Christopher Weaver ‘4 Keys to Profitable Forex Trend Trading’ interview

February 8th, 2012

Forex trader Christopher Weaver talks about his new book ‘4 Keys to Profitable Forex Trend Trading’ with Trading Diary.

1. Who are you?

Christopher Weaver: forex trader and authorI have been around the trading scene for a while. Having never really worked for any large financial institutions, the majority of my trading has been private accounts. I spent a few years writing and delivering trading courses in London for a company that teaches and trains private retails clients how to trade the financial markets. I actually really enjoyed that experience although I haven’t done it for over a year now. I spend a lot of my time now in front of the trading screens and writing books with Harriman House which I really enjoy.

2. What is your new book ‘4 Keys to Profitable Forex Trend Trading’ about?

It’s about learning how to identify solid trends and then trade them profitably. It’s a very practical book and it has over 200 images of charts in it. I felt that it was important to have almost an overload of charts simply because technical analysis is a very “visual” experience. This book helps train the readers mind to instantly identify trading opportunities. It helps the trader develop an instinct for trend trading.

3. Why did you write this book?

I wanted to write a book that had definite and clear trading strategies laid out for the reader. I find a lot of books on Forex trading seem to shy away from doing this and it doesn’t make sense to me. People who read books on trading are normally looking for practical tools that they can apply and implement immediately. In this book “The 4 Keys to Profitable Forex Trend Trading” there are 8 different trend trading strategies that define the entry and exits specifically.

4. Who is your book aimed at?

The book is aimed at individuals who have a basic understanding of trading, for instance they know how to place a trade and understand the basics of a chart, and who want to focus their trading very specifically on trading with the trend and increase their profitability.

5. What in particular interests you about forex rather than other derivatives?

I have always loved the idea that the forex market is a market that is “made of money”. Plus, it is very liquid, and as far as I am concerned, liquidity is always a good thing. I also believe that the forex market provides opportunity for so many different types of trader. It doesn’t matter if you have a short, medium or long term trading style, there is normally something for you to trade.

6. Do you just use technical analysis for your forex trading or do you look at the fundamentals as well?

I believe that it is possible to trade successfully by using only technical analysis. I also believe that by introducing a small amount of fundamental analysis the trader can improve his results dramatically. The non-farm payroll figure that is released monthly in the U.S. is for me, a key fundamental piece of information that I focus on. If the figure is consistent with the current trend of the time frame that I am trading, I see that as an opportunity to potentially enter the market. If it is inconsistent with the trend of the chart that I am analyzing I tend to stay out of the market completely.

7. I often find that by the time I start trading on a trend, the trend is nearly over and reverses. What can I do to identify the trend earlier?

Yes, this is key. Traders, like to “see the trend” before they “trade the trend”. As you say however, by this time it may be too late as the price action is likely to be overextended and ready for a pullback. A basic way that I define a trend is by looking at the relationship of the 50 EMA to the 200 EMA. If the 50 EMA is above the 200 EMA, the trend is up, and if the 50 EMA is below the 200 EMA, the trend is down. The only problem with this is that once the cross of the moving averages takes place there is normally a pull back against the trend which happens. So, if the 50 EMA crosses down through the 200 EMA, I will wait for the price action to come back and test the 50 EMA before I start shorting and vice versa. This is just a general rule. In my book, there are a number of other techniques which I talk about that assist on determining the trend and also the timing of the entry.

8. You have spent extensive time trading forex. Do you have any particularly memorable trades (either good or bad!)?

It’s funny but the first thing that comes to mind is actually a trade that never happened. I got up early one morning at about 5am, which is little bit earlier than normal, because I wanted to see how the USD/CHF had traded overnight. I had been watching this pair closely as it was trending rather strongly and I didn’t want to miss any opportunities. As soon, as I opened my screens up I saw the setup I had been looking for, which was a bounce off of the intraday pivot level. So, I set a sell limit order directly at the price of the pivot. If the price action traded up to the pivot I would be triggered into a short position automatically. I was very excited about this trade as my target was four times that of my risk and so I was hoping this would work out as planned. After I placed my order I turned off my computer and started to get ready for a meeting that I had in London. 2 hours later on the train to London, I checked the price of the USD/CHF and it had already hit my target! The only problem was that the price action never made it up to my entry price – it missed it by one pip! I was therefore never filled on the trade and missed a perfect 4:1 reward to risk trade by just 1 pip. I was certainly disappointed to say the least.

Josh Cohn ‘GreenWorld BVI’ interview

January 20th, 2012

These days more and more investors are looking for green investments so they can make money whilst protecting the planet at the same time. Trading Diary talked to Josh Cohn the founder of green alternative investment firm GreenWorld BVI.

What is GreenWorld (BVI)?

Josh Cohn GreenWorld BVIGreenWorld BVI are a boutique green alternative investments firm. We offer investments in such areas as farmland, forestry, renewable energy and carbon credits. All of the investments we offer are actual direct investments in projects. Just to take one example, we have a farmland investment project in Africa in which the investor actually owns a piece of farmland directly and receives income from the sale of crops as well as any increase in the capital value of the land. Likewise, with our timber investments, the investor actually owns a plot of forestry and all of the trees located on it, and is entitled to receive all of the income from the sale of the timber from the trees.

Another salient fact about GreenWorld is that all of our projects are targeted at retail investors. The minimum investment requirement in our projects starts as low as GBP1,950, and none of the projects require a minimum of more than GBP20,000. Since all of these projects are targeted at individual investors, they are all “passive investments”. That is, the investor is not required to actually become a farmer or hire a firm to sell the crop, since everything is done for them.

Why did you set up GreenWorld?

I set up GreenWorld BVI first because I am passionate about green and alternative investments. I actually made a number of green investments myself about two years ago, primarily in farmland and forestry, and I became fascinated by this whole asset class.

Furthermore, I also am quite keen to make individual retail investors aware of the fact these types of investment opportunities are available to them. I am of the personal opinion that stock brokers and investment advisers generally point people to only two asset classes, stocks and bonds, and hence small investors are missing a wonderful opportunity to add some diversification to their portfolios. If you work with a stock-broker, needless to say he or she will be suggesting investments in shares, and I am determined to make the “little guy” aware that there are other options out there.

Why is GreenWorld registered in the British Virgin Isles?

Candidly, there is not a hugely complicated reason for this. Many if not most investment firms are registered offshore just for simplicities sake, and the BVI makes it very easy to register a new company. Plus, the URL “” was already taken, so just by adding BVI I was able to obtain the type of URL I wanted! Pedestrian reasons I suppose, but nonetheless true.

Why should people put money into green alternative investments?

Alternative investment products are those outside of the traditional investments of stocks, bonds, insurance or cash. Alternative investments generally are not influenced by the same things that affect the performance of stocks or bonds, and therefore their return is not correlated to stocks and bonds. Many people do not understand that diversification means that all of an investor’s assets do not move in lockstep with one-another, and so whilst they may think they are diversified because they own many different shares, in reality – as we saw in 2008 – all types of shares have become increasingly correlated with each other and so investors must look for more creative ways to add non-correlated assets to their portfolios. So, even for those who may not be interested to investment with GreenWorld per-se, I am more than happy to at least educate them on the existence of alternative investments they will not hear about from atraditional advisers.

