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An End to the Bull: Cut Through the Noise to Develop a Sustainable Trading Career by Gary Norden

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Chapter 1 The Financial Junk-Food Industry

In This Chapter …

I explain some of the reasons why retail traders can be led in the wrong direction and end up employing unreliable analysis and trading techniques. There is a strong element of mythbusting in this chapter, and no doubt I will offend some in the industry with my views. I am not easing readers in; from the outset I will be confronting you by challenging widely held assumptions and views.

Traders play a different role from brokers and analysts

During my time as a convertible bond trader I received an email from a salesperson from a large US investment bank. The email contained a research piece about a convertible bond that his firm was recommending; the piece ran to a number of pages, and it looked comprehensive. Skimming through the research I disagreed with some of the assumptions that were underlying the analyst’s view that the bonds were cheap. Later that morning I received a call from the salesperson asking what I thought of the trade idea, and whether I would like to buy any of the bonds. My first question was, ‘Do you have any of the bonds or will you need to go to the market to buy them?’ His answer was that his firm had $10 million of the bonds on their books, ready to sell.

I now had all the information I needed to decline the trade. Here is what had probably happened: another trader sold $10 million of these bonds to this US bank, or the bank had them on its trading book. The bank then decided to sell these ...

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