This interview was the result of a phone call between Mike and I in early November. Mike trades the market on a full time basis and enjoys being outside whether it is hiking or snorkeling, visiting his pad in Cyprus, and podcasting on topics of the stock market, in particular the junior AIM market. You can listen to his podcasts here: https://soundcloud.com/doc-h-4
Please tell us about yourself Mike, how you got involved with the stock market, and what your early experiences were?
What got me involved in the stock market? So, I worked in oil and gas, and power, from an engineering background initially. In my working life I’d go and spend times travelling around the country and Europe, predominantly for oil and gas companies and different power companies as well. In that business in contracting it’s a bit of a rough neck game. You eat, sleep, and shit with the same guys, and it’s very industrial based. It’s tough work and tough hours but decent pay. For anyone who’s worked in that business you’ll relate to it, if not then you really don’t – it’s six days a week, seven days a week, and as a young man one of the pearls of wisdom that was shared with me by the upper or older echelons of that industry was to not go and fritter away your hard earned cash. If you’re travelling into Europe or away from home, what’s the point of bananaring [Mike uses this word in place of ‘squandered’] the cash?
That’s quite wise!
So when I was up at these oil refineries, I was up at Shell, Texaco, all these different oil companies, and what I would do is I’d come home and use my wages to then go and buy into these companies or associated companies to where I’d actually been working. There was no rhyme nor reason, no fundamental decision making. I didn’t look at dividends and yields. I literally would go and work at companies and think “This looks pretty slick, they’re making bucket loads of cash, the terms of employment are excellent for the people that are working there”, and so I thought these businesses were going places. They were blue chip companies so they were pretty uninspiring in regards to returns over short periods of times, but they were safe havens, and safe bets that people were taking for long periods of time. So that was my first sort of unsophisticated introduction to the stock market.
That’s quite interesting, so what made you not put it in the bank and instead buy shares into these companies? A lot of people in your situation would fritter it away or put it in the bank and save for a deposit for a house – you did it differently.
Do you know what? It’s hard to say. I think at the time, I used to work with one guy, and his nickname actually was “The Banker”, who arrived to work in a shirt with a really nice jacket on, and he always carried a really smart bag and wore spectacles. You’d get a lot of guys turning up to work in jeans with a jersey, and you know if you’re working on an oil refinery or that environment or in the power industry or out in the field, you wouldn’t generally go to work in a nice pair of shoes, but this guy did. He was very smart and he was always a very well presented bloke, and he would sit and talk about business and finance.
To this day I don’t actually have a recollection of me talking to him about the stock market, but I remember spending a whole summer when I was really young and impressionable, and I swear to this day that it was something to do with him. He was a little guy from Stoke-on-Trent. I don’t even remember his full name; it was that long ago. You’re talking twenty plus years ago.
A curious character!
He was one of those characters that stood out from amongst the rest. Some people would’ve considered him boring because he didn’t drink a lot. But he was extremely astute when it came to political views and business outlook, and I’m going to throw it out there that it was probably something to do with that. It’s fascinated me buying and selling, and it always has done, even from being a little kid at school.
A bit of wheelie dealer then?
Yeah, and some people would say a typical Scouser. Although I get referred to as a Scouser quite a lot, I’ve lived equally between three major cities, so you get referred to as a ‘woolly back’ if you live in the towns. But none the less I was born in Liverpool, so I take it for what it is in the stock market, and I was typical of that sort of character.
Back in those days when I’d get back from Europe from spending two months on the road away I’d be buying cars and selling them on the street, and literally anything else that was of interest to people at the time. So, yeah, I was that guy, that would buy and sell literally anything.
So how did those stocks do that you bought with your money from work? Did you make good money on them?
Do you know what? I watched the whole portfolio of stocks never make more or lose more than 5%, it was totally drab and lacklustre; it went on for a few years.
A few years and you never made or lost more than 5%?
No, but it was all stuff like blue chips. You’ve got to remember as well back then I’d have been checking the value of my shares once a week or so. I wasn’t checking them on a daily or an hourly basis. Sometimes if I worked away it would be once a month. I once worked in Vlissingen which is in the Netherlands, and I worked for Total over there, and I never checked the value of the shares once. I went there for a week and ended up there over three months, so it was one of those situations where I never knew how they were performing, and I didn’t really care because it was more of a long term thing. My goal was to buy these things and in ten years they’d be worth some money. All of these things were big valuation blue chip stuff, BP, stuff like that. I actually made quite a bit of money on BP after that in the Deepwater horizon disaster but that’s a totally different story.
My initial punt on the market or in the market, the initial welcoming into this, was to be those companies that were just not particularly rock and roll; they were well known companies. They were institutionally held, they were in pension funds, and over a five and ten year period it would return handsome gains (or that was the idea).
In my experience I don’t think I saw more than a 7.5% profit or loss on that portfolio, which naturally then became a lot less inspiring as that time went on. Plus, if you go back to then you could probably get 5% in the bank at the time. I can’t remember what the bank returns exactly were but they were decent. You could buy these fixed income or fixed interest policies which were better than what I was getting, so it wasn’t exactly sparking my enthusiasm.
So was this during the 80s/90s?
Yeah, this was the 90s/00s. I was a really young guy back then; I didn’t know what I was doing. There was no rhyme nor reason, other than that I’d spent some time around one or two wise people in a bunch of very unwise individuals. Many of them liked to gamble. I used to work with lots of people, and if you were an engineer, or an agent for these engineering companies, they would never mix with the rough neck individuals.
I did because I found it to be quite interesting to build relationships. A lot of them when finished on a Saturday would go down the pub, have a few beers, and them probably go and chuck £100 on the nags. That was the standard routine for these guys, and I just thought “What a waste, it’s a total waste of time”. I’d get a hangover on Sunday, and I’d bananared my wages, or my wages for that day. They were out the door as quick as you’d earned them.
It seems like although a lot of people get in the market and start punting things you’ve actually bought decent companies, companies you said were making good money, had good employment terms, so how did you end up into the AIM market?
