On the Couch
Marcus Padley and Henry Jennings sit down with fund managers, CEOs, investors, and industry professionals to discuss markets, strategy, risk, and decision-making.
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On the Couch
On the Couch with Gary Norden: Inside a 35-Year Trading Career
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Prefer to watch? Check out the full interview on video here: VIDEO – On the Couch with Gary Norden: Inside a 35-Year Trading Career
A bit of a different approach at Marcus Today; Callum Newman sits down with Gary Norden, a 35+ year pro trader (LIFFE floor, bank derivatives desks, hedge funds) and the author of An End to the Bull – to talk how the pros actually trade when it's their own money on the line.
In this conversation, Gary explains how professional traders really approach markets; building an edge through knowledge, skill and risk management – and why much of the "sell-side research" investors read is often just a sales tool dressed up as insight.
We cover:
- The professional trader's edge – skills, knowledge, and risk management
- Why bank research gets "taken with a pinch of salt"
- Day trading vs punting – order flow trading as a real craft
- Can humans still compete with algorithms/HFT?
- ETFs, concentration risk, and the "all in / all out" market
- Options – why Gary prefers buying options (hedging + asymmetric upside)
- Gold and silver – why the bull case may not be done yet
- China, commodities, and what Gary sees on the ground.
Standout moments (timestamps):
- 03:58 Why traders ignore sell-side research
- 06:12 Day trading as a professional skill (order flow)
- 11:56 AI, ETFs, and the concentration problem
- 19:35 Options as portfolio "insurance"
- 26:47 Gold vs silver, miners, and what to watch
- 48:25 The red jacket story (and what it meant on the floor)
Gary's book: An End to the Bull: Cut Through the Noise to Develop a Sustainable Trading Career (John Wiley & Sons).
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Disclaimer
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Hello, it's Callum Newman here from Well, of course, from Markets Today. So today I thought I'd sit down with Gary Norden, who's a very experienced trader and the author of a very good book called An End of the Bull. And there's another one that we can talk about as well, actually. But the the one no, I've got both of them actually, but End of the Bull is the one that springs to mind straight away. I thought I'd get him on to talk about his experience of how he approaches the markets, which is a little bit different to everybody else. And we'll talk a little bit about AI and its impact on how the markets move and uh and value stocks and all sorts of things, and a little bit about the recent precious metals rally. So, Gary, thanks for coming on.
SPEAKER_00My pleasure. Thanks for having me, Callum. Good to see you again.
SPEAKER_01Now, let's just put you in context. You want to very briefly introduce your experience back from the investment banks to what you do now?
SPEAKER_00Yeah, I've been uh trading now for over 35 years. I started, I'm from London originally, started as a Japanese investment bank when I was a teenager trading equity derivatives. I worked for a number of banks in London as a senior derivatives trader. Uh, also traded on the floor of the Life Exchange when that was back in pit trading. I was an options market maker. So I held a number of different positions in different kinds of markets, convertible bonds, options, futures, uh, equity derivatives. I moved to Australia like 20-something years ago, had my own involved in hedge funds now, have you know involved in a hedge fund at the moment and other ones over the last sort of few years, and also consulting to hedge funds and to consulting to pro traders around the world.
What Pros Actually Do: Skills And Risk
SPEAKER_01Well, let's just touch what you famously, well not famously, but you describe the way professional traders, I think, different to the way people perceive what professional traders do. Do you want to just elaborate a little bit about what you talk about in your book, An End to the Bull?
SPEAKER_00Yeah, I think the first thing is it's professional traders, you know, they build their edge and their careers around knowledge, really, and skills, right? And that's what we work hard on. We work on knowledge and skills. And I'd say that's very similar to professional golfers or anybody a professional. They're just constantly working on their skills and and their knowledge to improve both. I think people out there seem to think that there's there's stories going out right at this moment as we speak around social media of you know a large organization manipulating the price of crypto and manipulating this. And I think retail traders often think that they're doing sort of things that are untoward. And that is almost most very most of the time just not what's happening. Um, so what we really try and do is just build our skill set. We have a different skill set. We use different types of analysis and research. We're not using charts and technical analysis patterns and things like that. We're using real skills, real knowledge and insights, and just trying to build that and then, of course, overlay that with a risk management process because to some degree you can basically argue that the trading and investing business is a risk management business. And if you can take care of the risk management side of things, then the profit side will come as well.
Sell-Side Research Versus Trading Reality
SPEAKER_01I always like your story. You talked about, you've told me this a few times when you're at the investment bank in London, where the one half of the bank would be putting out research, and you guys on the trading desk will basically ignore that research and just go with what you were seeing on the market. Do you think that sort of dichotomy of is still in play? That the that it's what's happening on the market, literally on the market, that that's what has to drive your decisions.
SPEAKER_00Yeah, absolutely. There's very, I mean, the the research part of investment banks is a sell side part of the business, right? They're trying to sell to people out there. I think that's really why, for example, independent research, such as what you know, where you are at Marcus today and other independent research is more valuable because in investment banks, you know, it's purely just as a sales sort of technique. And you can see that as traders, we don't really go for what they say, right? It's that's and that's widely known. I'm not spitting the secret. I think I think people kind of generally know that out there, right? And I think it's more valuable. There's often reasons for that research, sorry, as well. And that's the thing, is that the bank may have a relationship with a customer. So, and it happens to me. So, as an investment bank trader, when when I was there, you know, I would get phone calls from other investment banks, right? Oh, we've got this research piece coming out selling you these, we want to sell you these bonds, right? For example, these are really good bonds, they're really good, great, you know, idea, and the credit spread is really low on it. And the first question you would ask is, do you happen to have some of these for sale? Right. And the answer would always be, yeah, actually, yeah, we've got like a whole load of them. And of course, that's the real story, right? The real story is they have someone wanting to sell something, so they construct a narrative around it. That's very commonly what happens. So to be able to access independent research where the people with that research are not actually trying to sell you the product, they're just trying to research the product. That's why, you know, independent analysis is more important. So, yeah, investment bank research, you know, I always say we take with a pinch of salt. It's there, but you know, I don't think it's something that we would use in any investment banks. Sometimes, frankly, you know, investment bank traders will go to research and say, look, I've got this position, I don't want it anymore. You find the story to sell it.
