$3B Bank Trader: Most Traders Blow Up Before They Can Build Wealth, Here's Why!

This man managed over $3 billion at HSBC for 17 years, made over 100% returns, and has built one of the most respected research firms in global finance.

The stock market is a church with a casino attached. There are people living in the church and there are people living in the casino playing the same game. So, if you go and buy high quality stocks, these are not dangerous investments. But at the other end, if you're playing AI stocks on leverage and you can get wiped out very quickly or you can make a fortune, but even if you make a fortune, that might be the worst thing that ever happened to you because then you'll keep going and sooner or later you'll have nothing.

Introducing Charlie Morris, former head of absolute returns at HSBC Global Asset Management, one of the few people who has operated at the highest level of institutional finance and is willing to tell you exactly how the game actually works. Charlie reveals why institutions are incentivized to be mediocre, what that means for how you should be trading, and the two words of advice he would give to every trader after 30 years in the markets.

What was your beliefs on technical analysis?

I love it. I spent years and years trying to understand what was the value of historic price. You're looking at historic price and you're trying to say what is it telling us? And I've come to the conclusion that most of it I think it's a bit of a myth that the institutions are designed around maximizing the value they have from that money because most of the people going in and out of the lift in those buildings they are in risk and accounts and marketing and sales. The number of people employed to generate alpha is surprisingly few. It's actually quite hard when the market's 100 to be 200 is actually quite difficult. If you do that there's a risk of being 50 if you know what I mean. So they try and get to 105 or 110 and if everyone's in the middle that's fine.

In your institutional days I guess it was not a one strategy approach and it was probably a very complicated diversification. Probably some algorithmic stuff going on. So can you walk me through what a portfolio looks like for you? How would you allocate and what areas would you have interest in and what would be the high-risisk pots?

Cra where do we start? It's a big question.

Ladies and gents, welcome back to another episode. Charlie, you've had a phenomenal career and a very diverse career and I think in the last 5 years you've you've ventured onto a different path. So I want to explore it all but I want to get into first the idea of you were in the institutional world and uh that's where you've immersed yourself and the retail world where I guess most of my audience is going to be listening in from. uh we have a lot of them versus us mentality and a lot of feelings of they know more, they have more money, they have more resources, they have insider edge. Uh and therefore it always when you go through a losing period as a retail trader, it's very easy to have the blame game, victim mentality, stop-loss hunt, the market's out to get us. So if you can shed us some light on this idea of institutional versus retail.

It's a good question and really good to be here. You know, the institutional world is big and wealthy. Yeah, they manage and sit on vast amounts of money, right? But you they're very cautious with that. They're more they're more interested in the rent from that money um and protecting the management fee um and rather than the alpha whereas I think the retail investor is is after the alpha. They want to make some, you know, decent returns. And so that's a big differentiator. And I think it's a bit of a myth that the institutions are designed around maximizing the value they have from that money because most of the people going in in in in the lift in those buildings, those glossy skyscrapers, um they they are in risk and accounts and um compliance and these sorts of areas and marketing and sales. Um the the sort of number of people employed to generate alpha is surprisingly few. Mhm.

So the goal of an institution is not always to generate as much alpha as possible. You kind of want to be in a goldilock zone as opposed to an outlier or or an overperformer. Why would that be?

Well, they don't want to underperform because long-term that's disastrous, you know. So if the index is up 100% over 10 year period or whatever and they're at 80 or 70, that's a disaster. Their business is dead. Um it's actually quite hard to, you know, turn to for when the market's 100 to be 200. it's actually quite difficult. And so if you if you do that, there's a risk of being 50 if you know what I mean. So they try and get to 105 and or 110 and and and then the fees will be that 10 and and so they're just sort of kind of quietly in the middle. And if everyone's in the middle, that's fine.

You know, it's funny. I was at a CTA expo in Chicago not too long ago where I was hedge fund managers or wealth allocators meeting up and cominging um traders, let's say, who were looking for funding. And there was a cocktail hour towards the end and a few of these wealth managers, they got a bit too tipsy and they started opening up and one of them in a very boisterous way was like, "Man," he was like, "I've got 100 million under management now. I get paid, I forgot what the number was, but you know, in multiple multiple seven figures, I think even eight figures just for turning the lights on." I like, "Man, you got to figure it all out." And you could see in his mentality, he couldn't care less about the clients. Couldn't care less about how much he performed. And I'm sure part of it is just whacking in creative ways to make it just have the the beta just just match the benchmark and maybe a slight alpha there. So yeah, I think that's a a nice reflection of what you're saying here that the institutional world is more management related as opposed to alpha generation. However, why does a retail trader then have this feeling of they are more skilled, more competent, they are the gold standard that a retail trader needs to strive to be towards?

Well, you think that retail traders um sort of consider themselves to be George Soros and you know they want to go and do great things. I mean they can be the opportunity is there. It wasn't in the old days. You know you got to think about the technological revolution and the impact it's had on markets. It's been phenomenal. You know 20 20 30 years ago it was hard to trade another country's stock market. You had to be rich and you had to have access to a private bank or something like that. These days it's easy. You know, you can log on to some trading app for virtually nothing and and and trade far away places and in and out of this and that and you've got sophisticated derivatives. You've have access to options, futures, things like that. These are all hard to access in the old days. So, the re the retail investor has never been better empowered than they are today in in their ability and they've never been better educated. I mean, you have to go on to Twitter X to to to, you know, get a PhD in finance. I mean, everyone's telling you, you know, all the Greek letters and what they mean and and and publishing all this stuff out of the investment banks. And so, I think that the retail investor is really well informed these days, much better than the much more so than the old days.

Very interesting take because I I completely agree. The barrier to entry is so low now. You can literally start an account and start trading today and call yourself a trader. But with the lower barrier to entry, I wonder if there's a correlation to the failure rates because the going statement is still, as it has been for decades, 95% of retail traders lose money despite being at all-time highs of uh empowered in terms of learning, maybe access to capital through leverage or other types of uh getting capital. Is it just something that is notoriously hard or do you think the barriers to entry invites people that shouldn't be in the market that are just gambling by proxy?

Well, gambling is absolutely what they're doing if they're losing all their money in a hurry. I mean, leverage is the number one enemy, but the problem is, you know, someone's got $500, they open an account, and they realize they can have 50 to1. And so, suddenly, wow, you know, I'm a player here. But, you know, one wrong move and you're out. But investing doesn't have to be like that. Investing, investing can be really boring if you want it to be, and it can be really safe if you want it to be. If you wanted to make it really dangerous, you can do that, too. And so I think Buffett in his recent interview with CNBC um was was saying that that the stock market is a sort of a church with a casino attached and and there are people living in the church and there are people living in the casino playing the same game. Yes. And and and that's absolutely right. So if you go and buy high quality stocks, you know, things like well Barkshire Haway or Proctor and Gamble or or Johnson and Johnson without leverage, I mean these are not dangerous investments. But at the other end, if you're playing AI stocks on leverage, I mean, that's craziness. I mean, you can get wiped out very quickly or you can make a fortune. But even if you make a fortune, that might be the worst thing that ever happened to you because then you'll keep going and sooner or later you'll have nothing if you carry on uh with a leveraged high volatility approach.

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So, I I I think you're one of the first um guests on the show that is in the corner of the trading world or investing world that you were that is wealth management and you know a big name HSBC. So I want to kind of draw so we can shed some light on the difference between what you were doing in your career versus a typical hedge fund manager that I've had many on the show where they are maybe multi strategy either trend following or but their goal is basically discretionary trading most of the time and just being not correlated to beta the benchmark to have true alpha let's say whereas in wealth management I would imagine is completely different because you would have a lot more team um a lot more risk and compliance so and a lot more capital so with that what would you say is the difference between retail, hedge fund manager, the typical, and then what you were doing in is is wealth management the correct term here?

Yeah, sort of. I mean, I'm pretty fluid. I don't think I'm fixed to um uh to anything really. I just, you know, communicate what's happening in markets and and the audience I've had, whether I was in the institutional world or today, it's always been a mix of of of of all sorts. You know, um no shortage of professional fund managers follow our trades. You can tell by some of the volumes paying retail fees. So that's a bit naughty, isn't it? But but I think that the go back to the history of the hedge fund and I think it was invented in the um the 50s or 60s and and some professor, I forget his name now, talked about going long and short and therefore stripping out the market risk. And it seemed like a really good theory, but the problem is that the stuff of the stuff that's going down and the stuff that's going up aren't necessarily a perfect match. So for example that you get the regime change in the market and um that you know the the stuff that's not doing very well suddenly goes up and the stuff that's doing well suddenly goes down and and suddenly this pursuit of pure alpha becomes crazier than the market itself which defeats the entire object and hedge funds really started to boom in the 1990s um as as as a renumeration strategy. So the fund management industry charge 1% let's say and suddenly these guys come and charge two and 20 20 on the profits two on the fees and and and I think that over time you realize that the two is more exciting than the 20 because you know if you if you've got a billion dollars and you can clip $20 million a year but actually outperforming the market's really hard and then you know getting above your high water mark and and in that sort of late '90s um era it was very popular because we had the dotcom crash. The stock market went down by 50%. And that was awful and the hedge funds didn't. The hedge funds shorted tech and owned fundamental stocks and they made money over the 20201 2002 years. Um, but then in the credit crisis, although a few high-profile ones did make money shorting the banks and so on, um, most didn't. Most most got into a lot of trouble. So, the hedge fund industry had a lot of capital withdrawn after 08. And since then the S&P 500 has been so amazing that they just haven't performed as a group. Now of course there are some very good hedge funds out there but as a group collectively they haven't done a very good job and so I think that it's uh become much harder uh for them and so they've basically become quai wealth managers if you like and that's what these multistrat groups the returns they deliver are not dissimilar for the returns and correlation of the wealth management industry generally.