The long and short of it is that a lot of people know that in 2003 I was involved in a really bad accident where I nearly lost my life.
Yes, I can remember you saying previously, that’s not very nice to hear.
And I’d gone to help a friend of mine. He was a young guy and he’d got a really good job for an American company I believe who had got a division out in Austria. They were doing all their overseeing and quality of work and because they were unhappy and because the business was not performing how they wishes, he’d asked me to go into this job and do him a favour and I agreed. The result was that my right leg was hanging off and I was buried under about eight tonnes of masonry and steelworks, so that wasn’t a great experience. But, having said that, I lived to tell the tale, and without that event happening and the trials and tribulations of it I wouldn’t be where I am today. I actually take a lot of positivity from it although it doesn’t sound too exciting.
The result of that was that a few years later these guys realised that the error was on their side and I’d nearly lost my life, so I was paid out a small sum of cash for that injury, as they accepted liability. This is where I came into the market and thought “Now I’ve got a bit more money to go at, we can make a bigger impact, and hopefully see some better returns”. I was ten months into physiotherapy at the time so going off back to my old job wasn’t an option. The funds were low as the income had tailed right off because I was no longer travelling and putting the hours in, and I thought this bit of cash was going to be the saviour.
In essence it really was, but what ended up happening is that I chucked some cash into my existing portfolio, and then it was the razzamatazz of AIM. I think this was probably 2010, and there was a big decline, and a big move up, and we started to see some more interest in stock market around that time, and the glitz and glamour of the AIM world came a-calling. I ended up selling down decent companies and buying shit.
Back then, when the Deepwater horizon thing happened, I started to realise that these black swan events presented a buying opportunity and not a selling opportunity, and that these came far and few between. I remember buying it when everyone else was selling. I’m also sure at the time, it may not be this one, but I’m sure it was always on the bulletin boards talking about Sareum Holdings, and there was a group of investors who’d go on there on a night and discuss it. One day there was a rumour that had broken out that one of these guys had found out, through their pipeline of technology, a cure for cancer. We knew that was a nonsense, and most of the people that would chat on the boards in the evening time would temper the bullshit or excitement from what people would be promoting in the day.
At the time I didn’t realise that back then that all of these loonies came out during the day because they’re trying to manipulate the market, and I didn’t understand that. I was going to work, coming home on a night, reading all this twaddle, and the intellectual guys, who were well versed and knowledgeable on these particular companies would be discussing the stock. After holding that for a little while when this rumour came out it went from around .1p to 4.5p at the highs.
It was insane back then. And the markets were getting frothy in loads of different areas, and these were the days when Gulf Keystone Petroleum [EPIC: GKP] went from 7p to £4, and huge communities of people were of the opinion that GKP would go to £200 and get taken out, and of course that never happened.
Sareum did that move, and Physiomics [EPIC: PYC] at the time was like the poor cousin, and I remember this particular day not going to work, and I’d bought Sareum at .25p or .5p or something, and I’d turned a couple of grand into £7,000-£8,000 in the space of thirty minutes. Now I was feeling really chipper, and then on the same day as I sold that I bought PYC in size, and that thing went up then directly after it! The two were quite similar, they had the same technologies, the same Chairman, so there were big relationships and similarities between the two at the time.
In all that time, if we fast forward to now, all these companies have achieved nothing, but back then the narrative was strong. They were big retail favourite stocks, and you know how they perform because you’ve been around the market, so I made some big money on that, and that really helped the portfolio. That was before I’d been able to inject the size into it that was coming from this industrial injury payment that I was to receive. There were some smart guys on those boards; I knew they were smart and switched on rather than the lunatics that appeared throughout the day.
That doesn’t sound like the bulletin boards I know!
Yeah! Anyway, that was it, and then the Deepwater horizon event happened. I saw that as an opportunity. I had a massive amount of profit in the portfolio, and I was feeling quite good now. I realised I could punt these penny stocks and ship that cash into these blue chip stocks, and if a helicopter crashed or an oil rig caught fire, and it sounds horrible but you could make money. That was my strategy back then, and I was thinking “I’ve nailed this, I’m making good returns, it won’t be long before I’m a millionaire”. That was my view, and I got this payment, I put it all into the penny stocks, and within six weeks I’d lost 65% of my money. That’s when I thought “Shit”.
I’d had the baptism of fire, but I also had this nice fluffy period where you could make good returns. I realised that BP was not helping me out here, because I was haemorrhaging cash in the AIM market, and BP was not going to make the returns I need. I ended up chasing these positions, and started to make poor decisions, mainly because I was uneducated and unsophisticated, but now I was also more emotionally involved in it. That’s pretty much when you’re standing in front of the wall and the firing squad comes out, and you’ve done nearly 70% of your portfolio in. I’d had a decent return from a couple of stocks in the market, the £7,000-£8,000 I’d made on Sareum; I’d also made similar numbers on BP, and then you add in a little bit of compounded growth in, and was enough for a house deposit. Then I put the other money I got in, so then it was a lot of money to me. And I’d gone and spunked 70% of it. I also had this really bad injury that I needed to get over. Life was not an enjoyable place, and it took me two years to understand how I’d lost the money, why I’d lost the money, and what I needed to do to get it back. Then it took another year from then to equalize that position and get back to where I was and to start to make returns. And really, other than a few major hiccups on the way, I’ve never particularly looked back and subsequently gone on to do this for a profession.
So that was from about 2013 you’d gotten over the losses?
Yeah, and the market started trading sideways back then. There were opportunities and swings in the market, but it was nothing like the last couple of years. It was hard work. Much of the way the market trades today is indicative of times back then. It was just hard work to get returns, nothing came easy, and there weren’t these big multibaggers en masse. It was actually a good time to start cutting your teeth on the way the business worked, understanding the motivation for service providers, for example understanding how brokers worked, and understanding the bullshit stories that companies would tell you. A lot of people will remember me from the days back before I was banned from all of these bulletin boards.
You were banned?
I was banned for life!