Furthermore, many of the investments GreenWorld offers – especially in farmland – provide high current income from the yearly sale of crops. Given the rock-bottom interest rates and hence very low returns available from traditional savings accounts, the type of investment opportunities that GreenWorld offers allow investors to obtain the current income many crave. In addition, I believe that we are only about half-way through what many are calling a “global commodities supercycle” where commodities will continue to remain high in price and rise over time. This is being driven by the rapid growth in emerging markets, especially China, and our investments are a wonderful way to play this trend. Again, taking agriculture as an example, one could certainly invest into an agricultural commodities ETF that tracks the price of a basket of agriculture, but these types of commodity ETFs in our view are heavily influenced by financial speculation, and may not truly reflect the long-term trends in the ag sector.

What types of green investments do your deal with?

We offer five types of investments:

  1. Farmland
  2. Forestry
  3. Renewable Energy
  4. Carbon Credits
  5. International hotel properties in Morocco and Slovenia

Again, all of these investments are targeted at retail investors, and they are all “passive investments” which require no ongoing effort by the investor. Most of them also pay current income as well, sometimes quite high. I suppose it would be fair to add that the hotel investments are not I guess what one would consider truly “green”, but they are interesting nonetheless. They involve partial ownership of a boutique hotel room in either Marrakesh, Morocco or Slovenia with the investor entitled to receive a portion of the cash-flow from guests who stay there. The investment guarantees 8pc per year for the first three years, and also involves a lifestyle component as the investor is allowed one free week per year stay at their hotel.

Why are farmland investments popular?

Good question, as these are by far the investments we receive the most queries on. Farmland investments are a wonderful way to capitalize on one of the post powerful global trends in existence – the ongoing surge in food prices. As the United Nations Food and Agriculture Organization notes, as the world’s population climbs to 9 billion by 2050, an additional 6 million hectares of new farmland investment is needed every year to prevent food supply crises. Unfortunately, the amount of arable farmland globally is actually shrinking due to development, desertification and climate change, which means that the supply/demand factor is very much in favor of investors in this sector.

In addition to the supply/demand case, there are a number of other specific factors that make farmland investments attractive:

1. Inflation Hedging – Farmland has historically been an incredibly strong hedge against inflation. Unlike gold, however, farmland investments pay a yearly dividend from the sale of crops, in addition to the long-term capital gains on offer. Farmland is a tangible, real asset with a substantial underlying value for human use.

2. Diversification and Lower Risk – Farmland investments have a very low correlation to stocks and bonds therebye lowering overall portfolio risk.

3. Fantastic returns – The returns from farmland investments on a historical basis have been phenomenal. Over the last 10 years, farmland has returned approximately 13% per annum in the UK according to Investment Property Databank (IPD). In the United States, the return is similar at nearly 14% per annum based on data from the National Council of Real Estate Fiduciaries. Finally, if one considers farmland investments internationally, taking African farmland as an example, the returns have the potential to be even higher based on the low purchase price of farmland in Africa. Just as a specific example, GreenWorld BVI’s African farmland investment African farmland investment recently paid an initial dividend of 16.2% whilst the capital gain has already been nearly 30% in just the last year since the land was put into productive use.

Likewise, we believe Australian farmland to be one of the most amazing but unknown investments on the planet. Consider the statistics below:

  • Average Price of quality Farmland in England: Over £6,000/Approximately US$9,300
  • Average Price of quality Farmland in America: Approximately US$10,000
  • Average price of farmland in GreenWorld’s project in the western Australian wheatbelt: Approximately US$600

This Australian farmland project yields less due to the dryer climate in Australia, but nowhere close to the 15-20 times less which is what it is priced at! According to an article in the Australian press, there is approximately US$1.6 billion that will be flowing into Australian farmland imminently. The three investors putting money into Australian farmland are a UK fund that is putting in US$400 million; legendary commodities investor Jim Rogers who is using a rural land fund that has US$600 million into the pipeline; and an Australian government pension fund called called Future Fund. That is US$1.6 billion in high-end institutional money ready to go! I do not wish to push people in any particular direction, but of all of the investments that GreenWorld offers, I must admit that I am most partial to the African and Australian farmland investments.

If someone invests in farmland what do they actually get?

In the farmland projects, our development partners purchase large tracts of farmland. This farmland is then offered to individual investors in increments ranging from as little as one acre in our African and European projects, and 50 acres in the Australian project. The key point here is that the investor receives direct ownership of a plot of farmland, and a portion from the sale of crops which constitutes the investor’s yearly income yield. Therefore, it is important to emphasize that these are NOT financial funds of any sort, but actually investments in the direct asset itself. Investors also are entitled to any increase in the capital value of the land. Investors are free to sell their farmland at any time, which is one way they could cash out, whilst we also believe that one or more of these farmland investments will ultimately be acquired by giant institutional investors. Either way, in addition to the yearly income, we believe there are also very attractive capital gains on offer as well.

What kind of risks come with green investing?

As with any investment, there are certainly some risks investors should be aware of, so allow me to list the two main ones below.

1) First, the types of investments we are offering are inherently “illiquid”. These are not the type of point and click investments you may be used to doing from your brokerage account. I would say that any of the investments are meant to be held for at least two-three years, and some such as the forestry and farmland investments for at least several years. Therefore, the risk is that if an investor suddenly needs money, he or she will not be able to just log-onto their computer one morning and just sell the whole lot.

2) The second risk has to do with the underlying price of the commodities themselves. For example, currently the price of the grain commodities such as wheat and rice are quite high and we do expect them to remain so. Likewise, the market for bamboo is projected to double in value over the next five years, but of course no guarantee – as the old saying goes, “past performance is not a guarantee of future results,” and it is not impossible that some unknown factor may result in the prices of these commodities falling which of course would reduce the yearly income yield and capital value increase of your investment.

How can green investments be made tax efficient?

In general, there is a good argument for putting income generating investments in a tax-advantaged structure such as a SIPP (and all of GreenWorld’s investments are SIPP-eligible by the way). By the same token, the actual tax issues involved are not overly complicated as the yearly income would simply be taxed at the same rate as income from savings accounts, whilst the capital value increase in the asset being sold would be treated no differently than the increase in value when one sells a stock. So, whilst it is fair to say that ideal mechanism for purchasing these types of investments are through a tax-advantaged structure such as a SIPP, the actual tax treatment of these investments is not overly complicated.

Any final words of advice?

Definitely. First, as the old saying goes “all things in moderation,” and this applies to our types of investments as well. We would recommend that individuals put no more than 15 – 20pc of a portfolio into investments of the type that GreenWorld offers. I believe that our investments can add diversity to your portfolio, but they are not meant to be a dominant part.