So what's the advantage of going to a hedge fund over wealth management where you have supposedly higher fees and less innovation, less incentive to drive towards alpha? Why does so much capital flow in that direction?

So the hedge fund strategies that have thrived in recent years have been these high frequency ones. You know these these corn related Dshore and um um Citadel and the these kind of places and they've they've done really well. That's pure alpha. But they've done that alpha through being extremely short-term and basically sitting in the middle of the market behaving behaving more like a crooier than a risk taker if you like. I think that would be a simple way of putting it. And they they've done great high-tech super clever people. Um brilliant. Um but I don't think it's as I don't think it's infinitely scalable scalable that model you know because there's only so much alpha to go around

in terms of alpha decay would be uh an issue at the scale that they're reaching

I would think so must be

how how does uh in in the wealth management world where you're responsible for potentially a sovereign fund or institutional capital plus private capital you're you're at a much larger scale how do you overcome this issue of alpha decay

well totally ignore it so basically if you go out of the short term um don't play that game and go into the medium term, it's it doesn't matter. Nothing to see. So, if you're just looking for things that are going to make money over one year rather than one minute, um then you're at a completely different environment. And if you're looking for to make money over things for 10 years, you've got the biggest advantage of all. And this is what Buffett's always talked about. You find a you know a good company that's cheap, own it for the long term, you'll do very well. I try and you know, I think my audience would fall asleep if I did 10 year trades. um we focus on the you know 3 to 3 month to 12 month sort of time horizon.

So I've got a bit of a paradox in my head which is I I get what you're saying here of like longer time horizons you you know you're you're allowing fundamentals to play out and and certain things have the tide of inflation on your side and you know there there's a bakedin appreciation indexes for example but then in my head I also have this feeling of if if someone put a gun to my head and said where is gold going to be in 10 minutes? Well, it's only going to be a little bit higher, a little bit lower. I can draw a box with high degree of certainty where price is going to be. You project it out. Gold is probably not the best example, but something that is uh usually consolidating. Let's say currency Euro dollar in in a 5year horizon. Put a gun to my head. No idea. It could be really high. It could be really low. It could be exactly where it is. So, for me, the degree of certainty is harder on longer time horizons. And therefore, it feels like there is a better advantage on shorter time horizons. But here, you're saying it's actually the opposite. Why? Why would it be?

Because you were able to measure value and value is like a um you know the joke is it's like a stock clock and you know how a stock clock is tells the correct time twice a day. A broker block. Yes. Yes. And um and some people criticize value for that. But you can for example in currencies the euro is probably fair value on purchasing power par. And that basically means if you take a hundred um dollars to America and and buy things and put them in a basket, take a $100 and go to Europe and do the same thing, you're getting about the same amount of stuff. If you go to Japan today, you get two baskets full of stuff, your $100. So the yen, for example, if you were to be a value investor, the yen as a five 10 year bet is is a very very good bet. It's very because it's massively undervalued. uh and some of the emerging market currencies also could be undervalued but they have high inflation so maybe they're cheap for a reason but Japan doesn't have that problem and then yeah there are overvalued currencies around I mean the Swiss Frank probably is rich but but it's a very well-run country and people put their money in so you know why it's rich uh maybe the dollar's a little bit overvalued probably about 30%. And um and indeed the policy of the US government is to try and get it down. You know, every time you see the S&P not crashing when we have reasons for it to crash, like wars in Iran or tariffs, they put the dollar down. And guess what? Everything's fine. Uh and they can do that because the dollar's rich because it's been going up for the last 10 years.

in in your institutional days, I guess it was not a one strategy approach and it was probably a very complicated diversification with boring things like bonds and then some speculation, probably some algorithmic stuff going on. So, can you walk me through what a what a portfolio looks like for you? What how would you allocate it and what you know what areas would you have interest in and what would be the high-risisk pots because I know you have a big interest in crypto but I I doubt uh you were in the institutional world. So if you can walk me through what was uh a portfolio or how you would manage funds in those days.

So in those days and then perhaps we can come on to into these days because they have changed. Um in those days we basically were born out of the dotcom bare market. So at HSBC investment management it was called James Cap in those days and we we came out of this um this in the middle of the bare market um the time of 911 and that sort of thing. The tech stocks were were slumping you know everything was down 90%. And um we we the client demands said, "Can you can you stop this benchmark thing? Stop trying to beat the index. Could you just build me a portfolio that will go up? Doesn't have to go up a lot. Just want it to go up, not down." And so we responded to that and built the absolute return service. And our original thinking was okay, let let's be approximately a third equities, a third bonds, and a third alternatives, whatever alternatives means. And we hadn't clearly defined it in the early days. Um but it came on to be a very active approach to all three buckets. Yeah. So in equities we noticed in 2001 for example places like India and Brazil were making relative highs. They weren't going down whilst the US S&P and European markets were slumping. Right? So so you could put money into India and Brazil. These were dirt cheap and Asian stock markets. They'd come out of the financial crisis in two in 1998. They were dirt cheap these markets. Russia was another one. And uh so we put small allocations to these emerging markets. Not only did they not go down, but they started to make some serious money from 2003 to 2007. So we had a very active approach to our equity book. We didn't worry about the index. We just bought the things that we thought um would go up. And by the way, that's what I still do today in equities. In fixed income um was a bit simpler, but we basically realized that if you were short duration, there wasn't much risk. um if you stayed in your own currency, the the portfolio currency, there was very very little risk. And so unless we had a high a high uh conviction on duration, we basically kept it very very simple. And whenever the bond market was very oversold, we'd buy the long bond, we switch the short bond to the long bond, take the alpha back into the short bond. And in a bond bull market, that was great. And we we had some very successful trades uh following that model. And the alternatives bucket was probably the most interesting. and I latched onto the gold trade early and so we just you know we we were gold guys. U but we also participated into the Chinese-led commodity bull market um of that era which was just fabulous. I mean China was growing like a weed and it was just amazing and and everyone felt it. So basically the west was re between 2000 and 2008 the west was really boring and the em you know the rest of the world was really fascinating you know and the more exotic the country the better and um you know Indonesia as I said Latin America, Eastern Europe all of these and Asia they they just went up and it was fabulous. Um and so that was a big commodity bull market because living standards improved massively you know GDP per capita kind of measures um massively for these countries and so that was very exciting and we had um commodity so gold exposure we had commodity exposure we we were on the oil trade uh and then we also had alternatives so we're big backers of CTAs and macro hedge funds we did a bit of long short but clearly tired of them we were allocating to other people's funds not doing it ourselves and and we were very disappointed with the long thought managers they they just they just didn't deliver you know so they were kind of saw them as a waste of capital in the end.

Wow. Okay.

And the CTAs were always crazy but they delivered when it mattered you know. So for example in 2008 you had something that really went up uh when other things in the portfolio came out of pressure. So the non-correlation was quite valuable.

Okay. Interesting.

Yeah. Um yeah and the macro hedge funds I think the final word we we try to do that you these clever people that can um understand where the bond spreads are and what the next problem is and you know where these sort of strange trades to do with the yield curve the the butterfly and all this nonsense and none of them made money. So you know so I quickly realized that the clever the clever the people were running macro hedge funds the more pointless it was. It was better off to have a trader and a CTA just following the trend.

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So, as you're describing all of this, uh, the the thought in my head, and I know you're into crypto, so you may understand this analogy, where I earlier on in my career, I I just fell into the hype of some some crypto coins. And I got into staking. I was like, man, this is wonderful because now I get a fixed return on my capital. I just got to tie it up and I'm getting guaranteed return backed by the coin. Like, this is wonderful. Until I realized you're getting paid out in the native coin and if the coin is going down, doesn't matter how much you're making, you're just losing money. So with that in mind, when you were putting your money into emerging markets, uh I guess the foreign exchange portion of it was something that you'd have to consider also cuz if you were getting appreciation on the stock market but then depreciation in the currency which you would invested in, uh you it would be offset. So then I guess a cornerstone or an underlying tone of all investments was currency.