Just because by that point I’d been through the baptism of fire and I’d gone and taken the hard yards and hard steps in life. I was very vocal about what I believed companies were doing and the level of corruption.
People never like to hear that, do they?
They never want to hear it. I’d been a major voice in Sareum and I’d been a major voice in Sound Oil, which is now Sound Energy [EPIC: SOU]. When that company was put together I was constantly in contact with the Chair of the company. I was researching it night and day, and you get a level of kudos from your peers after you’ve been involved with these forums for a few years and you’ve had a few decent results, and you’ve been quite transparent about the mistakes you’ve made.
I was very vocal about how I thought this was all corrupt. The corruption side of things and the suggestion was always the reason I got into trouble with these moderators because I said it as I found it, and I think they just grew very tired of me as an individual. The personality started to grow a bit too so loads of people were probably reporting me en masse and I was saying why I thought things were really shit. Sound Oil actually hit massive highs, and I didn’t book gains then. There were huge huge gains on the table. I got lured into thinking it was the next GKP, the next Rockhopper [RKH], the next Xcite Energy [no longer listed]. There was a whole bunch of them at the time that had done massive moves and made loads of paper millionaires, and I thought this was going to be the one for me.
I was very vocal, and the information that came from the company and its advisors and brokers was really poor. As a direct result the company went from £30-40 million market cap to £200 million and then collapsed back to where it started and even lower. I’d watched £10,000 go to between £90,000 to £100,000, and back to £10,000 again. Again, it’s those lessons that everyone out there is experiencing, has experienced, or will experience them. But at the time I didn’t know what it really meant, and that was all part of the cycle that I went through.
Do you think that was partly because you were in communication with the Chairman that you didn’t sell?
Oh absolutely, it was emotional attachment. I got emotionally caught up in the story. I most definitely had my head turned. I’m not going to say by privileged information, but unique interpretation, because I’d spend hours and hours looking at the assets and historical data, and I would then put that to the company and then naturally the Chairman would only ever really give a one sided response to any of the questions I’d ask. And I thought “Wow, I’m pulling on a thread here, and it’s just unravelling in front of my eyes. It’s only a matter of when. This is going to make me rich.” And I was totally subscribed to that!
You know there were other people at the time too, other guys, and one of these guys still goes out on site visits to the company eight years later. He’s stood on stage with James Parsons, who then subsequently took the company on, and did very well I might add, from previous management teams. He totally revolutionised the board, and that company actually delivered their returns with James and have held onto a lot of the gains they’ve made, whereas the previous board was a bit more spivvy. The previous guy there was a guy put in by Rab Capital, which was a fund at the time that many people will know as a sacrificial lamb, because they were one of those companies that refused to pay bonuses back in the 2012-2013 era. Loads of people were culled on the back of it, and this guy was put in as the CEO and Chairman, then he became only Chairman, and then moved out. I believe he was their safe pair of hands, and I believe this happens a lot on AIM.
Naturally, a lot of these junior companies, they’re often not set up by some ex-Tullow guys. The Tullow guy is literally the frontman for the financiers, and it’s the financiers pulling the strings on the business. The guy who is fronting the company is really there to look after their interests, and they’ll look after his. And retail is just so far down the food chain it’s unbelievable. The way that these companies present themselves, the narratives, the websites, and the paid for research, and all everything that comes into the public domain is just marketing material, and it’s designed try to encourage you to take a position in the stock. This is just so they can build up the secondary market. We’ve got a friend of ours who coined the phrase “buy wholesale, not retail”, well, that was something that that I spoke to him about, and he nicked my phrase and ran with it! He’s done very well out of it, and Wayne has done incredibly well raising the unity of investors with Momentous Events.
He has – well done to him.
Very, very well, and he’ll tell you that’s a conversation we had, and that’s the Eureka moment: when you realise that this business is set up at the wholesale level, and we’re referred to as retailers as private investors for a reason. You start to understand where you are in the food chain; you start to understand the structure of the boards; you understand that the financiers who pull the strings are really the people that make a lot of key decisions. We get to the point where we start to quickly piece together that we are the prey on the savannahs with many, many predators. That’s who you are punting the junior markets, or the AIM casino, and that’s where I’ve been for eight years, and that’s pretty much my interpretation of it.
That’s a very interesting take on it. Do you think some of these companies are set up to milk retail investors and to fund salaries? Or do you think they start off with a good idea and want to get funding? Because when you think about it, some of these companies have been listed for over ten years, they’ve all drawn six figure salaries, and they’ve all achieved absolutely nothing. Yet they still get funding. What do you think?
There’re the ones that come into it with great intent and enthusiasm to use the AIM market or the junior market as an incubator to help them grow, and sadly when they don’t make the progress that they believe, or their idea gets stale, they then slip into this lifestyle director type of business where they jump from one industry to another.
They might start off as a gold mining company in West Africa, and then they end up as some rare earth metals business in Greenland. That transition happens over a decade, and I’m sure that when they came into it as a gold company they genuinely believed that they’re going to make themselves and a lot of other investors rich. Unfortunately, they then realise that actually operating in Ghana or wherever it may be is not that easy. They start figuring that out and think “Shit, this is way more difficult than we anticipated, and it’s not a case that we’ve just got to find the gold, which we thought that was the hard work!”
There’s due diligence and system, the ministry, the mines, the commissions, the corruption there, the corruption in London, it then becomes a hard job, and the opportunity then starts to fall away, and they’ve gotten used to the easy life, right? You just tap the market.
Sometimes I wish I was an AIM director!
Then you just go and find a new asset. Now they’re doing some oil and gas in a far away land, so are these companies set up for that purpose? I think it’s a transition over a period of time. It evolves that way, and the ones that can’t get their ideas off the ground, or the ones that generally just are unsuccessful characters, find themselves coming into this business. The ones that are successful in this business go on and move up the food chain and develop the business to things that are really exciting and they become one of the few companies that leave the junior markets, like Asos [EPIC: ASOS] with their clothing. There is a bunch of companies that have done it, but the vast majority of them don’t, and I think people get used to the fact that we can be remunerated handsomely and be rewarded for failing, and they stay in this sort of really sour and toxic environment for decades and decades, and there’re plenty of examples of these directors who are just there for the money.