Second, consider what I noted above, that these investments are illiquid. Do not invest with money that you may suddenly need access to in the short-term. If I ever were to talk to a client in which I discovered this to be the case, I would for their own protection simply not consider it appropriate to work with them just for their own protection.

You can find more about GreenWorld BVI on their website at

James Sharpe ‘Foreign Exchange: The Complete Deal’ interview

January 19th, 2012

James Sharpe has written a new book “Foreign Exchange: The Complete Deal,
A comprehensive guide to the theory and practice of the Forex market”. He talks to Trading Diary about the book and forex trading.

1. Who are you?

Foreign Exchange: The Complete Deal by James SharpeI have been involved in the financial markets since the late 1970s and since this time I have worked for five institutions that have spanned the globe. I have worked in the US and the Middle East where I was responsible for the region and Interbank/Central bank relationships. I have combined the positions of trader and foreign exchange sales but it is in the latter area that I have focused and where I have run a number of desks. I have dealt with practically every corporate sector, including central banks, multinationals and funds and most recently high net worth individuals.

2. What is your new book ‘Foreign Exchange: The Complete Deal’ about?

The book is about providing a clear and thorough explanation of the world of foreign exchange from a practical and theoretical point of view. I have also addressed the policy implications for governments as the management of exchange rates has become integral to economic performance and to the political landscape.

3. Why did you write this book?

I wrote this book on foreign exchange to shed light on a topic which is often sidelined and misunderstood and which also has a profound influence on our lives. I also wished to show that managing foreign exchange exposures is relatively simple once the associated jargon has been overcome. After reading this book the reader will have a good idea what moves the FX market and how to manage FX exposures.

I also wished to show to the general reader that the choice of exchange rate system is extremely important as it determines the process and impact of any economic adjustment. This point has become starkly in focus over the past year.

4. What are some of the pieces of advice that you offer in this book?

If you are thinking of trading make an honest assessment of yourself. Do you have the emotional inclination and resolve to trade? It is important to recognise that the subject matter is not simple; a great deal of expertise is required and it is mentally wearing and time consuming. Not many people actually make money.

For companies and fund managers currency exposure needs to be identified and managed.

5. You have 30 years of FX experience. Have the skill and techniques needed to be successful changed much over the years?

There have been enormous changes in the industry over the past 30 years. I joined with a degree in Economics and a Master of Finance, very rare at the time. Technology has made a huge impact as has the reduction in number of banks actually trading. The quality of traders has gradually improved although a lot of trading now is actually computer driven. That being said I believe the skills and techniques which I outline in the book are still as valid then as now.

6. Many people are reluctant to try FX due to its high volatility. Should they be worried about this?

Volatility is what makes FX so attractive for trading. You cannot trade door numbers.

7. What mistakes cause most people to lose money when trying FX?

It is not always a case of simple lack of ability. A great deal of trading can be learnt and in the book I devote some time on this in a ‘blueprint for trading’. There is though no guarantee for success. The major weakness of poor traders is lack of discipline, an inclination to wishful thinking and for private clients in particular, not devoting enough time to the task at hand.

8. Which currency pairs would you recommend for beginners?

I think beginners should choose liquid currencies and if possible those that they have some connection to. For UK clients GBP/USD, GBP/EUR and EUR/USD would be good starting points.

9. What other authors do you admire?

I admire J K Galbraith for the way he brings economics alive and Sir Roy Harrod and F Hayek for their quiet brilliance.

Maike Currie ‘The Search for Income’ interview

December 13th, 2011

Maike Currie author of The Search for Income talks to about investing and how to generate more income from your money.

Who are you?

Maike Currie authorI am a financial journalist covering all aspects of personal finance from investing to pensions and tax issues. In short: I write about income for a living. I have worked as a reporter and editor across the Financial Times Group for a number of years – currently I am deputy personal finance editor of Investors Chronicle, one of the oldest magazines in the world, having provided private investors with investment advice since 1860.

What is your new book ‘The Search for Income’ about?

The book is about how to use the financial assets and capital which you have to build an investment portfolio, in line with your risk appetite, with the aim of generating income to supplement your personal needs.

Why did you write this book?

Since the onslaught of the credit crunch, interest rates in much of the developed world have been cut to historical lows and remained at these paltry levels for almost three years. While this is great news for those on a mortgage, savers and investors leaving their money in the bank are receiving little in the form of a return.
Investors today have work much harder to seek out alternative income generating investments as the traditional channels such as bank savings accounts can no longer be relied upon to produce an adequate income. Income investing in the 21st century is not more important than it was in the past but, as the situation since the financial crisis has shown, more thought and planning is now required by investors to secure the income they desire.

What kind of readers would benefit from your book?

Anyone looking to earn an investment income whether a knowledgeable investor or a novice at the investing game. Readers may range from retirees looking for ways to supplement their pensions, parents who want to generate an income stream to fund their child’s education or another family need to individuals seeking to draw an income from their accumulated wealth whether this be to cover basic living costs, a period of redundancy or illness or to improve their overall standard of living.

What are some of the pieces of advice that you offer?

The merits of drip-feeding money into the market, the power of compounding, the role of different investment vehicles in an income portfolio, how to effectively draw income from a portfolio of aggregated investments, and more. Broadly speaking the book delves into the concepts, vehicles and strategies that can be utilised to earn an income from investing. It is about where to find income, how to grow income and of course, once you have income, how to make sure you keep hold of it.

Where are good places to search for income?

Investment Trusts – these vehicles have an advantage in income terms over open-ended funds in the form of a revenue reserve. This enables them to hold back some of their income in reserve during good times which can then be paid out to maintain income levels when markets are struggling.
Listed infrastructure funds are also attractive. Given the long-term nature of the underlying contracts with the public sector the dividends (income payments) from these vehicles look sustainable. Dividends are also fully covered by cash-flows and the majority are index-linked providing inflation protection. This is a good alternative investment as it shares a low correlation to other assets and is not economically sensitive.

There is a lot of economic turmoil right now. Is this a good time for people to invest?

Absolutely – volatility creates opportunities – and with investors running scared many investments, most notably equities, are cheap. As Warren Buffet (arguably the greatest investor of our time) put it: “Be fearful when others are greedy and greedy when others are fearful.” History also shows that in periods of economic weakness and associated equity market volatility, companies that offer a high dividend yield perform well relative to the wider market. Now is a good time to focus on higher-yielding stocks but remember that high yield can be misleading so good stock selection is critical.

Have you always been good with money?

No. Like most people I had an overdrawn credit card and lived beyond my means. But working as a personal finance journalist I have realised the merits of making your money work harder for you. I have since cut up the credit card, live within my means and am a keen investor.

What do you invest in?

A mixture of shares, property, gold and infrastructure all of which I keep safely wrapped within an ISA to avoid my hard-earned money ending up in the taxman’s coffers. I also regularly top-up my pension. Given issues such as longevity my portfolio is definitely higher risk but as a long term investor I believe there is enough time to ride out the ebbs and flows of the markets.

What other authors do you admire?

Ken Fisher, Jim Slater, currently enjoying fund manager, Gervais William’s new book Slow Finance.

