This interview was the result of a phone call between Richard and I in February 2018. Richard has been full-time investing for nearly twenty years and has caught many a multi-bagger and was all in cash for the Brexit referendum, ready to take advantage. He runs the Rebel Chatroom on Slack.
We were having a casual chat then it occurred to me I might as well click record.
Yeah, he chased me around on ADVFN for ages and then I’d had enough of it. He’d got my address and it was real stalker stuff, and then I saw a picture of him as someone sent it. When I saw the look of him – I thought it was scary! I thought “That’s it, I’ve had enough – I’m starting my own chat room”.
That is bloody weird!
It is weird, it’s very weird – this pic of him in a leather jacket and up against a tree! He looked so weird, and I decided to start the Rebel Chatroom and said to people if you’re interested you can join. The main reason for having membership fees to start with, and the problem with ADVFN is that they don’t try to police it. If you took people’s credit card numbers and then said “If you abuse it we’ll get rid of your credit card number” – they’d soon run out of credit cards to come back with! That would be the best way to police it – charge people £1 and then you can scratch them off each time, but in the end they wouldn’t.
So, I started the chatroom and it was £145 back then, and that’ll cover people for if anyone does play up the you’ll be off just like that and you’ll lose your 145 quid. So, it gave people something to lose. That was the start of it, and in the end it’s become quite a lot of work, answering a lot of messages, and doing a lot of hours – a lot more hours than I thought for the chatroom. But it’s got bigger and more work than I thought. I don’t mind, I enjoy it.
It’s a great chatroom, I’ve found it really useful in my first couple of years so I’m really grateful you did it.
Yeah, that’s good. Over Christmas I’ve had loads of letters come back from people saying how much they enjoy it, how well they’ve done, the banter. One member comes on every now and again, she’s about 78 years old, she’s had her hips done, she says she just loves sitting there listening to everyone chat. She’s been investing for quite a while, so there’s quite a few people in there who like it.
Last year I lost about 30 at the end of the year, and some of them might’ve been because I put the price up, but there were others that had medical reasons and work reasons, and this year we’ve only lost 18, I’ve made most up with new members though. Loads of people have benefitted and they’re all saying they got out in June, just recently they’ve all got back in again as well, so it was a good timing guide for them on the chatroom.
It’s been really helpful. I’m surprised we didn’t lose that many given the indices and how everything has been going on.
Yeah, me too – I’m surprised. There was a lot more people downhearted and they hadn’t made a lot of money this year, but I suppose if you haven’t lost then you’ve done quite well really over last year.
So what year was that then? That you started the chatroom.
Well, it’s 2019 now, so I think 2015. And I started the one on ADVFN probably six or seven years ago so 2009 or so.
The boom years!
Yeah, exactly! I probably chatted on there before 2009 because I remember chatting on there as the market was going down and it was probably around 2007 when the market was really starting to fall, and previous to that I was on Hemscott and ADVFN for quite a while. Must’ve been on Hemscott around 1999, I think.
What happened to Hemscott? Was it bought out or did it just fold?
They just didn’t have a clue!” They had all this data. They had REFS, which was a printed-out thing that gave you all the PEs and PEGS like Jim Slater used to use. So, they were behind the data and marketing and things for that, news statements, they still go by MorningStar now – it got sold off to them. They were quite good but they didn’t see the value of that chatroom. All they wanted was a little cheap off the shelf piece of software that I’m using like Slack.
The chatroom was free to join and some admin used to watch that you’d behave and all, and if you didn’t you were banned quite easily, but at least they policed it quite well. But, you know, various people joined and in the end it just came to a halt, and people started going to ADVFN because it had more stuff.
Well, you either adapt or die, I suppose.
Yeah, that’s where I met Typo on there and Felix – they both used to be on Hemscott years and years ago, there’s a few still going.
I don’t really know how Typo trades; he seems to be able to do magic compared to the way I trade. It’s quite impressive to see him talk about it.
I think now he just gets up, trades the auctions, goes out for the day and then comes back and trades the closing auction.
Do you remember Microsoft Messenger?
Well, Slack is very much like that was. Slack is almost like someone has ripped of Microsoft Messenger and we used to use that about ten years ago, and we used to have it as a little chatroom where there was about 8 or 9 of us in the morning. So, we’d all be there when the RNSs came out we’d be talking to each other on MSN.
It’s funny that, MSN has gone but it exists almost the same like on Slack.
It is – it’s exactly the same, someone has taken it and copied it completely, the sidebars and everything. The way you put the message – it’s on a bigger scale. Microsoft missed that as it’s such a handy thing for business – we chatted on there for quite a while.
So, when was the year that you actually started investing? I think you were talking about 1987 before – that was before I was even born!
Right, OK, well, don’t say that, Michael! I probably started in around 1984; the market was quite good in ‘84 and I was using a guy from Allied Dunbar, do you remember them at all?
I’ve not heard of them.
Well, I think they’re still going, and they were like an insurance and pensions company, but their nickname was Allied Crowbar, because they used to lever money out of people like nothing. You’d get them round your house and they were terrible. But the long shot was that Karen’s brother got a visit from one of these guys, and they’d sit there and pester him about pensions, and at the end of the day he’d say “Is there anyone I should be helping for you?” and so he put him on to me!
He was quite good to start with, he got me to take out a pension, but he was just weird. He was schizophrenic and sectioned.
That’s not good!
No! He came around our house one night with somebody who we didn’t know, and he said “This is your new business partner; we’ll have 10% of your business and you’ll have 10% of ours” – but he’d only just started this business and he didn’t have anything in it, and I had a graphic design business at the time.
We ended with him around 2002 or 2003; he actually got me interested in shares and he said “Have you ever seen a penny shares guide?”, and I started reading penny shares things, and I ended up buying some unit trusts with him. That was in Japan and the Pacific and the market was going up really heavy at that time.
Japan would’ve been, yeah [Japanese ‘economic miracle’].
It was coming out at 1987 and we’d go out shopping and I’d say to Karen: “We’ve made enough to pay for all the shopping we’ve just had”. We didn’t have a lot in there but it was going up at such a rate, and in the end, I had these things called single premier investment bonds, and he said that I should take these out and put them into unit trusts, you pay less charges and you make more money.
So, I decided to do it and I did it about four days before the 1987 crash, and they moved my money into unit trusts probably the day before the crash, and I was phoning saying “Has that money moved? Have you still got it in cash?”, and they said it’d already moved and then all the contract notes were coming through on the day of the crash. I’d look at it and they were arriving and they’d say I’d spent around £30,000 to £40,000 at that time and I’d just put them into unit trusts, and I looked at the valuation and they were now around about £28,000.
Overnight, while I’d just moved them in there.
It was going down so fast it was just frightening. I’d never been in anything like that, I’d dabbled in shares and suddenly all my money was disappearing. We sold out and I’d lost a third – it’s easy to say you shouldn’t panic at the bottom when the market is going down, but when the market loses 27% in a day or two days-
-you see your money disappearing that fast, you’ve got to have some confidence you’ll have some money left, so we sold out and I thought “I’ll never touch shares again, I’m finished”, then I thought “Well, I’ve got to make a living somehow”, so I started doing graphic design. I started a little business printing and stuff, I learned how to do graphic design, and we ran it from the studio. I sub-contracted all the printing out and when I packed it in in 2000, we were turning over about quarter of a million from here.