They’re there to front companies for other people, and I think that’s what a lot of private investment community just do not understand. They don’t realise that, and often you’ll see them buy shares in the company, and you’ll say “Well, they’re buying shares in the company”. What has really happened is that they’ve just taken a three month payment break because the company is absolutely skint and can’t raise capital. So what they do is when they’re ready to tap the markets the brokers say to them “Well look, Mr Jones, you actually need to be buying some of this”, and they’ll say “I can’t buy any shares – I’ve not been paid for three months!”, and they’ll say “What we’ll do is we’ll transfer this three months’ worth of pay into stock and then we’ll report it to the market that you took £20k in the recent placement”. That’s happening all the time, and everyone gets proper frothy and horny that the board are buying shares, but it’s just remuneration!
Yeah, it’s not like real risk. They’re not putting in their own money, are they?
Yeah, it’s exactly that. What’s happening is they’re converting their debt from the company into equity, and the reason that they can do that is that they’re absolutely terrible at running the business to start with. So that transition from understanding the way that the market works and how things are structured, that was a big learning point in life, and even today it really causes a lot of problems. Because there’s a continuous door of people exiting and entering the market, and often people that’ve blown their accounts won’t ever talk about it.
They won’t go down the local rugby club and tell their pals that they’ve gone and you know, bananared 70-80% of their cash, because they feel embarrassed, so you don’t really hear about the ones that really make mistakes. What you hear about is the very few successes, and particularly the big successes, and they become the focal point for everybody else. It’s a total misrepresentation to the number of winners to losers, because the losers are going to be 8 or 9 out of every 10 people. They’re going to lose. They’re going to lose heavy, it’s just how heavy. Is it all of their cash? Or 50%? Or 70%. But they’re going to lose, and we never hear about it.
There was a transition at some point where people started to move onto Twitter, which back then I was one of the few people who went onto, and people thought I was mad. But I had no choice because I was banned from these forums. It took off, and it took off because it was a quick way of getting information around, and people could message their views on the markets. It’s changed very much in the last three to four years, but one of the main and key issues was that when you highlight the fact that people are losing, and you look at the narrative, it’s total dis or misinformation. If you look at Twitter today, that was like the bulletin boards of 2012.
It was like when the times are bad the narrative is there to try and give people hope. It’s like being stuck in the trenches on the front line with no bullets in the gun and being told its fine, and then when the German tanks come towards us, we’ll just fix bayonets and we’ll charge them. That’s how delusional war was, and that’s how delusional people are today; they believe that in very weak environments they can go and penetrate tanks as infantry, and its total madness. It’s a psychology that has existed for thousands of years, because if you can get people to live in certain conditions or do certain things en masse, that type of culture has got to exist within this business too.
I’m quite opinionated on politics and things like that, and the whole thing is corrupt as fuck. It’s as bent as a whippet’s back leg, and it’s built by design, to disarm us in life, and to take our cash. There’s a class system, and you don’t see many Kings and Queens on the front line. You don’t see many prime ministers. Therefore, when times are bad, you don’t see these big financial institutions on the front line. What you see is the media telling people that things are all going to be OK. It’s to keep the troops happy out there, whilst they fall back and they take their positions. I don’t know if this analogy works or not, but that’s the point that I’m trying to make. The narrative doesn’t match the reality. People are not talking about the major shakedowns that are taking place around them, there’s been an exponential number of directors resigning, or being pushed out,
Yes recently, loads-
or an exponential number of companies delisting, suspending, nomads resigning. Since the beginning of September, the whole summer of negativity was built on that in September and October we would see the green shoots start to go again, Since Sept to today, all we’ve seen is the market, not necessarily the Dow or the FTSE or even the AIM All Share Index, but when you start looking subsurface at the numbers of companies, the Luke Johnson company [Patisserie Valerie, EPIC: CAKE], Urals Energy [EPIC: UEN], there was another one today, Mysquar [EPIC: MYSQ] where £900,000 has gone missing. Since September I’ve never seen in all my time in the markets so many companies like this, yet go and look at the narrative out there. Hardly anybody talks about it. Not really a mention, why? We don’t want to upset the masses, we don’t want people to think that the whole thing is screwed. And this is the lesson in life where investors – they’re gonna either learn or burn. And that’s the long and short of it.
That’s a good phrase that, I might nick it!
We’ve had a few good years in the market, and people think that we’re just coming into the bull market. We’ve had it! Can we go into a supercycle that happens once every thirty years? Of course we can! But you know we can also see major correction which can wipe off huge amounts of gains that people have got. You know and I know the number of paper millionaires who are all running around thinking how clever they are, well I’ve seen these people who’ve done it before, and Ive been involved and seen that cycle in the market before, more than once. So I know that a lot of these guys out there, who’ve been paper millionaires over the past year or two, are taking massive heat, and nobody dares talk about it. In fact there’ll be another day on the golf course, there’ll be another lads holiday, there’ll be another meetup, there’ll be another track day with supercars, there’ll be another Land Rover that someone’s posting online, someone’ll be talking about their new watch they’ve just paid for with twenty grand. That’s the weight of expectation, and I’m sorry to go off on a tangent, bring me back into line.
It’s interesting, I think you’re right. There’s definitely that culture of rewarding failure, and that nobody talks about their losses, and I suppose I’m guilty of that too – we don’t talk about losses and we only talk about the wins, because they’re the ones that we like. And does that skew perceptions of risk to reward? I think it does. But also whenever anyone wants to get into trading or investment, for example anyone who asks me what I do and they’re interested. When you tell them you’re a full time trader they all want to learn because they like the idea of being one, but then when you say “You’ve got to start slow, you’ve got to read books, you’ve got to learn before you put your hard earned cash in”, and you can see their eyes glaze over and they’re not interested anymore. But if I tell them “You can make so much money in stocks” which we both know that you can, then people are really excited, but as soon as there’s any effort involved that’s where people switch off. And I think that’s why so many of these companies succeed in keeping going, because they feed on dreams, and dreams are cheap, aren’t they?