Christopher Grafton ‘Mastering Hurst Cycle Analysis’ interview

December 4th, 2011

Christopher Grafton talks about his new book Mastering Hurst Cycle Analysis with

Who are you?

Christopher Grafton authorI have worked on the Japanese equity sales desks at a couple of different investment banks, both in London and Tokyo. I was also an analyst and a trader at a small cap value hedge fund based in London. My connection with the Japanese stock market is that I lived in Japan for over 12 years and speak the language, but I have also been involved in global special situations and risk arbitrage. I am a technical analyst by training and hold the Market Technicians Association’s CMT designation. Next year I also expect to have the Master of Financial Technical Analysis (MFTA) designation.

My current project is running an FSA authorised market analysis service which is due to launch in January 2012 at . This is aimed at institutional investors and again looks primarily at the Japanese market, although there is enough Asian read across and global macro for it to also appeal to a wider audience. In addition, I am an active programmer and most recently built a grey box trading system for a major US hedge fund. This has already had a strong impact on the fund’s performance and has enabled them to significantly increase their AUM.

What is your new book ‘Mastering Hurst Cycle Analysis’ about?

Mastering Hurst Cycle analysis is effectively a manual on how to perform this particular style of technical analysis. The basic premise of the book is that cycles exist in freely traded financial markets and that these cycles share the same properties as those found in nature. As such, early on the book I explain the physical properties of all cycles and then carry these principals over to the markets. That there are cycles in market data is nothing new, but Hurst’s system allows us to identify them and forecast future price action.

The book is fairly involved and the methodology might seem difficult at first, but once you get the hang of it, it opens your eyes to a whole new way of viewing the markets. More to the point, an experienced Hurst analyst can achieve spectacular accuracy. So I would say that the book, in a way, is all about drawing back the curtain on the underlying mechanics of price action in the market.

Why did Hurst’s original system need updating?

Hurst was an aeronautical engineer by profession and sought to apply a rigorous mathematical approach to market analysis. He put together a course for a limited audience in the 1970s, but back then of course PCs and technical trading software were unavailable. As such the original work is more or less manual and paper based. I think very few traders and analysts today would be willing to go through an analysis in the way Hurst prescribed. Additionally, the original material is quite dense and abstruse and as such I think only a few dedicated souls would be prepared to approach the subject. What I have tried to do is bring the material into the modern idiom, make it current and of course provide the code required to perform analysis on a PC.

Why did you write this book?

I have long thought that traditional technical analysis has limitations. It can often be quite subjective and rules are often scant. What this means is that results can be pretty mixed. Before I studied Hurst, I was a keen student of Elliott Wave theory. What I like about Elliott Wave is that there are rules and guidelines but more importantly there is structure and context. Hurst cycle analysis shares the same concept of market structure and it has well defined rules. This takes a lot of the guess work out of analysis, but of course it requires experience to get results. I wrote this book not only to help people see the market in cyclic terms but also to be able to master the techniques of cycle analysis.

Who is your book aimed at?

Primarily technical analysts who are looking for superior results and are prepared to put in the extra work. Anyone looking for quick superficial answers, for example those who are drawn to statements like “ the 200 day moving average has just broken” or ”RSI is diverging with price” and so on, probably will not be the target market. To my way of thinking, someone who has mastered Elliott Wave for example and wants an add on would be ideal.

Your book includes code for trading indicators. How will these indicators help the reader?

They will help, because you will be able to run the code and put together a full analysis in about 30 minutes. Put it this way, if you do not use the code, you will need a lot of chart paper, a lot of pencils and a lot of patience.

Which indicators do you find most useful when trading?

I like to try to have a very good sense of where price is in the overall structure before I start using indicators. When I think I know where I am, usually through a combination of Hurst and Elliott, I use three indicators. I am a big fan of RSI and use a lot of advanced techniques, negative and positive reversals, hidden signals, RSI derivative and so on. I have also started getting some good results with one of Gann’s original ideas, the Profit Float Indicator, whereby volume is compared to the number of shares available to trade. I also use a proprietary indicator which is a fairly involved combination of smoothed short RSI, Williams%R and Stochastics, which does a great job of calling turns.

What in particular is it that attracts you to Japanese equities?

Nothing in particular other than I am familiar with the market, what drives it, the companies and how they stand in relation to their global and regional peers and supply chain. I am just as happy looking at commodities, currencies and other global equities.

What other authors do you admire?

I like Robert Prechter very much, he is an original thinker and breaks a lot of new ground. I think Jeremy Du Plessis’s work on Point and Figure work is very clear. Thomas Stridsman has written a very good book on systems testing. Tony Plummer is always worth reading as is John Ehlers. I would say my favourite books are those that get to the point and don’t take 120 pages rehashing the basics of technical analysis.

Glenn Martin ‘How to Value Shares and Outperform the Market’ interview

November 4th, 2011

Glenn Martin, author of the new book ‘How to Value Shares and Outperform the Market’ talks to Trading Diary about investing in the FTSE 100.

1. Who are you?

Glenn Martin author I spent my employed career of 34 years working in Financial Services. The latter part of my career was in Investment Banking, where I was Chief Information Officer for several investment banks.

I have always been a private investor in equities. In 1994 I developed my own system for valuing the FTSE100 and individual UK shares. I was inspired to do this by studying the famous Black-Scholes system for valuing equity options (I was Chief Operating Officer for an equity derivatives house at the time). The Black-Scholes system is complex but entirely logical. I thought a similar logical approach could be used for valuing the underlying cash equities.

I retired from my last employed position (JP Morgan Cazenove CIO) in 2005. As the valuations from my system had repeatedly proved to be correct (e.g. it exposed the boom to be a bubble ready to pop), I set up ShareMaestro Limited to package and market the system ( The system has received very positive reviews in the main financial journals (e.g. Investors Chronicle, Daily Telegraph, Shares magazine). ShareMaestro valuations are being used in the IC roadshows which are being held this week.

I am also the Chairman of my local tennis club, which is another limited company and effectively another business, as we have to recruit enough members to cover our costs.

2. What is your new book ‘How to Value Shares and Outperform the Market’ about?

The book is about how to use my value-investing systems and strategies to achieve successful long-term investment in UK equities. It explains how private investors can manage their own equity funds and avoid the huge destruction of value which the fees of commercial fund management will bring.

At the heart of the book are instructions on how to build two spreadsheets for valuing the FTSE100 and individual UK shares. These systems are based on the ShareMaestro software. The book then provides strategies for using the systems together with the detailed long-term (27 year) track records. For example the book shows how a 20-year old could enjoy a pension 8 times larger through using these strategies than he could get from the median-performing commercial UK equity fund/annuity approach.

Finally, as I want this book to be a one-stop shop for UK equity investors, I have included all the practical information needed to manage your own UKequity fund (e.g. best service-providers, tax breaks, risk controls etc.)

3. Why did you write this book?

I was asked to write this book by Harriman House after they had read an article which I wrote for the Investors Chronicle.

