Free Capital: How 12 Private Investors Made Millions in the Stock Market

[charlie]

I

 

Also, I think we may now have more than two "chapters" amongst our members. But I do not know who they are after the first two.

 

I wonder how many (beyond the obvious two) would "own up to it"?

 

Well I am going to be like an English judge - no matter if the names are tweeted, my super-injunction will stay!

[charlie]

 

Question if I may - one of the best things in Talib's Black Swann (I think) is the "Ludic Fallacy" - Fat Tony vs Dr John comparison (see link below) which I brutally round down to the wiseguy vs the scientific approach. For me it was a bit of a wakeup call as an investor.

 

Does your book in detailing the characters of the various investors deal with any any of these personality traits?

 

Well I guess you could see the 4/12 early school leavers in the book as Fat Tonys.

 

But whilst the concept of the ludic fallacy is a helpful one, I don't really agree with Taleb's association of personalities and insight.

 

He says "Fat Tony would outperform Dr. John in any other possible ecological,

real-life, situation." Well, maybe the particular Fat Tony he has in mind (I think Taleb is probably thinking of someone he once knew). But in general, no. I think the engineers (and actuaries!) are in general much better at thinking outside the box than the Fat Tonys.

[CB67]

Hello. I'm a newbie who came to this site indirectly through reading this book. I'm about 80% of the way through this, and have found it an informative read. I would make the following comments:

 

(i) What is interesting from the book, is that there appears to be lots of different ways for investors to make money in markets (and keep it). What appears to unite successful investors is having a self-discovered philosophy and process; sticking to it; knowing the strengths and weaknesses of their approach; and evolving the strategy over time.

 

(ii) I am struck by the number of investors who "maxed" out in the tech bubble (97-00) creating a solid base of wealth to work from subsequently. Obviously the key was to keep these gains. Whether this was skill or luck is a matter of conjecture. I did the same by being a forced seller of tech shares in Jan - March 2000 to fund an apartment in Central London - which, of course, with leverage, subsquently turned out to be a judicious 10 year switch. The reality was that it was luck. I wonder if the defining issue in the years to come, will be the guys who keep hold of likely substantial gains made in the commodity complex over the last 10 years? (I think returns in this over-invested area will be much less satisfactory in the next few years).

 

(iii) The parallel debate on what is a "safe" base investment is interesting. I use the dollar, or dollar proxies, as this. Whilst this has not been too disadvantageous for a sterling based investor over the last 3 years - given £ weakness - obviously in retrospect, the Swiss Franc was perhaps a more "obvious" play. I am structurally positive on the US dollar; not just for its "least ugly" characteristics in the "Keynes Beauty Parade". If I were based in H Kong, as Dr Bubb appears to be, I would heavily invested in Renminbi - as I believe this is now possible for all HK residents?

 

CB

[littledavesab]

Well I guess you could see the 4/12 early school leavers in the book as Fat Tonys.

 

But whilst the concept of the ludic fallacy is a helpful one, I don't really agree with Taleb's association of personalities and insight.

 

He says "Fat Tony would outperform Dr. John in any other possible ecological,

real-life, situation." Well, maybe the particular Fat Tony he has in mind (I think Taleb is probably thinking of someone he once knew). But in general, no. I think the engineers (and actuaries!) are in general much better at thinking outside the box than the Fat Tonys.

 

THANKS CHARLIE, am somewhat disappointed, was rooting for the Fat Tony's! Agree that Taleb was probably thinking of someone he once knew and maybe that clouded his thinking somewhat. Similar comparison maybe Liars Poker and the of Italian descent floor traders mentioned who could have been lorry drivers in another life.

 

On the otherhand maybe people who are capable of being successful at this game do have some special qualities. Really must read the book!

[drbubb]

Hello. I'm a newbie who came to this site indirectly through reading this book. I'm about 80% of the way through this, and have found it an informative read. I would make the following comments:

CB

Thanks for those comments, CB.

 

(i) What is interesting from the book, is that there appears to be lots of different ways for investors to make money in markets (and keep it). What appears to unite successful investors is having a self-discovered philosophy and process; sticking to it; knowing the strengths and weaknesses of their approach; and evolving the strategy over time.

I agree with this.

If you want to be successful, you need to find an investing technique that fits your strengths and interests, and doesn't cause undue stress. For example, I am not very good about using stops- except when they protect profits. So I have tended to use Options and diversification to protect me from falling markets. This worked well for years, but in 2008 my portfolio value slid as Junior miners fell sharply, and I did not cut my losses as soon as I should have.