Oh, absolutely. And this is human nature. When you talk about hard work, the hard yards, the sweat, the tears, and the emotions that you’ve got to go through to make this work as a business, they don’t want to know. But these are the same sort of people that when you’re leaving school and you’re 16 and you’re going to go off and do your A Levels and go to university, or you’re going to join the military and be an Officer – these guys don’t want to do that. What they want to do is be a Private on the front line getting bevvied, shooting guns, and running around and getting paid a few hundred pounds a week.
These are the same people that you tell them that “If you want to be a carpenter instead of being a joiner, it’s going to take you seven years as an apprentice carpenter rather than four years as an apprentice joiner, or in actual fact you can be a bit of an odd job guy in two years, these are the guys that take the two years! They don’t want to put the seven in. If you find a stonemason in this country, they’re not like bricklayers, it’s a totally different trade. It’s expertise. And if someone wants to be an expert they’ve got to put the time in.
The same people that want to get rich quick in the markets are the same people that didn’t want to go and do all the education to become an Officer in the military, or a stonemason, or to be a doctor or a vet. It’s the people who want to be stood in a trench, digging a hole, and out on the razz with their mates. I’ve been there, and I’ve done that too. And I can tell you, and I’ve spent the vast majority of my working career in an industry that paid well. But I hated it. It was dangerous, and it nearly cost me my life. It was fun, and there were loads of stories, and there were loads of adventures, but there was a load of shit as well. And again, it’s about personality. And if you’re not prepared to put the hard work in, don’t bother. I mean I was up early and I was doing 18 hours a day working through the night, seven days a week, and never had a day off. Everything went into it, and it had to.
Through the years I’ve faced some serious adversity, even after a bad accident, I was sat there and I thought to myself “I’ve got to make this work”. It’s not “I might make it work”, it was “I’ve got to”. I’ve got young children, I’ve got financial commitments, so I understand when you see all these people who’ve made a few quid, they want to enjoy their fruits of their labour. But I think the trick to enjoying the fruits of your labour is to enjoy it over an extensive period of time and not five minutes. You’ve got to have a strategy that runs a bit deeper than just taking a punt and trading in a bull market because otherwise it’s like “Oh no, I’ve made some money, and the market has turned, and I don’t know how to retain that cash. I don’t know how to hold onto my gains, and I don’t know why I’m making losses”. And if you’re in that position, and people are in that position, then you’ve got to go back scratch because you didn’t put the hard work in, that perhaps you’ve put in, or I certainly know that I’ve put in, and a few others around me too, so that’s my message on it.
Due to the length of this interview, part II will be published next week.
PART II BELOW:
I know that since I’ve been trading it’s gotten progressively harder. When I first started it was really easy, you could punt anything and it would go up, but now I’m looking at charts for several hours a night, and sometimes having completely flat or even losing months. And it can be frustrating, to put the work in and not see the efforts, but I know that when the market does turn it will really deliver the rewards, and I suppose it’s now separating the men from the boys.
Well I’ve been through this cycle before, and the mad thing about it is the psychology. It’s how you watch people, and I’ve known people who I’ve spoken to and been friends with for five or more years, and because I’ve taken a stance on the market these people move away. It hasn’t been in tune with other people, and it’s not been publicly arguing but you just see these people move away. Because you’re bad for their psyche.
And I get it. I don’t want to listen to all this bullish bullshit being forced down my throat when the markets are going backwards and I know that a lot of these paper millionaires are taking big heat on their portfolios, massive losses; they’ve extended themselves massively personally in life, and the only way they feel they can get out of it is if they can try and talk everyone into a continued bull market. And I think we will get a relief rally in this market by the way and I think it’s coming soon, but having said that, that narrative is just not in tune with what’s actually going on. Even now that the Dow and the FTSE are doing great, the junior market just really isn’t, and there’s an exponential amount of companies that are going tits up, or there’s been a clear shift in the way that compliance and regulation works, because we’re seeing a whole bunch of these things getting flagged up as well.
So for me, it’s quite amusing, well saddening really, because people that you’ve known for a long time will no longer converse with you on a regular basis, because they’re frightened of you. It’s because you’re propagating a story that doesn’t suit them, and I think that’s mental. It’s better to know that something bad is coming so you can prepare for it and insulate yourself, but it appears that people don’t want to know about that.
I think this is the first time too that I’ve seen where companies actually are unable to raise and going bust. Even garbage like Fastjet [EPIC: FJET], they’ve never achieved anything and just burned cash, but they’ve always been able to raise, and now it finally looks like they might actually go bust. And Crawshaw [EPIC: CRAW] which went from 2p to 80p and back to 2p again, it’s probably not even that bad a business compared to most AIM companies, but they were unable to get a placing away and do a CVA, so they’ve gone bust. Mysquar today. We’ve seen quite a few that have left AIM in the last couple of weeks and it might even continue. We might actually be seeing a bit of a clean up.
And that clean up could well be the breaking of the dawn after the darkest hour. That could be where we are. But the problem is you’ve got to consider the confidence in investors. We’ve gone from nearly 2,000 companies in the heyday to 800 companies. If you ever want to start sitting there and someone like Paul Scott, or someone whose really clever, unlike myself, if you get someone who is good with numbers, or Graham Neary who you’re involved with-
Both incredibly smart, yes.
They’re smart guys. And they’ll sit there, and they’ll get their calculator out, and they’ll be able to say to you, “Let’s look at 1200 companies that will have listed on a pro rata average of £5m raise, £5-10m, over 1200 companies… Start thinking about the figure. Start thinking about the amount of cash that’s been totally, erm..
Squandered, or haemorrhaged in the market, to allow these City professionals over the last five or ten years to live their life that they’ve become accustomed. It’s not because they’re successful! When 60% of these companies have delisted, there’s something fucking majorly, majorly wrong. But the problem is that business is very lucrative to lots and lots of people. PR companies, nominated advisors, IR companies.