I decided to write about how private investors can manage their own UK equity funds as I strongly believe that they should. My father was a great believer in unit trusts and I inherited quite a few from him. I experienced first hand the dismal performance which most of these commercial funds deliver (the median real return of commercial UK equity funds over the last 10 years has been just 1.2%).

4. Can you tell us a bit about your system for investing in the FTSE 100?

In simplified form, the system calculates the current value of the FTSE100 in 7 steps. It:

  1. Projects the value of the FTSE100 dividend in 5 years time by applying a growth factor to the current dividend.
  2. Calculates the projected FTSE100 dividend yield in 5 years time by reference to the market’s expectations of inflation in 5 years time.
  3. Projects the FTSE100 price in 5 years time from 1 and 2.
  4. Adds the value of reinvested dividends over the 5 years to project a total investment value.
  5. Reduces this investment value by the Risk Premium (to compensate for the greater risk of holding equities than cash.
  6. Discounts 5 for 5 years back to today’s value by using the gross redemption yield for 5-year gilts.
  7. Expresses this current FTSE100 value as a percentage of the current market price. Over 100% is good value, under 100% is poor value. The greater the gap above or below 100%, the greater the extent of over or under-pricing of the market price.

5. What skills do you need to successfully invest in FTSE 100 companies?

  1. Basic numeracy.
  2. Common sense.
  3. Inquisitiveness as to how companies generate profits. If you like Dragon’s Den, this is a good sign.
  4. Emotional detachment –the ability to ditch shares when they become poor value, even if the price is less than you paid.
  5. Discipline to stick to a preferred strategy.

6. With the current Eurozone crisis (November 2011), is now a good time to buy FTSE 100 shares?

The most critical factor in my valuation system is the assumed rate of dividend growth, which heavily depends on earnings growth. From a long-term perspective many FTSE100 share prices offer very good value. However, if the Euro collapses, earnings and dividend growth are likely to be severely impacted, thereby changing the values. With my system, you can easily stress test to see the impact of your worst case scenario on any current share valuation.

7. What is the ShareMaestro software?

The ShareMaestro software includes FTSE100 and share valuation systems similar to the one included in the book. As the software is packaged, it includes a lot of added value features such as indexed databases for the valuations, help buttons on each input and results field etc. Most importantly ShareMaestro subscribers can import a data file which we produce in association with ShareScope. The enables valuations of all the shares in the FTSE100 (and of the FTSE100 itself) to be produced in a matter of seconds. The facility to export bulk valuation runs to Excel means, for example, that all the shares can be ranked from highest to lowest valuation (or vice-versa). More information is available from our website

8. Apart from the FTSE 100 what else do you invest in?

Apart from the FTSE100, I invest in:

  • The FTSE250.
  • Individual UK shares.
  • A smaller companies fund (smaller companies have the greatest potential for long-term growth and the smaller companies funds have had the best returns of UK commercial funds over the last decade). To avoid the high fees, I would prefer to invest in a low-cost UK smaller companies ETF but one does not exist!
  • Fixed-interest cash deposits (not gilts, which are due for a crash when interest rates rise).

Wherever possible, I hold my investments in tax-free wrappers (ISAs and a SIPP for my money-purchase pensions). Where not, I use the tax-saving measures which I describe in my book.

9. In this time of economic uncertainty what should people be doing to improve their finances?

Employ a three step plan:

  1. Reduce your annual living costs. I wrote a book in 1992, the Personal Prosperity Plan, about how you can do this. Now sites such as give all the information you need.
  2. Determine according to your personal circumstances how much money you should set aside for an emergency fund. I would opt for 2 years of living expenses. Put this money in easy-access cash deposits, finding the best rates from
  3. When you have got your emergency fund to the size you need, use the strategies in How to Value… to maximise the value of your long-term savings. If you are risk averse, stick to the medium-risk FTSE100/cash strategy.

10. What other authors do you admire?

Some of the investment books which I like are:

Smarter Stock Picking (David Stevenson). This features a section on ShareMaestro.

Simple but not Easy (Richard Oldfield). Full of common sense and has a great chapter demolishing the myth of hedge funds.

The Naked Trader and The Naked Trader’s guide to Spread-betting (Robbie Burns). Both very readable and very shrewd.

I am about to read The Long and the Short of It by John Kay. I think I will enjoy this as, like me, Kay has highlights the high costs of investing through commercial funds.

Glenn Martin’s book ‘How to Value Shares and Outperform the Market’ is available now on Amazon.

John Cotter ‘Cotter on Investing’ interview

October 12th, 2011

John Cotter, Vice President of Barclays Stockbrokers, talks to Trading Diary about his new book ‘Cotter On Investing’.

1. Who are you?

John Cotter ‘Cotter on Investing’ - author Just a 59 year old man who has worked in the finance Industry for 39 years, the last 35 years in investment and the last 15 years on the execution only side of the business.

I have done a lot of public speaking on the subject of investment over the last 15 years and write a regular column, “Cotter’s Corner“, on the Barclays Stockbrokers web site which has been one of the most popular sections for a number of years.

I have been an investor on a personal basis in the stock market for 30 years.

2. What is your new book ‘Cotter on Investing’ about?

It’s about why and how an individual can invest, survive and hopefully thrive in the stock markets and provides ideas and strategies that I believe will help improve their performance as a stock selector and a manager of their own portfolio.

3. Why did you write this book?

I have been in the investment business all my working life and yet I still struggle to understand some of the investment reports and papers that are put in front of me written by experts. I am not questioning their knowledge, just their ability to communicate it in terms the average person can understand.

I wanted to write a book written in plain English on investing in shares that cut through the jargon with a basic “keep it simple” approach which not only a novice could understand but a more experienced investor would still feel added value.

I genuinely believe that investment is a relatively straightforward subject that is best kept simple. Warren Buffet himself once pointed out, investment is not a subject in which the person with the highest IQ will do best.

4. What are some of the pieces of advice that you offer in this book?

Hopefully readers will find there is quite bit which will help in all sorts of areas .Specialising in areas that you know about or interest you is a good start ( “the investors circle of competence”) . The importance of the dividend. Understanding and being able to tell the difference between a share that is just cheap and one that is undervalued. The difference between diversification and over dilution and which Directors Deals you should really take note of would be some ideas and concepts that spring to mind.

5. Tell me a bit about the ‘3 box test’.

It’s a test I use on an idea or strategy before I use or adopt it. It has to be simple , it has to make sense (pass a reality test) and it has to work most of the time.

6. You have nearly 40 years of stock market experience. Have the skill and techniques needed to be successful changed much over the years?

Yes I think they have. When I first started most self directed investors were of the buy and hold variety who tended to focus on the large cap companies and invested as much for the dividend as for capital growth. Although these investors still exist and in the main still make money there is a strong argument that a more active style of investing will bring bigger rewards. This is because the market is more volatile now than ever before. Investors should now not just think in terms of buy, hold or sell. They should also think in terms of build and reduce or even consider trading a share short term.

