Your trading and politics should be mixed carefully
The editor of the popular Guido Fawkes’ blog gives his tips
IWAS a futures broker in my twenties, mostly interest rate futures – I did a bit of bond dealing, mainly in sovereigns rather than corporates. I got fired from the Japanese investment bank I was working at in the late 1990s and a friend of mine said: “Do you know anything about stocks?” So I fell into trading technology stocks during the dotcom boom from 1997 to 2001, ending up in Tokyo trading for a hedge fund during the six months long Japanese tech stock boom. I thought I was a genius trader, made a fortune, then lost only half of it in the Nasdaq crash. I realised I was perhaps mainly just in the right market at the right time. Nowadays almost all of my capital is in real businesses, in which I have a hands-on management interest. But I still play the markets with some risk capital that I don’t tell the wife about.
I am a bit of a closet gold bug. When my first daughter was born I bought her a one ounce gold coin. She has just turned 7 so that investment is up some 200 per cent. When she lost her first tooth the tooth fairy in our house put a small Canadian Maple Leaf gold coin weighing about one gram under the pillow. She came down the next morning in tears crying that she had only got a penny and all her school friends had got a pound.
My basic political world view is that the advanced Western democracies are screwed after decades of deficits and that we will see inflation – the Black Swan will be double digit inflation. My view is that policy makers – particularly in Washington DC – deliberately want to inflate government debts away after sticking the Chinese with their Treasury paper, just as they did to the Japanese and before them the Arabs. The problem is that inflation has a habit of getting out of hand. Hence gold as the immortal hedge against inflation – or maybe farmland, if you are really apocalyptic.
There are two points I would make about your political analysis informing your trading. Unless you dine with central bankers and trade on the back of what you hear, it isn’t much use for day trading. Money flows determine minute-by-minute price moves. You will get poor if you let your political 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 few drinks, 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. However, he is happy to chat to you about politics on his private jet. There is a lesson there.
Secondly, at the beginning of the year I expected Greece to be out of the euro by March at the latest. My trades were predicated on that. Was that wishful thinking because I’m a Eurosceptic? I’m not sure. But it is important to guard against your political prejudices influencing what should be a cold calculation.
Paul Staines spoke on the City PM Active Trader politics and trading panel.