It was all sub-contracted out, there were no real printing costs to me. We were doing great, and we had a bit of money on the side, so I started dabbling in shares again during the tech boom.
This was 1999?
A bit before that, probably ’98, ’99 when I started with tech shares. And I’d bought a few tips from the paper and a few other things and all these tips and things never come good, and in the end I sat down and thought “You know what? I’m going to learn how to do shares properly now”. I’ve spent my early life buying tips and things like lots of people do, and I wanted to try and do this properly. So, I read Jim Slater’s book.
Good book that, isn’t it?
Yeah, good book. So, I read the Zulu principle, and Beyond the Zulu – both those books are very good – and some others too. In the end I understood how to value shares and why shares should go up, but at that time tech stocks were going bananas, and as much as I knew I should be buying Jim Slater stocks, I bought tech stocks. I had one tech stock called Affinity Internet, I bought them at £3.80 one month, the following month they were £8, the following month they were £16, the next one they were £32. I pointed it out on Hemscott, and it was doubling every month!
And then suddenly right near the top of the boom they did a deal with Vodafone, it was nothing, all it was that Vodafone said they’d take their servers or whatever they do or run the internet over Vodafone – it was really nothing, and the shares went from £40 to £86 in two days!
So, I woke up in the morning, put the tele on in bed, and Bloomberg, and it said Affinity Internet had done a deal with Vodafone, and it did that in a few days. I think we’d made about £30,000 before I’d even got out of bed that morning, and I said to Karen we’re up ten grand, fifteen, twenty… It was mad, it was just unreal.
After that they did a deal with Powergen, and the shares had come back to £82 and they went to £86 again and then they came back, and I said to Karen “That’s strange”.
I felt something was wrong at that point, because they didn’t keep going up like most of the others, and I noticed a few other shares didn’t go up as well. At that point I sold all my Affinity Internet and sold lots of other bits I had too and brought the amount I had right down as the markets didn’t feel the same.
As it turned out it happened that was the top of the market, so it was a bit of luck and a bit of me just noticing, and I didn’t carry on chasing it much. A lot of people did; I suppose there were some greedy youngsters out there who wanted to keep going, and thinking these will come back, and they did start to go again.
I dabbled a little bit, made a little bit, lost a little bit, and that point I started to do what Jim Slater has always done and his way of investing. That was fabulous for me then because whilst techs were falling little value small caps were going up. I think Hornby [EPIC: HRN] that time around £1.40 and in two or three years nearly £10, I sold them near the top as well.
I’m quite good at timing the market, maybe not picking some stocks sometimes, but timing the market, by probably just watching charts. But I think when you’ve done it for 20 years and watching charts day in and day out, in the end it’s almost like you and the market are at one with the charts, and you can just look at a chart and say that’s pretty much going to go up or pretty much going down, and 80%, or 60-70% of the time you’re going to be right because you’ve seen it so many times before.
Well, patterns repeat, don’t they?
You see the curved bottoms, the bowls, you can see the rounded top.
So yes, I agree with that, about the charts.
And they’re clear to see too – I noticed when in 2003 Rightmove [EPIC: RMV] was doing a lovely curved bottom and I said to my brokers “I’ll buy some Rightmove”, and two brokers there betted on me, one betted on me and the other betted that I’d lose all my money.
That’s not nice!
One of them said “He’ll win out of these” and it did, it carried on curving round and carried on going. It went straight up and had a beautiful curve. I sold out way too early because I hadn’t realised how far these curves could run from a bottom, and when you get bottoms of oversold markets and one of those curves, in future if ever we have a market crash then I’ll just buy all the curves, leave them and not touch them again.
The bulk of them can run on for so long from the bottom of a market, and you can pretty much just make money from holding them at that point.
I think you’ve got to have extreme patience though for that, when we were talking the other day about PPHE [PPHE Hotel Group].
And the chart is fantastic, but it might not move for three months at a time, and three months is a long time in especially when you’re in the market day in, day out. You need patience.
You need to buy something like that and someone to come and smack you over the head and put you in a coma for ten years! Then when you come round you’d just be a multi-millionaire!
But yes, when you look at it all the time there’s always that temptation and thinking “Has that gone far enough?”, and the trouble is you look back the chart and you think “If I’d bought that there and held that I’d have made a fortune”, but you forget about all the ones where you said “I sold there” and nothing ever come of that stock, and you would’ve just lost money over the course of time probably, when you average them all out.
But you look back at those big ‘uns and it’s a real regret you never hung onto them.
I suppose the only way to pre-empt that, and what I want to do in the next crash or real bear market, is to write down where exactly I’m getting out, so I’ll always have one piece that I’m holding unless it goes below the 200 average, because that’s the last bullish indicator. Some of these stocks you look at them from the bottom and you see that they’ve gone up ten or fifteen times but they haven’t even come close to the 200 moving average.
So, if you just had a piece of paper, like a flowchart, that said “Is it above the 200 moving average?” “Yes” then “Don’t sell”, you’d be able to stay in.
Of course, it’s easy to say now and in reality, it’s much harder, but I’ve sold loads of things too early.
But you know if you make a profit and you cut a loss, and if you’re doing it day in day out most of the decisions are probably going to be right ones, so you learn that over time and then in the end it becomes almost worrying that I know the market that well. Maybe I’m spending too much time doing this, but if you enjoy it then it’s all right.
I really enjoy it – I can’t ever imagine how I lived without it to be honest.
Yeah, I used to spend absolutely hours and hours here day and night jotting down company results. It wasn’t always easy to find anywhere that had the last five or six years earnings, and then I’d go back and do the six months as well and measure the pattern of their earnings growth, and I was here for ages calculating stuff and calculating if earnings growth was getting stronger or weaker, how fast is that move, or if it was H1 weighted, and all those hours do pay back in the end.
But it’s all right when you’re young, but when you’re older you just can’t do that day in and day out and it becomes boring. Have you ever read that book by John Lee?
Not yet, no – because he likes dividends and very few of the stocks I buy pay them!
How to Make a Million Slowly. I’ve bought the book but not read it yet, but I saw something on the screen with them and he was saying that now he can pretty much look at a stock and say whether it’s right to buy or not just by looking at them, because he doesn’t need to do the research any more, and I think that’s right – once you’ve been doing it a while you can tell.
In recovery stocks I like to see director buying, and a new board. If a company has gone wrong you want to see a load of directors get kicked out, and you want to see the chart gradually stabilise and directors buying, and if you get that curve that’s all the formula for a recovery stock.
First of all the directors come out and say things are not quite that good, they’re going along as expected, and then you see the directors buy £20,000, £30,000, £100,000 worth, and you think to yourself “They know a little bit more than they’re letting on, because they don’t want to be coming out saying things are great because then the share price would go galloping off and they don’t get a chance to buy their shares”.