Absolutely. And I'm glad you asked that because that was the era that the dollar went down by a third. So the dollar peaked in 2001. It worked out very well and it went down. So if if the dollar goes down, everything else goes up, right? And so EM currencies were fantastic. You know, one of the best trains trades of the era was the Brazilian CE bond. Um the the long inflation link bond which gave a real yield of I don't know 15% or something at one point, you know, when it was just so oversold. Um I I forget the numbers, but it was something like 7x capital and income return over the over the decade. It was it was for not and currency. So all of those currencies went up when the dollar went down because capital was flowing into EM because it was so exciting. The S&P between 2000 and 2008 was the worst performing stock market in the world of the majors. It was miles behind. Europe was better. Uh Japan didn't do very well, but Europe did very well and EM did amazingly well. and and so and all the capital was flowing and and there was a scam towards the end. So people get really excited by so excited by um EM that by 2007 there were scams on North Korean convertible bonds and of course they weren't corre they went didn't even exist you know North Korea wasn't even issuing bonds but there were scams going around and go North Korean bonds you know North Korea's got mining assets and everyone was piling in and that's when you know it's crazy when uh when people just fall for it. Um but yeah, EM was amazing in that era. Um and and I I'm quietly waiting for the next major EM structural move.

Well, China and and US just met, so there's things brewing for sure. Uh the question therefore becomes for me, is a retail trader, a big topic when I speak to guests on the show, it's always risk management and psychology. When psychology, we can have a conversation. is often interesting, but risk management beyond just hey make sure you do 1% per trade or 0.5 if you're in a losing period if you feel it's an A+ setup up to 2 3%. But beyond that, I don't get too much um depth in a conversation of risk management. But in your case where you're managing multiple markets, asset classes and diversification and different objectives, long-term and short-term holds, etc. I guess risk management becomes a um pretty interesting topic. Was that something you were doing yourself or would you have a risk team? H what does the word risk management mean to you from an institutional background?

Well, risk management means you're managing your money properly. It's the most important part because if you don't lose then you can only gain. Yeah. So, but you can't take that to the nth degree because if you try and avoid all losses then you end up not doing anything. Sure. Yeah. So, you've got to be re realistic about that. And the only free lunch in investing and I know it's a cliche um diversification is the only free lunch in investing and effective um diversification is your opportunity. So if you if you want to own um gold and silver you have not diversified. Yeah. Um pretty obvious, right? And if you want to own Bitcoin and Ethereum, we haven't really diversified either. But if you own Bitcoin, I'm plugging my own book here and no doubt we'll get to the bold at some point. If you're in Bitcoin and gold um and bonds and US equities and Chinese equities, you're doing some different things now, you know, and the portfolio is now starting to have different drivers. Um and actually what this means is now you can go and take a nap, you can read a good book, you can go for a walk and not worry about your portfolio. If you're worrying about your portfolio, then it's too risky.

What was your beliefs on technical analysis?

I love it. I've been around I've been um I did the STA exams I think in 1999. I I got a distinction and um not this probably the easiest exam in the world to get a distinction in. Um but but I I spent years and years trying to understand what what was the value of historic price. Let's face it, that's what it is, right? You're looking at historic price and you're trying to say what what is it telling us? Um and I've come to the conclusion that most of it most of the tea leaf stuff is not very useful at all. And I think you spend a lot of time looking at a chart trying to interpret it. much better is to measure it and say what's its trend, what's its volatility and and where's its position relative to its trend. So there's kind of three three main things you can take from it.

What was that? Trend, volatility and

uh deviation from trend.

Okay. So let's say a mean reversion kind of thing.

Okay. So if you distill down everything that technicals could be probably in that exam, um I also have this feeling of uh traditional textbook support resistance head and shoulder all of these things. Uh I mean the image in my head was I don't think there's a big fund manager sitting there thinking oh right shoulder let me let me put in a big chunk of money um and therefore I always had the same feeling that does historic price predict future price I'm glad you said it yourself that probably not but then when I distill down technicals what is the place of technicals because is price driven by technicals is it a self-fulfilling prophecy in terms of if everyone sees that round number and support level it must become true because everyone's thinking you think it so I'm going to think it what what is the dynamic of technicals or a lot of traders tell me it's not for trade ideiation that's other things but the execution can be on technicals so what is its place in trading

for me um I just want to touch on the history of the chart so pre95060 I wasn't alive but um they didn't have screens computers internets that kind of thing and so the chartists of their day drew them they recorded each day on on um graph paper and they and they did things like point and figure charts and I think there was quite a lot of value in those days when people really hadn't um sort of understood trend maybe some of the savvy traders you know mentally visualized it um but I think it was a very very powerful idea and so certainly you can test that by um looking at things like momentum over long periods of time and recognize that there's a there's a an alpha from stock market momentum It's a fact. Yeah. It's one of the unexplained things. People understand that that over the long term, although it hasn't, lots of things have gone wrong in the last 5 or 10 years. But but basically, small companies are supposed to beat large companies over the very long term. There's some debate about whether that's true or not, but that's what the evidence shows. Cheap companies outperform expensive companies over the very long term. Again, disproved in the last 10 years, but no doubt, let's do this in 10 years time, see where we are. Um, and there are a lot of these what they call factors. and low volatility stocks beat the beat high volatility stocks. So there's some of these sort of academically u more as much as you can prove in financial markets. Um not quite physics but but you know the these things and the interesting one for technical analysis is momentum. This idea that the stocks that have gone up the most over the last year continue to outperform the market long term. Now it's a choppy old thing uh but you get an alpha of about 5% per year over the market. It's a lot. It's a lot and and that compounds up. And the reason is twofold. One is that you are avoiding the losers. So if you're buying stocks that are going up, you're you're naturally avoiding all the things that are that are irrelevant to whatever's happening today. So uh and the second thing is you're you're buying the things and they go up one year, they go up the next year, they go up the next year. Just think of Nvidia and it's just been a momentum stock for years. So you've so that's good. You've got your Nvidias, you don't have your disasters, but the so the point of the point of destruction for momentum trading is the um the cost of implementing the strategy because not all momentum stocks stay. So some are falling off, right? And then some of the weak ones are starting to come up and so the churn of maintaining your momentum portfolio becomes the challenge. But on average over time with with with modest rebalancing, you will get that alpha over the very long term. And indeed the last month or two has been an extraordinarily strong period for momentum investing. You know, one of the best on record in terms of monthly return. Um so that's you know technical analysis comes down to that in terms of how you can scientifically prove it works. The concept of trend and momentum.

Sure. But what I'm getting a more feeling of what you're describing here is it's momentum can be obviously se seen on the charts. But what it could be more interesting here is talking about positioning let's say through the coot report where where is the institutional money flowing would be a better leading indicator than um bullish candles on a charts right

I would say that the cot report commitment of trading traders data I would say and this is slightly controversial it just tells you what the chart looks like because most of the commodity traders are trend followers right the CTA community yeah so when they're all long so when the cot reading is high theart looks good and when the cot reading is low the chart looks bad.

So I guess no added information there.

I I spent years looking at cot until I sort of went how come particularly in gold how come how come the cot data just follows the trend all the time and so when everyone's long it means it's going up. So the idea of selling high cot data means you're just fighting the trend and buying low cot data but it probably is right to buy low cop data because the chart's bad. It's something like gold where it's going up long term. A bad chart is a buy, right? But a good chart is not a sell.

Interesting. So when when you um look at a chart of something you're interested in, does the charts bring your interest first? Momentum is the first reason to be interested in something or are you doing fundamentals first? And

no, always chart first. But but because I'm I'm very well I can tell you a secret. I'm really lazy. Okay. So So we use computers to find good charts for us, right? I cannot be bothered to go through thousands of stocks of charts a day. I used to, but now I just realized there's got to be a better way. So you can you can screen for trends. Yeah. And that's a much more powerful thing to do. Now there's another thing that's even more important. Yeah. Which is relative trend because ultimately you're trying to predict money flows. Yeah. You're trying to where the money is and where it's going. Yeah. You we don't know the future, but we just get the clues from today of of where it's likely to be going tomorrow. And if you've got um back to your point about weak currencies, so you could have a um an emerging market with a weak currency and the chart looks good, but the currency's bad and actually the world index is better. So the world index is going up at 10% a year, but your market that you think looks good is only going up at 5% a year and the currency is a bit bad. Put all that together, you can you can compare your emerging market to the world index and say actually it's going down relative. And then you look put Nvidia on it and you go, "Wow, Nvidia's better than the market." Yeah. Or something else that's um um related. And so by studying those relative charts, which we call currency adjusted price relative or capar is our acronym. If if you look at capar um which is basically alpha rather than beta. Yeah. So think think of the world index being the purest measure of beta. It's all the stocks in the world. And then so anything that can beat that is alpha. Yeah. and you're basically looking for that alpha. So what we've built is um is is a is a system that identifies all the stocks in the world which are demonstrating alpha. Now once you once you've looked at them now put your thinking cap on and and spend your time wisely. Yeah. So the lazy people just want to use their time sparingly and effectively and I don't want to waste time on 90% of the stocks that aren't demonstrating alpha. So on a concentration of effort um on those that are that are that are interesting and this is when AI is the you know the bionic arm isn't it? You know it turns you into Superman and you know you use all these tools um just to make sure your your attention is is is efficiently um put to work.

