Soon the FxCuffs foundation will be hosting Mr. Anton Kreil as a key speaker of the FxCuffs Conference in Cracow, Poland. The event is planned as a two day conference and exhibition on 24-25th of March. Anton Kreil is a former Goldman Sachs, Lehman Brothers and JP Morgan trader who eventually left banking industry. In a series of controversial speeches he points out numerous problems with the banking sector these days. Today we are honored to present you his story told with his own words.
Marcin Nowogórski for FxCuffs: Anton, you have been inspiration for thousands of traders following you in social media, and dozens of those that went into strict cooperation with you through the Institute. I have so many questions to you regarding this as well as your past jobs in banks and current operations. But first, I would like to ask you about your early days in trading.
In Cass Business School interview, you said that you started trading IPOs as a teenager, so it wasn’t like you were born in a noble family with ties in financial sphere. Could you please describe it more?
Anton Kreil [A.K.]
Hi Marcin. It’s great to chat to you again and I just want to say I’m really looking forward to the FXCuffs conference in March. I very rarely do public Conferences but I know this Conference is going to be really special. Not a great deal is known or understood about my early background in trading. I grew up in the U.K. in Liverpool in the 80’s and 90’s. It’s not exactly a place that is known for breeding Traders in the Financial Markets. It is a very working class city and the focus of the vast majority of people is very narrow. As a teenager, I was very rebellious and I wanted to breakout of the city and determine my own financial destiny. I was attracted to trading after seeing documentaries about how the London Markets had been de-regulated in the 80’s and “Big Bang” in 1987. I was 15 when I decided I wanted to give it a try. There wasn’t much information readily available to me about trading. It was 1994 and the internet was only just getting going. So, I went to the public library every week and tried to read and understand as much I could about it by reading textbooks on Finance and Economics. I did a lot of part time work and hustled to get my first GBP3,500 together to stake a Brokerage account. There was no leverage in those days for Retail. But there was T+21 settlement on IPO’s with certain Brokers. I got my Mum to open a trading account in her name and get the name “Mr Kreil” (her husband) on the account as an “authorised trader.” However in reality there was no Mr Kreil. My Mother and Father divorced when I was five years old. It was so I could telephone the Brokers and pretend to be him. I wasn’t 18 so I couldn’t open an account myself in my own name.
So, from the age of Sixteen I was in the game. I was participating in IPOs through a regional Broker. My strategy would be to “put in” for the IPO’s that looked attractive valuation stories or had hype around them for a lot more shares than I could afford. Essentially this is like trading on margin but with physical stock. I would get allocated stock, then I would give myself a 20% stop loss with 5 days to either take profits or cut, then settle on T+21. It was the beginning of the tech boom and I rode the boom all the way to 1999. I participated in about 30 IPO’s over 4 years and turned the GBP3,500 into GBP60,000. At one point I was actually up over GBP120,000 whilst at University in 1999 but I lost big on a few trades which taught me some very important lessons. It was only when Goldman Sachs came to my University (Manchester) and when I started speaking to the traders there that I realised how one dimensional and risky my strategy was. I was lucky to time the tech boom, but it wasn’t luck that I worked out how to make money without having much money. I still had to take big risks at the time and had a lot of sleepless nights. It wasn’t glamourous and I wouldn’t advocate others trying to emulate what I did now. The market is totally different now.
M.N. Could you tell us more about your past in top investment banks? LinkedIn says that you were an equities trader in Goldman Sachs, Lehman Brothers & JP Morgan. How did it look like?
Yes, so as I mentioned Goldman Sachs came to Manchester University where I was studying Economics to recruit for all of their different divisions. I used to have a simple strategy for getting the attention of the traders when banks came to my university. I realised that after the banks completed their presentations that my student peers would surround the traders from the banks and that the traders would never remember anybody because there were simply too many people. So, I used to hang back, have a few glasses of wine and then approach them when everybody left with my track record. So, I used to get them alone and show them print outs of all the contract notes of the trades I had done. I showed the traders at Goldman and they loved it. So, I went down to London to interview. The Goldman interview process is typically 40-50 interviews / 4 or 5 interview rounds before a job offer / contract is offered. I had eight interviews in one day and was offered a contract as a trader on the Pan European and UK Equities trading desk in London. This was almost a full year before I’d even graduated from University. At the time that was the record for the least number of interviews ever at Goldman Sachs to become a Trader. I have no idea if the record still holds today, but it will definitely be hard to beat.