They’re a little bit coy and they say something like that, and I always think that’s a time to be looking at them a bit closer and getting in here. So that formula is pretty good, a new board comes in on a crummy company, the chart stabilises, the directors buy, or the directors come out with a statement and they say things aren’t as bad then they buy; there are loads of stocks I’ve bought on that criteria.
I can’t remember where I read it now but it was analysis on insider buying and insider selling and are they powerful measures of correlation to stock prices? They found that insider buying is and insider selling isn’t.
No, well, someone’s always got a reason to sell.
Divorce or they have to buy something, or pay a tax bill. You never get forced into a reason to buy! There’s never that to it. I like to watch for director buyers and it’s a big clue when they’ve got skin in the game and they’re going to take a hit with you.
If you look at most of the AIM shares that punters love they have zero director ownership.
And the ten-year chart is just down!
All they’re doing is milking the wages out of it, they’ve probably got options that they dump, expenses on account, and they jet off round the world because they’ve got to see such and such and have a good holiday whilst they’re at it.
A good job if you can get it.
It is yeah, exactly, one of those AIM ones. I always watch the director buying in little small AIM shares, a mate of mine was talking about a company yesterday, I can’t remember what it was it was so bad…
What does it do?
I can’t remember now, but it was one of those new names on AIM and it’s a “me too” float; I used to know every name of every company on AIM and what they did at one point, in the early 2000s, and there’s companies I see now that I think “When did that float”? So I look at the chart and there’s a little chart that started recently, and it’s got no director buying whatsoever, none at all, and if the share price is on its knees you want to see directors buying, but there was none of that. I said it to him and he said “Oh, I know one of the directors and he said it’s quite good” – and that’s the last thing you want to listen to!
They’ve got to say that, when things are that bad then get out, and if they say it’s bad then everyone is going to be selling it if you spread that about.
Anyway, I always watch for small cap stocks, you want to see them have a good stake in there usually.
Relative to salary as well, it’s no use buying £5,000 worth of stock if you’re getting paid £200,000.
It has to be meaningful.
That’s what I look for now. I wouldn’t say I go into it too deep – some people study the balance sheet and cash flow, that doesn’t tell you an awful lot really. A company that might do well can have a crummy balance sheet, because some of these companies can have such low expectations anyway that it doesn’t take a lot for them to turn up, so I look at the balance sheet but you can’t be too scared of them; I’ll have a look and see if things aren’t glaringly bad, especially operating cash flow.
I always look at that and make sure it’s pretty solid, but aside from that it’s really PEs, charts, and then have a quick look at the balance sheet and make sure that looks reasonable and check what the directors stakes are, whether they’re buying and stuff like that.
I think you can also put too much importance on a single thing, for example like you’ve just said there, if you rule out a company because it has a bad balance sheet, that doesn’t mean it can’t go up ten times! Look at Versarien [EPIC: VRS].
I did trade it but I should’ve been in around 20-30p and getting in as the hype started to build and the RNSs were coming thick and fast about all of these collaborations.
Well Thomas Cook was – were you in the chatroom when I bought Thomas Cook [EPIC: TCG]?
When was that?
When the market bottomed, so probably two or three years ago now.
Ah no, I don’t think so – I joined in 2017.
Well, the shares came down to bottom at around 15/16p and they’d come all the way down and they had about £2 billion in debt, and this guy said to me “You must be crazy buying Thomas Cook – there’s so much debt they’re never going to get there”.
I looked at it and I saw the chart come to a bottom, they’d got this new woman in called Harriet Green; she’d only been there a few months and she said profits are going to be £100 million better than expected. Talked about how she’d done these things, and loads of people I know had written Thomas Cook off – completely written them off.
The market cap was only about £200 million and they had £2 billion in debt – they said “They’re never going to be able to raise enough money even if they do a rights issue – it still won’t be enough – they’ll have to raise another 500, 600, 700% share capital to get out of this”.
It didn’t, it started to go up, and as soon as it started to go up a couple of brokers jumped on it and they started saying “We think it could go higher”, and as it started to go higher the market cap got bigger and suddenly all the brokers were jumping on it saying “This could keep going, this could keep going” – they all wanted a bit of the placing that was going to come along later on. But they didn’t have a placing until they got to about £1.50 something like that.
Oh, wow. That’s a big rise.
It was 19p and you manage to do it at £1.50. The market cap then was much bigger and it was doable. I bought them around 19p and loads of people in the chatroom all came in there with me, and we were up to £1.50 in six months.
That was great because you could buy loads of them, it was so liquid. Everyone was buying, I had loads – it paid for a good part of the new build. Bigbigdave and a few others on there had all bought big stakes into Thomas Cook – the brokers were coming out with these notes, and it was all becoming self-fulfilling then.
Yes, a bit of momentum.
The brokers were leaping on it and the brokers who said it was a sell saw they couldn’t keep going against it so they said buy as well. It was just buying charts and listening to what they were saying. That had a crummy balance sheet as well – everyone thought that they were dead. Well, not everybody, but most people thought it was dead.
That’s where the risk is the highest but also the reward is the highest as well.
So, if you can pick them and see they aren’t going to bust, or there’s a high chance that they won’t, you’ve got a good chance.
Especially when the market pummels a stock down, like when we saw with Luceco and the director bought a load right at the bottom, and now he’s doubled his money.
Yeah! There was another one that went up as well, Rentokil. There’s a lot of these things about. If they’ve had a big following, and Rentokil used to have a fantastic record years and years ago, and the guy who ran it, he was like a God to people. In the end they had a problem and the shares fell and they went right the way down to 30p I think it was, and suddenly they got a new board in and it went up a little bit, but then the new board bought a load of shares. Rentokil would’ve been another fantastic one to buy at those lows and everyone thought they were dead on their feet, and then they came right back.
It’s often the big names of the past when people know it’s done it before and it can do it again. You see these new companies that come on and nobody has ever heard of – you don’t know what they’re capable of. But when you see an old company that’s a recovery you know what they can become because they’ve been there before.
Even if they can’t become that people believe that they can, so sometimes you’ve just got to ride the belief. If everyone believes it just joins in on the ride, and if it comes off it’s great, and if it doesn’t just make sure you’re not late to get out.
It’s amazing how a lot of people do all of this valuation work and what shares should be but at the end of the day it doesn’t really matter because what people believe and what people think – you often find that the accountants, the people who are really good with numbers, they’ll say this share shouldn’t be that because of this, this, and that, but it doesn’t really matter if it’s going higher.
That’s something I’ve learned.
I always ride the momentum. Often, if something’s going up and people say that’s far too expensive, you can look back at the chart back to where it was and it was far too expensive at £2. Like FeverTree [EPIC: FEVR], when it floated, I looked at that and thought the valuation is way too high, three quid? I’m not paying that!
You sit there and you see that go to forty quid and you just think “Oh, why didn’t I just realise that it had the momentum behind it?” but I didn’t know at the time that it kept the imagination of people and that’s what it needs to have. If it’s got a story behind it and people go for it, then it can really run.
That only listed in 2014, didn’t it?
So not even that long ago! That’s done fantastically well for a lot of people – and well done to them.
I had ASOS at 10p and 7000p it went to. You just sit there and think “If I’d just bought a thousand and held them!”.