Day Trading As A Professional Craft
SPEAKER_01I just want to touch on, too, that you are an advocate for day trading it and you regard it as a symptom of a professional trader. It's not usually how it's phrased. It's usually like, you know, someone's got the idea in their head that they can, you know, not work for a living and day trade the market, and it's this kind of speculative froth. But you see it as a very professional pursuit, don't you?
SPEAKER_00Absolutely. That comes from my background on the floor, right? There are very skilled traders, and we, you know, we were all essentially mostly day traders. Option traders, we weren't, we had to carry inventory positions because we were market makers. But generally, most of our Greeks, we got as flat as possible on an overnight basis and then day traded the next day as much as we could of the flow. And I think that's the thing. Day trading from an order flow perspective is very much a skilled professional style of trading. And there are even you know very famous large hedge funds who day trade order flow. What I think is different is day trading, if you're just trying to, you know, punt direction and guess every day where the market's going. Well, that's a different story, right? That's just no different to trying to guess anything else any given day. But what you know, trading order flow in that style, that market making order flow style, is a very professional style of trading. It's something that I advocate that I teach and I think is a professional style. And I also think it gives you really good insights into the market microstructure. So, you know, even though I don't day trade on a you know daily basis now because through the hedge fund and other things, I'm doing you know, longer-term strategies. That knowledge I gained as a floor trader, day trader, understanding the microstructure of what's happening still gives me insights. And we might talk about something in gold and silver later on today that I've noticed in the last few days or the last couple of weeks, actually, that is by watching microstructure, you can start to see things as well. So I do think it actually it helps me in all of my trading by understanding the market microstructure and what's happening in that level.
Humans Versus Algos And HFT
SPEAKER_01And what's of interest to me too is that day trading dynamic is part of it, is you're you're reducing the risk of being exposed to big market moves. And that's so relevant now. Like the huge drawdown, I'm sure you've noticed in Australian technology stocks, which has played out now for quite a few months, that's the kind of situation you're avoiding by the nature of that trading, right? Like you're not you don't get caught up in those massive moves down.
SPEAKER_00Yeah, as professional traders with their own money, which is what most floor locals were, but we were, with our own money, we kind of realize that the most important thing is first is to preserve your capital. And essentially, you know, when you go home at night, you know, anything can happen overnight. And in this world at the moment, it's even even more so the case than maybe 20 years ago when I was on the floor. And so the reality, so the theory is that if I can come in, generate PL in a day by trading in and out of the order flow, and then have no position overnight, that's a really good place to be for someone trading with their own capital. Different when I'm in a bank and I, and if I'm long and today's a bad day, like you know, silver yesterday fell a lot, right? If you're long and you're in a bank and it falls a lot, you can cope with that on a daily basis. But as a day, as a someone with my own account, that's a really big hit. And the other point, of course, of that is the sentiment does change daily. So yesterday silver was really weak, today's silver strong. Again, I can trade from the short side yesterday, and today I can trade from the long side with the order flow, just watching what the order flow is doing and trade in and out of that. So professional traders learn that that's a really good way to trade with your own money. If you're trading for a living, of course, that's different from investing. And I would throw onto that that even the large hedge funds, hedge fund like Citadel, for example, which you know is tens of billions in assets under management, they also have a lot, you know, a large area of their trading is day trading order flow. So they see those benefits too. And you can actually make a small amount of money work very hard for you in that environment. But as I say, that's trading in an order flow mentality, not just trying to punt every day, because that's just that's again a retail way.
SPEAKER_01One thing Marcus has been writing about lately is the influence of algorithms on the market. Do you feel that a human trader can compete with that dynamic?
SPEAKER_00Yeah, absolutely. Absolutely. There, you know, there's always been a you know a debate over the last really 20 years about that, right? HFTs, if you go back to Flashboys, the book came out in the mid-2010s right, 2014 or something that came out. So it's a long time ago. It was viewed then, or you can't compete with them in the futures markets, but you can for a few reasons. Number one is just because something is automated or an algorithm doesn't mean it's that the algorithm behind it is necessarily robust or any good, right? It can still lose money and they do. And secondly, you're trading on different time frames. So a lot of algorithm traders are trading on a microsecond time frame and are looking for opportunities on that basis. Whereas I feel that whereas if you trade on like holding for a few seconds, I feel that's still a reasonable sweet spot, which is what most order flow traders would look to do, hold it for four or five seconds. And then again, you have the people trying to hold trades for half an hour or two or three hours. I think that becomes different again and becomes harder. So I think, yeah, we're all doing something slightly different. We're all trading for slightly different time frames in slightly different ways. The key thing is, you know, what do you have edge or who you're trying to pick off in their timeframe you're doing it? So I still feel that there is, yeah, absolutely. For skilled manual traders, yeah, I don't think that changes. I still think there's there's edge for them.