 

(ii) I am struck by the number of investors who "maxed" out in the tech bubble (97-00) creating a solid base of wealth to work from subsequently. Obviously the key was to keep these gains. Whether this was skill or luck is a matter of conjecture. I did the same by being a forced seller of tech shares in Jan - March 2000 to fund an apartment in Central London - which, of course, with leverage, subsquently turned out to be a judicious 10 year switch. The reality was that it was luck. I wonder if the defining issue in the years to come, will be the guys who keep hold of likely substantial gains made in the commodity complex over the last 10 years? (I think returns in this over-invested area will be much less satisfactory in the next few years).

My one gains were mostly made after 2001, riding the bull market in Gold shares and commodities. I think the easy days of commodity profits may possibly be behind us. But I do expect to be able to make money in spurts. I am now looking for a trade similar to my foray into Hong Kong properties which protected me reasonably well from the slide in stocks in 2008. Had I moved more money to property, it would have been better. But HK property is no longer a "safe haven" given its degree of overvaluation. I am very tempted by property in the US, but there are various pitfalls, such as taxed.

 

(iii) The parallel debate on what is a "safe" base investment is interesting. I use the dollar, or dollar proxies, as this. Whilst this has not been too disadvantageous for a sterling based investor over the last 3 years - given £ weakness - obviously in retrospect, the Swiss Franc was perhaps a more "obvious" play. I am structurally positive on the US dollar; not just for its "least ugly" characteristics in the "Keynes Beauty Parade". If I were based in H Kong, as Dr Bubb appears to be, I would heavily invested in Renminbi - as I believe this is now possible for all HK residents?

It is not so easy for me to invest in Rmb. My partner has put aside some serious money into Rmb, but she is a HK ID card holder, so it is easier for her. I do think that China may be headed for some trouble, because of their "overinvestment" in capital projects. I don't know when that trouble will show up, but when you start hearing more about bad loans on the books of Chinese banks, the troubles may be arriving.

 

I like the HK dollar more than the US dollar. There is a built-up hedge since if the US dollar collapsed quickly, I think the peg might be shifted to the Rmb. I agree that the US$ is out of favor, and could show a strong rally at some stage. I confess to being a little disappointed that we have not seen more rally already. Maybe it will come as the Euro crisis moves to the next phase.

[CB67]

Oh I very much agree with you on US property, not just for valuation grounds, but if the US economy/job market starts to surprise on the upside in Q3/Q4 11 and the "shadow inventory" of foreclosures starts to ameliorate. Here's an interesting switch my now ex neighbours did last month: Sell an apartment in Kensington, London at $2,500 per sq ft and buy a house in Scotsdale Arizona (one of the worst markets, but an upmarket address within this) for $250 per sq ft. Of course, the big issue in the US is land supply constraint (i.e in most markets there wasn't/isn't any). For this reason I looked at some apartments in Rio recently (best areas - Leblon and Ipanema, massive land supply constraint in this booming City) and liked what I saw. Apparently German residential property is interesting on a valuation and momentum basis.

[drbubb]

Here's an interesting switch my now ex neighbours did last month:

+ Sell an apartment in Kensington, London at $2,500 per sq ft and

+ Buy a house in Scotsdale Arizona (one of the worst markets, but an upmarket address within this) for $250 per sq ft.

 

Of course, the big issue in the US is land supply constraint (i.e in most markets there wasn't/isn't any). For this reason I looked at some apartments in Rio recently (best areas - Leblon and Ipanema, massive land supply constraint in this booming City) and liked what I saw. Apparently German residential property is interesting on a valuation and momentum basis.

 

I am thinking about visiting North or South Carolina.

 

Prices seem to be in freefall in Charlotte, NC:

 

 

 

Jan 2010 117.16 $164,024

Feb 2010 115.98 $162,372

Mar 2010 114.77 $160,678

Apr 2010 116.05 $162,470

May 2010 116.39 $162,946

Jun 2010 117.24 $164,136

Jul 2010 117.03 $163,842

Aug 2010 116.57 $163,198

Sep 2010 115.40 $161,560

Oct 2010 114.12 $159,768

Nov 2010 113.45 $158,830

Dec 2010 112.41 $157,374

Jan 2011 111.10 $155,540

Feb 2011 109.64 $153,496

Mar 2011 106.96 $149,744

 

I own property in Berlin through a Fund set up by one of our old GEI posters

[charlie]

A further comment on the dealmaker Fat Tony (streetwise, loud, school of life) versus the engineer Dr John (analytical, studious, book smarts).