I did make good money out of them all along; I think I sold them about 150p and bought them back, I traded in and out of them so I did make good money but nowhere near what I would’ve done if I’d just bought and held. £1,000 then makes you a millionaire today.
Quite a lot, isn’t it?
Yeah, you sit there and think about – a five thousand stake would be five million today.
The problem with that sort of statistic though – and it is a pretty cool statistic, but it’s one company out of how many thousand that didn’t do that? So, people might think “Oh, well, ASOS did this so I’m going to hold these”, but really they shouldn’t be doing that and they should be selling.
You’ve also got to be comfortable with the volatility as well. I remember Boohoo – WheelieDealer said he had Boohoo and they had a profit warning – he didn’t sell, but when he saw that the business was starting to turn around, he averaged down and bought a lot more, and he’s done really well out of it. But you’ve got to be comfortable with that. Because shares go down as well as up!
Sometimes shares can go down for a reason, especially with BOO when they floated and they just dived straight away nearly.
That’s no good!
No, so everyone was nervous about them to start with. Same with Luceco [EPIC: LUCE] – the guy there, he flogged a load of shares and then they just dived. Straight away you just think that they must’ve known this. And they did know. I’m sure BOO knew they were going to struggle, and even now the valuation on there is still a bit rich – they’ve got to do a lot. If they ever slip up, they’re going to come off big time again – its one of those ones where I don’t feel comfortable in them.
You’ve got to think about what the gain is going to be as well from now on. Where they are – have they got a big gain in them? Or is the chance that they’ve got a big loss in them? And you look at the chart and there’s a big risk there. You can probably find a bigger gain somewhere else.
I think so, yes. The small caps that are under loved. There are quite a few companies that do multi-bag over a couple of years but nobody is ever interested in those ones. Myself included – I want fast money as well! But you’ve got to be willing to hold if you want to make big money.
When you get some of these recovery stocks, and new floats that people suddenly get into, like Gear4Music [EPIC: G4M] – when that floated at a pound, I thought it was worth more than a pound from what the brokers were saying, but the market wasn’t that good at the time so it was about all they could get for them. But when it got to about £4, I thought “That’s got to be as far as it wants to go really” – and I sold out about £5 and it went to up to £7 and I just thought “This is crazy – it’s gone bananas!”
What’s the gain here for what the risk is? Who’d be buying here? I said this on the chatroom and a lot of the guys were saying “I’m holding on, I’m keeping them” – but now it’s back down to £2 and no-one is interested in them.
Funny that, isn’t it?
Yeah. They’ve got all those sales and everyone is saying “Get out, get out” – the value is probably somewhere between the two, of £2 and £7.
It got to £9 at the end!
As high as that – mental.
The value is somewhere between there and I reckon probably looking at the G4M chart now that’s made that bit of a bottom there. If it goes down now, I think it won’t go down quick and you’ll lose a little bit, and if it goes up it’ll probably be on the trading statement and everyone will be piling in. There won’t be the stock about that there has been the last few months with Blackrock selling.
It’ll be interesting to see what the next card is. As you say if the next news is bad it’s already been beaten down so much, and the directors have already bought, so they might even buy more. It’s definitely one to look out for.
What’s the longest you’ve ever actually held a stock for?
Probably Hornby [EPIC: HRN]. I think I held that from about 2000 to 2003 maybe. So, three years, four years.
What was the catalyst there? Did they bring out a load of new models or something?
What were they doing then that they can’t do now?
Well, they struggled with the all the little model trains, they’d sell them and geeky guys would buy them, but for ages they had problems. The share price came right down and then it came up a little bit, and the directors said that trading was better than expected, and no one was interested. It started to go up a bit more and then the directors bought shares, so that had that formula for me then. The chart had started to bottom, the directors had bought shares, so I decided to find out a bit more about them and read up on them then.
What they’d actually done has moved the production out to China, so the cost of making these little model Scalextric cars and trains had fallen by about 70%, so all they had to do then was start selling them and with that profit margin they were going to make a lot of money. So, then 3I – have you ever been on there?
The website – Interactive Investor.
Ah, yeah, no, I’ve never been on.
Well, I used to go on there and chat on there a little bit and I went on to read about what people were saying about Hornby and on there were all these geeky guys that loved train sets. They were saying things like “Oh, the 00 gauge is fantastic – it’s such a close replica to the real thing”, so I checked where they were all looking up things and buying stuff, and all these guys were saying “This new train is fantastic”, and “This is a step up from Hornby in quality”, and these guys all started getting excited.
So, I started buying shares in Hornby around £1.47 and then I just kept reading about what these guys were saying about Hornby trains, and there were so many geeks out there you could just sit there and eavesdrop all the time.
They’re the stocks that I like, retailers as well, you can go in there and see what’s going on. People say things like “Per una from M&S is awful”, and “I wouldn’t buy anything from there anymore”, and you think that they haven’t got it yet. But you get these anecdotal things from people saying these things are quite good, and it gives you ideas to go and have a look and see yourself. So, I’d go around a few stores and have a look and see if I did think it was any good to myself.
Same with housebuilders. When the housebuilding market topped we drove round all of these sites and were just knocking on the site office and saying we were interested in these houses and asking “Is it very busy at the moment?” and they’d say “No, it’s been a bit quiet actually”, or, they’d say “Oh, yeah – it’s been really busy, we’re selling loads of them!” and I’d look around and there was nobody there! No one around. They sing a good tune but the reality was very different. That’s what led me to short the housebuilders at the time. With things like that though, it’s getting harder and harder, because of the internet.
It quickens the information distribution and moves everything quicker.
Yeah, and you see these things like Quiz [EPIC: QUIZ] and Joules [EPIC: JOUL] – there’s a few of them out there that are internet retailing women’s clothing, and even that now is getting flooded with “me too” businesses. It only takes a few small businesses selling stuff to chip away into Boohoo and Asos etc, and it takes a bit of the cream of growth off their shares – they’re not going to grow like that they were. But housebuilders are probably going to keep going all the time. With houses I can’t see what’s going to stop people buying other than a recession, really.
What year was that – that you were short?
Right as the market topped. We’ve always looked at houses and kept our eyes on it thinking should we buy this or that. We’ve never moved but we’d go around and have a look. We’d watch Grand Designs and we’ve always been interested in property.
We wanted to buy back in 1993, something like that; we wanted to buy a place and the market was roaring away, and you could get self-certificated mortgages, and you could just walk in and say “Yeah, I can pay for that” and you just signed a bill to say you could pay and you could get a mortgage. It didn’t take anything more than that to get a mortgage!
I used to think “How long can that go on for?” There are people with no money getting these things. Then everyone was starting buying these houses for buy to let in 2003/2004/2005 and they were all geared up on each house! We had a girl coming in and she was doing hairdressing and she said “Oh, I’ve got 20 houses! I don’t do much hairdressing now”.
We had a milkman – he told me he’d bought a load of houses as well, and all he was doing was letting them out. I said to Karen “How long can this last? Are they lying about how much income they’ve got?” And every house they’re using that house as collateral for the next mortgage.
So, they were just leveraging each house on the other, like a house of cards?