PR companies don’t even do anything other than send a tweet out now and again!
Yeah they do nothing, for £35,000-£40,000 a year! And I take my hat off to companies like Proactive, who almost sort of hit the rocks, they’re starting to make a bit of a comeback now. That’s a very lean business compared to where they were years ago, I mean that was flying. But a lot of it is staged too, managed and staged, I’ve been to events where there’s pretty girls giving out flyers and badges, and all people really want is information.
They don’t want all this shit, gone are the days where young men will aspire to go down to a local conservative club or cricket club, and after 7 o’ clock wear a collar and tie. Those days are gone, and therefore so are the days of these pitched events that PR companies are doing are gone too. Which is why you see people like Gibby and Momentous doing so well, because going into some London capital club with a load of stinky old blokes dressed in suits, it’s just not what inspires people who are in their 30s or 40s and even early 50s.
There’s been a massive transition that’s been taking place, and you know it’s why people like Wayne are doing so well, hats off to the guys at ShareTalk, they’ve done OK, Dave’s doing OK with TMS. There’s loads of people out there who are going for it, and personally I welcome as many of these things are possible, but at the same time they’re labour intensive. And if you know the way the market works, and you can sit and wait long enough for the market to come the right way, you will make substantial gains. And that’s it! And what you’ve said, and what I’m saying, is that I’m not making a lot of money this year! I’m having down months.
Yes, this year is nowhere near as good as last year.
That’s what I’m saying too. My view is that I don’t want to give back gains. What I want to do is have a small interest in the market because I need to keep my finger on the pulse because it’s what’s going to make me money in the future. But at the same time I’m sitting here and watching some months the PF will be 5% down, or 5% up, but I’m not making any great gains. I’m not making any huge money, and you’re not hearing anyone else say the same thing!
I think a lot of people on Twitter probably aren’t having great years, at the least the people I speak to no one is really smashing it, but no one really talks about it openly I suppose.
No, absolutely not, and that’s a really big flag in itself. If people can keep continuing the story long enough, eventually the market will turn, and they’ll say “Well, I knew it was going to be OK all along, and there was a few of these people who were a bit negative but…” And the negative ones have been through it before! I’ve spent months overseas this year, in the sunshine, so yeah I’ve not made a lot of money this year but I’ve had a pretty nice time!
This is probably the time to do it!
Exactly, and there is a lot of money to be made eventually, and I do think there’ll be a relief rally. I still think there’ll be a major shockwave too but whatever.
Yes, we’ll have to see. I’m certainly not clever enough to predict it so I’ll just keep doing what the charts say and manage my risk. What’s been the absolute scariest day on the stock market for you and how did that feel?
These flash crashes were scary. Not now. But nothing really scares me now because you become insulated. And what’s a bad day in the market today would’ve been like the worst day of my life five years ago. And there was a flash crash back then, there was a crash in the stock prices, I think it was like 5600 points on the FTSE, I can’t remember when it was.
Was it 2015? I think that was before I was trading but I remember reading it on the news, something to do with China slowing down or something.
Yeah it might’ve been, it was around three or four years ago. I remember back then I sat there and I thought I knew everything, and I just felt totally exposed. I was all in in the market, and I thought I had a good understanding of things, I’d been writing for a number of publications about corruption in the market and how these things were being run, and I thought I was really clever, and that happened and I realised I just didn’t know anywhere near as much as I thought I knew. That’s actually that’s one of the interesting points when you do these articles, in year 1 you think you’ve got a good understanding, and in year 2 you think you’ve got a great understanding, and by year 3 you’ve got this, and then by year 4 you realise you know nothing, and year 5 you then become more humble, and then year 6 you start to realise that if I get myself too involved again I’m going to make the same mistakes again that I made in year 2, and it’s that side of it where I keep seeing a load of 2s and 3s out there. They’re not at 4 yet. And they will be. So what was the worst day? The worst day was those sort of pullbacks when you had the realisation that all of the skills that you thought you’d learned or were contributing to your trading were just absolutely pointless or worthless and ineffective when these crashes happened. That was a bad day.
So what did you do? Did you sell out, or did you buy more? What happened? Did you stare at the screen in horror?
I totally fucked it up, sold some stocks that I could sell, that I should’ve held, and the ones that I couldn’t sell I held onto that I should’ve sold. I should’ve made more effort to sell the shit, and held onto the decent ones. And I just thought “You know what, I’m doing OK, so I need to preserve myself”, and I went into that fight or flight and I didn’t particularly fight, I just flew. I can’t even remember the figures. But I think I had £100,000 in the market on the Monday and by the Friday I was down to £65,000-£70,000. And I was thinking “Well, I’m happy, I can live to survive another day”.
That’s what it’s all about!
But in reality, what I should’ve done is work much harder to sell the crap in my portfolio that I couldn’t get any size on, and I should’ve held onto the other stuff. I did it completely the wrong way around, but having said that, it’s a valuable lesson that you’re not going to have until that happens to you. And what would be considered the worst day is when I lost about £35k to £40k in less than two hours. So that was a bad day.
What stock was that?
I prefer not to say, because I was an absolute bear on it, and I just believed that once it’d been spanked that hard, it was going to come back up. And it didn’t come back up at all. Because the rationale here was that even corrupt cos, before they go bust, you see them rally before they go under.
Yes, that’s true, there’s always one big move when the market cap gets to a few hundred K or something silly, someone saying it’s oversold, or someone pops up ramping it.
Exactly, you see it happen, and then it goes, it’s gone, it’s finished. I looked at the decline and I thought “This is so severe it’s going to have that heartbeat moment, most punters are going to 70 80 90% offside, and I’m coming in now looking to take 50-100% gain on it, which actually wouldn’t have made that much difference to the losses they’ve got, but it would’ve given the City an opportunity to get out or close out. And I thought I’d got it nailed on, and again this was only, we’re talking about in the last 18 months, maybe two years, and that happened, and I thought “That’s a bad day”.
