Siam Kidd, Money & Me, COVID-19 Special
In this episode, Graham Rowan talks to Siam Kidd a stock market trader and founder of the Realistic Trader. Siam has some very interesting views on the current crisis along with the short and long term impacts of it.
The views expressed in this programme are not necessarily the views of the TV channel, it's officers or employees. The value of property and investments can go up as well as down. Always consult an independent financial professional.
- Hello, and welcome to Money, Me, and COVID-19 where we talk to subject matter experts about the economic, the financial, the business, and the social impact of coronavirus. My guest today is someone who's not only a serial entrepreneur, he's become a full-time trader of the financial markets and the cryptocurrencies and he's now got a whole tribe of followers on his Realistic Trader platform. His name is Siam Kidd. Siam, welcome to the show.
- Hi there. Thanks for having me again. Good to be here.
- Great, Siam, let's start with the big picture. What's your take on the steps that governments are taking around the world and the economic impact that this is going to have as these things come home to roost?
- I guess as the Borg would say, "Resistance is futile," in this particular situation. I think most people have their heads well and truly buried under the sand at the moment and are oblivious of what's about to happen. I've even spoke to fund managers, "Oh yeah, we'll probably have a slight recession, "but we'll have a V reversal." And I was dumbfounded. We are looking at something worse than the depression. We're looking at something far worse than 2008. I think it won't be like a 15-year depression like we saw from the 1966 depression. I think it's gonna be a very short and deep depression. Something like two years, maybe three if it squeezes in on get a bit, but it's gonna be deep. So if you look at the 2008 crash, that was I think a 50% pull back before it then bottomed out. I think we're looking at something more like the 1929 depression and in 1929 that crash hit about 85%. When you look at the equities or the indices we had the fastest equity crash in history. It took literally weeks to have 30% of it crash. It's what, the 8th of April as we're speaking today, we're on a bit of a relief rally and a few weeks ago I was actually screaming on Facebook saying, "Don't be fooled by the coming relief rally." And as we're seeing right now, it's pulled back to about 40 odd percent. So, typically, when you look at every crash that's crashed more than 20% over the last 100 years, it's something like 70 to 80% of them have a 40 to 50% relief rally which is exactly what we're seeing right now and then we see far further falling. So, the lows that we made or whatever mark index you're looking at, we're gonna take those lows out and it's gonna fall a lot further. If the absolutely low that we've seen so far is I think -39%, I'm looking at something at least a 60 to 70% crash from the top of drop to the bottom of drop.
- And yet you read about the fact that loads of people are now opening up brokerage accounts because they think they can now buy a bargain. I was thinking the other day, imagine a scenario where I own some fancy branded chain of hotels. I long ago did the sale and lease buys. I don't know the bricks and mortar. I just have my brand name and I'm operating them. They've now all been closed by these regulations. So effectively, what do I own? What is a reasonable share price for my company? There's a strong argument that it's zero.
- Yeah, it's absolutely ridiculous. I guess since 1975, really since the end of the Bretton Woods System, we've had the petrodollar system where we've basically been in a form of crony capitalism where every 10 years capitalism has to be bailed out by socialism which I find completely comical. As an investor, one of the most prudent things you can do is you have to do the deepest dive research you can and then when you have assimilated all of the facts and figures, et cetera, come up to a reasoned stance. And then once you've, I guess, put your stake in the ground of what your belief is, you then first of all you need to be continually liquid or fluid with your opinion so when new data arises you need to shift your opinion based on new data. A lot of people don't do that. And also 90% of your research needs to be why you're wrong. So you don't know what you don't know and basically for the last month I've been trying to prove myself wrong. What am I missing here? What would it take for us to not to have further falling? And for this to be a V reversal then we're gonna go back to all-time highs et cetera? And I'm still coming up blank. I'm extremely open-minded, but I cannot