Yeah! Every house was levering the other! And it was all right when house prices were going up 10-20% a year. But as soon as house prices stopped going up and people stopped buying them, you’ve suddenly got 50-60 houses that you’ve got to liquidate, and you’re either going to liquidate them or you’re bust.
Then you go to liquidate them and straight away the estate agent comes around, has a look, and says “Well, it’s up for £60,000 but we think its only worth £50,000 – we’ve got to cover ourselves because if we take that off you on a mortgage we’ve got to make sure we’ve got enough in the house if we’ve got to sell it”.
People couldn’t sell their houses because they were in negative equity so they had to pay the mortgage off, but it was all from the financial crisis and short term lending that people couldn’t keep up.
I saw that on The Big Short, where I think the lap dancer says she has twenty houses, I thought that was just a bit jokey for the film – I didn’t realise that people like hairdressers and milkmen did actually have 10 houses!
Yeah! I watched The Big Short and when I was watching it I said to Karen: “It’s just like when we were round the estate agents and it was a building site”.
It was just BTL people buying them and it was almost like they didn’t care how much the house was worth. People were just buying straight off the plan – the house hadn’t even been built, because they knew that they could sell it later on before it came to the market and they’d make £10,000 before they’d even have to buy all of the house.
So, they’d literally see the plans, say “I’ll have it”, then when it came up to being built they’d stick it on the market and they’d make ten grand. They were just getting loads of plans and selling them straight away!
Suddenly, when that all stopped, they’d put their 10% deposit on a house on a plan, but when they were coming to sell it they weren’t going to get their money back. That all stopped and killed a load of buyers. Then all the shares, the builders, they were just saying “Oh, yeah, things are a little bit quiet but it’s just a little blip” – I said to Typo and to others “How can this just be a bit quiet?”
No-one was buying houses round here – you couldn’t sell a house around here. Then when the shares had come off 30% or a bit more, suddenly they started saying that things were quiet, and as soon as one said things were quiet or we were going to miss our expectations, all the builders were just falling like stones. You couldn’t stick your money in IG Index and short them fast enough – they were just going down.
I should’ve made a lot more money on it really, but I’m not a confident shorter, and you always get these rallies and you think “Is that the bottom?” but I had a few stop losses and a few of those were getting hit, and I wasn’t comfortable being too levered. In hindsight I should’ve just held on – I knew they were going down. I should’ve made far, far more than I did. I made good money, but still.
It’s easy to say in hindsight.
It is, but I did limit my risk as well.
I don’t short too often, not long term. I do like it though because when a stock falls through a key area it can be a quick move for a quick 10, 20, 30%. I remember I was short Versarien before the results, and it did fall 20% and I closed half, but it started to go back up and I couldn’t close at all – I had to call up and just say “market buy Versarien” – it actually overshot my entry! I thought “That’s bloody scary!” due to the slippage. Your losses aren’t really unlimited because you can always close but it was still scary – the price was going up and I couldn’t close it.
I rarely short anything that’s really small. Occasionally, I’ll do it but when it’s that illiquid and small I don’t want to risk it. Especially if something is coming down and they say “We’ve had a bid approach” and you think “What am I going to do here?”
Typo is quite cool with it; he’s never really bothered about shorting, but he’s pretty good at it. He’s a miserable thing – you have to have that pessimistic outlook as well.
I don’t think he’s as pessimistic as he makes out!
No, he isn’t, he plays on it!
You’ve got to be able to see things as they are and question things like he does. Funnily enough, he actually mentioned Crawshaw [EPIC: CRAW] – Seven Sisters, the related party transaction, and Crawshaw has gone bust. He did it as well with Footasylum [EPIC: FOOT], when they listed. Small Cap Share Watch had it in their NAPS, a few were buying Footasylum, and he was the only one who was saying it looked dodgy. Now look at them – 90% down. He’s really good at it.
I know. I remember CRAW – do you ever go to that Mello?
Yes, it’s really good.
They have a load of quite good stocks but some of the guys get too involved. Sometimes Carmensfella will buy something, and loads of people will follow him. A few of them were in CRAW and I always thought “How can selling meat be the growth that they’re talking about?” – most butchers were struggling against Tesco but they were sure that this Crawshaw was going to do well.
Sometimes you’ve got to watch it. It’s very easy to get in and amongst the crowd, where you all believe the same thing, you start to believe your own hype
It becomes again a self-fulling thing, like confirmation bias. Everyone on the same side. In the end, you’re all going to believe what agrees with you and you don’t want to believe what doesn’t agree with you. Some of them made decent money in there but I reckon a lot of people lost a lot of money in Crawshaw. There was another one as well, with Rob Terry – Watchstone [WTG] now.
Quindell, was it?
That was before my time but I’ve heard the story.
On ADVFN I was going on there all the time telling people “You’re going to get hammered on this” and they were saying “Oh no, it’s buying up this and buying up that”, and in the end it came out bad and they’d lost an absolute packet on those, and even now the guy that was involved – once that Rob Terry went and the guy that came in.
AIM is the only place where you get rewarded for being rubbish!
It’s amazing – the guys who were bad in the banks, they’re still running other banks! You would’ve thought all those directors in 2007 and on would all be out of a job now. But you’ve got them in others – Jamie Dimon is still going, You just think “How do they stay in the business, and stay as directors?”. But they do.
It’s weird. Another example – Colin Hutchinson of Ascent Resources – gave himself a £65,000 pay rise or so to £210,000 – he’s never actually achieved anything with the company, but I think it’s because nobody has ever taken a material stake to challenge him, and the only people who are holding the shares are small time shareholders, or gamblers, or traders – people who are buying it and selling it within days. If I’m going to buy a piece of news and sell within a day I don’t really care what he’s getting paid. It doesn’t mean that it’s right, but that’s the reason why it keeps going on because no-one puts a stop to it.
There’s another other, SIXH is the ticker, 600 Group.
Yes, I know that one.
Cor, the time that they’ve been going and they’ve never delivered on anything, and it’s the same board, and I wonder why nobody kicks the board out? But no-one can kick them out because there’s not enough large shareholders to kick them out and you can’t get all the little shareholders to organise.
I’m sure these guys just look for a shareholder base where all the shareholdings are all over the place and they couldn’t organise themselves to kick me out, and once I’m in there I’m in there for life. So, they just live off the wage.
Yes, I agree. So, 2007-2008 you were short the housebuilders? I can’t really remember 2008 that well, because I was about to go to university but I remember Lehman Brothers went bust and I assumed that it was just one of those things that happened on the stock market. Of course now, when I look back at the charts of 2008 and see the FTSE and constituents of the 100 just tanking, that must’ve been quite scary.
Ever so scary. Funnily enough, a good guy that we used to chat with on MSN Messenger, “DiogeneseJ”, his name is Jonathan Backhouse, and his Grandad, or great Grandad, started when the big banks, he was one of the founders of Barclays years and years ago – he had to drive down from up north to London with about a million pounds’ worth of gold in his cart to prove that he wasn’t going bust so there wasn’t a run on his bank.
