose you stumbled on a “simple strategy for successful investing” that allowed you to consistently make money in the stock market. Of course, you wish to profit from your discovery, and two possible ways to do that occur to you. You could a) make millions by writing a book that explains your method or b) make billions keeping your mouth shut and running a hedge fund. Which would you choose? Hint: a billion is a thousand millions.

Put another way, suppose you developed a way to play golf especially well. Would you teach it to others at the local country club or join the PGA Tour?

The bottom line is that everybody who can really beat the market does that for a living. They do not write books. And they rarely give interviews. In fact, people with effective schemes for making money in the stock market are generally very secretive about how they do what they do. If everybody knew and used the trick(s) they wouldn’t work so well. Indeed, Madoff could get away with what he did because it is common for hedge funds to disclose very little about what they do, even to their own investors.

Investing may be the ultimate “those that can, do, those that can’t, teach” subject. Because doing just pays so darn well. I know I am being a wet blanket. I just can’t help myself.

Still, I am sure that there is an optimistic fool or two reading this that hopes that maybe Rule #1 will be the exception. Town’s picture on the cover just looks so trustworthy. So in the rest of this series of posts I will methodically examine his simple strategy and I will show how Phil Town is the only person who will ever make a dime from it.

[Links to parts of this review: Part 1, Part 2, Part 3, Part 4, and Part 5]

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