AI, Edge, And Risk Parameters
SPEAKER_01And anyone listening to that will go, okay, 20 years ago we've had algos. Now it's different. I know it's never different this time, but it's different because AI is here now. So yeah. How do you, generally speaking, how do you view in the way that it'll shape the way the markets move? Do you think it's as big as it's made out to be?
ETFs, Crowding, And Concentration
SPEAKER_00I feel that I think in a still early days, I'm actually working with an AI expert actually on to developing some strategies. So I'm trying to see from the inside of how an AI expert will develop a strategy. And what's quite interesting there is, you know, he'll come back to me a lot to guide him to how to train the AI model, right? Because ultimately there has to be some parameters, right, around how you want it to train. And so, and some of that will come to risk management. Now, here's the thing risk management ideas, they're going to stay the same, right? So they're going to still have to work under a risk management parameter. You're not just going to allow them to run up whatever losses they want. So there is still going to be some human guidance in risk management. And as I said at the start, to some degree, trading will always be about risk management. So, and I'm finding this out, particularly like in the crypto market, where risk management is almost everything. If you set a 1% stop, it almost doesn't matter in some of these assets what your style is, you're going to get stopped out all the time. So where you place your stops and how you position how you risk manage is actually the key to everything there, not even about direction, which, you know, again, that's a very professional outlook. But people think that trading is about guessing direction. It's more about understanding risk management. So that aspect of it, you're still going to have to guide in terms of what do you expect and what do you want, how much tolerance do you have for risk? AI will still need to work within those parameters that you're setting. And so that's something that I'm learning from it. But I think the main thing from what, you know, if I'm trying to project in the future is I think it's a continuation actually of something we've seen through ETFs, and that is concentration risk. So ETFs, you know, back in the day when let's say 90% of investors, you know, were buying into funds of some kind, that fund manager would spread their risk amongst a whole different bunch of stocks, and they would all be doing something different. Today, one fund manager wants to buy NVIDIA, tomorrow one wants to sell, et cetera. Market was a lot less concentrated in certain ways, right? And it wasn't everyone chasing everything. Now we have in some markets, you know, over 50%, even much higher than that, of investors are now in ETFs. What does that mean? When they buy that, they all buy everything together. And when they sell it, they all sell everything together. So we've seen that concentration risk, right? And we see that the market reacts in that way and that stocks will become more expensive because people are less, they don't care as much about value anymore, right? They don't care about value, they just buy the index, right? They're buying very expensive stocks in that index, and they're buying some stocks that are okay, whereas a fund manager wouldn't buy the most expensive stocks in that index. And what we've seen under the ETF environment over the last 20 years or so in particular is that that does lead to that concentration risk, and it does also lead to times where everybody's buying at the same time, and then everybody wants to sell at the same time, right? So you saw, for example, a lot more circuit breakers triggered under COVID than were triggered in the GFC. I don't think, I don't think circuit breakers were triggered once in the GFC on SP 500, right? But were triggered numerous times in COVID. I think that's a sign that everybody sells together, everybody buys together. And they're not, whereas in the GFC, there was some selling and buying, although the market did fall sharply. It was done in a different style. Now, AI, I see that continuing. I see them ultimately, if they're all learning in similar ways, I think ultimately they'll see more and more of that. They're all in together and then they're all out together. And we've seen some of that even in the last few weeks. In terms of if you have a look, while the indices themselves in the US kind of like moving not too much, under the hood, there are lots of 10%, 15% moves in individual stocks, right? Big moves. Yeah. Here in Australia, too. And if you look at stocks like Micron, Sandisk in the US, and again, you're finding that when some of them start to run in there, when some people want it, everybody wants it. And then when they sold it, everybody sells it. So we're seeing that kind of environment. Now, the indices themselves are not moving much at the moment, although I think they, you know, that's maybe something that will change over the course of the next few months. But that's what I see mainly is that kind of all in, all out, add that to ETFs, and we start to see some perhaps some more violent moves like that.
SPEAKER_01You've got a good quote in your book where you say the your old trader mate tells you, I've got to try and remember this. He's like, the best trade you'll ever have is when you're doing the opposite of everybody else. So I think the the hard part with what you're describing there is when that move the other way happens, because they can go on for so long, and you never quite know when what's gonna like break it and turn it go the other way. But if you're alert enough to to to pick up on that shift, it's a trader's dream in some ways, it's because the volatility is go through the roof.
Contrarian Trades In A Crowded Market
SPEAKER_00Yeah, so yeah, I mean, two great points there. So, yeah, firstly, absolutely, it it feeds into what I talked before about day trading is that today everybody's rushing in, you just trade it from the long side, right? And tomorrow everybody's rushing out, you can just trade from the short side. So that that kind of meets with that. But secondly, that point you made, becoming a contrarian trader can become harder in this environment. You know, how you know, and sometimes it may not even be easily seen why they're all rushing in or why they're all rushing out. There was a an exit out of some of these memory names, you know, about what two weeks ago in the NASDAQ. Just over one or two days was a bloodbath in some of these stocks, right? It wasn't really easy to pick up what drove it. And that often happens with market corrections. It's not really always easy to pinpoint something specifically. So that but that whole environment makes contrarian trading harder. Ultimately, there will still be a lot, you know, it's still a very good strategy, but you just it's it's harder, I find that. And the way you have to do it, you have to use options, for example, you have to be a bit more careful about it. But yes, it will make that more difficult. ETFs have made contrarian trading more difficult. And I think AI trading will make that even more difficult. But when you're right, the whole point of that anecdote that was said to me is you know, if you can have the opposite position to everybody else, they will be your best trades, right? And you have to have that ability as a trader to be able to do that. So I'm not saying you always are contrarian, right? Yeah, there's you know, gold's going up, you don't just say I'm selling it because everyone's buying it. You have to understand sometimes that's a positive trend and goals are still going to go up. But when you can recognize that something has the potential, that people have the potential to be disappointed, then if you have that ability, that's a very strong way to trade if you can manage it. But it is becoming harder and has been increasingly becoming harder over the last 20 years. And you can ask, you know, a number of short sellers that it's become more and more difficult.