He understood banks really well and it was Northern Rock, their funding was all done on short term loans, so they were borrowing short term overnight and then they’d refinance the next day, and they were doing it on this overnight lending rate LIBOR, so they could keep could refinancing night after night. It was a cheap way of borrowing for them, because however it worked out it was cheaper than borrowing on a long term basis.
So that’s what they kept doing, and that was the business model. This new guy came in, Nick Hornby. I don’t think he’d ever run a bank or anything but he said we’re going to do it like this. Well, the overnight lending rate just froze up overnight and there was no overnight lending because obviously they saw that this couldn’t last, and you couldn’t keep borrowing overnight, and it was all to do with these CDOs and from the banks, and the other stuff.
Credit default swaps.
Exactly, it was all to do with those and they were using that as collateral and that was going down and they’d released that it was all mortgages chopped up and you couldn’t find who owned which mortgage inside these things.
Then once we saw Northern Rock start to go down everyone was saying “Why is Northern Rock falling?”, and we couldn’t work out why it was, and then suddenly it came out about how big these CDOs and CDSs were, and it was mind boggling.
One morning he said “Do you realise how big this is? I’ve been looking and it’s just huge, like ten times the economy of the world” or something”. We were thinking “If they all go bust what happens to all the money? And the banking systems and everything?”.
So, I was on alert from the moment he said that, and I knew that house prices were already falling, and we got through to 2007 and 2008, and all it was relentless – day after day, you’d think the market would bounce today – it didn’t, the next day it was down.
As soon as you’d think it would bounce again as there was a little rally – it didn’t – it went down again. I continuously watched these spikes down, and one day some news came out from America and the markets bounced in the morning, about 6 or 7 percent, and I thought “Ah, this is it!” – everyone was piling in and they thought that was the bottom, and it all came back off again. In the end it just became such hard work to make money.
It was draining, physically draining, you couldn’t make money going long, so unless you were short it was really difficult. Then it got to a real bad point ahead of Lehmans, a month or two before, and I was thinking the whole banking system is going to collapse here, and we’re going to be a in real big mess. I’d just bought a brand new BMW 6 series.
The BMW garage was there looking all over it and just paying for it and suddenly the market was collapsing and I was thinking that this wasn’t a smart idea – spending all this money in here for a new car. We were talking about the financial system collapsing and then I just thought “That’s it – I’m getting out of this market”.
I phoned my broker as I didn’t even think currencies were safe, I thought the pound could collapse here. What if the pensions or ISAs are only guaranteed to £75,000? What happens if you’ve got over £75,000 in cash? So, if you’ve got over that you’re probably only going to get £75,000 if it collapses – you’re not going to get all your cash.
A few people were saying they were buying gold, but gold wasn’t going either! So in the end I bought bonds – the best place for your money was, if you had £500,000 to stick away, if you’re in bonds, because at the end of the day if they were physical shares in your account and you held the share certificate you were going to get the share certificate back no matter what they were worth, it’s just the cash that you were going to lose.
So, I stuck all mine in bonds and that was about two weeks before the Lehman collapse, and bonds just went up like 10% in no time, I didn’t have anything in the market and I was sitting out, and Sky came to me and asked whether I’d do a bit on Sky News for them over a week.
I sat there trading for them on Sky, they wanted to show how bad it was and they said they’d give me £500 to trade. I said “What can I do with that? Nothing”. They said they’d give me £1,000 and I said I’d trade it on Hargreaves Lansdown and see what we can do. I thought they genuinely wanted me to try and see if I could make money during that week. I tried my hardest, and I did, I was up about 5%, but it was in and out quick on a couple of shares I knew, and a lot of the time I sat the market out, and you just can’t buy. The market is down 4% today – what do I want to buy? It was down 2% and more so why do I want to go long? But I bought some things and made some money, but they wanted me to lose money.
I came back and they said “Well done” – they gave me the money I made for doing it for a week. I sat a week out of the market when it was down 7% and my money was in bonds, but after Lehman collapsed, Karen said: “Ah, look Lehman has collapsed now, what was that all about? They’re all going mad on the news”, and I said “We’re all in bonds so I think we’re all right”. That was about September or October when that happened.
September – a couple of days before my 18th birthday!
The markets started going down and I was just watching the chart on the Dow and the S&P and the Dow was about 7,000 – there was a big support a long way back at 7,000 and then it came up and the market got right over and I looked back and thought “7,000 is a really obvious level where that chart is going to come down to it, and if we get 7,000 and we go through that, we’re in trouble, this is serious, this really is hitting the fan.. but if we bounce at 7,000 that’s the bottom”.
I sat and watched it come down to about 7,000 at around 7 o clock and it got there and just went bang – straight back up again. It went from there to about 7,200, 7,300 and I thought “Oh, don’t go up so much yet – if you come off 7,000 hard the market will go up a lot tomorrow and I’m in cash” – it went up a bit and from that point I knew we had hit the bottom there; it had hit the big previous low on the Dow, and up we started going. It all felt right – we’d hit a big support. It was the bottom. But that – I really thought we were in trouble. I actually thought about going and getting a job or doing something different at one point.
It must’ve been terrifying. So, the market actually started going down with the housebuilders and this Northern Rock – I can’t remember when that was – but that was the catalyst for everything to go down a lot more?
Well, once Northern Rock started going down then everything followed – Bradford and Bingley started going, they were all going down, the major banks were coming off, and people were saying “They’re not involved in short term loans” and all this, but you could see the charts were following and you knew they were in trouble.
Anything to do with financials, mortgages, banking, they were all tanking. And then it wasn’t just them in the end – everyone realised that if the banks were in bother then that’s going to make other businesses in bother.
It looked like they were going to go bust – so many of these businesses had so much debt you just thought they were all going to be called in by the banks or closed, but the government cut interest rates down to zero, or nearly zero, and from that I was sat there thinking things were bad and our mortgage went from £1,000 per month to about £137 – I was thinking “Crikey, we’re safe – saved £800 per month just on the mortgage!”
Then suddenly everyone was buying houses again because the interest rates were zero! if you bought a house it was cheaper than renting, then people were trying to get their money in that, and the builders started to pick up, and it had obviously got overdone because they did all these rescue deals to save the banks but constantly having Paulson out in America come on – he had this gruff voice – you could see he was frightened stiff. He was in charge of the Fed, or the financial side of the government, and he was coming out and saying “We’re doing this, we’re doing that” and you just looked at his face and you could see he was petrified.
And Greenspan at the time was there, and he cleared out, and then Bernanki came in, and they all looked frightened from everything they said. You could see they were scared.
That’s not good!
No! But the thing was the fear and greed index had got right near to zero, and the Vix was so high you’d never seen it that high before – there was that much fear in there and I said to Karen “I’m going to start buying here, and she looked at me as if to say “Oh really, this is it, this is the end, we’re going to be skint”, but it wasn’t, and Debenhams [EPIC: DEB] had started to bottom and I bought some of those, and I’m trying to think what else.
There’s a name you wouldn’t buy now!
No, you wouldn’t! They were down to around 12p or something and they started to going up, and everything you could just throw darts at everything and it would go up.
Is that because expectations were so low that like anyone who had wanted to sell had sold or been scared out?
