My Top 6 Takeaways from Billionaire Martin Sandquist (Future Skills Interview)

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“I’m not really the entrepreneurial type but I always liked the independence of trading and also the fact that you’re always judged by just the market.”

~Martin Sandquist

Martin Sandquist is the founder of Lynx Asset Management. Lynx is one of the most successful hedge funds in Europe. They’re classified as a CTA and have 70 employees.

Listen to the interview on iTunes or Android. Or right here:

 

Note: I am not a professional trader and I don’t care to become one, but I love Learning from Masters.

Martin is one of the world’s leading experts on Pattern Recognition and he has a unique perspective on where the world is going. He’s also an entrepreneur (started Lynx when he was my age).

While I’m not too interested in trading, I am interested in finance (many of the best thinkers and decision-makers crowd to the financial field because the rewards for superior thinking are out-sized, compared to most other industries). Investing is inherently high-leverage.

Note 2: This is Martin’s first international interview. He’s only done one interview before, and it was also with me (for Swedish business podcast 25 Minuter). If you wish, read my summary of that interview here.

SUMMARY OF NEW LESSONS LEARNED FROM MARTIN SANDQUIST

This includes my own reflections. So it’s more than the 6 in-depth takeaways further down…

  • Most of Bitcoin = held by less than 1000 people. This makes price manipulation possible.
  • You cannot know how many more times Crypto will “Fork“.
  • Crypto doesn’t have intrinsic value (perhaps in the future), and should be considered a speculative asset for now. 1
  • The Blockchain Technology, not to be confused with Bitcoin or various Cryptocurrencies (“AltCoins“), will probably have a major impact on society over the next 10 years. Martin sees it as “Internet 2.0”.
  • The Crypto Community has done an amazing job bringing this into mainstream. For fun, for those of you older than 25, you can make an analogy to the emergence of the Pick-Up Artist industry.
  • Two personal points of interest for Martin in this area: Peter Schiff’s “SchiffGold” company and the Blockchain company “Symbiont.io”

Martin Sandquist went from 8 monitors to 2

  • In his work and trading, Martin used to have 8 monitors. Over time, he realized this was overcompensation for not knowing what he was looking for 2. Now he makes do with 2 monitors or his laptop. “When you get older and more experienced, you want to Simplify…”
  • More simplification: Through years of experimentation, Martin has boiled down his Monthly Analysis to just: Profits and losses, writing down big mistakes, and analyzing the mistakes (which factors were present when they occurred?)
  • If you want to have more “original ideas” (not priced into the market), you should spend more time alone, thinking deeply; not reading popular stock magazines.
  • Many of the best creative ideas come when relaxing (after having doing extensive research). For Martin, in the bathtub.
  • Choose to go pro in a field where skill outweighs luck over time. (“If you can be right 60% of the time, while spreading out your bets, you can make a lot of money.”)

For more tips, check out the practical 27 Lesson Summary (bottom of page).

For more in-depth info, read on.

Martin on the Market

We haven’t had capitalism for a long time. The Fed has been manipulating prices and markets for a long time and they’ve tried to push risk out. Risk is like energy. You can’t create or destroy energy, you can only change it. In the same way, you can’t get rid of risk, you can only push it in time. That’s what they’ve done. They’ve pushed the risk out in time, but sooner or later it’s going to come back, like trying to contain a volcano. You can just put a lid on it for a while, but sooner or later it’s going to explode. Since we’ve been pushing this for such a long time, it’s going to be really bad when it finally explodes.

Now for deeper info.

My 6 Top Lessons from the Martin Sandquist Interview:

1) On Bitcoin

Martin: The reason I don’t like to trade– I understand people who trade Bitcoin, but I would never do it because my type of analysis requires that there’s a very large group involved. I heard that a majority of the Bitcoins, over 50% or more is held by only a thousand people. It’s very easy to manipulate and there’s a lot of that going on in the price when it’s controlled by such a few hands so that makes pattern recognition [Martin’s trading approach] not that great.