Options For Hedging And Upside
SPEAKER_01I'll bring up another point too, because uh you're an advocate for options at times and in different ways, and not usually the way it's promoted, but it they don't get talked about that that much. But generally speaking, when someone has a portfolio, you you like the idea of them uh hedging that market risk, don't you? Almost on a like a permanent insurance policy so that when you get a thing like the tech meltdown that we've had recently, you don't get taken to the cleaners to the same extent. Is that fair to say? Or do you want to talk a little bit about what how options can be useful and the way you you can use them beneficially?
SPEAKER_00Yeah, I I do like options as a product. I only like buying options. I'm not a fan of selling options. So traditionally, retail traders are told or investors are told to sell options. I feel that there are I just don't like that strategy, right? And I don't feel that retail option traders actually understand the risks and the mechanics involved enough to do that strategy, right? And don't understand the math behind it either. But I I use options in two ways. I do like to hedge with my own personal, you know, investment portfolio. I mean, there are times I I will generally have some kind of hedge, which is usually an index option, but not a big amount. So I and then there'll be other times where I think that the risk is even greater. Maybe there's some big announcement coming up, going into Liberation Day, for example. We knew something was coming. You know, I bought a few more put options on the Australian index against my hedge against my investment portfolio. And of course, that was very well. Oh, I was very glad, yeah. And they were well, and yeah. And I think from my perspective though, see, I it's funny, I made my living as a day trader, which people think is you know an extremely risky environment. But I'm actually a very conservative person, a very conservative trader and a conservative investor mainly. So that's why personally, as I grow my investment portfolio, I feel kind of naked without some kind of hedge, right? And I've traded so many crashes over the years that I just feel for you know a few cents here and there, I just think it's worth it, right? And of course, it's a bit of peace of mind. The other way that so, and I do feel that you know, people insure their cars, right? What's the chances of you having a car crash for most people? It's less than one every 10 years. People will insure their houses. Again, what's the chances of a claim for most people? It's probably one in less than every 10 years. But most investors out there may have a half million, million dollar plus investment portfolio and never insure it. And I thought if you're gonna insure, if you know, if you're gonna insure your$50,000 car, why aren't you insuring your$500,000 or a million dollar investment portfolio? And that's essentially what I do. And I just increase and decrease that insurance as I see more risk or less risk. So there are times I have very little of the hedge on and just leave my portfolio to just grow as it is. And the other way I use options is in particularly for stocks that I think have more chance of big upside moves. Because with options, you can, you know, you get to juice that move, right? They have with the gamma, the way that works, that they can start to increase substantially. So, for example, a year or so ago when lithium was very low, and I just felt, okay, then, you know, it can only go either lithium stocks like PLS are just going to go under if it stays this low, or lithium price is gonna go up. I started off by buying what was just called a strangle, right? I think PLS was a dollar something, right? And I bought a strangle calls and puts because, as I say, at that point I did then when it became clear that it was moving up, because it moves up so significantly, you know, you know, if the stock goes up by 20%, the option might go up by uh 3x or 4x. So in stocks like that, so with lithium and PLS, for example, you know, I did that a number of times. And so I said that's the other way. If you have, particularly in that mining sector, if you have options where in a stock where the stock can go up by 20, 30, 40%, or even double or treble within six to 12 months, then options are a great way to do that because you'll get you know 5x, 10x, etc., with options. So I feel that makes sense as well. So I've used options quite a lot, even in my investment portfolio, because it may not be a stock that I really want to own at that point, you know,$1.20 or whatever. I might not want to own that stock, but I'm happy to own the option at that point. So it gives me that flexibility, right? If this stock remains crap, I'm only going to lose a little bit. But if it does perform well.
SPEAKER_01I I went too early on PLS with a similar idea and I bought some options on it. And yeah, I dusted dusted my money there. But I know that's the kind of but you position size.
Australia’s Options Market Gaps
SPEAKER_00So the next point is, and this is crucial part of trade, is position size. So you position size smaller with options. If I was going to spend X amount on stock, I'm only going to spend, you know, 20% of X or whatever maybe on options. And then as the trade starts to grow, I can start to increase my position size. So position size, again, part of risk management is always a really key thing here. Um, the biggest issue here is that, and if there's any option market makers watching in Australia, your prices are terrible, right? Like they have such wide spreads at time. There'll be like a 20 cent option with a 10 cent spread. And it's like you're not really going to get much business doing it that way.
SPEAKER_01So do you think that the options market here is immature relative to well relative to the US, but like it, but it just doesn't play a big role for most Australian investors, I don't think. It's just it's not captured the public imagination, really.