But, I blamed myself, for being extremely bearish on the story, so never really have gone down that line of going into the details behind it, because I should’ve known better. I mean I’ve traded loads of things that I’ve known are a load of crap because I thought they’d rally. And it is what it is. I think there was some sort of investigation into it and the plug just got pulled. I recovered a little bit of money on it, but not a lot. And then sat there and thought “Well, if you can lose that much money in a couple of days, in a couple of hours. Imagine what a bad couple of weeks is gonna look like”. And this is all I’m doing these days.
A big wakeup call?
It was a wakeup call. But by applying the same theory to the markets, and the markets were good back then, as we’ve discussed right, applying the same theory but twelve trading days later, which seems like a bit of time when you’re in the market, it’s a couple of weeks later down the line, I loaded into an oil and gas stock. It was pretty much a shell company and I loaded into it when I read the announcement. I bought loads in the pre-market, and I knew which brokers dealt with which market makers so I made sure that I got as much as I could from each individual one. And I absolutely smashed it out the park; I made back all those losses and a load more.
Nice! Which one was that?
It was IRG at the time, it’s Echo Energy today [EPIC: ECHO]. I read the announcement and IRG was a shell company in the oil and gas space, and I read that the COO of Rockhopper [EPIC: RKH], there were a few additions to the board, and it then accelerated really quickly over a couple of weeks. They started to name and link in big name players, who’d had great deals of success, and that Fiona Coolly, massive name in the industry, she’s well respected after that Sea Lion find down in the Falklands. All of that started to come, they had the Chairman from Sound Energy join, you could just see it. I’d waited for years to see what those guys were going to do next, and because I’d been in the market that long, the day you wake up and read the announcement, you know these guys are doing to do something else. You never know what it’s going to be until the morning. And I read it and I was thinking “This is going to go well. These guys have made a lot of money, they’ve personally got a lot of money, the funds that are putting money up have got a lot of cash, and they’re all very pally. They rely on each other because they’ve turned Sound into a £30m co into an £800m fully diluted company, so I knew they were going to do well, and they did do well, and it made a lot of money for me. And those guys, I’ve got all the time in the world for, because they do continuously keep on delivering.
It is just one example of a few companies that will do well over time I think, and all of those guys were in together with Salamander Energy, so if you were around back in those days, those guys took Salamander into the FTSE 350, and the guy who was head of that company is the same guy who is headlining Coro Energy [EPIC: CORO] now, so those facts interest me, and you can make money from them. So from the worst day, to a really good day, in twelve days.
That’s a big emotional rollercoaster, isn’t it?
Well, not really! Not as bad as the flash crashes from three or four years earlier, actually it wasn’t!
Because you were more battle-hardened?
More battle-hardened, absolutely yeah. And I think it’s the disappointment in yourself, rather than the anger at the company. So I’m not angry at the company because it’s a fraud, or because they’re ripping people off, I’m not angry at them because I already know that. I’m angry at me because I should’ve had the right conviction to take the right decision at the right time and I didn’t do that. But then by not getting fazed, because that’s what’s one of the things that’s happened historically, when you make a good trade and you feel invincible, and you make a bad trade and feel crushed.
And it totally takes you a long time to get back into the swing of it, and what I’ve found over the years is that having that constant in your life of conviction, even if you make a mistake, being able to go back in again and do the same thing, and getting it right equalises any of the negatives that come with that.
I think that mindset where you actually take accountability for your errors is crucial to success. Even though some of these companies are complete frauds, and some of these people pile their life savings into it, and even after it’s gone bust, they continue to blame the company, even though the warning signs were clearly there. You’ve seen it before, we’ve seen it before, I’m not going to name any company names because that’ll obviously upset a few people, but people either blame themselves or they blame the company.
I think if you blame the company it’s very difficult to ever actually win on the markets, because you’re devolving responsibility for that mistake to someone else. Even though no matter what happens in the market, we can choose our entry, we can choose our position size, our exits, there are so many variables that we can choose, so you can’t really blame the outcome on the company I don’t think. I think it’s interested that you say that because that’s probably why you’ve been successful. Because you can take responsibility.
Yeah, and you end up taking responsibility for a lot of other people because you realise that there are a lot of vulnerable and weak individuals out there, and that can weigh on you. I see a lot of good traders, people who are quite approachable, end up getting totally consumed by other peoples’ inabilities to do all of the things you’ve just said, and that starts to have an effect, and that’s tough on people out there.
What’s the worst thing that you’ve seen happen to someone else? And what do you think they could’ve done to prevent that?
[Details not included due to potential legal ramifications].
You’ll never see me in any of these chat groups. If I do, I’m in for one or two days, I make my point and then I’m off, and I think I’ve only ever done that once or twice. I don’t go in them, and I ask people not to invite me to them.
It comes round again to people being lazy, and not doing the work for themselves, and wanting to be told what to buy and sell.
The analogy that I would give is that you either give 1,000 bottles of water to a village in Africa. Or you can give them the tools to build the well.
I agree with that.
And the idea of the podcasting and all of that Mike, was to be able to give people the tools to build the well. It wasn’t to tell them where the water was. That just isn’t the way this works. I’ve been fortunate over the years because a technical guy, a chartist, who I think today is better than anything I ever see, he took me under his wing in 2012 so he helped me a lot. One of the things that a lot of people don’t know is that I made the money that I made to go full time from technical analysis, and not from trading fundamentals.
I think you can’t really trade fundamentals, because it doesn’t matter how good the stock is if everyone’s selling it, and dumping, is that the sort of stock you really want to be holding? If investing, yeah, buy more of it, but if you’re trading you need to get out pretty soon. Most of my losses are small, and they have to be, because I don’t want to have to go back to work. I think you’ve got to trade technicals. I think you can’t trade fundamentals at all. We get paid by price.
Well like you say a lot of people don’t even know that, but the problem that I’ve found then is that trading the market mechanics was easier than trading technicals, so it’s trading psychology. It’s trading against other people and how they’re going to view the world, because you know that the vast majority of them are going to be wrong, and with these small cap things you just can’t get position size, so that’s why I changed the way that I trade. But if I lost 80% of my money tomorrow I wouldn’t be doing what I’m doing now, I’d go straight back to trading the chart. Straight back to it.