So I I totally get the wisdom behind it. How is it executed? So when you want to filter through thousands of stocks to find um ones that are outperforming or have alpha, the proxy is trend and that was is that that what the AI would scrape for or

Yeah, Well, this is actually AI. This is good oldfashioned high processing. Uh the AI comes next, but we've built this inhouse, right? And we've got a product coming um to the world. In fact, there's a there's a very lowgrade product we have called bytrend.io and it's a it's not a very good product, but the next version coming in the next couple of months will be 100 times better. So that's going to be so we have it behind the scenes. So that's very exciting and um and you literally press a few buttons and you can see where the things that really matter are and the big changes you if you get the turning points of the big changes um that's when the real money's made you know being into gold and oil stocks early and then suddenly there's a two or 3x move that that's what really matters.

Yeah, If I was to ask a retail trader, someone that's likely watching, I would say, "What is your what is one word that is the biggest pain point for you?" Well, the the area you spend most time thinking about, I imagine that word is manipulation where um often people can get the direction right, but they they hit stop loss before it goes in that direction. Every time it's a loss, the mental burden, they go into tilt, they say, "The market manipulated me because they showed me price action that I fell for." Uh it's a big either a scapegoat or blame game or something that could be real. What does that word manipulation mean to you from the institutional world?

Manipulation, I think, is always there. I mean, what are these big hedge funds making money out of short-term this and that? I mean, you can call that manipulation, but it probably is. I mean, whatever they're doing to take that alpha from the market is presumably to the detriment of short-term traders because it's a zero sum. Uh, the market doesn't create money. is going from one hand to another.

Well, it does create money over the long term. So, the stock market, the value of the stock market follows global GDP. Let's say it can go up faster, it can go up slower, but but it's following that journey, right? The world creates wealth. Markets go up long term, right? Sure, different things happen short medium term. Um, so all the alphas in the long term that's easy to win because you're capturing that all the medium-term. But in the short term, if there are clever actors in the market scraping bits here, bits there, that presumably must make it harder for other short-term actors. That's where the fight is. Yeah.

So on shorter time horizons, there will be more manipulation.

Competition.

Okay. Nice. Okay.

I mean, manipulation sounds like someone's doing something wrong.

Are they? I don't know. That's another debate. But they they're, you know, free market, clever people, big computers.

Is it is this illegal? I don't think what they're doing is illegal. But it's competition you have to face. You know, you're up against these big boys.

No, that's what I meant by zero sum. For someone to gain, someone had to lose. So,

so the alpha is zero sum. The market's not the beta. So, the beta is creating value year-over-year as the world economy grows. But the alpha will always be real some because not everyone can win.

Over the decades that you were involved in the markets, obviously you were mentioning digitalization and now AI and quant and I guess supercomputers. H how has that changed your interaction in the markets or the

Visibility of technicals, let's say?

Well, I think the fight again is in the short term. You know, it's all the information you could ever desire. You got to go back just just a few years, just 20 years, 10 years. The retail investor knew nothing in terms of information from the market. They might have been clever people and well-informed, but you know, the institutions wrote all the research. Um, pre-08, a lot of that leaked out. Through there was a sort of environment where they didn't mind selling it to retail investors, but then regulators cracked down. And so they were really cut off from news flow compared to the institutions.

But now that's back with the way X has gone and other platforms, it's just tons and tons of information. And so I think that that um, that disadvantage is probably is probably waning. But I, but I reiterate, you know, the more computers there are, the more competition there is in the short term, leaving the patient investor without leverage, um, in a very strong position. Yeah.

So I think that most, and the problem is, of course, I, I get it. You've got $500, $5,000, you start trading, you want to turn into a million by by Friday. I mean, you there's only one way that can go. And it's, and the reality of investing is actually quite a boring enterprise. But if you can compound at, you know, 15%, it's pretty good over 10 years. If you can, if you can compound at 20%, then you're Buffett. And if you can do more than Buffett, then by God, you should be on the front cover of Time magazine. So the expectations of what markets can reasonably deliver, um, are just way shy of what someone with $500 wants to do with their trading system, with what they think is possible. And, you know, I suppose during the crypto era, people were making vast sums of money in short spaces of time. Um, but, but I, but you know, leverage and volatility are a dangerous combination.

So we were talking about empowerment as a topic before we started shooting. So I want to take that and say, let's empower the retail trader because every retail trader knows all the reasons that the institutions are better and what we have to fight against. But what are, if there are any advantages a retail trader has over an institution? Whether it's the less capital can be a favorable thing. The liquidity issues that maybe an institution faces that the retail trader wouldn't. What are the play to our strengths? What is the arena for a retail trader to focus on?

I think you've mentioned two of the most important ones. Not having vast amounts of money, um, is an advantage because you can get in and out of more stocks, not just the big stocks. You can now trade the small stocks which are under-researched. And by definition, if something's under-researched and less traded, then it ought to be cheaper. Yeah. So the average small cap these days is cheaper than the average small cap by basic valuation metrics. Which should mean, if you apply decent fundamental analysis, you know, over time, you should outperform by by doing that. And the information advantage is, is what you have versus the institution is, um, is very slight. You know, you, you don't have vastly less information than the institution. I mean, there's hardly any research. The institutions don't know anything either. Yeah. So it's a fair fight in small cap, right?

Oh, in a small cap, yes. So, so that's one area, um, less trade impact, as you say. But also, I say freedom. So, you, you wouldn't believe quite how restricted many institutional investors are in what they're allowed to do. And certainly my experience at HSBC Asset Management pre-08, I had a pretty free hand. There's still plenty of checks and balances. I mean, HSBC was a very well-run company. So, there, there were lots of checks and balances to make sure no one was doing anything stupid, but we had way more, um, investment freedom pre-08. And then after 08, uh, we really had were heavily restricted and trades had to go through committees before they could be implemented. You know, risk management, risk departments, and, >> compliance and and a lot of it was bureaucratic nonsense. But basically, they, they just wanted to slow everyone down. I think the emphasis was, let's just stay out of trouble and, and, you know, be in the middle. We're no longer trying to do things, um, differently. And, and, and to outperform, you have to do things differently.

And so by being more consensual, then you're in the middle of the pack. And, and I think that's where firms like that, >> makes sense, >> wanted to be after 08. It was a frightening environment. I understand it. It was a frightening environment for the financial service industry. It was horrible.

And, uh, so they just wanted to, to quietly, quietly sit in the middle.

Yes. The Goldilock zone. So when you're going through such levels of bureaucracy and compliance to place a position, does that eradicate, uh, one, one cardinal sin for a retail trader, that is trading psychology and FOMO and greed and all of these terms? Uh, I guess that's out of the window when you have to go through stages of compliance where you can't execute on an impulse or chase a position.

Yeah, I'd say that's right. But also, you know, the, the short-term entry and exit, you, the short-term entry exit prices aren't nearly as important as you think for unleveraged, long-term money.

True.

You know, I mean, it helps to pay a bit less and get out a bit higher. Of course, it does, but everything helps. But, but you know, owning the right things for the wrong period of time is much more important.

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What is your thoughts on this idea that an institution is alpha-driven, exposure to beta, but alpha-driven? Uh, and a retail trader, their objective, maybe wrongfully so, would be, let's do the same. I need to find alpha. But could a better advantage be to find where the institutions are moving and catch a ride, piggyback their move? Um, would that be a better idea? And would it be possible? What would be that digital signature to follow the institution?

That's trend following. I think trend following is a very simple way to think about that because when the money's moving into one area and out of another area, then that's responded by improved price action. And so, yeah, it, it's following the big money shifts. And, um, that, that's what I think is the best alpha opportunity for the medium-term investor. For the long-term investor, it's value, value, momentum. You want to find cheap things that are going up. Um, and, yeah, and again, it comes back to this, this really, really hard short-term thing. I have no idea what's going on in the short term. Absolutely. You know, no idea. I think I've got, with 30 years experience, I've got zero advantage over a beginner at short-term trading. I don't think I'd do any better with, if you give me 100 bucks, right, Charlie? There's gold. Do some. And I know a lot about gold. Can do some leverage trading and I'll see you on next Friday and see where we are versus a complete beginner or a chimpanzee. I, I think we, I think we'd all be equal in our fight.

Let's, let's talk about, uh, Bitcoin. Now, I, I feel like this is one of your favorite topics, but it also seems quite contrarian from the world that you're from. So, first of all, let's talk about is, is crypto or Bitcoin specifically adopted now in 2026 by the institutional world, or still a bit of a taboo?