fathom, I cannot think of anything that would pull us out of this. And I always go back to first principle thinking. You boil something down to the fundamental truths. And I keep thinking, all right, when you look at the global economy and I guess for the average person watching this, the easiest way to equate this is to imagine the global economy as, I don't know, 10 average people with jobs. And what does the average person do these days? They have a job, they have a steady income. They're living beyond their means. I mean if you look at the U.K., the average U.K. citizen spends 150% more than they earn which is ridiculous. The U.K. citizen is the best in the world at spending more than we earn. Better than Australians, better than the Americans. So we spend, spend, spend. Interest rates are pretty low, well zero pretty much. Cheap, cheap credits. We borrow, borrow, car finances, mortgage, 'cause everyone loves a mortgage these days and then we have a little bump in the street. So your car breaks down, the boiler breaks, something happens and you need to spend a few thousand pounds in fixing it. Now most people don't have five, 10 grand laying around to fix a problem like that. So what happens is that you end up going to a payday lender like, I would say the name, but you're all probably thinking what I'm thinking, some dodgy payday company and you get a loan and then that is the beginning of the downward spiral. So what you end up doing is at your, yeah, it's game over and then eventually you keep on borrowing and borrowing, but the only thing holding up this very loose pack of house of cards, is your job or your business, basically your income stream. When you lose your job, it's game over 'cause then you end up doing more borrowing until no one lends to you and then you have to default. You have to default on some or all of your obligations and you go bankrupt. You then, if it's a person, you have a one-year sin bin I guess, one-year financial holiday, and then you start over again. So when you equate that sort of analogy to the world economy right now, everyone has had that bump, that jolt, and we are all struggling to pay the minimum interest-only repayments on our credit card debt let's say. And guess what's just happened? We've all lost our jobs at exactly the same time. Coronavirus, whether you think it's fake or not, I don't really care, what is undeniable is the effect that this COVID-19 has had on the planet. Everyone has had to drop tools, everyone. Never in human history has literally I guess, the best part of the whole developed world, been forced to shut shop and drop tools. I mean I've got nine businesses. I've had to basic close down four of them. I've had to furlough all sorts of staff, 50 plus staff. Everyone is in the same boat and when you look at every country's main income stream, pretty much it's tax revenue. So all of our tax revenues just evaporated and basically for every three days that a country drops it's tools, the GDP drops by 1%. So, we're screwed, we're absolutely screwed, there's nothing that I can logically see that will basically take us back to the previous all-time highs in February.
- Also, just to reinforce that. As I understand, there was 6.6 million job losses in America just last week alone and then you add in yes, the taxes disappearing, but the spending is going through the roof. We thought we were dodging a bullet when we didn't get a Jeremy Corbyn within government, but now here's a supposedly Tory government throwing trillions at this problem. I think a lot of people don't realise that those government bonds that are getting issued are effectively a claim on future taxation which means at some point the taxes are gonna have to go up massively to cover this. So I suppose one good part of all of this for you as a trader would be that you like volatility because you can do much better in a volatile environment. Have you been able to trade these scenarios in a proper way?
- Yeah. It's been amazing. I hate and I cringe saying that, but as a trader it's these sorts of events where you I guess you make your profit. Now I know that a lot a people will probably hate me for saying that, but it's a fact. As a trader you need volatility, you need big, heavy surges and that's what we're seeing right now. But here's the thing, as a trader what I would also say is that you can use these events to really beef up your trading account and then use that profit to do good. If that makes sense.
- Absolutely. What have been the kind of things that you've been able to trade successfully? It's obviously some of this has happened so fast that you'd need to jump in and out pretty quickly. But how have you managed to actually leverage this into a successful trades?