 

In praising Fat Tony's abilities over the engineer's, Taleb is probably thinking of a particular person. But Fat Tony makes me think of a different person: a 'local' (independent self-employed trader) on the old LIFFE trading floor.

 

These guys (usually from Essex - British readers will understand ) made a very good living in the 1990s in the open outcry futures pits. But when trading went electronic, many of them couldn't adapt. Yes they were streetwise, but they were very dependent on a particular ecology of market institutions.

 

This leads (obliquely, and probably going OT, but here goes anyway), to what I think is the most general definition of intelligence. (As far as I know this is orginal. I have not seen it anywhere else.)

 

Intelligence is not just IQ (the engineer Dr John) nor is it just streetwise smarts (the dealmaker Fat Tony).

 

Intelligence is the ability to think and behave like both Dr John and Fat Tony as the situation demands. That is,

 

Intelligence = anchored adaptability

 

where

 

Adaptability = ability to think and act in radically different ways in different environments

 

Anchored = not just behaving the same as other people in your current environment

 

But this does beg the question of what your adaptability is anchored to! Rationality, perhaps. Or perhaps other values.

[CB67]

I agree: flexibility and adaptability are keys in investment, as well as life:

 

"Is is not the strongest of the species that survives, not the most intelligent, but the one most responsive to change" - Charles Darwin

[littledavesab]

Intelligence is the ability to think and behave like both Dr John and Fat Tony as the situation demands. That is,

 

Intelligence = anchored adaptability

 

where

 

Adaptability = ability to think and act in radically different ways in different environments

 

Anchored = not just behaving the same as other people in your current environment

 

But this does beg the question of what your adaptability is anchored to! Rationality, perhaps. Or perhaps other values.

 

Oooh very good - especially where the markets are concerned.

 

The ability to think and behave like both Dr John and Fat Tony as the situation demands - should be a necessary part of being a hedge fund manager! Wonder how many would qualify? Dont tell me - thats a whole other book! Actually it would be great if it were a pre-requsite of being a normal institutional fund manager, rather than having to be a herd follower...........

[drbubb]

Intelligence is not just IQ (the engineer Dr John) nor is it just streetwise smarts (the dealmaker Fat Tony).

 

Intelligence is the ability to think and behave like both Dr John and Fat Tony as the situation demands. That is,

 

Intelligence = anchored adaptability

 

where

 

Adaptability = ability to think and act in radically different ways in different environments

 

Anchored = not just behaving the same as other people in your current environment

 

But this does beg the question of what your adaptability is anchored to! Rationality, perhaps. Or perhaps other values.

That's all a good insight, Charlie.

And I cannot disagree.

 

I have to say that I first thought of Taib's comments differently. I thought he was aiming to draw a distinction between those who use analytics and fundamentals to work out how prices "should be" (like the Professors at Long Term Capital who wound up over-gearing and lost billions) and those who simply watched the market, and used technical signals to see what the market was telling observers about what it was really doing. I would tend to back the technicians over the fundamentalists. By even better are those who are flexible enough to USE BOTH, and especially those who look for a technical signal that is backed by good fundamentals.

[frizzers]

Guy Thomas is interviewed by Dominic Fisby in the latest Frisby's Bulls And Bears.

 

Research actuary turned private investor, Guy Thomas, author of Free Capital: How 12 Private Investors Made Millions In The Stockmarket discusses his book, some of stories and methods in it, and also looks at some of his own investment strategies.

 

http://media1.podbean.com/pb/e76c4acf398c794b24bbb5bf0e5a960c/4debf51a/blogs/2516/uploads/GuyThomas.mp3

 

Read the BLOG about the book.

 

Buy it from from Harriman House or Amazon.

 

http://commoditywatch.podbean.com/2011/06/05/how-12-private-investors-made-millions/

 

 

 

 

 

[drbubb]

Thread started on the interview: http://www.greenenergyinvestors.com/index.php?showtopic=14902

[littledavesab]

In praising Fat Tony's abilities over the engineer's, Taleb is probably thinking of a particular person. But Fat Tony makes me think of a different person: a 'local' (independent self-employed trader) on the old LIFFE trading floor.