It's still a taboo, very much. Um, so to, we've got a Bitcoin and gold ETF called Bold. And we came up with the idea six years ago for the Bold index. Managed to float it in Switzerland 2021, 2022, sorry. And so it's been just over four years. And we managed it. Finally got it to London, um, in January. There have been huge regulatory barriers to to our listing in London. And still, um, you know, when you promote it to the wealth management industry, they all say it's a fantastic product, but they can't buy it.

Why?

Because you have to sign to, to buy Bold. Yeah. Which is, which is, uh, right now, it's, um, 57% gold, 43% Bitcoin. We talk about why later. Um, but, but you have to sign a form saying, I can lose all my money. Right? So you go to a retail brokerage, you have to tick a box that says, you know, you put in 10,000. How much could you lose? 10,000. Correct answer. Well, it's, but it's not true.

Yeah, it's not going to happen.

Because you've got, well, it's first, it's not going to happen, but secondly, 57% gold, too.

57% in gold. So, you're telling me that the Bank of England owns gold, right? Are you telling me that they're sitting on an asset that they think can go to zero?

Okay. So, what you mean is the Bitcoin that can go to zero? Well, it's had 17 years to try and go to zero, and it keeps, it keeps rejecting that. And, um, and people say, "Oh, it's in the doghouse." And, well, the, the best performing market the last three years since the, this bull market began in early '23, right? Is Korea, the Kospi's gone nuts with the microchips.

Yeah.

Bitcoin's still ahead after its dip since last October.

Yeah. Is the volatility and variance that Bitcoin has that is probably the taboo?

Yeah. So Bitcoin's made more money in the last three years than the Kospi. I mean, it's a fantastic asset. And the reason to stay bullish is because the global wealth management industry is $170 trillion. That's trillion, not billion. Trillion. Yeah. Trillion is such a big number. And their exposure to gold is about 1 or 2%.

Yeah. Oh,

it's quite low considering where the world is. And their exposure to Bitcoin is zero.

The exposure to gold is, or who, who's the big buyer then? Is it just central banks? Where is this big demand?

Central banks, uh, jewelry, and, uh, and, and bar and coin, an ETF.

Interesting. The, the contrarians to Bitcoin that I've spoken to, because I've had both. I've had Bitcoin maxis and I've had absolute contrarians. Their argument would be that, greater fool theory. It's just, who, who's left holding this expensive asset? And because there's no underlying value. So then I push down that and say, well, the underlying value is the cost of mining. And they're like, cost is not value. Um, someone can pay more to mine a Bitcoin and the price can be lower. So utility, I guess, is something that can be the intrinsic value of, uh, gold. Fiat can also be the greater fool. It's, it's, it's just paper that we all believe has meaning. So where is the place of Bitcoin? Because yes, there is utility, but there are better coins. There is, there's cheaper, faster, with less volatility. So is it just the digital version of gold? Because now, as we know, it's, it's not really correlating. So what is, what is the place of Bitcoin in the global markets?

Yeah, crikey, where do we start? It's a, it's a big question. So Bitcoin is the king of crypto. It's, it's the first and it's the biggest. Um, I haven't checked Bitcoin dominance in the crypto industry, but let's call it 75%. It's something like that. Yeah. So there are, I don't know how many crypto, what's it, tokens there are, but I mean, we used to say 20,000, but apparently it's 2 million or something. I have no idea how many projects there are, but you can set one up this afternoon in 10 minutes on a website. You know, it's not difficult.

And that has no value. Why? Because it's got no beating heart.

Yeah.

Um, you know, Buffett once said that he wouldn't buy all the Bitcoins in the world for $20. The interesting thing about that question, um, about what he's saying there is that he's, he's not understand, he's thinking Bitcoin is a thing. It's a network. You're buying a share in a network. Yeah. Now, if you owned all the Bitcoins, then Bitcoin wouldn't be worth $20. It would be worth $0 because you destroyed the network.

Yes. Yes.

Yeah. It's a bit like, I don't know, let's say there are a billion telephones in the world and you own all of them.

Yeah. You got no one to call now.

Yeah. So, the network is the valuable piece of this. And when you and I go and launch a coin this afternoon and ramp it on Twitter for a laugh, um, no one will buy it and it will have no value.

Like, like Trumpcoin, Melania, these things. But Bitcoin turns over $50 billion a day. It's a highly liquid institutional grade asset. Yeah. Gold's $150 billion a day. So let's look at gold and Bitcoin in their frameworks. Bitcoin 75% of crypto. Yeah. Then you got Ethereum, that's probably about 10. And then you got the rest of it, you know, Binance and stuff. And the stable coins are growing and they're part of the economy. They're part of the digital economy.

And AI, when it, when it starts to get more involved in commerce, which I'm sure is imminent, in hedge fund trading and commerce, it will not be using a traditional bank account. It will be using electronic money. So either stable coins or Bitcoin. But it doesn't matter if they don't use Bitcoin because Bitcoin is the reserve asset of the digital space. Now let's look at the other side of that, gold. So the above, so oil might be a very large market, you know, hundred billion dollars, $100 million a barrel, $100 million barrels a day.

Um, okay. Yes.

Yeah. So, you know, a lot, it's a huge market. But, but the oil only comes above ground for a short period of time because it's very quickly consumed. Yeah. I mean, Iran, Iran aside, it comes out, we use it as quickly as possible. Same with food. So most commodities are consumed. We don't have inventories.

Perishable. Okay. Yes.

Yeah. But in gold, we've got, we've all the gold that's ever been mined is basically now sitting in above ground supply or inventory. So if you think about the, uh, commodity markets, it would easily be something like 75% of all commodities above ground are gold, just as Bitcoin is around 75% of above ground.

Interesting perspective. Yeah.

Yeah. So the two most liquid ones which are investable are Bitcoin and gold. Gold, um, oil markets obviously hugely liquid as well, but oil is an uninvestable. Yeah. As a long-term asset. Now, that is, we do actually have a position in oil at the moment in one of my portfolios. Um, so when I say it's uninvestable, I, I don't mean it's, what I mean is it's not a long-term investment. It's a tactical investment, right? Because you can't physically hold it. You have to own it through futures.

Futures are either good or bad. So, at the moment, oil's in backwardation. So, owning futures is good. You get paid extra. So, you get the spot price plus the backwardation. Yeah. If it was in contango, um, where the future price is above the current price, then you, you have to pay to own oil. So the moment you get paid to own oil, right? So owning oil at the moment is a very good tactical investment. Long-term, it's a terrible investment because it swings from backwardation to contango, and you basically don't get the, you don't get a benefit, um, from owning the futures, and you can't possibly achieve spot unless you physically have it, you know, a tanker outside your house, I don't know how you do that. Or the storage cost, probably.

Storage, all that. Okay. So, so in terms of investing, you've got precious metals and commodities and that's it. The rest of it, futures contracts, which, which fine, you can build products around that. That's fine.

But, but all the value in above ground commodities and precious metals, and the vast majority of that's in gold. Yeah. 30 trillion sitting in gold. Couple of trillion dollars or one and a half trillion is sitting in Bitcoin. Yeah. Um, on, on a long-term catch-up trade. Very simple. What's going to drive that? The $170 trillion dollars of wealth management industry realizing that it's not a Ponzi scheme and actually it's here forever and it's a new asset class. It's a diversification opportunity, and you're short, and you should be buying it. Yeah. So when, as those guys come in, then, you know, the Bitcoin and gold equalization becomes possible over a 10-plus year period. And all the arguments against Bitcoin have basically, uh, been false. I mean, the current one, um, is quantum, but, you know, that will be addressed. And Bitcoin has solved every problem that's ever been put in front of it. You know, when the banks wouldn't let you trade with the exchanges, they invented the stable coin, which is now a $350 billion industry.

Yeah.

So, you know, don't bet against this space. Don't have to get involved. You don't have to speculate in it. You have to be very careful with, you know, anything after Ethereum and things like that. But, um, it is, it is risky. But Bitcoin is very serious. The volatility of Bitcoin is below Tesla. It's below Nvidia. It's about the same as Amazon and Meta.

So, so many things in my head right now, but number one, Bitcoin is mass adoption. It's here to stay. Well, not mass adoption. It's, it's adopted highly, let's say, and it's the dominant player in the crypto world. But there are still some assumptions here that I want to walk over. Number one is, um, it's a proxy for money. So if it is a proxy for money, which I guess a lot of people say this is the digital money, then it has to go through some criteria. I can't remember them all, but the criteria of money needs to be, it's a store of wealth, which I don't know if Bitcoin is, uh, transferable, which it is, uh, easily transferable with a bit of a time lag, but sure.

Um, I forgot all the definitions of money, but I, I feel like it doesn't match all of the criteria that money would have.

Yeah.

Um, the only advantage is limited supply, which fiat isn't. So, is the correct way to look at it, um, it's digital money, or is that not the point of Bitcoin here?