- Indices in oil primarily. So what you'll find is that, and copper I guess. Oil is the blood of the planet. It's the grease, the lubricant that keeps things going. I guess it is the blood, it's our energy source I guess. As the world has basically grounded to a stop, the demand of oil therefore goes down. So oil has literally fallen off a cliff at the same time. We're now at $20, or no, last time I checked it was $24 a barrel. We basically slid from 50 down to 20 very, very fast. My target for my oil trades is to take profit at $10 a barrel. So I see oil hitting $10 a barrel pretty easily. When you combine that with another converging bullet for oil of solar and battery technology, it's game over for oil. We will not see $100 oil again unless there's World War III, which I think is unlikely. We're going through World War III in an economic sense right now. War is the last thing any country needs right now. Oil is screwed, game over. In fact, as of 2018, solar is the cheapest form of energy on the planet, so extremely bearish on oil, medium to long term. Copper, that has fallen, it's still going to fall 'cause the world is not moving, the world is not constructing and building stuff as it were, hell, two months ago. So that's gonna slide further, but look, again, shorting the indices. So we're shorting the indices. I called this relief rally. This relief rally is happening as we speak and now I'm just waiting for it just to roll over again and it's gonna take out those lows and go beyond. Obviously my advice here is pointless and useless for most, but is inactionable for most people probably listening to this. So what I would highly recommend, if my opinion has any weight on you as a viewer, if you're an average person and let me just define that a bit. If you are someone that has any form of conventional asset like an index-linked SIP, index-linked stock and shares, anything that is connected or linked to the stock market whatsoever, I would highly recommend you to start, this is not financial advice okay, this is just my Siam opinion hat's on. This is where I basically go against what most IFAs and what most fund managers do. So, at the moment most IFAs and fund manages are saying, "Don't exit, just play the long game, "you need to basically stay still, don't do anything, "'cause you're playing the long game." But the thing is, if you look at what most fund managers and IFAs have done to most people's life savings in the 2001 crash, the 2008 crash, hell, go back to 1966, same thing, it's the same advice, it screws people over. I think Graham, yourself in 2000, the tech bubble? Your fund manager lost a lot of money?
- That's right, I got well screwed in that part, yes.
- Yeah, so basically contrarian investing is the way forward. And so what you should do, I don't know how this is gonna be. Is this on the left for you? Does that look like a normal chart for you?
- That'll work.
- So let's say for example you have 100 chicken nuggets, or 100 units of whatever and the price is 10 let's say. So 100 nuggets at 10 pounds. You've got 1,000 pounds worth of stuff at this level here. Without a crash let's say it's now five pounds, so your 100 nuggets is now worth 500 pounds. So what most people are saying is, "Don't do anything, "just wait because in the long run, 10 years time, "you're gonna go back to breaking even." Or whatever. Now, yes you need to play the long game, but you need to do it properly and that's where everyone does it really badly. You do not just put your head in the sand and hope because hope is the world's worst investment tool. So what you should do, again, in my Siam opinion hat's on, is that you need to exit now. You need to ignore the people saying, "Oh yeah, but you're crystallising all of your losses." No, what's gonna happen is you exit now at five pounds. So basically you've got 500 quid. You then wait for the further falling and there is extremely high probability we're gonna see much further falling and then when the price gets down to, I don't know, two pounds and that is when you buy. So basically for me, I'm looking at at least a 70% fall from top of drop to bottom of crash. So, let's say it gets to two or call it three, then you in fact, well at 500 divided by three, my trusty calculator, now we've got 166 chicken nuggets that you've basically increased the amount of chicken nuggets you've got. So, when it goes back to 10, guess what? You're in a far better position and depending on when you get in, you'll be up anywhere from 50 to 100% ROI or a better position than before. So that's one thing. And that's what I've really been screaming to my close friends and family. Whether they listen or not, it's their call. What else? Going to cash is also a very good thing. I guess in anything, go to cash because what that'll do is give you some pouncing money. So when we get near the lows in a year or two years time, whenever it may be, you'll be like a kid in a candy shop back when fruit salads were a penny and Freddos were 10 pence.
- So clearly the very strongly expressed view there on the direction for the stocks and shares part of the market. We look at some of the other assets. Bonds obviously again, the traditional IFA will say bonds are a safe haven. What's your view of bonds in this kind of market?
- Game over. At least 97% of the world or the money out there is actually debt. Money is debt. A lot of people don't know that. So the way, I guess it's a bit of a Ponzi scheme really. So when a government wants to increase their currency supply they sell government debt, bonds, IOUs. This is a bit too long to get into in this interview. The bond market's screwed. Look at the yields. We've got inverted yield curves. I would not touch anything conventional. In fact, no matter who you are, you are taking a bet. So if you'll go into cash, what you're doing is that you're betting of the stability of the sterling, or the dollar, or whatever. You're basically betting that the government and the Bank of England is going to look after sterling. If you go into property, you're placing a bet that property is gonna weather the storm. If you go into gold. So no matter what you're doing, you are placing a bet. If you do nothing, you're hoping, you're betting, that the world economy is gonna sort itself out and everything's gonna be fine.
- So let's talk about those two. Property is obviously something that a lot of people watching this have got a lot of money invested in. So what's your take on the impact on the property market with COVID-19?