If you think of the stock market experience as a journey I think the ultimate destination is the same but now the route taken is very different. This additional volatility enables the investor to sell or reduce at a premium or buy or build at a discount. It also presents opportunity to short term trade some of the shares they may also hold as a long term investment. The Internet has acted as a catalyst to this development empowering investors and traders alike to be more informed, use advanced deal mechanisms such as stops, limits and trailing stops to their advantage and to actually place the deal at cheaper online rates.

7. Have you always been good with money?

I am not sure what being people mean when they use this phrase. Good in what way? I like my money to make some more and I have over the years made money in the stock market. However like most people I know I have also made mistakes. When I have lost money I tend to analyse the reasons for any mistakes and make sure that I gain from the deal if not in monetary terms in terms of experience.
I don’t think it’s clever to die rich. I have 5 children so I am unlikely to do so anyway. Money to me is a means to an end not an end in itself. More holidays, a better social life and ultimately a more comfortable retirement are all things that money can help provide.

8. What do you invest in?

Let me deal with the vehicles before I consider the passengers.

I have been a higher rate tax payer now for 30 years so I am naturally very keen on tax efficient investment vehicles such as self select investment ISAs and SIPPs.

I work for Barclays stockbrokers and we have 16 clients who are all ISA millionaires! Over a million pounds that you don’t have to declare on your tax returns for the rest of your lives! This is important at any time but especially at present when you have multiple higher rates of taxes for the first time since 1988 and the 40% rate comes into force when you have gross income of £44k!

For those who are working I also think SIPPs (self invested personal pensions) are important as you not only have a tax free share dealing account but you can also get the tax back that you have paid on the contribution made. This means that for a 40% tax payer a £10k contribution would only cost £6k. That’s a 66% return even before you even place a deal.

With regard to the investments I normally believe in a 5 box asset allocation model in other words a mix of Cash, Bonds,Shares, Property and Commodities. However the property element is provided by my own home and I prefer in the main to achieve my commodity exposure, especially at current valuations, via upstream Oil and mining companies. This leaves me with 3 asset classes to consider. On a valuation basis I would presently ignore Gilts and be very selective in any Corporate Bond selections so right now I would be overweight in equities and cash. The former to take advantage of the very cheap share valuations at present and the latter to provide me with the power to wait for the growth of the former and also to keep some of my powder dry so I can feed some more money in to the markets if they get even cheaper.

9. In this time of economic uncertainty what should people be doing to improve their finances?

I think they should plan better. They tend to plan their holidays, their golf games, their social lives but almost leave their finances to chance. They should do what a company does, prepare an annual balance sheet of their assets and liabilities and split their assets into the 5 asset classes mentioned to the answer to question 8. Nothing complicated just a simple 1 pager. This way they can check their wealth and asset allocations at the same time.
They should use where possible the tax efficient vehicles mentioned above (this is a must if they are higher rate tax payers) and they should feed money into equities at a pace dictated by the rule of 20 explained in my book. The pace of feed being increased if, as at present, the reading is below 15, slowing if the reading is over 17 and reversed if the reading exceeds 20.

10. What other authors do you admire?

I like the old classics like Peter Lynch (Beating the Street) and “The Intelligent Investor” by Benjamin Graham. Also I love reading any quotations from Buffet himself. They are usually not only pearls of wisdom in their own right but a great help when I am doing client presentations.

Scott Ford ‘Financial Jiu-Jitsu’ interview

August 22nd, 2011

This is the Trading Diary interview with Scott Ford, author of Financial Jiu-Jitsu: A Fighter’s Guide to Conquering Your Finances.

1. Who are you?

Scott Ford - author I am the president and founder of Cornerstone Wealth Management Group where I provide my clients with proactive investment and wealth management advice based upon my trademarked system Way2Wealth. I was recently named one of “20 Rising Stars of Wealth Management” by Private Asset Management Magazine. I live in Hagerstown Maryland with my wife Angie and children Lakin and Jacob. I study Brazilian Jiu-Jitsu at Clinch Academy in Maryland.

2. What is your new book about?

Financial Jiu-Jitsu: A Fighter’s Guide to Conquering Your Finances is about going back to basics and executing the sound financial principles that allow you to consistently build wealth and master your finances, no matter what the market throws at you. So many smart, intelligent people fail to build the wealth they really want because they neglect some of the key foundational elements to create financial freedom. As with the sport of Jiu-Jitsu, it is by learning to protect what we have and to master certain fundamentals that we can build a lasting financial foundation.

3. Why is your book called Financial Jiu-Jitsu?

Mastering your finances is a lot like mastering a martial art. It has nothing to do with perfecting technically challenging moves, rather mastery is as simple as performing a handful of basic moves thousands of times. What are some basic moves of money management?

  • Establishing an emergency fund
  • Maintaining a budget
  • Setting aside money for education and retirement

Financial Jiu-Jitsu teaches you how to use the guiding principles of finance to build a solid financial foundation that can then be leveraged to help you achieve your long-term financial goals, while building lasting wealth for you and your family.

4. There are a lot of finance books out there, why did you decide to write one? Why should I buy yours?

Financial Jiu-Jitsu is based on taking care of the basics first, using straight-forward, easy-to-understand principles and strategies as a platform and springboard to future success. It acknowledges that not everyone has the same financial goals and that everyone’s financial plan will adapt and evolve over time, but its basic principles are principles that everyone can understand and apply. In this troublesome economy, I feel like it’s more important than ever for people to feel like they have control over their financial situation. My goal with this book was to show that you don’t have to be a financial expert to be financially successful. I use easy-to-understand language and exercises so that anyone can take these principles and apply them to their lives.

5. What simple steps do people need to take to master their finances?

  • Prepare to Win: Paying yourself first, maintaining a cash safety net, managing credit wisely, and never procrastinating.
  • Balance and Base: Determining your specific financial goals, and developing a vision for your life.
  • Closing the Gap: Overcoming your fear of the unknown by creating a personal balance sheet and using it to analyze your current situation.
  • The Power of Respect: Choosing and working with a financial advisor.
  • Timing: Taking advantage of tax-deferred investments, maxing out 401(k) contributions, and contributing to IRAs.
  • Gain Control: The basics of an estate plan, living trust, pourover will, and power of attorney.
  • Position Before Submission: Protecting yourself with insurance
  • Attitude: Planning for your retirement

6. In your book, you mention that it is possible to build real wealth regardless of what the market throws at you. Given today’s volatile market, can you explain how that works?

I believe that there are seasons to investing just like there are seasons in nature. Most investors and professionals helping investors are applying a spring and summer strategy to a fall and winter season which isn’t working. My company has tailored its investment strategies to meet the needs of the investment season. During the spring and summer season we can use a sailing strategy. A modified buy-and-hold approach makes sense and we can take advantage of the bull market and not only enjoy the upswing, but also work hard to beat the markets. A rowing strategy is needed for the fall and winter seasons. The goal is to preserve capital and then make investments that take advantage of what opportunities do exist even during a bear market. Seasonal investing is based on a relatively simple premise: When the sun is shining almost anyone can make hay. When winter comes…it’s not so easy.

