Tom Welsh talks with investment maverick Clem Chambers about trading with data, why investing is easy, and what to expect from his adrenaline-fuelled speech at City A.M.’s Active Trader Conference
Q You’ll be speaking at City A.M.’s Active Trader Conference in June and your discussion is billed as five trades for adrenaline seekers. What will this entail and what insights do you hope to provide?
A No one wants to know how to make money investing in stocks. They really don’t! I’ve tried to tell thousands of people. Instead people want to have a crazy time gambling. So it’s about time someone came out and suggested a few ways to give them that feeling that can’t be beat; the feeling of going to hell and back trading. Rather than trying to educate people by showing them what they don’t want to do, let’s show them all the stuff they really do want to do and what then happens. That’s much more fun.
Q You recently wrote that you expect the world economy to boom, and that investors should act aggressively to buy boring stocks as a result. How can aggression benefit a trader, and are there limitations to this approach?
A It’s very hard to make money directly by being part of the herd. Nonetheless, when times are good, the trick is to catch the wave early. In the short term you buy a crash, in the long term you buy the big economic turns. We have just had a turn of the economic cycle. As such, now is the time to go boots in. There is no need to go mad, but just go boots in into low risk. Of course, if you want to go ultra-aggressive, now is also the time to act. But sometimes it’s better to be smart than a genius.
Q Your career has spanned writing novels and involvement in the software industry. How can a broad range of experiences improve a trader’s performance?
A Investing and trading are all about common sense. And common sense is largely a function of experience. As such, my time in technology pioneering, computer gaming, software development, internet incubating, all that crazy stuff has given me lots of knocks to benchmark the stock market with. But it is not that difficult, as an Amazon purchaser of my number one bestseller 101 Ways to Pick Stock Market Winners wrote: “I knew all this stuff already, but I bought the book for convenient reference”.
Q You were once described by Wired magazine as a Markets Maven. How did you gain this reputation and how does it reflect your personal trading strategy?
A At the time I was developing multidimensional visualisation software to data-mine multivariate information, especially stock data. Wired wanted me to write for its monthly money section and to do an image using the graphic models. This I duly did. The people at Wired weren’t really stock people, so I think they just looked at the pictures and went “cool.” Meanwhile, I was doing ok investing in the outliers that the software picked out.
The only ones to understand the software were the people at Nasa and myself. Nasa listed it on its website as a data visualisation tool. I still use the software as it still works, and many people still don’t understand it when I dust off a copy and show it to them. Personally, I like to start from complex data and port it down to simple conclusions like the market is going up for five years. This is my current thinking. To get there, however, took a lot of data.
Q Is there one significant event you can point to this year that has fundamentally affected the way you view the markets?
A Nothing has materially changed in my view of the markets at all. However, various milestones, such as the recent Dow highs, fit in with how I see things developing. They have taken longer than I anticipated, but here they are. I also think the way things will play out will be much smoother than anticipated.
The stock market is dominated by old rich men and, as such, sentiment is always bearish because by temperament they are miserable. The old tired bears will be right on occasion, such as the period we have just gone through. But in bullish times they will be just plain wrong.
We have just entered such a bullish period. The world isn’t going to blazes – the last five years just proved that. It’s been bad, but it’s been worse many more times in the last century. From here on in, and for a long time, it’s just good news with bumps. Meanwhile the world will be going to the dogs as far as the old guard will be concerned.
Q What advice would you give to novice traders?
A Don’t trade until you can invest and make money. Trading is 10 times harder than investing, but only 50 per cent more rewarding. As such it’s a bad bet, at least to start with. Before you try to make 100 per cent a year trading, first make 25 per cent a year investing.
Clem Chambers is an author, journalist and chief executive of private investor website ADVFN.com. He will be speaking at this year’s City A.M. Active Trader conference on 21 June 2013 at the Grange Tower Bridge Hotel, London E1 8GP. Tickets are now available for only £65 at www.CityAMactivetrader.com