- Again, game over. I know I sound like a permabear at the moment and it's like the world is ending, but I'm called the Realistic Trader for a reason, I'm just being realistic here. At the moment everything's frozen. So the property market is pretty much frozen, there's not many buying or selling, I guess rent is stable-ish. I know there's some landlords struggling with renters that are just refusing to pay rent now. What's likely to happen is once the market starts opening up again we're gonna start seeing a slide in property. Let's take a few steps back. If you back to the Weimar Republic, so the hyperinflation back in Germany. It was one of the worst hyperinflations ever. I know it's a bit of an extreme example, but it sort of really highlights public sentiment. So what happened is that they did the normal levers, they dropped interest rates, they tried to print loads of currency to try and kickstart the economy, to get people spending and get the economy going. And that's pretty much what every central bank has ever done for the last 100 years basically. But it never works, it never works. So when the markets get to proper capitulation stages and the public is scared, you could drop 10,000 pounds into most families during the proper capitulation phase and it won't kickstart the economy because people's money habits and spending habits change. So if all of a sudden the stock market kills those previous lows you've just got it really start ramming down and we've got all sorts of lockdown stuff with corona and all that, whatever. Basically everyone's scared and people are not working, they're losing income, or most people are financially worse off at the moment. So any money the government does gift us or give us or loan to us, they're not gonna spend it on a new fancy car. They're not gonna be buying new whatever, they're gonna be hording it, they're gonna keep it. So what tends to happen is that stimulus never actually gets into the economy and so this is one contributing reason why I see property is gonna go down.
- So that's a no to shares, a no to bonds, and a no to property. What about you and I first met in your days as a gold bullion dealer. Where does gold sit in all this?
- I'm bearish short term, I'm bullish medium to long term. So, what happened, because we're in a world of literally a massive spiderweb of derivatives. A lot of people think gold is inversely correlated to stocks, it's not. If you go back 300 years ago, yes it was, stocks go down, gold bullion goes up. But, these days because of all the ETFs, what actually happens is that gold and stocks, they move in lock steps so that's why we saw the markets crash, gold and silver crashed with it and that's simply because of the paper gold and silver out there, ETFs. But what then happens is that there's a demand and supply squeeze. So what happens is so all the strong hands out there go, "Oh my God, gold's on a fire sale, let's horde, "let's buy up loads of cheap gold and silver." And then the supply just evaporates. So if you go to pretty much any bullion dealer right now, their delivery times have gone from one day to 30 day waiting in delivery times. So what happens is that you have this disconnect, as in the supply and demand disconnect where the paper price of bullion carries on going down and then the physical price goes up. So we haven't had that yet. So as stocks continue to plummet, I see gold and silver also probably plummeting in the short term, but I'm very bullish long term. I'm in wealth generation so you should never be like, "Property's a way to get rich. "Trade is the only way to get rich." You have to use the correct vehicle at the correct time. So right now I would say going to cash is very prudent. So go into cash right now, but don't just go into cash for the next five years 'cause all sorts of rubbish is gonna happen there. I wouldn't be surprised if there are capital controls. There will maybe be bail-ins et cetera. So go into cash. Again, you have to time it. So go into cash is good for now. It won't be long I see where I think they're probably gonna use the whole corona stuff as an excuse to get rid of cash, as in physical cash. What's gonna happen at the moment is that the way they create currency or money is through debt basically. The government gets in debt to its Central Bank and so the only way to create new money, currency out there, is to get into more debt. But it doesn't need to be that way. So one thing the government is able to do is to create money or create currency without a Central Bank. So without doing the whole shell game of buying and selling treasury bonds, et cetera. So what's probably going to happen is that the governments probably gonna force the Central Bank and it'll be in every country, so they're gonna try and get every Central Bank into I guess retail banking. So they'll create a digital version of sterling for example. And what will probably happen is that we'll have a bank holiday at some point, banks will close for a week, maybe two, and during this they'll outlaw physical cash and you'll have a window of opportunity to go and give the cash, et cetera. And what they'll do is let's say, and I think this will probably happen after the first mainstream bank goes bust. So I do see a major