SPEAKER_00I think it's a massive source of potential upside for the the stock exchange in terms of the volumes that could happen for portfolios traded in the right way. The problem is that most people, probably in Australia, who are pushing options and telling people to sell them, which is a just a strategy that will blow you up at some point. But I think in the context that I've mentioned, in terms of hedging portfolios, in terms of accessing these hot markets like lithium stocks, gold stocks, I think it's a really viable product. And you've seen options volumes in the US just explode. And we're way lagging behind here. It's an education process, right? And I think again, because some people who have gone into options have traded them incorrectly through selling them, blew up, and then go, oh, options are just too risky. But if you buy options, the risk is always limited, and you can limit that to, you know, you can buy$100 worth of options, right? That's not risky. It's more risky to buy a stock, right? And lose a thousand you could lose on it, or$10,000 or 20,000. With options, again, you just buy them, you limit that risk. So they're not any buying options is no more risky than buying a stock. And in fact, it gives you some some potential upside. I think with the right education, and I'd say I think it's a massively undertapped area in Australia. And again, I'm not trying to push massive speculation. I'm talking about prudent, smart trading structures here and protection of portfolios. I think that that's you know, I think it's yeah, massively untapped here and has good potential. But again, any market makers watching, you've got to improve your prices because it's not not gonna get with people have to pay away 50% of the price of the auction in a spread, right? That's just a killer.
SPEAKER_01Well, you mentioned gold there. Let's just chat about gold. So gold's had a massive rally. I know you've followed it for a long time. It's a you know, it's a big market, and you've traded futures as well. After such a big rally, uh, are you wary of gold now? Or do you have any view of it at all? Or are you just literally gonna go with the tape, the truth of the tape, as it were?
SPEAKER_00Yeah, no, I think I'm still running with it. I still think there's more to go. I feel in the short term, I think silver's taking some of that thunder away from gold. So you're seeing gold underperform a little bit at the moment. I think as people are just seeing a bigger story in silver potentially. I still think that they will grind higher. I feel the reasons for the move over the last year, I don't think they've changed. I don't think they've suddenly stopped, right? The issues that people, the concerns people have with global debt deficits, the way governments are just not approaching that. So I feel that that's obviously one thing, and plus the concerns over the US dollar and US, what's happening there. So I don't think any of that changes at the moment. I just feel that maybe the pace slows down slightly, and maybe in the short term, silver takes away some of that that sparkle. But I I still, I still quite like it. And I feel that increasingly now, I think, you know, there's allocators around the world looking for exposure into gold and silver mining stocks, which may have underperformed a lot over the last year. You're seeing like them start to outperform. A really interesting yesterday, right? I won silver stock here, but you know, yesterday I noticed that I think it was unchanged or slightly higher, even as the price of silver was, you know, silver futures was falling three, four, five percent, which is again, you know, a real sign as a start to increase exposure to mining stocks. That global allocators, of course, they don't buy futures or or physical commodity if you're a you know, most investment funds, they're buying stocks. So I feel that they are moving more and more into the mining stocks, and therefore they could outperform slightly at the moment. It's interesting you say that.
SPEAKER_01I've noticed just recently that even if the NASDAQ's down one and a half percent, the ASX doesn't necessarily follow anymore. And I'm sure that's money flowing in towards the mining sector because it's a different trade. It's it's diversification away from the Nasdaq that's propping up the the ASX. And BHP and Rio have had such huge rallies. And again, you sort of look at the fundamentals and go, well, iron ore's not really doing anything, and you know, copper's sort of priced in. We all know the story kind of thing, but they're they're holding up and uh probably for the same reasons uh that you're talking about. So when you when you saw gold was actually let me pause there for a moment, you you your crypto now, uh for those reasons you just discussed you could easily apply to Bitcoin. Why let's just briefly detour why do you think Bitcoin collapsed then? Which trades off a similar narrative in some ways, global debt and deficits and what have you.
SPEAKER_00Yeah, I thought the confidence in in crypto just kind of collapsed after that 10-10, you know, 10th of October last year. I think confidence collapsed for a lot of the degree. A lot of long-term holders lost confidence. That was partly to do with the market structure and the structure of some of the platforms, the way that they uh exited traders, people lost a lot of confidence in that because there were some few, you know, technical shenanigans about how they were, you know, forcing exits of traders. And I feel that confidence got lost. I still don't think we're back anywhere near where it where it was. You know, my job is really just to design strategists to trade it, right? So it doesn't, I don't have to be a believer necessarily. My job is to create strategies to trade it. And it's a very tradable contract in many ways because there's a lot of moves. It's just from a risk management perspective, very hard sometimes to capture those. But I think after 1010, I don't think we've really regained in the crypto space that confidence. But we saw some really major long-term holders of Bitcoin, for example. And I one thing I pointed to, which happened maybe in November or early December, a long-term uh Bitcoin hodler sold everything. Now it was billions of dollars. This person had held it since you know it was a few cents. And it was many billions. So, you know, there was sort of the discussion of, well, of course, you're gonna take profit. But my opinion of that was if you held billions of dollars worth of Bitcoin and you still believed, wouldn't you just hold like five percent of it, keep 10% of it? But that that particular massive holder sold everything. And that to me was yeah, one of the whales, exactly. That to me was a real warning sign there. I thought that was like, okay, if these people are selling everything, he no longer believes in it. And I still feel that crypto probably needs a new narrative, some more news to get it sparked again. I think otherwise it probably remains under pressure for a while. And of course, you know, a year ago there was the optimism about the US administration, they're pumping it, they're pumping it.
SPEAKER_01Yes.
SPEAKER_00I feel that now maybe people are realizing that, you know, you've got to be very careful. A lot of the things that, you know, the first family touch tends to turn to not to gold, right? If you follow them their business acumen over the last 20 or 30 years, I feel crypto is maybe another one. And so I feel that optimism's obviously disappeared as well. It's not happened. And so I think at the moment, yeah, it remains a bit under pressure. I feel that the narrative just doesn't fit. And to some degree, the more that gold shines, the more that that looks bad on crypto at the moment.
