Eric Geddes
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The CityAm Active Trader conference included a contribution from Paul Staines (Guido Fawkes the political blogger). Here's a copy of his speaking notes in which he traces his route from beginnings as a professional trader to his position now where he just dabbles in it as a sort of hobby. Does this ring any personal bells for you?
"Just some background on me I was afutures broker in my twenties, mostly interest rate futures, did a bit of bonddealing, mainly in sovereigns rather than corporates. Got fired from theJapanese investment bank I was working at in the late nineties and a friend ofmine said do “do you know anything about stocks?” So I fell into tradingtechnology stocks during the dotcom boom from 97 to 2001, ending up in Tokyotrading for a hedge fund during the six months long Japanese tech stock boom. Ithought I was a genius trader, made a fortune, lost only half of it in theNASDAQ crash. Realised I was perhaps mainly just in the right market at theright time. Nowadays almost all of my capital is in real businesses in which Ihave a hands-on management interest, but I still play the markets with somerisk capital that I don’t tell the wife about. I will however tell you whatI’ve been up to this year.
I am a bit of a closet gold bug, when my first daughter wasborn I bought her a 1 oz gold coin, she has just turned 7 so that investment isup some 200%. When she lost her first tooth the tooth fairy in our house put asmall Canadian Maple Leaf gold coin weighing about 1 gramme under the pillow.She came down the next morning in tears crying that she had only got a pennyand all her school friends had got a pound. A “shiny penny”.
My basic political world view is that the advanced Westerndemocracies are screwed after decades of deficits and that we will seeinflation - the Black Swan being it will be double digit inflation. My view isthat policy makers - particularly in Washington DC - deliberately want toinflate government debts away after sticking the Chinese with their Treasurypaper, just as they did to the Japanese and before them the Arabs. Problem isinflation has a habit of getting out of hand. Hence gold as the immortal hedgeagainst inflation.
Or maybe farmland if you are really apocalyptic.
Add to that macro-view a possible Eurozone break up withcurrency carnage and I had to be long gold. Anyway as you can see here, Isteamed into gold futures at the beginning of the year with an aggressivelyover-leveraged position which stopped out with my NAV down 49% on a $50 moveagainst me. Not a great start to the year’s trading. I tried again luckily justahead of a Fed hint that there might be another round of QE and gold jumpedsome $100, so I was almost back where I started.
I still wanted to be long gold in case of Grexit which to behonest they have dragged out longer than I expected, I cut the position size asgold drifted lower until I was out. I suspect we’re now in a counter-trendperiod for gold.
I still wanted to play the Eurozone trade and my focus switched to France where I figured the election of a socialist president wouldgo down like a bucket of sick with the big American money market funds likePimco who were already moving dollars out of European banks.
The obvious trade would be to short French government bonds,but the ECB nowadays buys any kind of junk so the European bond market is in myview a fantasy landscape depending on the whims of the ECB.
So I decided instead to sell the EUR USD cross, initiallyvia futures, which I generally use for positions I intend to run for a while,then I started to day trade a bit on the news via spreadbets around the coreshort position. Incidentally the big moves in the cross always seemed to happenin the afternoon during US market hours even if the news happened in theEuropean morning, so I do think it really is US funds driving these moves.
As an aside that Facebook logo on the chart was me dabblingin the stock on day 2 after it plummeted on the open, I bought some Facebookvia CFDs for a bounce, it creeped up a buck during the afternoon and I thoughtwhat am I doing here, I don’t have any edge, I don’t have a clue and anyway itis against my religion to be long technology stocks. So I jobbed out of it.With a profit - but the risk / reward on that trade was pretty stupid.
The EUR USD cross basically broke the 1.30 support level acouple of weeks ago and from that moment on I was pretty sure we would test theyear lows again. I doubled up and traded around the position, either short or doubleshort for the last two weeks. It broke the old low yesterday and I took profitsand closed out. Allowing me to come here and tell you how your politicaljudgements can be profitable.
Two points I would make about your political analysisinforming your trading - unless like George Soros you dine with central bankers andtrade on the back of what you hear - it isn’t much use for day trading, moneyflows determine minute by minute price moves. You will go poor if you let yourpolitical prejudices - in particular what you would wish to see happen -influence your short term trading decisions.
A friend of mine is probably the biggest trader of short term interest rate derivatives in the UK. He too in private, after a fewdrinks, is a gold bug. He doesn’t read the news he just trades his algorithm.He keeps his politics out and off the trading floor. He is however happy tochat to you about politics on his private jet. There is a lesson there.
Secondly, at the beginning of the year I expected Greece to beout of the Euro by March at the latest. My trades were predicated on that, wasthat wishful thinking because I’m a Eurosceptic? I’m not sure, but it isimportant to guard against your political prejudices influencing what should be a cold calculation."