As part of the contract when you go to work as a trader at a bank you have to relinquish all of your own private trading outside the bank. It can only be done in the bank with strict rules from the regulator. So, I had to stop trading outside the bank once I signed the contract a few weeks later. I worked at Goldman Sachs as a trader for 4 years.
Like all of the other traders on the desk we had a dual function. We were Market Makers and we were also Proprietary Traders. So, we had two trading books. One for doing business with customers like Pension Funds and Hedge Funds (Market Making) and one for using the banks money to take positions (Proprietary Trading) and run portfolios. I become known in the market for having a reputation of no fear and trading very big size. I used to run proprietary trading books with up to $500mln of gross exposure and the team were always several steps ahead of the competition. Proprietary Trading mandates back then were also very open. We could trade everything from Equities to Equity Options to FOREX and even Commodities even through were in the Equities division. There were always multiple competitors trying to figure out how we always seemed to “pull the rabbit out of the hat” and come out on top of any big situation and make money. It was basically because our trading approach was a lot more sophisticated in terms of risk management across asset classes. The team there at the time and the training I got from them was fantastic. It was a desk of real leaders and we were always way ahead on everything. What we read in the newspapers every day is what we created weeks before. It was a massively important part of my overall education and development in Financial Markets.
Other banks were always trying to hire me. Some of the offers to move were truly amazing for someone in their early 20’s. In 2004 I was offered a position at Lehman Brothers that I just could not turn down. The money was far too good and the career opportunity of the mandate was to help build their Equities business in Europe as one of the main traders on the desk. I took the offer and after a few years of being there realised that it was an extremely reckless place to be. So, I was looking to get out if I could. I left in 2006 after being headhunted by JP Morgan on a similar mandate, which was a much better place to be. As we progressed in 2007 I was becoming increasingly more and more bearish of the market and the industry. I had managed to “cash out” at this point. Meaning that I didn’t have any stock in JP Morgan. I managed to convince them to pay me out in cash for my previous Lehman contract and I was therefore a free agent and could leave the industry if I wanted too without bearing any financial cost to myself. So, in May 2007 I left JP Morgan, sold everything I owned and took one bag to travel the World. I was on top of the world at this point. At 28 years, old I had everything I had ever wished for and I turned my back on the industry. It was one of the bravest but best decisions I have ever made. Two months after I left London, the market topped out and six months later the market began to really accelerate to the downside. I was sitting on beaches in South America when the market collapsed and when the worst parts of the credit crisis happened.
M.N. What type of training did you get in the so-called ‘big banks’?
To call it “training” is really a bit of a fallacy. I was sent to New York twice for periods of 3 months by Goldman Sachs to partake in Graduate and Associate training programmes. However, the “training” is not really useful for the specific role of trading. The Graduate intake class is across all divisions and many people did not study Finance or Economics prior to the program. So, the graduate classes are all about bringing everyone to the same level of Finance and Economics understanding which I already had. It was a broad programme learning all the basics. The real lessons for me came when I went back to London and started trading on the desk. On day one I was told to sit between two of the senior traders for six months and just learn from them. I was given $10mln of capital to start with which quickly grew to $25mln by month six then $100mln by the end of year one. The training was very much “on the job” and as I alluded to earlier it was all about being surrounded by the best people. I have close relationships with my Mentors from Goldman Sachs still today and I have a great respect for them. They taught me so well and they always had time for me, no matter what was going on in their own career or their personal lives.
M.N. Would a “bank trader’s” training be useful in the context of a Retail Trader’s activity? Maybe certain aspects of it?
