Former Goldman trader schools the Muppets

 The former Goldman trader may not work for them anymore but he kept his wily instincts for a buck earned by cleverness and being on the inside track.

Commentary: Deck stacked against them, retail traders seek magic ticket

‘It’s shocking how little retail investors know.’

Anton Kreil

Former Goldman trader schools the muppets - Shawn Langlois's London Sketch - MarketWatch

LONDON (MarketWatch) — Anton Kreil  Kings College  two-hour trading seminar. 

 the path to financial success 

When someone tells me about shortcuts to big money and “can’t lose” trading strategies, I generally shunt him or her into the corner of my brain that houses the likes of L. Ron Hubbard and Donald Trump. 

 Prepared to, at best, be entertained, and, at worst, to be slapped in the face with the greed, hubris and unethical behavior wafting through Wall Street and the City....

Kreil started his talk with — what else? — a video of his astronaut training, “Top Gun”–style. So far, so strange. Pilot jumpsuits, rock music, footage from inside the cockpit, Kreil doing his Maverick impersonation.

As for his relevant skill set, Kreil got started early, trading his own account as a teenager until Goldman Sachs gave him a desk. He then made his way through various positions at Lehman and J.P. Morgan before bailing out and going on one of those soul-searching trips around the world. All before turning 30.

He’s out on his own now, coming off a star turn in the 2009 BBC miniseries “Million Dollar Traders,” in which rookie traders were given a million dollars with the aim of beating the professionals. They did. 

After some idle banter about g-force and world records, he launched right into the meat of his seminar: 

Day trading doesn’t work. It’s “the big dupe” perpetrated by brokers. They make money, you lose money. 

It’s the 90/90/90 rule: 90% of you will lose 90% of your money within 90 days. 

The brokers and trading desks get paid no matter what. At this point, I was waiting to hear this: “Lucky for you, I’m different. And here’s why!”

Over the next 90 minutes, Kreil dropped some insightful glimpses into how the brokerages view their “muppets” (yes, he used the word) and how woefully misguided the retail, private trader is.

Lambs to the slaughter.

“Brokers just want to churn the [bleep] out of you until you blow up,” he said. “It’s shocking how little retail investors know.”

He has compiled decades’ worth of statistics to support the argument that the whole system is rigged against the average Joe from the start. Filtering out the nonsense and overhauling the prevailing mind-set is the only way to survive and build the balance sheet.

Among his many tips, he urged attendees not to get bogged down with technology. It’s just a distraction. Forget the blinking lights and the siren song of your trading terminal. And, for the love of all that is holy, forsake those handheld devices.

“Steve Jobs wasn’t a genius because he gave us the iPhone; he was a genius because he understood humans,” he said. “He legalized crack and put it in your hand.” As Kreil turned away, I slid my 4S under a notepad.

Kreil’s overarching point was that the little guy needs to think more like the big guy — there’s really no magic sauce. Contrary to popular opinion, the folks at Goldman and J.P. Morgan aren’t smarter than anybody in this room, he pandered. Like Kreil, himself, they just found a way inside.

In fact, Goldman’s senior investment strategist, Abby Joseph Cohen, is “the worst trader I’ve ever come across,” he said. “She’s top-ticked every bull market for the past 20 years.” 

Ignore the analysts. The media. It’s all a bunch of political maneuvering inside those walls, anyway, he said.

Without going into too much detail, Kreil explained that day trading is but a small part of a hedge fund’s strategy. Rather, the pros put together diversified portfolios of shorts and longs with horizons of one to three months. Avoiding losses is the priority. 

“Of course there are bad hedge funds, and there are crooks, but, excluding this tiny minority, the outcome of most hedge funds is, first, capital preservation and, then, growth,” he said.

“For independent traders, the outcome of day trading is capital destruction.” 

Why? At the risk of oversimplifying matters, the market is a “sleeping beast” 75% of the time, he said.  Intraday trading during these sessions is a fool’s game. The good hedge funds aren’t doing it, so why are you?
 

But when volatility picks up, the seasoned vets reduce their exposure in their medium-range portfolios by raising cash. Only then do they start “punting” the market. In other words, when the wild swings are there, so is the smart money, setting targets and stops, appropriately.

Kreil aptly compared it to counting cards at a blackjack table. When the odds tilt in your favor, have a go. When the count says otherwise, bide your time. Until you get caught, of course. Then it’s on to the next casino.

After two hours, it was finally time for the big payoff. The kicker. A step-by-step guide to riches. The whole reason this group had come to the bowels of Kings College in the first place.

How can we be more like you, Anton?
The answer: Come to the next session. This time it’ll cost you.

Fair enough. This is London, and even a Goldman Sachs alumnus has to eat.

Shawn Langlois is an editor and columnist for MarketWatch in London.

Disney
Those other Muppets.