Martin: I’m not saying that this is over now. There’s a good chance that Bitcoins can go to 100,000. I don’t know. If we get a collapse below 3,000 or 4,000, that’s going to be 80% correction. Many markets when you have that type of correction, it doesn’t go back up. Now, in Bitcoin, we’ve seen 70% correction a couple of times and it’s gone back up to make new highs. The recent correction was around 67% so it might not be over yet. Now, we’re back above 10,000. I’m not going to say it’s impossible that we go to 100,000. Again, the endgame is that it has to collapse.

Ludvig: You have a very different focus on this in the time horizon compared to many people my age, who’re just trying to get rich quick, speculating.

Martin: Exactly. That’s what everybody’s trying to do. It’s just a speculative asset now.

 2) Martin=Visually Oriented & Practiced Early (Find out Your Learning Type)

Ludvig: I would like to backtrack a little bit. We have you there, 15 years old, maybe a boy with charts on his walls, how do you first get started with the market? Do you just read the paper?

Martin: Yes, it started like that. I read the papers and saw all these numbers on the back of the paper and I wonder, “What’s that? That was interesting.” [laughs] Then, when I realized that you could make money by predicting where these numbers are going, that made it even more interesting. I started the usual way, I started reading about fundamental analysis and company reports and my dad opened an account and we bought some shares of some stock.

I was really crazy at that time. People had posters of Def Leppard on their wall, but I just had charts on the wall and people thought I was totally mad with all of these charts. [laughs]

3) Martin Likes Synthesis–And So Do I (Find out Your Learning Type)

Ludvig: You’ve said before that it’s very important to gain an edge. You realized that you were visually oriented and you also realized you liked technical analysis, what did you do to expand upon that? Did you maybe come up with some systems to use this talent of yours or practice it in different ways?

Martin: Yes. I tried to practice it and also tried to come up with things on my own. I’ve always been a synthesizer in that way that I read a lot about what other people are doing. You had a question about role models, my biggest role model in trading is Linda Raschke. I modeled a lot of my approach based on her. Pattern recognition….

Martin: She’s in the new Market Wizards, the second book. She’s really fascinating and the case that she’s a woman is  also. There are very few women traders and she’s one of the best.

Ludvig: I also like to read a lot and synthesize. Do you have some process for doing it? Because for me, at this point, I feel like I’m becoming so much better at it all the time and it’s a really nice feeling. It’s becoming intuitive but I have practiced it a lot. I’ve used all sorts of crazy learning methods and memorization stuff

Martin:  No, I don’t have a method for this. I just try to be an infinite learner. The fun thing about that is the compounded interest effect that you have on learning. Buffett said that the compounded interest is one of the greatest wonders of the world and I think that’s true, but it’s also true in terms of knowledge and learning. You’re still very young. So, Ludvig, you’re going to be way smarter than us when you come to our age if you keep this learning pace up.

3b) How does Martin Learn?

Mikael: Do you read with a pen in hand or do you just read?

Martin: I read books! [laughter]

Mikael: When you read, do you do anything to remember?

Martin: I have my phone. I write down on my phone if there’s something interesting I want to remember or do more research on. I also read a lot in the bathtub, like Alan Greenspan, so all my books are wrinkled and destroyed because of all the reading in the tub, but I love lying in a bathtub and reading.

Mikael: Is it mostly to collect information and knowledge? Is this a directed activity for you or is it more for entertainment but you like things that also contain information?

Martin: Yes, it’s a bit of both. I just love learning things. It’s fun to dive into a subject that you can have an opinion on, talking at cocktail parties and stuff like that. I have to admit, I have a bit of a bias. I think this is a work hazard when you’re in trading, you’re always looking for the variant perception. In the market, you’re always looking for the other opinion that’s contrary to everybody else. That’s where you can make a LOT of money; when you have an opinion that’s not priced into the market… This also spills into my other stuff, I always love issues or topics where I can have an opposite opinion to the conventional wisdom, but my wife really gets annoyed at me. She’s always like, “Why do you always have to like contrary opinions to everything? It’s so annoying!!”

[laughter]

4) Martin Recommends These Books he Recently Read

  • Principles — Ray Dalio.
  • Grit — Angela Duckworth.
  • Fed Up — Danielle Dimartino
  • More Money than God — Sebastian Mallaby
  • George Soros biography — by Kaufman
  • Alchemy of Finance — George Soros
  • Market Wizards — Jack D. Schwager
  • Warren Buffett’s Ground Rules — Jeremy C. Miller

And “Future Shock” by Alvin Toffler (recommended by me). Excellent predictions, most of which we are now living through.

