Former Goldman trader schools the muppets - MarketWatch

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Shawn Langlois's London Sketch

April 21, 2012, 12:01 a.m. EDT

Former Goldman trader schools the muppets

Commentary: Deck stacked against them, retail traders seek magic ticket
By Shawn Langlois, MarketWatch

LONDON (MarketWatch) Anton Kreil would certainly forgive my cynicism as I walked into Kings College on a soggy Thursday night to listen to his two-hour trading seminar. In fact, hed encourage it.
Ive spent more than my fair share of time over the years with slick traders claiming to know the path to financial success and hot chicks. Youll make six figures this year and probably seven figures next year, my buddy told me about a decade ago. No problem. Were going large, he said. This was a potential invitation into the 1%. A door to that despicable segment of society that probably doesnt seem nearly as vile when youre part of it. I was still relatively fresh to journalism at the time, having left a lackeys job on a trading floor in San Francisco for the financial-news upstart CBS MarketWatch. I had no intention of getting back into banking or of leaving my Internet bubble job and its Margarita Fridays. But then my good friend, whom I had known since we were kids, approached me with a hefty offer. His team was looking to build out its trading room. They had invested the money. The infrastructure was in place. The early returns for clients were glorious. Suspiciously so. And the pay? Also far too good to be true, despite strong assurances from a stream of fast-talking suits that it was legit. So, after a few restless nights, I declined, feeling three parts stupid and one part relieved. Good thing. Turns out that fateful interview was with the KL Group, the West Palm Beach, Fla.based trading firm that shortly thereafter fleeced its customers of hundreds of millions of dollars. A complete sham. The founders were later arrested, and my friend, who was just one rung removed from the top of the ladder, avoided prosecution but still lost everything, including his reputation in the financial industry. It was ugly. So when someone tells me about shortcuts to big money and cant 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. No, thanks.

Its shocking how little retail investors know.

Anton Kreil

With that baggage in tow, I settled in for Kreils presentation, fully 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 didnt disappoint on either level.

I feel the need ... the need for speed!

Kreil started his talk with what else? a video of his astronaut training, Top Gunstyle. So far, so strange. Pilot jumpsuits, rock music, footage from inside the cockpit, Kreil doing his Maverick impersonation. He said he plans to be the first British space tourist, beating out fellow countryman and stargazer Richard

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Branson, even though he has several stages and 18 months or so of the $95,000 training course left to complete. Finely coiffed. Smartly dressed. No shortage of confidence. A dash of that swagger. Very much fitting the Wall Street mold. And, normally, a repugnant combination, but Kreil wears it well, even after he showed us his version of Russian billionaire Mikhail Prokhorovs classic jet-ski promo. 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.

BBC/Anton Kreil

Kreil on the BBC program 'Million Dollar Traders.'

Since I was living on a couch at my girlfriends dads house at that age and to this day havent successfully searched my soul, I figured Kreil was worth a listen. Hes 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.

The big dupe

After some idle banter about g-force and world records, he launched right into the meat of his seminar: Day trading doesnt work. Its the big dupe perpetrated by brokers. They make money, you lose money. Its 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, Im different. And heres why! But not yet. 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. Its shocking how little retail investors know.

Disney

Those other Muppets.

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. And Kreil was just warming up. Among his many tips, he urged attendees not to get bogged down with technology. Its 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 wasnt 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.

The worst trader Ive ever come across

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Kreils overarching point was that the little guy needs to think more like the big guy theres really no magic sauce. Contrary to popular opinion, the folks at Goldman and J.P. Morgan arent smarter than anybody in this room, he pandered. Like Kreil, himself, they just found a way inside. In fact, Goldmans senior investment strategist, Abby Joseph Cohen, is the worst trader Ive ever come across, he said. Shes top-ticked every bull market for the past 20 years. Ignore the analysts. The media. Its 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 funds 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 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 fools game. The good hedge funds arent 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 its 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 itll cost you. Fair enough. This is London, and even a Goldman Sachs alumnus has to eat. At least he was buying the first round at the pub down the way.

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