 

These guys (usually from Essex - British readers will understand ) made a very good living in the 1990s in the open outcry futures pits. But when trading went electronic, many of them couldn't adapt. Yes they were streetwise, but they were very dependent on a particular ecology of market institutions.

 

Am presently residing in Stratford E15 myself!

 

Just remembered this

 

http://ftalphaville....he-barrow-boys/

 

Terry Smith, Tullett's chief executive, once described inter-dealer broking as "a full-contact sport", and the British are accustomed to playing such games without helmets or body-armour.

 

There are still some barrow boys in inter-dealer broking, but it has evolved into more an attitude of mind than a matter of social class. Mr Smith was born to a lorry driver in London's East End, while Michael Spencer, Icap's chief executive, was the son of a colonial administrator and attended a Sussex boarding school and Oxford University

 

 

Incidentally I see Terry Smith has a blog and was educated in Stratford!

 

http://www.terrysmit...raight-talking/

 

- interesting article on possible dangers re ETF's and naked shorting on there

[crushtherents]

My new kindle came today. i had to send the other one back cos i thought it was broke and now the new one cant speak the book! can anyone cheak the book can speak on kindle please.

[drbubb]

My new kindle came today. i had to send the other one back cos i thought it was broke and now the new one cant speak the book! can anyone cheak the book can speak on kindle please.

For this one, and an even more erratic post...

I have had to suspend CTR for 30 days or more

[halight]

Guy Thomas is interviewed by Dominic Fisby in the latest Frisby's Bulls And Bears.

 

Research actuary turned private investor, Guy Thomas, author of Free Capital: How 12 Private Investors Made Millions In The Stockmarket discusses his book, some of stories and methods in it, and also looks at some of his own investment strategies.

 

http://media1.podbean.com/pb/e76c4acf398c794b24bbb5bf0e5a960c/4debf51a/blogs/2516/uploads/GuyThomas.mp3

 

Read the BLOG about the book.

 

Buy it from from Harriman House or Amazon.

 

http://commoditywatch.podbean.com/2011/06/05/how-12-private-investors-made-millions/

 

 

 

 

 

 

 

I downloaded this podcast today from itunes. Really enjoyed it.

Many thanks for doing the interview.

[charlie]

A question received on the BOOK thread on ADVFN..any thoughts? (Hong Kong...so DrBubb...?)

 

zangdook - 5 Jul'11 - 11:53 - 117 of 117

 

I've just been going round a few bookshops in Hong Kong. No-one seems to have the book, or have heard of it - does anyone happen to know a shop here which does stock it?

 

More or less every bookshop has a big shelf of investment books near the front, mostly American, so I suspect there might be demand for it. I don't really know how publishing works, but if such a thing can be done it might be worth the publisher's while trying to get a few copies on shelves here.

 

I saw a few copies of Anthony Bolton's book. Perhaps he's been knocking on some doors since he moved here, trying to flog a few.

 

freecapital - 5 Jul'11 - 13:20 - 118 of 118

 

Thanks for the intelligence zangdook. I will ask Harriman. Also Nigel in the book, as he's based in Hong Kong.

[charlie]

There has been some other overseas interest. A German publisher wants to do a German translation, which surprised me, but hey why not, I've accepted their (very small) advance and half-royalties.

 

There is also going to be an "Indian edition". Same text, probably a different title, and a lower price for this market. Slightly nervous about arbitrage, or a pdf copy leaking out of the production chain somewhee. But in the end I'm not doing it for the money, so go with the flow.

[TrueNorth]

Delighted to hear you are getting a positive response across so many markets! Well done!

[drbubb]

A question received on the BOOK thread on ADVFN..any thoughts? (Hong Kong...so DrBubb...?)

 

zangdook - 5 Jul'11 - 11:53 - 117 of 117

 

I've just been going round a few bookshops in Hong Kong. No-one seems to have the book, or have heard of it - does anyone happen to know a shop here which does stock it?

 

More or less every bookshop has a big shelf of investment books near the front, mostly American, so I suspect there might be demand for it. I don't really know how publishing works, but if such a thing can be done it might be worth the publisher's while trying to get a few copies on shelves here.

 

I saw a few copies of Anthony Bolton's book. Perhaps he's been knocking on some doors since he moved here, trying to flog a few.

 

freecapital - 5 Jul'11 - 13:20 - 118 of 118

 

Thanks for the intelligence zangdook. I will ask Harriman. Also Nigel in the book, as he's based in Hong Kong.