The only way that it could go if it didn’t go bust was up?
I sat there and I thought to myself “I’m quite hard and I thought I can take it tough”, but I was scared and I’d all gone into cash, and in the end guys were saying they’re selling out, and I just thought I’m probably one of the last to hang in there, there must be guys who are really tough to still be hanging in, and it must be only the end boys that were there in the pensions saying it’ll come good eventually, and I thought “Well I’ve got to live off this today, I’m a trader, so I can’t just sit there. I want to make sure I have enough money to play with when the market turned”, but you could see that there was so much fear in the market at that point.
Even then when I went back in loads of people were saying “Oh, I’m not touching it yet, I don’t think this is the bottom” – the same as in December when the market bottomed there, always guys on the chatroom were saying “Oh, I don’t think so yet”. But the chart does tell you a lot, you know? I think probably the charts at that time told me we’d got there; you could see these supports. Rightmove was going that way, loads of these charts were doing these curves, and I hadn’t seen anything like that in ages.
I think if you scroll through quite a lot of charts, because I like to trade a lot of breakouts, when there’s not that many and I can clearly see on the filters how many are popping up and how many good companies are popping up, you can get a feel for the market. When you can see there are very few stocks breaking out you think “Well, if they’re not breaking out they must be going down!”
So, especially when you see some of the big names come off as well you can guess that you’re in for a downturn, so reading charts has helped me quite a lot.
Did you ever go on Motley Fool?
No, I never went on it.
They used to have a chatroom on there as well. Pauly Pilot used to have a chatroom on there, and a lot of the guys used to follow him, and they used to be a stuffy bunch of guys, they’d be all “I’ve looked at the balance sheet and done this” and they’d go on there and chat about a share, and a few of them would say “What do you think about the cashflow about this period and that period? It’s out of sync with the balance sheet and I wouldn’t touch this with a bargepole” and I thought “You’re just looking too deep – you don’t need to” – and if anyone said anything about charts they’d be saying “Oh, I don’t wanna know about charts – charts are all voodoo”, and stuff like that.
They’re not voodoo – they can be a graphic picture of what the market is doing at that particular time, and it is literally a homogenisation of everybody’s thoughts and what they’re actually doing, and that chart draws it for you in a way that you can’t hear it when you’re listening to the market I think. To ignore charts is dangerous really. Whenever I ignore them, I usually get a punch in the face.
I know investors tend to buy the valuation but why don’t they just look at a chart as well? Why do they need to be mutually exclusive? It seems silly to not do so.
You want to buy buying at a point where you’re most likely to make money, so it seems dumb to not do that.
I can imagine in the old days where you prob didn’t have charts and the internet and things like that, it would’ve been old voodoo but if the chart is heading down all the time and you think it gets to a point where It’s a nice valuation, just wait until it starts to turn up because it might even get a better valuation than you expected. Just got to wait and see what happens and do it that way.
I never, well rarely, I hardly ever buy a falling chart. It’s just – until you actually see it turning that can carry on falling another 20 or 30% before you see that bottom and you could’ve been wrong. It’s far better to miss 10% coming out and miss the bottom and catch it on the way up than buying it on the way down and waiting for it to bottom.
Or at least be prepared to buy a very small amount and as it goes down double it and if it keeps going down double it again when it looks to have got the bottom, and then you’re probably in profit as it starts to turn. So, if you’re brave enough to do that you can probably make money, but you’re probably going to be picking a few bad ones as well.
The problem with that is that falling shares are often falling shares for a reason.
Sometimes you don’t know what it is – you only find out after!
So, in 2000 in the tech boom did you have these charts and charting packages? How much information was actually available? Because now obviously we can go on Stockopedia, we can see the past five years instantly, whereas you were saying before you were calculating them. How new is this?
Back in 2000 the charts – there were charts about – but you had to dig about on the internet for them and they weren’t that great. The internet was quite new and it wasn’t that freely available, you could track back charts so they were there but charting packages were nothing like they are today. So, really I’d say charts came into their own around 2005, charting really started to pick up then, you could see a lot more. Especially by the time we got to about 2009 when the market bottomed, that’s when I first noticed so many of these bowls then, because I was looking at charts a lot more, and they were showing up a lot more in that time.
So, you flick through a few hundred a weekend looking for bowls?
Yes, this morning I’ve been through all the fully listed stocks. FTSE Small Caps, FTSE Fledgling, FTSE 250. I didn’t do the FTSE 100. I was going to do AIM but I didn’t get around to it. It’s all right having filters but I’m not that great at getting filters right to give me what I want, but trying to find a bowl or a certain chart is a visual thing, and it’s hard to get a chart to get you to tell it’s a bowl. You said to me about 52-week highs the other day?
Yes, so I’ve got them set up so where if the price ever breaks the previous 52 week high then it’ll pop up on the filter that night.
So that gives you breakouts then, does it?
Yes, but it also gives me ideas of stocks that are uptrending as well, because I can filter for other highs too. So, in theory I shouldn’t really miss a winner because it pops up on the filters! No excuse for me to miss them, but yes that’s what the filter does. It’s quite good.
How far would they have come off the bottom though?
Oh, it wouldn’t show that.
Some of the things I’ve seen recently like DS Smith or Ashtead, they’re putting in a 20% rise, and they’ve been at a low.
Well, it depends when it actually does break out! But yes, they don’t show bowls or anything – the only thing you could do to find a bowl is a 12-week high filter, so when a price is making a new three month high, and sometimes you can see them start to bowl up and turn, so it would be the start of a bowl. I’m definitely going to keep on doing the 52-week high.
Once a filter can tell you if something has hit a six-week high after a certain big low, if you could put a filter in that said the stock has hit a two-year low but it’s then bounced six weeks after that it’s rallied.
You would be able to do that, yes.
Quite complicated, isn’t it? I’m sat there thinking its not my cup of tea really tying to work out how these filters work. So, I see these things its hit 52-week highs but hasn’t done this and in the end I’m just thinking it just doesn’t gel with my way of doing stuff. I just want to see what’s bowling. I picked out a few, Stock Spirits, you have a look at that.
Yes, just breaking out of that 200.
It’s got a bit of news coming up in March, the results are out, if you stick up a five year chart on that, you can really see that something has happened over the last six months. You can see it change that trend. That caught my eye today, I don’t know how I’d ever filter that to get something to tell me that other than charts where I go through them.
Well, that came up on my 12-week filter.
Yes – obviously it’s made a high on my 12-week filter. I did look at that but it’s £466 million market cap but it’s not really going to move 20 or 30% soon and I normally trade smaller companies.
The other one thought I caught quite well was BBA – these are ones that they’re not great buys but things I’ve picked up on just by looking at the chart. That’s made since Christmas, that’s just made that turn in the chart, where if you see the volume as well in August there was some massive volume.
I think volume is really good indicator; you can have a filter for that as well.
Those big volume spikes often tell you where a seller has got out.
PFD [Premier Foods] the other day – that had a massive spike in volume.
I wish I’d seen it earlier. I saw the bounce and I saw the volume but I think where that guy is buying more and more I think there’s something going on there; I don’t think he’s just buying a stake and driving the price up for no reason.