Absolutely! Retail Traders are essentially Proprietary Traders. The difference with a Retail Trader is simply that the bank trader does it with a lot more capital and for every Retail Trader they do it with their own Capital. At the Bank, it is with the Banks Capital. Other than that, the function is exactly the same. Which is to make money from financial markets with the pot of Capital you have been given. Either given to you by yourself or by someone else. There is a key difference though that can have strong consequences. With someone else’s money, i.e. in this case a Banks money, there is sometimes a tendency for a lot of traders to treat the Capital differently because it is not theirs. The risk of losing does not affect them as a trader. They have asymmetric risk. This is not a good thing. I have been witness to a lot of guys blowing up because they have been reckless. On the Retail side, however, as it is a trader’s own money, all the downside is owned by the Retail Trader as well. If you lose money, it’s your money. This means it is actually more psychologically challenging for a Retail Trader to conquer the skillset. It is a purer challenge. I had this skillset already due to trading when I was 16-20 years old with my own money so when I left the banks it was easier for me to adjust back to trading with my own Capital than perhaps a lot of other people found it. It was difficult adjusting back to it in the first year which was in 2009, but since then it has been a lot easier.
I’ve also realised in the years since leaving the Bank side of the industry that when I left I wasn’t rebelling against trading as a function. I was rebelling against Corporations and Corporate culture when I left and also trying to time my exit to optimize wealth. I still love trading and enjoy it a lot more doing it with my own money, being my own boss and never having to answer to anybody. I actually enjoy trading with my own money more now and I tend to take a more conservative approach than I did when I was at the banks. This is a function of the Capital being my own and because Volatility has been suppressed since the Global Financial Crisis. So, it has been a very different challenge to make money as a Retail Trader in the last 7-8 years. You have to accept a longer time horizons, trade less frequently, be more diverse by running portfolios and be more opportunistic. However, the training is essentially the same as being a Prop Trader and a Retail Trader. You have to learn the same stuff across the asset classes of Equities, FOREX, Commodities and Rates. There is no way of avoiding it if you want to know what you are doing, get results and be an accomplished trader / portfolio manager.
Check details of Anton’s speeches during FxCuffs 2017 HERE
M.N. From an outside perspective, it seems like your jobs in top investment banks are the foundation of your success. Is it really like this?
Well let’s not beat around the bush here. Success in Trading is to do only with one thing. How much money you make. If somebody wants to disagree with me on that then good luck to them. You don’t go into this game for any other reason and especially not to lose. I can’t go into specific figures but I have made a lot more money trading since leaving the industry in May 2007 than I made “inside” the Industry. The perception is probably the opposite because the numbers we used to trade were so big. But at the banks you only get to keep a very small percentage of your profits. Around 2%-3% at the time. So, if you made $100mln for the bank it is likely you would get paid over $2mln but probably not over $4mln as a bonus at the end of the year. Also, there is the 50% tax rate and 10% of additional taxes you have to contend with in the UK. I can tell you now when you see a pay slip of $2mln and it says $1.1mln tax on it and the net payment as $900,000 it really does make you wonder what you are paying for. Especially when you are young, fit and healthy and you do not consume any public services at all. Some people may think that it’s ridiculous to say this, but trust me, when you are the person it has happens to, you will genuinely feel like you are getting conned. Basically, the average person in the UK at the time was probably earning about GBP28,000 and paying about GBP7,000 in tax. Let’s say that was $11,000 at the time, basically you are paying the tax of 100 people in one year.
So even though I trade my own money since leaving the industry I get to keep 100% of the upside and I’m a lot more cost efficient because I trade through Special Purpose Vehicles (SPV’s) and my Corporations where I’m the 100% shareholder Director. Saying that the infrastructure and resources available to you at a bank as a young trader is far greater. I’m not talking about the systems and software however. That used to be the case, but it isn’t now. I’m mean the Human Capital, Training and Mentoring. There were seriously talented traders surrounding me all the time in that era and I got the best “on the job training” and experience you could probably get anywhere in the last thirty years. This is part of the reason I choose to pass this experience on in teaching people through the Institute of Trading and Portfolio Management. Because it is the type of training that is just not available anywhere else. So, in this sense working for banks at that time in history has been the foundation of my overall long term success for sure. I wouldn’t change anything. It was great to work at those banks at the time and the experiences I had there have completely shaped the way I approach things even now.
M.N. I have noticed, that you have many objections to Investment Banks these days. What are your reasons behind such intense criticism?