7. In Chapter One, you talk about the 9 guiding principles of financial success. Can you say more about these principles and why they’re so important to building wealth?

Scott Ford - authorGive back: How do you succeed if you give away what you hope to accumulate? I believe it’s impossible to get what you are not willing to give. Some people see giving back as a form of tithing. Spirituality is an important part of my life and I tithe regularly, you may also, but even if you don’t relate giving back in spiritual or religious terms, you should plan to give back in a way that is meaningful to you. By giving back you also gain and you make the world a little better place and feel good about it. Maybe what you can give is money, maybe its knowledge or time. Whatever it is, I guarantee you will get back more in return, if not materially, then certainly in terms of knowledge and self-satisfaction.

Pay Yourself First: Everyone makes enough money to be able to save, even if it’s a few dollars a week. Saving money doesn’t require setting up and living by a budget. No matter how much money you make, over time you’ll find a way to spend it. Instead of budgeting, get started by taking control and paying yourself first before you pay your mortgage, your rent your car insurance. Pick a number, (in my opinion you should pay yourself 10% of your gross but feel free to choose what works for you). If you pay yourself first, you will adjust your spending accordingly.

Automate: The easiest things to do are the ones you don’t have to think about doing. The easiest choices are the ones you don’t have to think about making. Automate the process of saving. Make the choice, weekly or monthly, but set up a system where paying yourself is automatic. A draft from checking into a savings account, money deducted from a paycheck for deposit into a 401(k). With electronic banking and web-based financial services – it’s simpler than ever.

Maintain a Cash Safety Net: Most financial experts feel you should maintain an emergency fund to cover true emergencies (losing a job, unexpected medical expenses, etc.). I agree, not just because an emergency fund makes good financial sense, but because it gives you peace of mind. Instead of worrying about things that might go wrong, prepare for the possibility that things might go wrong. I think three months of expenses is a great goal, but it may be a bit unrealistic for most people. I suggest you take a good look at your expenses and see exactly what you would HAVE to spend in an emergency and come up with an emergency fund number that’s right for you. Then don’t use your emergency fund unless it’s truly an emergency and if it is, replenish it as soon as possible.

Manage Credit Wisely: We all have it. We all use it. We all secretly hate it. Credit is not a necessary evil, credit is actually an incredibly useful financial tool if managed wisely. The key is to ensure that the credit you use fits within your overall financial plan and helps you build wealth. Credit should not be something you fall back on because you want to; credit should be a financial tool employed as the result of an informed and intelligent financial decision.

Get Time on Your Side: Time is arguably the most powerful component of any investing plan – and often the most overlooked. Understand the effect of time and compounding. It’s never too late to take control and make time work for you. Every wealth-building and investment strategy that makes up the Way2Wealth is based on harnessing the power of time and compounding. Think of time as an opportunity, not as a regret and you’ll succeed.

Never Procrastinate: Waiting is the worst approach you can take in terms of building wealth. Procrastinating is the polar opposite of getting time on your side. Time is only on your side when you take action and let time work its magic. Which is worse the pain of discipline or the pain of regret? I’ll take discipline any day. Never look back and say “I wish.” Look forward and say “I will.”

Make Reality Your Perception: Most people say “Perception is Reality.” In many cases that phrasing is true, but in financial terms perception often is not reality. On a daily basis you can get overwhelmed by all the “experts” spouting their financial advice. Most are loud, most are certain, most are wrong. If they weren’t wrong, they would all be rich and we would too! The key is to know reality when you see it and to make decisions based on accurate information and accurate advice. That’s what smart investors do – and over time smart investors tend to become wealthy investors.

Follow a Simple and Comprehensive Strategy: Many people in the financial industry make building wealth and achieving financial freedom seem incredibly difficult when in fact, it really isn’t. The key is to follow a simple strategy that takes into account all aspects of your personal and financial life. Not matter how much money you have, the basic principles are the same: Use strategies that seek to minimize risk, maximize return, and build a smart plan that helps you pursue your individual goals. That’s it. Simple. Comprehensive. Easy to follow.

8. What is True Wealth and how does it relate to reaching our financial goals?

True Wealth is made up of all the things money can’t buy and death cannot take away. By figuring out what True Wealth means to you, you’ll also determine your goals and start to build a blueprint for your own simple, comprehensive financial strategy. Then you can figure out how to get where you want to go, but first you must determine where you want your journey to take you.

9. Many financial experts preach about the importance of budgets, but you say to forget about budgets. Tell us more about budgeting and why it may not be the best use of your time in order to reach your financial goals?

I’m not a big budgeting guy. Sure, my wife and I know our monthly expenses. We know what we spend, know what we save, know what we put aside for a rainy day…but we don’t live by a budget. We spend our money on the things we feel are important, and we save money in order to build our vision for our family and to ensure that we leave the legacy we want to leave. If you want to create a budget and feel like creating and following one will help you, then feel free. Everyone has individual strengths and weaknesses and everyone uses different tools to help them succeed. My point is, that budgets don’t work for everyone. If you don’t want to create a budget, put your effort in other activities instead.

10. What is the Family Benchmark and why is it so important to know in order to create a strong financial foundation?

Your Family Benchmark is not an amount of savings per month. Your Family Benchmark is not what seems like an impossibly high savings target. Your Family Benchmark is the rate of return you need to achieve to reach your goals. You may not always be able to control how much you bring home. You may not always be able to control how much you save. But if you stay focused and get the right people in your corner, you can over time enjoy a fair amount of control over your rate of return. Your Family Benchmark is your “required” rate of return. Not a dollar amount, not an end goal, but what you need to earn on your investments to reach your goals. Focusing on your Family Benchmark makes it easier to adapt to a changing environment, because your Family Benchmark can naturally be more flexible than a fixed rate of pay or a fixed amount of annual savings.

11. Can you share a few of the common elements that are part of a sound investment strategy?

Build an emergency fund. Determine the size of your emergency fund by really evaluating your expenses. What could be cut in an emergency and what is truly a necessity?

Own your own home. Even in down markets, real estate tends to be a good long-term investment. Understand the tax benefits of owning your home.
Take advantage of tax deferred investments. Understand the basics of a 401(k), the tax advantages and “free money” due to employer matching.

Max out 401(k) Match Contributions. Don’t pass up “free money”. If you can’t max out today take steps to do so as soon as possible by putting a pay increase towards your contribution or cutting monthly expenses.

Contribute to Traditional and Roth IRAs. Understand the advantages and disadvantages of both, compare your options and go with the options that provides the best combination of fees and services.

Determine how to invest your funds: Understand the differences between Stock mutual funds, Bond mutual funds, Stable value accounts, Money market accounts, and endless combinations of the choices above. Spread your investments across different funds to try to maximize your returns and hit your Family Benchmark while only taking on the amount of risk you wish to face.

Diversify into Other Investments: If you are fully funding a 401(k), taking advantage of traditional and Roth IRAs and have more money to invest, make sure those funds work just as hard for you. No matter what, start investing today.