What was the scariest day in the stock market for you? 2008? Or 1987?
They were both scary in their own way – 1987. No-one was expecting that scary – or I wasn’t expecting that scary! Nobody was expecting scary at that point. Markets were at new highs and BBC News came on that night and they said the Dow Jones has fallen 100 points overnight and I thought “Well, that’s not that good, maybe I’ll sell a few bits tomorrow” – next day you couldn’t phone the brokers for two days because they just weren’t picking up!
That must’ve been awful, to say the least.
Yeah – had I known I’d have drove to where their head offices were and tacked my certificates in and said sell them! But I didn’t know that it was going on for a second day but I’m guess that’s what everyone was doing – driving down and saying “I couldn’t get in touch with you yesterday – sell this today” and once that all got out the way the market did a thing were the broker had a computer saying fallen through stop loss sell and it just kept going on and on and on, and the computers took all these stop losses out and the market could bounce. The third day it bounced 10 or 12% I think – that was the most galling bit having sold when it fell 27%. The most scary time though was Lehmans, when that collapsed, definitely.
Can’t really imagine it now, hopefully we won’t see it for a while.
I started full time trading towards the end of the bull market, and if I’d have started in 2009, I would’ve been laughing.
If you start when the market is near a high and you survive that time then you’re well prepared – the worst thing to do is start when the market is at a point where you get overconfident and you think “This is easy” – then you start living off something where it’s too difficult to live, it’s not going to happen all the time, but where your living gets to a stage where you’re reliant on it, and then suddenly, the market turns and you can’t cope. I always say to people if you’re going to go full time trading start it in a bear market. Get through that and you’ll live through and you’ll be laughing, you can do it. But those are the tough times to ride out.
How do you think the last six months have been in terms of it? Lots of things have been falling but you can still make money, it’s just a lot harder. Its not really a proper bear market, is it? I don’t think.
No – I wouldn’t say this on the chatroom but personally I think the market may have more in it for ages. I don’t think inflation has taken off as fast as people think it has been, I think there are other factors at work probably the internet and stuff like that and the fact that oil is going up as fast as it would normally go up.
America is just doing so well at the moment without driving up too much inflation, and now wages are picking up, and I just wonder whether all that in December was just a bit of panic; the market fell where it did and now we’re starting this year off and maybe when we get to the end of the year nobody will believe how well this market has done over the past 12 months.
The only reason I think that is because I’ve seen all those bowls and missed what people are saying, but it seems like we had weakness but certain things are picking up – in America I’ve seen new houses start to pick up, consumer confidence has picked up, wages have picked up, inflation hasn’t picked up, and in China they were saying they’re at an eight month high in their confidence levels, even France – their data hadn’t gone down, it was on its way down but it’s just flattened, and even they weren’t doing quite as bad. It’s only Germany because they rely on exporting so much to America and other places that a little quiet down there, and Brexit in Germany is probably a factor.
Looking forward to getting that out the way, Brexit! It drives me nuts.
It does me too actually. I wish we’d just leave and be done with it, or do something. Blow parliament up, or something like that!
There was some who was telling me about this German guy who had been in charge and he was a politician and he was charging them €150 to meet constituents and talk to them – could you ever imagine a British MP doing that he asked? What we would say?
Well, I can actually because we had the expenses crisis! 650 MPs doing it actually! So, it’s not that difficult to imagine. You just think they’ve always got their own agenda and we need to get on with it and do it – whatever.
I think any clarity on anything will help the market, I don’t know if that would help it long term but it would certainly give it a short term kick.
The uncertainty – I always say markets don’t like uncertainty – if you don’t know whether we’re staying in or staying out or another referendum or not, if someone says we’re going to leave or we’re not then you can say “They’re going to get hit, they’re going to get hit, those aren’t going to get hit” so you invest in them and it’s clear.
But when you don’t know what’s going to happen you don’t know whether to invest in A or B because you just don’t know; there’s no answer yet. I think now it’s got to a point where no deal is priced in, I think. More or less. It’s going to be that knee-jerk when everyone says “Oh, sell! Sell! Sell!” that morning, and afterwards people are going to be saying “What are you panicking for? Everyone else is starting to buy now”, and everyone says sell anyway and it’s back up straight away.
It was like the Brexit vote. It was down and after a few days it was back up again.
Brexit – what was your experience of that? Because I can’t remember but I think you said you were mostly in cash for it.
For the referendum result.
Oh, I was all cash at the time. I did say on the chatroom at the time that I could see the polls were saying we were going to remain, shares were going up and up and up and following polls, and at the bookies the odds against leaving were going up and up and up so about 17 to 1 for leave, and I sat there and I watch politics a lot and I know that when you get the polls of the people who voted at the end of the day, they are not the same as the people who voted at the beginning of the day.
The people who are voting at the end of the day are the people who at work and the and the people voting at the beginning are the ones who don’t have job, so you don’t get the same type of people voting morning and night.
I was watching the polls and no way can anyone know were not going to leave, but the polls were saying that we were and the bookies were saying the same thing, so I said “If we do leave the stock market is going to go down 6 or 7% now it’s in the price – if we don’t leave it’s in the price that we’re not going to leave. But if we do vote to leave nobody expected it now and we’re going to get a real good thumping, so I’m all cash”. And loads of other people went to cash on the chatroom. I actually went and put a bet on leaving, the odds went up to about 15 to 1 and I said to Karen “I can’t not bet that – it’s a 50-50 vote. It’s that close and they’re giving me 15 to 1 – I’ve got to put a bet on that!
Very good risk to reward ratio.
I went on the internet and I couldn’t get my account to work – Betfair wouldn’t work. I was watching it come from 15/1, 13/1, 12/1, so I thought I’m going to miss this. We had relatives over from Canada and I said “I’m just going to go in and put a bet on Brexit on us leaving” and they said “We’ll come with you – we’ll have a bet on as well!”.
So, we went in and I stuck some money on and walked out with a big envelope of cash two days later. They went back to Canada with a load of cash as well!
But at the time it was exactly what I’m saying. Everyone expected us to remain, the polls were saying remain, and at 9pm I went to bed and they were saying it’s 52-48 to remain, which is what the polls were saying, and I thought “Oh, well, we’re not going to leave, I’ve lost my money” and its all bad.
We laid in bed and watched the first two votes in and it confirmed it, and it turned around that night. And then the next morning it was like leave has won. So, it was like “Wow, that’s great, we’re all in cash – the stock market is going to plunge” – builders were down like 20%, Taylor Wimpey was down about 20%.
Opening auctions – 20%?
Everything was just red! Massive amounts, in no time. I couldn’t even believe how much builders had gone down. I was scared to buy, and they were still going down! I was thinking how far are they going to go down?
In the end I started buying when they were about 22% down, just nibbling in, and within about two weeks they were all back up to within 10% of where they were. So, you know, it was a good time to have been all in cash. And again, it was just that thing where everyone was expecting one thing and if you got it, it wasn’t going to go up cos the expectations were already in there, and if you don’t get it then everyone is going to get disappointed and you’re going to get hurt. So, going against the flow really.
Due to the length of the interview Part II will be published next week.