Investment Banks unfortunately have now become a vacuous echo chamber of talentless drones. We did a Video Series on this which is available on YouTube called “Investment Banks Destroyed” – It’s really down to the fact that Proprietary Trading has been curtailed massively. In my day, you could determine your own bonus by how much money you made for the bank proprietarily. Nowadays you can’t. You simply have to accept what your career earnings will likely be in a specific range and at each level on the Corporate ladder there are pay grades. So, you are essentially a slave to the Company for your pay check, not the master of your own financial destiny. This is even the case at the largest Hedge Funds as well. They have structured their businesses like Investment Banks and the large Hedge Fund space is a totally commoditised industry now. The best place to be is at Hedge Funds with $100mln-$250mln in Assets Under Management who have a strategy edge and growing i.e. with three years’ solid track record. You can grow with the company, learn a lot and make good money along the way as a trader / portfolio manager.
M.N. It seems that your advice to beginners is to start their trading career with a Hedge Fund and not in a bank. Is there any way that rookie trader could use to get into a hedge fund?
Absolutely! But this game is all about making money. If you can show a track record and an understanding of how Financial Markets work to employers, you are hireable. Just turning up and saying “I want to be a Professional Trader / Portfolio Manager” because you think it sounds glamourous and sexy is not good enough. Anyone can open a trading account from their bedroom these days and trade with not much Capital. It is a lot easier to access the market these days, so there really is no excuse. You have to be in it to win it and Hedge Funds will not have any patience with people who do not at least take the step to try and make money and show they can make money first. Especially if the person didn’t go to a good University or University at all. We have a lot of guys who have come through the Institute who have ended up working for Hedge Funds and Banks because they have implemented what they have learnt with real money. The key is to learn the right information and implement with real money. Demo accounts do not count. That’s because they do not test your emotional detachment to Losses and Profits. You have to do it with real money. If you can’t handle that truth, then trading just is not for you.
M.N. Do you think that Retail Traders should approach the markets like Professional Traders? Does Retail Trading require different skills or a different kind of proficiency.
There is no doubt about it you have to learn the same materials. There are no shortcuts. You can’t read a $20 book on Amazon and become a good trader. I know from experience that I have always learnt a lot more inside the market trading than any book could ever possibly teach. A great Mentor of mine and one of the guys that hired me at Goldman Sachs had one piece of advice right at the beginning of my professional trading career that has always stuck with me. He repeatedly said the following to me “You don’t know anything till you have a position.” What does this mean? Well what he means is that you can do all your work and you can still be wrong. By having a positon, you learn a lot more than you can on paper because you begin to understand where the pain is in the market and where the opportunities are. When you have a position, you are forced to know everything because a mistake can be costly. So, you become a sharper beast. A hunter can smell its prey from a mile away and goes for the kill. They are fine tuned to find easy prey and to take down big game and if you don’t hunt regularly you lose your instinct as a hunter. A $20 book on Amazon will not teach you this. You have to be in the game.
However, Retail Traders also have another difficulty. They are surrounded by misinformation. There are a lot of bad people out there teaching trading and the vast majority teach absolute nonsense. What they teach from a Professional Traders perspective is actually totally laughable and it’s amazing how they get away with it. But it’s as much to do with ignorance and greed on behalf of the Retail Trader as it is to do with the dishonesty of these Charlatans. The scumbags in the market are basically professional internet marketers and they tell Retail Traders what they want to hear then rape them for their money. No-one wants to hear that trading is actually difficult. What Retail Traders want to hear is that the market is like an ATM and all you have to do is turn up each day and you can make $10,000 a month trading the FOREX markets with 45 minutes’ work per day. Wrong! If someone is saying this to you, you are getting conned. So, part of the skillset of being a Retail Trader is learning how to avoid all of the ambushes in the market that are laid in front of you by the Hyenas that are preying on the ignorance of the dumb money. If you want to know how to do well in this business you have to go to seek out the Lions.
M.N. You run a Trading and Education company, the Institute of Trading and Portfolio Management. What does the company do specifically? Could you also give us some idea about its size please?
So, we have three areas of the Institute. Education, Implementation and Careers. The education is the front door to our Corporation. We have two courses. The Professional Trading Masterclass (PTM) Video Series and the Professional FOREX Trading Masterclass (PFTM) Video Series. Anyone in the world can buy our courses and take the exams. However once someone has passed their exams they have the option but not the obligation to become an Institute trader, trading with their own capital under our Corporate infrastructure. This can be done from anywhere in the world.