Bitcoin, Confidence, And Narrative
SPEAKER_01So well, let's circle back to gold then. So when do you see the potential for it to move? You have multiple, you can buy physical. I'm talking about everybody here, but you can buy physical gold, you can buy gold stocks, you can trade the futures, you can short-term, long-term, with something like a natural resource like that, uh, which can move big directions both ways. How do you like to trade those kind of things?
SPEAKER_00So, from an investment purpose, I think right now, I think the physical commodity or the mining stocks, I think are the two most favored ones for me right now. Previously, I may have looked at like some of the ETFs as well, but I have starting to have some concerns over the paper, gold, and silver markets. And I and I feel that there could be some sort of not crisis of confidence in paper markets, but I feel that there could be some issues going forward. So we know, for example, a Comic silver that the the amount of registered silver interest just isn't growing, it's actually dropping consistently, right? At some point this year, people thought it would happen today with the March silver expiry, but it's not going to happen. Open interest has dropped. But at some point this year, there's not going to be enough registered silver for silver futures, which may force Comix to make some adjustments. They may decide to go cash settled, for example, or do something else. And that could trigger, I think, some kind of a loss of confidence in paper products. So I think they're fine to trade, right? I'm always in favor of trading futures. I think that's what they are, a trading product. But I feel ETFs may go if your ETF isn't backed by the physical commodity, and if it is, or they say it is, I would just double check that what's what's really behind it. But I feel like you want to have access to the physical commodity, so physical gold, physical silver, good gold mining and silver mining stocks, because I think allocators are going to come into that environment and try to probably stay away now from the paper environment. That's just my own view of how you should be from a you know an investment perspective. By all means trade the sentiment in the paper markets. And if you're a day trader, that's fine. But increasingly I wouldn't be holding longer-term positions. That's my own view in that.
Paper Versus Physical: Metals Exposure
SPEAKER_01Very briefly, I know I've touched base with you a few times, and you've told me you're in China. And now China is arguably driving the gold price right now, or Chinese traders, silver, or at least involved in it. They're sort of muscling back on the Australian companies with their iron ore. Do you feel that those kind of big contract markets like the like in Chicago where gold's traded mostly, do you feel like China is eventually going to absorb and become the biggest futures exchange for all that? Because they're the biggest buyer in terms of world trade. Do you think that the that that they're going to take that away from America and Europe?
SPEAKER_00Yeah, it's a good point. I I feel that any in terms of futures, whichever exchange can kind of almost guarantee the delivery of the asset is going to be the strongest one going forward, right? But but Shanghai has some issues as well, I think, in terms of people just demanding physical delivery. And of course, futures and in the past were created, it wasn't ever viewed that people would actually want the end physical product, right? And so you could create open interest up to as many contracts as you wanted, because in the past, 90x percent of people never wanted physical delivery. Now you're getting numbers like 20%, 30%, 40% of invest of traders of silver are saying, no, I want physical delivery or even higher and gold. So it's changed. I think in terms of China, yeah, they're opening, I think, a new warehouse in Hong Kong, I think, for I can't remember which of the metals, it might be all of them or just some of them. And I you know, obviously, I think it will make sense that more and more trading is going to go through Shanghai, maybe Hong Kong too at some point. Um, they are massive in that space.
SPEAKER_01And what are you doing on your secret missions to China? What are you allowed to say?
SPEAKER_00Not so secret missions. I I go to China a lot. I have groups of traders I mentor in China, I just have you know business and contacts in in China, and I really enjoy actually going out there and dealing with Chinese traders and investors and meeting them. And as I say, I I mentor traders out there as well. I've had some you know pretty really good successes out there, and yeah, I just enjoy it. I feel that there's it's it's very interesting going to China, comparing it, for example, to the US. I feel that people have a real thirst for knowledge there, um, a respect for people and individuals with experience that maybe I think the West is losing slightly. There's a lot of sort of cynicism and skepticism in the West now towards anybody that you know has a view or anybody with experience and things like that. It's always like, oh yeah, but you know, you what do you know anymore? Because you know, things like, you know, oh yeah, but you know, AI will take your job or whatever. And I think they still have a very high respect for people out there. Yeah, I find it it's it's a really interesting and good place to go out there. It's really changed my mind in a lot of ways.
SPEAKER_01When you compare it to Australia, do they I mean, is your average Chinese guy opening the newspaper checking in checking the prices of the stocks like we do here, or do they have a different way of approaching markets? Or is it how do you tell us about China, Chinese investors?
China’s Role In Commodities Trading
SPEAKER_00They have the things that I've learned that's very different is they have they're certainly very much involved in the commodity markets and even in the physical commodities. So I meet lots of people whose you know day-to-day job is buying and selling copper, like the physical commodity or silver. Whereas here in the West, that's all done by big companies, right? Big companies, but there they have it's everything's a lot more micro in in China. There's a lot more, you know, people work for themselves, for example, have their own little businesses, doing things for themselves. It's a very entrepreneurial country. But yeah, certainly in terms of commodities, high tolerance and a very strong knowledge base because of it, because you either you or someone you know is actually trading physical copper or silver or gold on a daily basis, they have good insights, good knowledge of it as well. They just you know need to learn some trading skills, right? That's the kind of thing where I come in, trading and risk management skills. So, in terms of stocks, they've got burnt a lot over stocks in the last sort of 10 years, but they still do like to trade and they have some really good companies. Like there's some really cool companies in China. And when you go there as well, you see you know what's happening below the surface. So, here, if we think about Chinese car companies, we'll think about you know BYD or you know, MG. But over there, they have like a whole ton of other ones. Like there's a one of my favorite companies in China is a company called Xiaomi. I think Xiaomi is fantastic, and they're bringing out cars this year, by the way, and their cars are awesome.
