One of the benefits of having more than 30 years in financial markets is that you have had plenty of experiences both good and bad, and as you step back from the coal face of the trading desk you get the chance to reflect on and review them.
And if you are lucky and people will listen the chance to pass on the benefit of that experience and review process.
It seems appropriate to be doing this on the 33rd anniversary of the October 1987 crash something that I remember all too clearly, the kind of the day that you don’t want to experience too frequently, the once a decade cyclicality of the markets being just about the right tenure.
Which, of course, means that on this basis at least we are overdue a large downside move.
One of the best things about being the oldest person in the room is that you get to mentor the youngsters.
Encouraging them and getting them to think about the markets in a different way, by adopting a traders mindset.
Its been very rewarding to see some of those people go on to flourish in their own careers and establish themselves as influencers and authorities in their own right.
But really all that I have done in these circumstances is to pass on the benefit of my experience and accumulated knowledge in the same way that the older people in my career had done for me.
That brings me to my second point about trading which is that despite the modern buzzwords and new technology in trading nothing really changes.
If you read the Reminiscences of a Stock Operator (and you should) by Edwin Lefèvre published in 1923, which chronicles the life and times of Jesse Livermore, one of the largest US speculators of the times.
You will recognise the same traits and features in the markets described in the book, that you see now.
Investor greed and fear are constants.
Markets have short memories and each new generation of traders believes that this time it’s different.
However, in my experience, the setting and backdrops may change but the fundamental plots don’t.
This might be different in the future as more of the larger actors in the markets become non-human.
But we have been there before too when algorithmic trading was first introduced 15 years ago and the machines were easy to bait and pick off.
Which is one of the reasons that we now have rules and regulations around spoofing and painting the tape.
So what has worked for me over the years?
Well first of all its been an evolutionary process and it still is - but I think the most important trait is curiosity and a desire to learn and learning not to take everything at face value.
That might sound like cynicism and to some extent, it is but that can be offset with a good dose of pragmatism and the realisation that the...
“Markets can remain irrational for longer than you can remain solvent” JM Keynes
So for example whilst you might believe that the bull market in US equities is totally unwarranted and will all end in tears - there is absolutely no point in opposing it because it will just roll over you like a wave in the ocean.
So learn to go with the flow watch for the changes and have the foresight to have positioned yourself to be protected from the bust when it comes that means having cash and quality and only modest exposure to the most hyped and leveraged stocks.
Find a model or systems that will allow you to compare and track the markets - we live in a data age with new sources of information appearing daily but a certain amount of consistency is a good thing.
I have used the same models for 15 years and they are by no means perfect but I understand them and know their limitations, and speaking of limitations I know my own.
One of the best things about the lockdown and working from home was that I talked to people more, or more specifically I had different conversations.
Some of the best and most productive conversations have been WhatsApp chats late at night with a friend who manages client money and who has a different perspective and approach to the markets.
The back and forth conversation and the swapping of ideas have provided us with both with some real insight and decent stock picks.
That why the chats at Macrodesiac are so useful because you can ask questions bounce ideas off of your peers and have more in-depth conversations via DMs or other channels.
We will look at some of these themes in a bit more detail in future articles.