Then, secondly either a person has the objective to go into the industry or not. If not, then staying within our infrastructure works incredibly well because we do not have any conflict of interest with our students / traders. 95% of trading educators receive commission rebates from Brokers on the volumes that their students trade each month. Meaning they are incentivised to teach their students so called “trading strategies” that require their students to trade as frequently as possible in the biggest size possible because this is how they get remunerated. We eliminate this conflict of interest by making all of our Brokers sign contracts at 0% rebate. This means we want our students to make money. We don’t get paid further unless they do.
Which brings me onto the final (third) stage of what we do. If someone does have the objective to go into the industry, then once they have traded profitably for 9-12 months they get the option to trade Institute money where we invite people on power of attorney to trade our corporate money and keep 25% of the upside. This can be anything from $25,000-$250,000 capital. Therefore, it is in our interests for our community to do as well as possible. Because if we find talented traders we seed them on Corporate power of attorney and we all make money. If they do not want to do this and would rather go in to the industry elsewhere like a Bank or a Hedge Fund they are not contracted / tied to us in any way that restricts this. They can leave us whenever they want and we will even help them get placed as we get paid by the funds a consultancy fee for developing their talent. So again, it is in our interests to help traders become as talented as possible. In terms of size, the overall Institute Community (Students + Institute funds) right now is about $40mln on margin sitting in Retail Brokerage accounts with about $120mln-$150mln gross exposure at any one time. We are one of the biggest clients globally on Retail Trader platforms as a Corporation with over 300 traders and 340 trading accounts.
M.N. It is possible to become trader for the Institute. What would be the path for retail investor to go?
Yes. Anyone can as long as they take our education first. Why do we do this? Essentially it is a pre-qualification tool that ensures a minimum level of education / intelligence within the community. This means that as a control mechanism we ensure that no cowboys or dumb people come into the community to threaten our statistics / the quality of our community. It also means that if you have done our education and then you choose to enter our community, you know for sure that everyone else in the community has competed the education and therefore you know they have intelligence. So, when people in the community are generating and discussing trade ideas they know they are getting to communicate with smart people.
M.N. You decided to give a speech and a workshop to traders during FxCuffs 2017 in Kraków, Poland. Have you ever been to Central Europe before? Why do find this region interesting?
I have been many times to Central and Eastern Europe. My father’s side of the family is Austrian and my great grandparents on my Mother’s side were from “Old Russia.” I also used to own quite a lot of property on the Black Sea coast in Bulgaria between 2001-2007. In my younger days, my friends and I used to party a lot in Warsaw, Budapest, Prague, Sofia and Varna at weekends when London became too boring and we wanted to have fun. In the last 25 years, Eastern Europe has really opened up obviously due to the EU membership of many countries. But what is interesting now is that I think a lot of Eastern Europeans like other parts of Europe have experienced the EU and are probably not as impressed with what they thought it would be and at how Europe is run by the political classes. I think countries especially like Poland, Hungary and Romania have great potential to become Economic powerhouses in Europe and even take on places like Germany. Certainly France, Italy, Spain Portugal and Greece are now Economic basket cases. They are a total mess. The labour forces and the Economies in Poland, Hungary and Romania have infinite more potential. The key is for them to grow and as they grow diversify into services and diversify their export partners and not be too reliant on EU countries. This is just a natural extension of Economic maturity, but I think the industrious nature of the Eastern European people puts them at a great advantage. It’s a pleasure for me to be going back to Poland and Eastern Europe and I can’t wait to help with educating people there on the opportunities of how to do well in Financial Markets. It will be a huge help for them as Economies grow and opportunities arise.
M.N. Can we expect any ‘secrets’ of ‘big banks’ or professional trading revealed during your speech in Kraków?
For sure! I’m not flying all the way from Singapore to the FXCuffs Conference in Krakow to deliver substandard educational information. What people will learn from me about the FOREX Markets at this Conference will blow their minds and allow a much higher probability for them to be successful in the FOREX markets.
M.N. Thank you for your time, and we look forward to more news on your participation in FxCuffs 2017.