A lot of these stocks don’t really run on technicals, and the smaller they are it’s mainly hype, speculation, and sometimes you can of predict what will happen… For example yesterday, Anglo African Oil & Gas [EPIC: AAOG], it opened 30% down on what should be a small delay, and I was pretty certain that people were going to be buying it. When I checked the RSP there was nothing on it, so I took a good amount of it a spreadbet at 6.5p and started closing it down into strength. There was nothing technical about that, because it was just everyone buying. But if you’re wrong and then you’ve got a load of stock that you want to sell when everyone else is selling as well.
I do think though that you can predict what people are going to do, and you can make a lot of money doing that. It’s a lot riskier though I think. What do you think makes a successful stock trader or investor? I think we’ve probably covered it already, but if there were three things, what do you think they would be?
Somebody who can recognise risk, and see their nose on the end of their face, would be the first thing. And it’s a simple thing, but being able to recognise and react to risk in accordance to the severity of it. And that’s not saying “Oh, I know it’s a bit choppy out there, but I’m just going to do nothing because I’m not sure how choppy it’s going to get”, it’s about acting. Time critical action too. Some people say “I know the market is going against me, but my psychological view of my positions are that they’re really good, and I’m sure they’ll do really well against the others”, but it’s being able to establish that when the whole market is going down in these black swan events or these flash crashes, it doesn’t matter how good your investments are, they’ll nearly always go against you.
The only way that it works in your favour, is if people start dropping bombs in Iraq, you’ll see things like BAE Systems [EPIC: BAE] price go up, you’ll see things like Rolls Royce [EPIC: RR.] go up, because engines and systems and missiles, they suddenly become involved when war breaks out, but nearly everything else is going to collapse. It’s being able to see the opportunity.
I used to have files and files of companies. I’d look at three hundred a day, and they’d all be in these brackets. One guy, who loves pushing this propaganda that “You’re a pump and dump, you screenshot one of the files off your screening facility”, and it was called pump and dump. And it wasn’t stocks to pump and dump, it was stocks that were being pumped and dumped continuously, and I used to follow thirty of them. As soon as I saw spikes in volume and a change in direction, I’d look to buy them, because I knew they were probably turning.
I’ve traded pump and dumps before, I mean, why not?
I had files for housing, war, so if war-like situations broke out, things like transport and food would move too. I had all of these things broken down when I was trading all the time on technicals, anyway. And most people don’t realise that when disasters take place, unless you’ve got exposure to something that’s going to relieve that disaster situation, and you’re massively involved in it, things are just going to collapse. They’re going to collapse and you’ve just got to accept that. Whilst you might be in things like BP and they pay a nice dividend and they’re lovely, if the oil price is collapsing because of overproduction and there’s loads of political unrest in the world, you need to be out of them. You need to be out of everything and look for a low entry. And that’s the long and short of it. Most people don’t have ability to do it. So, what makes people successful? That. Being humble. One of the best traders I know, and is a friend of mine – and I don’t speak to that many publicly – I’ve known him years, Baron Trading, cracking lad, humble as fuck, you know what I mean, be honest with yourself, and be honest with other people.
I think that’s really good advice. Baron’s got a decent track record and has a knack for picking some real winners. If someone was getting into the stock market now, what would you to say to them? Let’s say someone comes to you and says “Mike, I want to make money in the stock market, I want to learn how to trade”, what would you tell them?
I’d tell them the absolute – and it’s only happened to me a couple of times – like loads of people ask me and there’s only one person whose ever done it. And he was working for a chemical company, he was really left field, and he’d already bought the shares that he thought he’d wanted, and I tried to give him a few pearls of wisdom. I looked at him and he was as green as the day come long, and I felt really bad for him, because the information that I was giving him just wasn’t going in there. When you say the one thing you’d say to people: one bit of advice is that if you don’t want to put the time in to become an expert at something, then, or certainly become talented or be good, as a minimum become good at it, if you’re not even prepared to put the time in that it needs then don’t bother, because it’s a lot of pain, a lot of heartache, you’re going to lose money, and you’re not going to get any rewards for it. And that’s the key message here.
Because everyone wants to become a Premier League footballer but only starts kicking a bag of wind around when they’re 16 or 17 years of age. Doesn’t work. People who are experts, or Olympians, and I’m not an Olympian right, I’m just OK to good at what I do, which is why I can continue to keep doing it, but when you start looking at other people who are more talented than I, and if you’ve got aspirations to go to the top and make yourself a millionaire and be rich, go and look at the work rate of people who are elite athletes or Olympians and consider the commitment of time that they’ve had to make to get to where they are.
So, when they’re 30 and lifting a gold medal, they started at 5 or 6 years of age, doing athletics or whatever it is, and yeah it’s understandable that you might look like a young lucky guy, to the person who is there, but you don’t see the hours that they’ve put in, you only ever see the success. And that for me is the most important part of advising anyone in this business, or giving an opinion in this business. If you’re not prepared to be an elite or an Olympian, and you’re not prepared to put the work rate in to getting there, then don’t even bother starting because it’s just not gonna work for you.
I absolutely agree with that, to be honest.
What I would say from an aside from that, is that I don’t have any aspirations to be an Olympian or an elite athlete, because I speak to lots of people we all know, and they have great aspirations of living on the beach, or living in big villas, or fucking yachts, money spewing out of their eyes, that’s not my dream. I’m living my dream, you know, my dream is to walk on the river, to go out in my car, to go and shoot some rabbits, to go and fucking climb mountains, to go to Cyprus where I’ve got a little gaffe out there, go on the beach, go snorkelling, that’s my dream, and I’m living that. I feel sad for people who want more and more and are never happy.
I agree with that too, to me I think the stock market is the best opportunity in the world. It is immensely rewarding to see the results of hard work for oneself, so I think we’ve got similar mindsets on that. Thank you very much for your time Mike – it’s been insightful.
Thank you very much.