I don't think it's money. I think it's an asset. I think it's a reserve asset. And gold is the reserve asset of the real world. Gold doesn't do anything. Yeah. Okay. You might have a filling. Um, maybe there's a bit in one of Elon's.

Yeah. So, people say it has jewelry. It has some medical use.

Well, jewelry is, jewelry is a store of value. You know, certainly in the, you know, in India, the women all wear their gold. And, um, if you go back to the ancient world, it was, it was a very simple way of. Gold's also a brand. It's not only an amazing, uh, chemical element with a high density.

I like the word brand because, so would Bitcoin then, it's?

It is. It's global. It's neutral, right? Gold is global. You know, even in the old days, it was the original fintech. So, pre-1970, before we had computers, decent computers, gold was the standard. All the fiat currencies were connected to gold. So if I took my ship to Japan or to Indonesia or wherever, then then my money is now equal to their money, because it was gold was what we had in common. After 1970, we get the fiat system for, for lots of reasons, but I would say one of the forgotten reasons is computers. Suddenly we have computers good enough to communicate globally. We can actually have a fiat FX system. We couldn't have had one before that, or pigeons. Pigeons flying over saying, you know, let's buy, sell, buy, sell. Um, so people forget that actually fiat has evolved with technology. And fiat is crap, but we know that. I mean, it's not a secret. It's designed to fail. It's designed to inflate. Um, but the government has a monopoly on it. Uh, they're in control of it. They can issue more of it or less of it depending on their needs of the, the economic cycle and that sort of thing. So, what we do, knowing that fiat's crap, we invest. Yeah. And we buy shares and we buy bonds, fine, but we also have alternative assets. And the king of commodities is gold, and the king of crypto is Bitcoin. And, you know, wouldn't it be nice to diversify? So it's a very simple argument. And as the digital economy grows, Bitcoin will grow. As the real world grows, gold will grow. Gold is the counterbalance to the global economy. I mean, the World Gold Council recently published a, uh, long-term valuation framework saying that basically gold should follow nominal GDP. So the more people in the economy and money in the world, the more gold should follow that long-term trend. Even though it doesn't do anything, you know, we wear it, we look at it, we save in it. It's a counterbalance. So when the fiat system has trouble, then gold tends to be the safe haven. Demand for gold goes up, the less trust we have in the fiat system.

Safe haven. Yeah.

Yeah. And in Bitcoin, it's just thinking the same thing, but the digital economy. And this is why, um, you know, I'm, I'm in a very small club, the Bitcoin and gold club, right? Most people don't care about Bitcoin and gold. Some people love Bitcoin. Some people love gold. People like Bitcoin and gold. It's a, it's a small, lonely club that I live in. Yeah. No one's in my club. And I like both because I think they're not in competition. I don't think that Bitcoin is coming for gold. I don't think the central banks will ever, not never, but I don't think we should think about them buying a digital asset. I think they're, they're fundamentally different. They've got the same money supply criteria and that sort of thing, and they're both highly liquid assets, which is very important. They wouldn't be reserved if they weren't. Um, but the fact is that they have a risk-on, risk-off kind of counterbalance. And so when gold's doing well, Bitcoin tends to do badly, and vice versa. So you can just think about the last six months of how they've just been exact opposites.

Is that correlation or causation?

I think it's correlation because it's been going for a long time now. There are times when the dollar is particularly weak and they both go up at the same time, or the dollar is particularly strong and they both go down at the same time. But whenever the dollar's basically stable, then they tend to not have strong negative correlation, but low correlation. So if, uh, long-term adoption and the eradication of taboo and people seeing it as an asset, not money, not a store of wealth, not a hedge against inflation, just an asset, uh, that would mean the inverse correlation of gold and Bitcoin would disappear over time. And therefore, your vision that you're on right now, which is you want to weigh them differently because they are inversely correlated. If that becomes correlated, what would your position then be?

Well, it wouldn't. So the algorithm that dictates our Bold strategy has got nothing to do with correlation. It's purely, it's purely based on volatility. Yeah. So when Bitcoin's volatile, then the weight could be down to 10% and then 90% and gold's calm. It could be 90% gold and 10% Bitcoin. As they converge, which they're quite close today, we're 43% Bitcoin, uh, 57% gold. I don't interfere with that process. It's a fixed algorithm. Our index provider calculates every month, um, and it's rebalanced by 21 shares in Switzerland at the end of the month. The gold, you know, if we, if we buy gold, um, then we'll be selling some Bitcoin because Bitcoin's done well that month. And then, uh, we'll be buying gold in JP Morgan's vaults. So, you know, it's, it's, it's a fascinating process behind the scenes. Um, but the correlation, I think the question is, is there an alpha in the strategy, um, if they became correlated? And the answer is, there would not be. So there is an alpha in the strategy today. It's been pretty, pretty impressive. It's been 5 to 7% or more per year, um, above and beyond the average asset price, right?

Oh.

And, and that comes from buying low, selling high. So, basically, at the end of the month, the asset that does worse, you buy it, and the asset that does, you sell it, right? Rebalancing, it's a classic thing to do.

And, um, if they were correlated, then the differences between the performance each month would, would fall. So rather than having a big gap where one's up 10%, the other's down 10%, um, in a month, and you get the rebalancing opportunity, maybe they're both up 1%. So there's nothing to do. So the answer here is, if you did a rebalancing strategy with gold and silver, which are highly correlated, there would be no alpha over the long term. If you did French and German equities over the long term, no alpha. Um, if you did Bitcoin, Ethereum, no alpha. What the institutions do is bonds and equities. Now they've become more correlated in the last couple of years, but historically bonds are supposed to be a risk-off asset, equities are supposed to be. And so you get the opportunity to rebalance, and there is some alpha. Now, the difference between Bitcoin and gold is, you've got two highly liquid assets with a massive opportunity because the, uh, non-correlation is so low. Yeah. As I said, Bitcoin, gold, and bonds and equities have become correlated. And so the, the opportunity in rebalancing those two is not very strong. But gold is off the, gold and Bitcoin off the chart. Uh, when it comes to the, you know, the rebalancing.

Why? I mean, for, for Bitcoin to thrive, there needs to be institutional adoption, and then this taboo idea needs to go away. You have a look behind the curtain because you were from the institutional background. What did you see? What is the institutional perspective, and what's holding them back to, uh, adopt, uh, Bitcoin?

I don't know if there's such a thing as asset class racism, but but this is it. This is it. They, they just, they just stick their head in the sand and they just go, "This is horrible." You talk to them, they just roll their eyes. Please make it go away. I, I thought it would just be the volatility. The, the delta between high volatility is lower than I told you. The volatility is lower than Tesla and Nvidia and SpaceX that's coming. And these things. It's about the same as Amazon. But Bitcoin is not volatile anymore. It's about the same as a normal blue-chip stock.

Crazy. Crazy. Okay. Well, um, moving forward, so Bitcoin and gold has become your preferred asset class as opposed to your previous diversifications that you would have done with clients' money or investor capital with your own funds. You're no longer doing the suite of diversification. You're, you're focusing on this in your personal, uh, life.

So, um, are you talking about my, my research business today? Well, I'm more just drawing a parallel between what you were doing in HSBC, which was investing on other people's money, but you had certain core beliefs and strategies and frameworks that you were doing. And it would seem like that's who you are. You've been doing it for decades. Now, it seems like you've got a newer approach. And because you're not bound by the same bureaucracy and racism of asset classes that maybe the institutional world was. So, when it's completely up to you, it seems like you haven't adopted the old ways that you, that was working for you for decades. You've kind of moved towards this direction, which is more Bold-orientated.

Yeah. So Bold. So we do, we do three things at, at Bry. We're a kind of tech company, but, but by origin. And we've got a trend-following product that I mentioned. We've got the Bitcoin and gold ETF, but the, but the core business is research. So we've got, you know, loads of people who, who, um, very, very our clients are fantastic, and they, they receive our, our notes every week. And we have model portfolios. And we've got one for safe stocks, what we call quality. So lots of stocks like Nestle and Unilever and Johnson & Johnson, those kind of stocks. Actually, we don't own Johnson & Johnson, but, but those kind of names. And then we've got one called, uh, another package which is called Whiskey and Soda. And Whiskey and Soda is basically the, the calm balance portfolio. Soda and the Whiskey portfolio, the equity one and commodities. So we have a bit of fun in there. That's got Bitcoin, gold miners, um, it's got crude oil, you know, and then it's also got a bunch of stocks. Um, um, so that's, that's quite fun. That's, that's probably our, our biggest product. And then our fastest-growing product is what we call Venture, which is our global equity portfolio, which we only started three years ago. So the Whiskey and Soda portfolio's got a 10-year record, very, very strong. I mean, we've done more than twice the market. Um, but the, but the, um, the, uh, uh, Venture portfolio's got a lower one, but we're basically using our trend, um, data to, we're demonstrating what's possible with our trend data. In a nutshell.