I am in the US now.

But I can say that I have not seen the book in HK.

If I get near a Barnes & Noble, I will check to see if they have it in the US

[drbubb]

REVIEWS on Amazon for:

======

Free Capital: How 12 private investors made millions in the stock market [Paperback]

Guy Thomas (Author)

 

4.5 out of 5 stars

(22 customer reviews)

22 Reviews

5 star: (16)

4 star: (2)

3 star: (3)

2 star: (1)

1 star: (0)

 

/see: http://www.amazon.co.uk/Free-Capital-private-investors-millions/dp/1906659745/ref=cm_rdp_product

 

4.5 Stars is a good average for an investment book

 

== ==

 

(Most Helpful Review):

 

Fascinating studies of 12 stock market millionaires, 19 April 2011

By S. Holdsworth (UK)

===========

This review is from: Free Capital: How 12 private investors made millions in the stock market (Paperback)

One of the most fascinating things about the twelve `pen portraits' that make up the bulk of this excellent book is that the investment strategies used are so vary varied. From Khalid's frenetic day trading, to John Lee's long term approach, from Eric's regular meetings and telephone calls with company directors, to Bill's focus on just the raw numbers.

 

Bulletin boards are full of discussion about which is the best strategy, but the fact that these 12 investors have all made millions using such very different ones would seem to lead to the conclusion that the only `best' strategy is the one that's best for you.

 

One way in which this book works so well is that for each interviewee, there is quite detailed information about their personal background, which in most cases helps to give a valuable insight into how each one settled on their own `best' strategy.

. . .

I would thoroughly recommend this book to anybody who is interested in the stock market, or indeed anybody who has ever dreamed of accumulating enough `free capital' to enable them to give up work.

=== === ===

 

 

I DO WONDER

how many people first visited GlobalEdgeInvestors because they noticed " GEI.com " ??

mentioned in the book ?

[drbubb]

What makes a successful investment bulletin board?

============

 

Originally written for Chapter 3 of the book (but removed in editing)

 

Properties of successful bulletin boards

 

...Most popular boards have most of the following properties.

 

Pseudonymity: Many people do not want their postings, particularly on a sensitive topic such as personal investments, to be searchable by employers or casual acquaintances, or even family members.

 

Persistent identity: Although pseudonymity is desirable for privacy reasons, any meaningful discussion amongst users requires some form of persistent identity, that is, a stable one-to-one mapping of aliases to users.

 

Reputation systems: Most communities have features facilitating the association of reputations with users, for example

•displaying a user’s cumulative count of posts;

•searching all of a user’s past posts;

•showing users’ votes (up or down) for particular posts or users.

 

‘Threading’ of discussions: Posts on a particular topic need to be displayed in a single chronological ‘thread’, with posts on other topics filtered out. Various forms of threading exist, including ‘semi-threading’ and ‘full-threading’.

 

Search function: An ability to search for posts by criteria such as user name or stock ticker code or date of post or any keyword.

 

Moderation: Any community needs moderators or ‘super-users’ who police other users, applying a scale of sanctions (eg warning, temporary ban, permanent ban) to those who are judged to be disruptive.

 

Private messaging: This allows any user to enter into two-way ‘off-board’ communication with another user, without compromising the anonymity of the users’ real-world identities.

 

Most of these requirements can be met by free software. Siites running on proprietary software don't significantly improve the user experience, which has not changed much in the past ten years. Improving the user interface of bulletin boards is hard design problem.

 

Moderation is the trickiest of these requirements. Disruptive users generally use a site exactly as intended from a technical perspective, so moderation is difficult to automate: substantial human judgment is unavoidable, but also contentious, because one person’s robust discussion is another person’s disruptive behaviour.

 

Free to users. Successful boards are either completely free sites run as non-commercial ventures by enthusiasts such as Nigel, or else ‘freemium’ models: a free basic service, with income generated from advertising and user charges for optional services such as Level 2 prices. This is counter-intuitive to many users, but operators who have tried charging - for example ADVFN in its early years - have found that the fraction of users willing to pay even a small charge to use a BB is extremely small. For an online community, the only sustainable price is free.

=== ===

 

Guy Thomas Monday 14 February 2011 : http://guythomas.org.uk/blog/?e=3

[drbubb]

Activist investors : http://wexboy.wordpress.com/2012/01/26/how-about-another-catalyst-part-v/

[drbubb]

Merge the two threads?

 

I probably will, if no one objects