12. How does the Jiu-Jitsu principle of “position before submission” apply to building wealth?

The phrase “position before submission” carries different meanings at different levels of the sport. Like investing, simple principles can become complex; so can the idea of position before submission. For beginners, it is based on protection and security. Great teachers make sure that the beginners focus on the basics. Position for submission, in financial terms, is a lot like insurance. Insurance helps reduce or eliminate some of my concerns or worries about unpredictable or unexpected events.

You can find out more about Scott on his blog at Financial Jiu-Jitsu is available now.

Geraint Anderson ‘Just Business’ interview

June 17th, 2011

We last interviewed Geraint Anderson in 2010, we caught up with him to find out what he’s been up to since.

What is this new book about?

Geraint Anderson City Boy suitIt’s about a mid-30’s stockbroker who’s doing too much coke and becomes convinced he’s going to get sacked just before bonus time (I don’t know where I get my inspiration from!) He breaks into his boss’ computer to find out if his fears are correct and uncovers a multi-million pound conspiracy. He and his on-off girlfriend have to go on the run abroad after he’s framed for a murder. It’s a humor-filled thriller with enough sex, drugs and rock and roll to keep most people happy! It should be a rip-roaring holiday read.

How much of this book is based on your real experiences?

Geraint Anderson City Boy suitThe central character Steve Jones is a good-looking, charismatic man – men want to be him, women want to be with him … but that’s where the similarity ends! All my experiences in the City are funneled into the book but I never got chased by gun-toting Colombian hit men.

Will you be continuing the adventures of Steve Jones in a future book?

Yep, I’m working on the third one which will see Steve take revenge ….

Other than writing this book what have you been doing since we last interviewed you in June 2010?

I got married, went on a three month honeymoon in SE Asia, moved to a cottage in Wales and am about to have my first baby … not much apart from that.

Do you still take an interest in the world of banking and finance?

Absolutely. I still do the odd bit of TV, radio and write the occasional article about the City so I make sure I keep in touch.

Do you ever wish you could go back into that life again?

Never – life is so much better now. I’m free, doing what I want to do, learning to surf and living a healthier existence. The only things I sometimes miss is the routine that a job gives you, the camaraderie and the regular boozy Michelin-starred meals courtesy of my bank’s shareholders!

Has the banking world changed much since the crash?

It’s not as much fun now … summer/Xmas parties are sombre affairs, expense accounts are minuscule, people are worried about their jobs, bonuses are down, everyone’s being professional and firms are even more bureaucratic. Bubbles are much more fun … I preferred it back in my day!

What do you think will be the cause of the next big crash?

Israel will attack Iran’s nuclear facilities, the Middle East will explode and the price of oil will hit $200 / barrel and we’ll have a serious recession … and if you believe that you’ll believe anything.

What is next for you?

Becoming a father, improving my rubbish surfing and writing new books. That should keep me busy for the next 25 years!

You can buy Just Business by Geraint Anderson from Amazon.

Kindle Edition

Guy Thomas ‘Free Capital’ interview

April 25th, 2011

Guy Thomas talks to tradingdiary about his new book Free Capital: How 12 private investors made millions in the stock market.

Who are you?

guy thomas free capital suitI am an actuary and investor. I qualified with a firm of consulting actuaries and then spent some years as a university lecturer. I left that job in 1999 in my mid-30s to concentrate full-time on investment, also continuing with some academic research.

What is your new book about?

The book profiles 12 private investors. Each of them has accumulated £1m or more – in most cases considerably more – mainly from stock market investment. Six are ‘ISA millionaires’ who have £1m or more in an ISA – a result which is arithmetically impossible without exceptional investment returns. The profiles cover the 12 investors’ backgrounds, how they made their fortunes, and how they spend their days now.

Why did you choose to write this book?

As a full-time investor myself, I have long been curious about other investors’ methods, literally what they do all day. How much of their time do they spend reading company reports as opposed to talking to company managers or analysing share price data? For many years I hoped that somebody else would write a book like this. Nobody did, so eventually I decided to write it myself.

How did you decide who to interview?

guy thomas free capital bookI posted descriptions of the project on investment bulletin boards; I asked stockbrokers, CFD providers and spread bet firms for introductions to their most successful clients; I asked friends and friends of friends. I wanted to include a variety of personality and career backgrounds and investment styles. In general terms, around one-third of the interviewees are ex-City professionals; one-third are other degree-educated professionals; and one-third left school at or before age 18. Most gave up all employed work in their 30s or 40s to be full-time investors.

Are there any common qualities that the successful investors you spoke to share?

The final chapter identifies some common qualities. One is the attitude that money is a source of quiet freedom, rather than ostentatious spending power. They aren’t high spenders: they tend to live very modest lifestyles relative to their accumulated wealth.

Another common factor that they all work alone, with a very strong psychological self-reliance: they prefer to figure things out for themselves rather than seeking advice.

Another commonality is that they seem to enjoy the process of investing, rather than just the proceeds. Several spoke of investment as a game, more like playing poker or chess than working.

Is there anything that surprised you during your interviews?

The variety of approaches which appear to work. In my own investing, I’m a fundamentalist focused exclusively on smallcap equities. I spend a lot of time reading accounts and researching the competitive position of the underlying businesses represented by the shares in which I invest. My time horizon is months or years. But there is at least one person in the book who never looks at a set of accounts, and generally has little idea what a company actually does. His time horizon is minutes to hours, trading mainly on short-term newsflow and price charts. So writing the book opened my eyes to the possibility that for some people, some very different approaches to my own seem to work.

Have you changed your strategy as a result of meeting and interviewing these 12 investors?

In Chapter 9 on Owen, the activist investor in closed-end funds, I wrote that his was the approach I most wished I could emulate. I particularly envy his time efficiency. So yes, I have tried to increase my own focus on closed-end funds. But Owen has more than 20 years experience of this type of investing, and his depth of knowledge is not easy to replicate.

Why are you donating the author royalties from this book to charity?

I didn’t write the book to raise money for charity, I wrote it for fun. But any author of investment books is susceptible to a critique along the lines of those who can, do; those who can’t, teach. Or something like: those who can, make millions in the market; those who can’t, make a few pennies writing books about it. Donating all royalties to the United Nations Stop Tuberculosis Partnership is potentially a way of deflecting this critique. I chose this cause and organisation with help from the charity evaluators Givewell, whose research I strongly recommend.

Are there any finance or investment related books you recommend?

I have always found books of interviews with professional investors are enjoyable and inspiring, albeit somewhat remote from my own activities as a private investor. I enjoyed Jack Schwager’s Market Wizards books and John Train’s Money Masters books; and for an insight into UK professional investors, Jonathan Davis’s Money Makers.

I read many investment books, both academic and professional. But I think anyone looking for a definitive book on investing will be disappointed. Investing is much more a practical craft than a formal discipline. Almost all the people in Free Capital have learnt mainly through their own experience and reading bulletin boards, rather than from textbooks.