Curious to know, with the empowerment you had in, uh, in HSBC with all of the resources and analysts and team and morale and all of these things that you could have had, versus now where it's, you're an entrepreneur doing it yourself. Obviously, there's more freedom that you may have now, but maybe less advantages. So, if we could just draw a comparison between, uh, institutional life versus, I guess, now as products and wealth management.

Yeah. So in those days, I mean, the job of running a large fund was running a, you know, running a business, right? So you had all the responsibilities. You had the team members, um, you had to report to people above you, people sideways in risk and compliance and those kind of functions. Um, you had to look after the clients. You had to communicate. Um, and then you had quite a lot of admin, which was, you know, was more than you'd think. And you, and then you had to stay on top of some of the boring parts of portfolio management, you know, treatment of dividends and cash balances and FX and, you know, all these sort of real-life things when you're, when you're managing many accounts. Um, and so, so there's quite a lot going on. And your time thinking about investments is, is shrunk by all of those other duties. Right. Right.

It's not 100% of your time. It's, you know, it's probably down to 10 to 20% of your time after all the, um, the burden. And now I run a small business without any of the admin or reports up or reports sideways. And so I probably spend 80% of my time thinking about investments. Maybe not 80, but 60. And, um, and then, you know, I'm here with you. This is not, I'm not thinking about investments right now. I'm chatting to you. And, um, and obviously we have to do some, so we still have to run a business and build future products and, uh, think about things. But, but basically, I'm spending far more time thinking about investments and doing so far more efficiently than ever than I've ever done before. And I think that that, that 60% has goes further with experience and, b, with good process.

Right. Now, the word AI can be more seen as a tool. It can help you scrape. It can help you save time. And it can definitely assist you in still doing manual discretionary trading. But when a, you know, extend out AI and its, uh, capabilities, five years, let's say, 10 years, uh, would it be a disruptor of what the markets are, what investing is, what value is, how much of a neutralizer or a threat is AI?

It's a very good question. I don't think we know the answer, but I think for me, it makes it makes me bionic. Yeah. You have to go back to the '70s TV show, The Bionic Man, Steve Austin, and he had this robot arm, and you could pick up a truck and throw it and this kind of thing. So, I think that it just makes you more efficient and more productive as an individual in whatever you're doing. So, that's great. Sure.

Sure. But it's also like everybody has access to it, so it becomes a neutralizer. The advantage, I mean, there's an adoption lag, which AI is not adopted by everyone, but when it is, then it's, uh, it's just like everyone has it. So then it's no longer an advantage.

Yeah. So the second part would say game theory, stock market, the alpha component of, we've already said earlier, the beta is created long-term by a growing economy. There are bubbles and crashes, but that aside, it's going up long-term with the economy. The alpha, um, is something different. That's a thing that we're all fighting over, and that's the game theory in in markets. And game theory is one of those things where you come along and say, "Okay, the answer is obviously this is obviously, you know, A or B. The answer is obviously B." Ah, but we all know it's B, so therefore it's A. You know, it's one of those, it's, it's one of those crazy situations where the more people that interact changes the outcome. And so it's more a case of the alpha still be there. Who wins it? Right? And, and I think that those without AI will be at a disadvantage. So, but, but to those who do, but I again, I think AI is going to be at the center of the fight of the short-term investor. And I think the medium and long-term investor will still be left alone to do exactly what they've been able to do over the last 100 years. The fight is to make money now. No one cares about making money over the next years. It's, I want to make it today. And that's where the fight is. That's where the investment, that's where all these mega computers and communication lines, and it's all about, let's make money today. Distance yourself from that, and I think you'll be fine.

So there's two parts in my head. The one that I just asked you, the other part of AI being a disruptor was more, uh, let's, let's use the equities markets. Right now, we're, we're rocketing, and because AI has helped efficiencies, it's helped, uh, you know, reduce costs and, uh, greater profits. So there is an advantage in AI right now. But what happens when you extend it out to 10 years where the people that were working in big companies now now lose their jobs to AI, and we're seeing record levels of layoffs. Now, the middle class of the economy, or white-collar jobs, their buying power, their purchasing power, their disposable income, probably PhD people now working on Uber. So when you have the middle class kind of diminish because of AI, who are the same investors and the customers of said companies, creates a paradox or potential implosion on that front. And then you can apply this to all markets, even let's say, uh, the property market. Right now, people have bought property with mortgages, assuming a 25-year job that is maybe disappearing. And therefore, they can afford these mortgage payments in 20 years. So then rebalance. But this is not one or two people. This is all white-collar jobs potentially, because I think already more than 50% of white-collar jobs can be replaced by AI. They just haven't yet because of bureaucracy, adoption. But when I look at it through this lens, it's hard not to have a bleak view on where the world is headed.

So the Luddites are the people in the cotton mills of, uh, the Northeast of England in the Industrial Revolution, who, when the, um, what do you call it, the spinning jenny, is it the thing that makes material when you put the?

Okay. Yes. Yes. Yes. Okay. I don't know the term, but I see the visual.

Yeah. And so that massively increased the production, uh, productivity of, uh, of material, and, uh, the prices came down as a result of that. And the Luddites said, "This is going to be terrible because there are fewer jobs in the cotton mills," which, by the way, I shouldn't think was a very nice place to work. And the capitalists said, "Well, actually, it's just going to reduce the price of shirts, and more people will be able to have shirts." Yeah. And B was true. Yeah. I mean, yes, there are a few people, uh, might have lost their jobs, but actually, across the economy, you now had mass-produced cheap shirts, which was a game-changer. And that's progress. You know, China making cheap stuff over the last 20 years has been good for society. You know, we've, we've got, you know, we don't, so you complained about you haven't had enough pay this year, okay? But if you've got more cheap stuff, then, okay, that's that's an offset, isn't it? And so that's a sort of productivity gains in society. And if AI delivers productivity gains, then it's got to be net net good for mankind. And, and if it doesn't, um, then it's bad for mankind. So, you know, that, I think that's the, the real conundrum here. I mean, the joke about computing is, is the economists will tell you, it's, it's, you know, the benefits of computer computing are everywhere apart from in the productivity statistics. The joke being that all these big banks have got these massive IT departments, you know, with all these people trying to keep these computers working, and maybe if they just got their pen and paper out, they could achieve the same thing. But, um, also, that's, I'm joking, but, um, so, you know, you, you, we don't really know where it's going. But I think there's a counterargument to what you say about it's going to kill all the jobs. If you can now employ someone who's bionic, so they used to produce 10, but now they can produce 20, then you want to employ people again, don't you? Because they can do so much.

So, we'll see. But I think you're going to be right. In some areas, we're going to see people go, and in other areas, we're going to see new people employed. And all of these big changes. I mean, the internet was going to kill jobs. It never did.

Yeah. We've always had these, uh, fear-mongers, and they've always been wrong up until now, but they always say, "This time is different."

But also, the price of compute is probably too low. Yeah. This is the other thing. So, at the moment, they're giving away AI in a freebie because there's the, the bubble out there is probably the capex cycle. You know, a trillion dollars a year in AI investment is probably where the bubble is. Maybe there's some heat in parts of the stock market and stuff like that as well, but it's crazy. You can't spend a trillion dollars a year on on microchips the way they are, um, to build, um, um, high capex, low-cost compute. And so maybe the cost of compute is just far too low, and it might be that has to come up. And at which point it gets more accurately priced. And then you start to say, okay, well, compute costs that, but, you know, Jimmy, who who sits over there, maybe it's not so bad anymore. And it will come to a point. I don't know. I'm just giving, making suggestions. But I think we should be bullish on technology generally.

What about the ability of AI to be better at alpha creation than humans, and all of the resources and psychology and everything that was an advantage for humans? Could that be eaten up by AI? And therefore, the way the market navigates technical analysis, you know, the, the thing that we, game theory basically in the markets, self-fulfilling prophecies, all of that could change. Do you see the, uh, financial markets orientating differently?

Yeah, I do because, um, for example, what we're doing with our trend products, we're making AI-friendly. So, you'll be able to stick all the trends into your own AI into claw code, and, uh, or other AIs, and, um, and you'll be able to know more about the market more quickly than you ever did before. Yeah. Not in terms of, not in terms of, uh, instant pricing or anything like that. That's not important. But in terms of where the trends are, more people will be more informed. So I think that that will probably mean that the medium-term, uh, information advantage will, will be impacted slightly. Not very much. I'm not suggesting that our trend-following signals are going to change the world, but I think at the margin, they will, they'll have an impact. Um, but again, I, I keep going back to it. It's the, the fight is at the short term. You know, that's, that's where the,

the market making, you know, your daily P&L for the prop firm. That's where the fight is. I've spoken to a variety of guests on the show, and a unanimous common denominator between all of them is the emphasis they put on data and actually knowing the inner workings and the insight of your edge and your performance. That's why I'm proud to bring a partner of the show, Tradzella, the number one journaling, backtesting, and all-in-one insight experience created by traders for traders. What Tradzella really gives you is deep insights about your trading that would ordinarily not be visible. Whether it's through understanding your trade types and playbooks, or even insights powered by artificial intelligence through Zela AI. Whether you trade forex, futures, cryptos, the stock market, it all seamlessly connects to Tradzella. So there is no additional work. You've seen me reference it dozens of times and all of the benefits I've had in my trading from the insights I found from my Tradzilla. So join myself and thousands of other viewers of the show. You'll get the best discount using the link in the description or code TOOT for Titans of Tomorrow.