SPEAKER_01I've heard of them.
SPEAKER_00Yeah, Xiaomi makes it.
SPEAKER_01Right, isn't it? Xiaomi with the X?
SPEAKER_00Xiaomi, yeah, X I O M I, I think it's pronounced, or X-I-O-A-M-I. But Xiaomi make everything, right? They make phones and they make you know all sorts of things. They make everything, you know, gadgets for the home. I think it's a really cool company. They have lots of you know companies like that out there. So they they are but even at the say at the micro level, a lot of Chinese people work for themselves, entrepreneurial spirit, work hard, you know, and you know, I I think it's and they have a thirst for knowledge. I I enjoy going there. Um, and they have amazing, you know, not just food, but their bakery products are fantastic. One of the most underrated aspects about China is their cakes and biscuits and pâtisseries. They're amazing. So it's yeah, go out and test some of that.
SPEAKER_01And enjoy. Well, I know there's a there's a guy who I've forgotten his name now, but he says, like, now is the best time to visit China because they're because they suppress the currency. It's like dirt cheap over there, right?
SPEAKER_00Everything is cheap. And I think, again, that's an advantage they have. They don't have the cost of living issues that the West has. So buying food, you can go out and eat out every night, you know, and it's going to cost you even even average, you know, even lowly paid Chinese people can't afford to eat out and can't afford to go and buy their groceries. They don't have that issue that we have. Yeah, they do work very hard, and you know, the if you're working in factories, it's not a great job. Those people have got hard jobs for low income, but then everything they buy is very cheap as well. Everything is very cheap. So they have some advantages. They also don't have, frankly, the clear device, uh, you know, divisiveness going on within their community that we have in the West, right? The, you know, whether it's because of social media, whether it's enhanced by social media, but you know, our societies are becoming increasingly divided, right? And argumentative. Whereas they don't have that at the moment either. They just focus on working and making money and and you know, providing a roof, and they don't, they're not arguing with each other half as much as we are.
SPEAKER_01Sounds interesting. Let's conclude with what you alluded to before. You sort of see the US markets going sideways, but you see that as becoming a bit more volatile as we go ahead. Was there a reason that you're thinking that way?
Mentoring Traders In China
Culture, Costs, And Entrepreneurship
SPEAKER_00Or yeah, I thought that generally I feel the US I see is a loss of confidence. And in US, I would normally associate with a very confident country. You know, when whenever there's new technology, the US is like, we're leading it, we're the best in it. It's gonna drive our economy, it's gonna be great, right? So if you think about the tech bubble, the the dot-com bubble, sorry, right? That you know, we traded through many years ago, the famous one. But if you look at it, you know, it wasn't just about a few stocks, the whole market was caught up in it. Why? Because the view was this is gonna lift everything and the whole economy is gonna be great and better, and everything drove stocks to multiples that were too high, but it was built on a confidence. Whereas right now we see the opposite. We see AI, you know, there was a viral post came out this week from a research guy about how it's AI is gonna take jobs away. And what we see now is when people talk about AI, is it's just gonna lead to job losses and it's gonna kill the service sector, and it's gonna kill the software industry. And it's that that that's a so that tells me it's a very interesting scenario of their confidence that they don't have right now. I feel that they're losing confidence in their institutions, and I'm I talk to and I'm friendship with many people in America. I'm constantly I'm on calls every day with Americans, right? And I do notice it's a change. I feel that they confidence in their institutions is dropping. So on a local level, I I've noticed that. In terms of stocks, there's been very high inflows. You know, it was noticeable that in January, for example, inflows into the US stock stock indices and ETFs were very high. Yet they were struggling to grind higher. And now, as a trader, that's information. When lots of money is going into something, but it's not really making new highs, not significantly. Whereas, like in Korean stocks and Australian stocks, we were making new highs, that's also information. It's telling you that there's obviously clearly also a lot of selling going on. So underlying it, I feel that that market has just been struggling now for two or three months. And often if it hasn't made gains in the first two or three months of the year, significant gains, I think there is potential now for a decline. So I'm just kind of watching that. Always, if you want, if you're thinking about short selling or shorting or selling, you've always got to understand that that's the non-normal scenario, right? That normally stocks go up. So you've got to be very careful if you ever short or think about it. So, and as someone that's shorted on many occasions, you know, I've known that. So I'm not just rushing out shorting American stuff. I'm still actually long at the moment, but I'm certainly thinking about the fact that that market's starting to look a bit soft, confidence drops. And I think without confidence, I don't see, you know, to me, confidence when you have an economy that's built on debt and deficit, the currency is confidence. You build huge amounts of debt and deficits, and you know, in an economy, both government and private, because you're confident, I can pay it back. As soon as that confidence goes, I think your currency of your economy is also in trouble. So yeah, I'm starting to watch that more closely now. That makes sense.
SPEAKER_01It's funny the point you make about the inflows. I did see another very shrewd guy make the same point. So it does suggest the opportunities uh elsewhere. And again, like the UK market is suddenly going through the roof, well, not suddenly, but it's been going through the roof over the last little bit. Now Australia's lifting. So there's this sense that there's a quite a big rotation going on around the world.