For 15 more of Martin’s book recs, go here.

5) On Being a Lone Maverick & How to Do Intellectual Work

Ludvig: I want to go back to the way that you work, kind of like a Lone Maverick. Do you really work alone? Do you have– do you really work alone?

Martin: Alone. [laughter]

Martin: “How can you work alone?!” [laughter]

Martin: No, but I really like being alone. I think a lot better when I’m alone. I don’t like a lot of distractions, and a lot of what I do is not really considered work. I spend a lot of time just looking at YouTube videos and researching on the internet. We talked about this before, it’s like an analogy with training. When you do workouts–when you’re doing the workout, you’re breaking down the muscles. That’s when you’re doing the damage. The whole positive thing comes when you’re relaxing, you’re just lying, that’s where the muscles starts to build. That’s where you’re doing the building process. Same with intellectual work. You could do a lot of research and look for stuff but it’s really just when you relax that the ideas come to you because that’s when you are open to them.

6) Martin’s 30/30/30/10 Time Management Method for Managing Money

Mikael: How much time per day or per week would you say is purely market related?

Martin: It’s hard because it’s all the time, but at the same time, I always have the alerts on so I know when I need to do something. I trade the US stocks up to 10:15 PM, then the currencies trade all the time. Maybe 30% of my time goes to just analyzing the markets and trying to find trades; 30% goes to finding new patterns and doing research, and then 30% goes to administrative work and to keep up with the P&L and boring stuff like that.

The remaining 10% he spends relaxing in the bathtub.


Listen to the whole discussion on iTunes or Android.

Or right here:

For a lot more, you can get 27 of Martin’s best advice here.

What do you think?

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  1. I’m not an expert at this, but people get it confused ALL the time; not able to distinguish between sales propositions and facts. Cryptocurrencies do not have intrinsic value. 

  2. Expert Pattern Recognition.

Comments

  1. Martin has some good points about the markets. While he is right about intrinsic value, he seems to miss that other people (surely 7/10 people under 40 years old) either don’t know this, or don’t attached any importance to it. Whichever one it is, the result is the same.

    Intrinsic value is pointless in the Internet Age. Marketing is ten times a stronger force.

    • Tulip Mania, South Pacific, New Era, New Economy, Internet Age. The biggest bubbles get their own names.

      Among several interesting things in the pdf version of the Martin Sandquist interview: Sandquist poses the idea of shorting the stock market vs. the idea of buying gold. I don’t agree with his implied suggestion, but the interesting thing is that he doesn’t even mention going bull on the stock market, or buying bitcoin.

      This is because a) Martin Sandquist ain’t know what he talk about; or b) he has a history of outwitting other investors. Need a hint? “Billionaire” starts with b).

  2. I like the reference to Richard Koch and Greg Lockwood’s book Simplify, it is one of the best business books out there.

  3. Hi

    I have some feedback :

    This is too fast, try to slow it down a bit. The things you talk about is good and I got not comment there, but it’s hard to keep up.

    Another feedback is that you can do an intro or ending where you tell what we will learn or what we just learned for more spaced repetition.

  4. Frederica says:

    Hey,
    To start or run a podcast how important is the equipment?

    I see you are using sound walls and a special table. Lessons from through Swedish podcast?

    • I don’t think the equipment is most important, the Concept and the Content is.

      That being said, I am rather bad at tech-stuff (and it’s a common bias for people to underweight the importance of that which they are bad at).

      You mention the Swedish podcast. Did you read the “100 Lessons” article? I answered this much more in-depth there. Read the first part, before getting into what I learned from the guests.

  5. Book reader says:

    Good going meeting some top level people, that’s what you need

  6. I listened to the interview, this is a good synopsis 👍 I like how you focus on the actionable stuff and not just how cool and great the future will be, it adds some nuance for those who think between the lines and not just blindly follow the crowd. I’m not am investor or trader either but I do it a bit in my share time and what i have learned over the past two years is how hard it can be. There is just too much competition for amateurs, so I am just going to focus on my career instead. Any advice here?

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