Let's, uh, end off the conversation on the topic of psychology. I think it's an audience favorite. Um, my caveat, personal belief is, uh, psychology is an easy scapegoat. It's important, but it's an easy scapegoat when you have no alpha or you have no positive expectancy. It's easier to blame psychology than find positive expectancy, and therefore it becomes a default blame for most people. So, aside from that, what is the true place of trading psychology in your career, with the way it was, and maybe some insights or advice over decades of navigating it?

I think the psychology is that it's worse when you're really wrong. You know, when things are going really badly. Um, and I come back to this simple test. You don't need complex algorithms to solve this problem. Can you sleep at night? And if you're struggling to sleep, then you're then your position's too big. Now, cut your position half, whatever, 10%, 50%, whatever you want to do. You know, if you can sleep, then it's, it's now okay. Your position is about right. But if you're worrying about your portfolio, then you've got a position that's too big. And so I think that all the psychological biases and problems stem from that. You know, if you invest calmly, if you diversify, and, um, and you're not too much in a hurry, and you avoid leverage, and so you can sleep, you're not checking your phone all the time. If you can do that, then I think you're in a much stronger position than if you're,

Okay.

in the lap of the gods, right? You know, if you, if you apply fundamental investing principles, have good trends in in the most of the things you own, and good reason for owning them, and it's all calm. Patience, time is on your side. Be patient. Time's on your side. If you're doing stupid things and you're leveraged, and then you're literally, if you have to pray for an investment return, then you, then you're gambling.

Mhm. So that covers what I think is

half trading psychology which is uh everything downstream of fear was basically this where it's patience whether it's anger revenge uh desperation you know all of these uh it's just okay you've over you've got too much size in the market or you're in the wrong thing. The other half I see is downstream of greed which could be ego excitement FOMO uh wanting bigger returns because you're underpositioned or you missed an opportunity. How would you tackle that half which is everything around the world greed?

>> Yeah. Well, I think again to uh to relax about it. I mean, you know, one of the things I've completely failed to do for my clients recently is engage in the semiconductor se sector. We have a little bit of exposure through this and that, but not much. And there are times when, you know, I'm absolutely on it and I've got all the right trades at the right time and we really kill it and it's fantastic. And there are times when you just miss it. And um even though we saw all the semiconductors gaining strength over the last year, for some reason I just went this won't last. And it did. And so I've got that completely wrong. But but the best thing to do is not to worry about it and just say okay, better luck better luck next time. Um let's try not to miss the next big thing. And um but definitely don't chase the big thing when you're late.

>> You know, >> the way you're describing this is obviously easier said than done. So I wonder where that comes from because it just looks like you have stoicism. You're neutral to outcomes I guess pro processor orientated. Is this something that you acquired and trained as a skill through I don't know meditation, journaling and morning routines and pre-market rituals or is it just time in the ring? You know, experience

>> you see this. Is it gray? Is my hair gray?

>> Yeah, it wasn't gray when I started. Got it.

>> So 30 years in the game, lots of mistakes. Those mistakes are hugely valuable. Learn from them. calm down. When you realize that, you know, 10%'s okay, 15%'s great. A whiskey portfolio is about 10 for 10 years, 15 for 10 years. And and that's great. I'd love it to be 20, but then you're taking a lot more risk if you try and go down that route. But if you can sort of keep up with those sorts of things um and and you're on on point for that, the then the best way to sustain a 15% return is by not going backwards. You know, if you go down 30 40%. then it's really hard to get back. So you try and maintain your nav without big draw downs. Crawl up slowly um using sound investment principles. Um then then you know I hate to say it's not difficult because of those sorts of comments bite you. Um but but never to be arrogant about it and just you know keep doing it and diversify and learn and don't be in a hurry. You know it's it's it's get into the church. get out of the casino and into the church in in in Buffett's terminology. And I think I don't think he's religious at all, by the way. I believe it's a sort of it's a it's a sort of funny thing. Um and I think you what he's saying is you're going to make more money in the church than you are in the casino.

>> And he's right. So actually the last area I want to finish off on is is just literally for myself which is I'm at a stage in my career where I've I've built a certain level of uh liquidity and up until now I've been trading for 11 almost 11 years and the entire time majority of my net worth was in my discretionary short time horizon trading and I realized over the last two years that's probably a mistake uh because when it's you know 50k that's fine but when it gets larger it's you think of the downside more than the potential upside. So that's when I've rebalanced and I've got a lot in property now. I'm a lot in equities and in gold. And when equities are skyhigh, gold more or less is skyhigh. Bitcoin is down a bit, but I've I've got some there.

>> Uh how would how would you advise me to orientate with my age on my side? I guess I'm only 30

>> and um the market is where it is. uh how should I look to preserve my wealth and grow it in a sensible way which is no longer in the approach that I had which was compound as fast as possible now I want to think more on the downside what would be a sensible way to navigate forward

>> well I think I mean I told you about my Bitcoin and gold strategy I think to embrace both them and rebalance them and to own them risk that's a great thing to do long term yeah the other thing is a stock like Barkshire Haway yeah back to Buffett his stock is trading at the lowest valuation it has in a long time It did this in the late 90s and went on to be the star over the next 10 years. It's a compounding machine. I mean, you could just buy that stock and and go to the beach, particularly on a starting valuation like this. All the stocks that are out of favor today, the boring stocks uh are are are sound places to put money for the next 5 10 years. You know, the unilver and the Nes that no one cares about them anymore. P boring brand supermarket. Um but but that's where the money is spent. I mean, you know, where do the women spend their money on these products? You know, open what's under the sink. Look, go to go to your friend's house and look what's under the sink. Buy the companies that make that stuff. Okay? Go to the your wife's uh makeup cupboard. See, buy the stuff, you know, buy the brands of those of those companies that make that stuff. The these are time old uh traditions and many of these stocks are currently trading very cheaply. So, I think that's a really good place. AI is going to change the world. It's fantastic. But the stocks associated with it are crazy and and it's highly unlikely that you're going to do very well there. Um yeah, investment is supposed to be boring and I think that all the wizzy computer games that that you know these platforms make it look like a computer game. It's it's a bad thing because people think that you know pressing buttons is fun.

>> Yeah. Another debate that I've seen online is private equity or wealth management versus self-investing because it's not timing the market, it's time in the market. So just buy an index and and call it a day versus property which is not as glamorous and you have the headaches of the cost associated of managing it and XY Z. But then you have the benefit of leverage because you can use the bank's money. So h how would you compare these three?

>> Yeah. So property I mean it property did really well from about 94 till about 10 years ago. That was it sort of glory days and um all of that was a period of falling interest rates

>> and so the last few years we've had rising interest rates and property you just said you know using the bank's money you you know in a falling interest rate environment property is hard to beat but particularly with other people's money are funding it and um um in the current environment until until rates peak out then you know I don't think it's that interesting I think in I think stock market property is quite interesting because it trades at a discount often so you can buy the REITs below net asset value.

>> Yeah.

>> Because they've anticipated, you know, high interest rates for longer. So, you could buy the big property greets for, you know, good yields. Uh but it's a really boring investment. So, it's a safe and boring thing to do. Um that's quite interesting. I think stock market is is very high the at the moment, but you could break it into two halves. The stuff that's irrelevant and the stuff that's overly relevant. And the illrelevant stuff is probably the place to think about at the moment.

>> Interesting. Um, but it's unexciting. Yeah. But this isn't the time to take loads of risk. This is a time to

>> to be cautious. But I'm a big bull on commodities. I mean, that's the other thing. And I think that this Iran situation, um, some of the people that know what they're talking about in the commodity space are all saying even if the straits open up tomorrow, to resume normal oil markets, fertilizer markets, and so on, it's going to take quite a long time. And the market thinks this is a a non-issue, you know, back to normal in June. I you know I I think that obviously the war may res. Um but but even even if the thing opens it's a problem and I don't think it's going to open anytime soon. It's going to drag on and so I think we're we're going to have a squeeze and you know that's bad for AI because that's a big input cost you know.

>> Um so I'm a commod so I'm a commodity bull a bond bear. um a long-term equity bond always equity bull always but but not withstanding the fact there's some crazy things going on there and gold bitcoin fabulous always own those

>> awesome and to wrap up what would be your lasting advice to an up andcoming trader for someone that's been 35 years in the markets

>> calm down

>> less is more there we go thank you very much Charlie was a wicked episode

>> thank you

>> boom