SPEAKER_00It's funny for Australia, right? The fact that for the last few years we kind of underperform in a way because we're just old style a market, right, where we're dominated by banks and mining companies.
SPEAKER_01Which is what they said about the UK. I remember the economist did a whole thing about it like two years ago. Like the it's old stuff, it's tobacco, oil, you know, nobody it was on 10 times earnings. That's how crazy lower.
SPEAKER_00Yeah, well, that it comes back to the contrarian. If you can hold that trade, right, it's a case of knowing when. But yeah, now it's like everybody wants the old, right? Now tobacco is good again, and binding is good again. And you can't smoke AI either. Well, that's true. And if you're put out of work, and I look, I think, you know, the reality is as well, is uh I've been talking to a few people about this. If AI does start taking jobs, right, from people, people are going to need to make money. So, what does that mean? Well, firstly, I think people unfortunately will probably go and drink and gamble a bit, and people gambling will probably continue. But I feel that trading and and and market. I think people, that's what's going to happen. It happened in COVID. When people lost their jobs, they start trading more. So I think it's going to mean that whether or not there's more AI traders, almost irrelevant, because there's going to be more retail traders as well. Because if people lose their job, they're going to look for that as well. So, you know, I think those dynamics will mean that, you know, a lot of the time when I'm trying to day trade, I'm trying to pick off retail traders. You know, there's going to be more of them potentially in that environment. So that you know that there will be that potentially happening. But yeah, look, I think, you know, uh being an old school like Australia is is probably going to be a little bit of an advantage at the moment, which is not too bad. I also feel like this is maybe yes. Sorry, I was just going to say, like, if I feel this is an opportunity, I mean we talk about the negatives and they're worries now about all the jobs it it it's going to, but I actually feel this is an opportunity. I said this to someone last night on a call. I feel, for example, in Australia and other Western countries, we've had a misallocation of resources over the last, particularly 10 years. We have a lot of kids going to university studying degrees that are really, frankly, not important and not going to help the real economy. Now, realistically, they're the ones that are going to lose now. They're doing jobs that can be replaced by AI. What did we need? We needed plumbers and electricians and bricklayers. That's what we needed. And yet we've actually told people, no, you should go to university. And we've got a lot of people with degrees. They're the ones that are going to get hurt. And of course, in the meantime, we haven't built enough houses. And I feel for the last 10 years, particularly in Australia, America too, and to some degree, England, you've seen house prices go up a lot because of this misallocation of resources. I actually feel now is an opportunity, perhaps, to get that allocation back in line again. And to, you know, yeah, people are going to lose those lower, though, you've come out of university with a degree in something that really doesn't mean anything. And you've got an average job that will be taken by AI, but we need people to build houses. So maybe now we'll get our young people going back doing jobs that we actually need them to do over the long term. But you know, I like the way you think it.
SPEAKER_01And it's a Chinese thing, you know, from crisis. Well, is crisis and opportunity are the same word, or I there's something about that. Yeah. All right, just to finish, I want to reference the jacket in the background. So that's the famous jacket you wore when you're in London, or maybe is that literally the jacket you wore, or like a rich jacket?
SPEAKER_00The one behind it is actually, which I can't show you. Yeah, sure. So tell the guys about the jacket. So this is the one I actually wore, so it's many, many decades old. A red jacket identifies traders who traded with their own money. So on the floor, actually, the one above it up here is a Nat West jacket because I worked for NatWest as well. So banks had their own colorful jackets. There were people just filling the bank's orders. But the people, only the people wearing red jackets on the floor were trading for themselves with their own money against the banks. So I did this. This was the one I wore in the options pit. And there is my badge with my mnemonic, which is, you know, for me it was UZI Uzi. And the it just tells people that I can trade options, that I'm allowed in that pit.
SPEAKER_01And that I trade with my when you finish for the day, would you like hang that up at the exchange or wear it down the pub kind of thing?
US Markets, Confidence, And Flows
SPEAKER_00No, at the end of the day, we would hang that up. We had like lockers in the back of the exchange. But at lunchtime, we would go out on the streets with these, you know, just for lunch or whatever. We wouldn't take it off every lunchtime. But yeah, and we're very proud, particularly for the particularly for the red jackets, right? Because, you know, 90% of traders on the floor were working for a bank or a broker. Only maybe 10% were trading for their own money, maybe 15% or so. So to have a red jacket to say that I traded against the biggest investment banks in the world with my own money, you know, I took them on and beat them, you know, is a is a you know a real sort of badge of honor. So people really like, you know, and and you know, their red jackets, they wear them with a lot of pride and you know why we we keep our jackets.
SPEAKER_01And so just uh so do you still do the the Gary Norton method uh program where you can people can actually sort of be awarded the red jacket by yourself?
SPEAKER_00Do you still do that? Yeah, I do, I do, yeah. But not to Australians, though, unfortunately. I don't offer that in Australia, but I do offer that to some international uh traders. I do still and I yeah, these is the modern day ones, which are still made by the same company in Chicago. And I trade as a parts of my program, I still give them to. Cool.
SPEAKER_01All right, mate. It's always a pleasure to have you on. So we'll leave it there. And if you're watching this and you enjoyed it, leave us a comment or whatever, and we can always get Gary back on. I'm sure he's happy to address anything or any questions, or maybe we could do something about options or something down the line or whatever. But there's lots that we could do. So thanks for coming on, buddy, and hopefully we'll do it again. Thanks, Carlum. Pleasure, mate. Good to see you.