bank going bust whether it's Santander, HSBC, probably Deutsche Bank first most likely. So when that happens and let's say you have, I don't know, 10 grand in your Barclay's account et cetera. Let's say Barclay's goes bust. The government will not, I don't see the government bailing out the banks like they did in 2008 again. I think there will be public outcry. I think what they'll do is the government will probably be on more of the public's side than bailing out the bankers again. So what's probably gonna happen is they will let the banks go bust, this is my crazy forecast. I see big banks going bust and there's gonna be like Bastions, Lehman Brothers, all over again. But what will happen is if you had say 10 grand in your account, what they'll probably do is go, "Right, we've now got digital sterling," they won't call it crypto sterling, they'll call it digital sterling. They'll probably increase the contact list limit at most 30 pounds, they'll probably increase that a bit. And they'll go, "Right, you had 10 grand in your account, "you now have an e-wallet, you now have a digital wallet, "and guess what, you've now got 10 grand "of digital sterling." And what they're gonna do is they'll just replace the whole sterling currency with digital sterling currency. But unfortunately, the HMRC, the government, will then have full optics on everyone's financial affairs. So going to cash like that, if you stay in cash not good. Go to cash right now and basically get out of anything stock related. I would I guess , I know, again, this sounds crazy, I would wait a bit 'cause I also see crypto, like bitcoin falling a bit as well. So I do think cryptos will be a hedge against economic uncertainty, but not again, like gold, it's at the moment people are crashing, they don't want to really spend it. They wanna basically secure their family and food and buy more toilet paper, I don't know.
- Is there an argument? As you talk, obviously some of these things happen very quickly. Is there an argument for saying that you should be should be drip feeding perhaps on a monthly basis into these things so that you can either, the old pound-cost averaging idea, is that gonna be a safer strategy than trying to time the absolutely bottom of the market?
- Yeah. Yeah, pound-cost averaging is always a safer bet than trying to time it. I mean I've been trading 15 years and I still get it wrong all of the time. So yeah, pound-cost averaging, but I would say I wouldn't stop buying into stuff until we've at least hit 50% crash. We haven't hit that 50% crash level yet, I think it's 39%. So yeah, there's more falling. So I would put a little bit a money into bitcoin, I really would because when they start inflating the currency supply away, it's only going to increase the value and also price of bitcoin 'cause you cannot inflate bitcoin.
- Would you argue, I know in the past there's been all sorts of other cryptocurrencies created and some have got some traction, many haven't, would you recommend spreading funds across more than just bitcoin in the crypto world?
- I wouldn't really. When I got into cryptos there was like 500 cryptos. I think last time I checked, not long ago, there's almost 6,000 cryptos, but most of them they disappear. Bitcoin, whatever your opinions is, is the only one that's been battle tested over a 10-year period now, or 11-year period. Yeah, I would have a little bit a money in bitcoin as a hedge.
- Obviously we've talked a lot about your trading strategy and the short-term issues that you're managing through. What about your long-term personal investment strategy? What do you see as the basis of building you and your family's long-term wealth?
- So there's a really good saying, I don't know who said it, but "the ultimate insurance policy is having the six Gs, "gold, guns, grub, ground, gasoline, generator." So I've always had that in the back of my mind and an insurance policy is something you hope you never need to call on right? You have life insurance, but you really hope you don't have to exercise that life insurance. So, in terms of financial insurance, the six Gs is a good thing. It is worth having six months supply of, maybe not guns, but gold, guns, grub, ground, gasoline, generator, et cetera. So basically you use a family unit to have food in your belly, roof on your head, water, et cetera. So, I've got six months of the six Gs. So I know that whatever corona rubbish happens, my immediate family is safe. So, that's one thing. So for me, my personal play is basically to trade the market 'cause that's just my skill, that's my job. My job is to sit at home in my underwear trading. And then I'm gonna convert a portion of that into cryptos. So basically going into cryptos is my hedge against the governments doing what they always do and inflating the currency supply away. They can't really drop interest rates any lower. So their only lead that they got now is to pump my currency and at the moment they do that your purchasing power disappears. I see capital controls in, I see bail-ins in the future, so again, that's why crypto, or bitcoin, is a hedge against that. I will actually be going long on Tesla. I will be buying Tesla stock. It's probably the only stock I will buy once we get to further falling. A lot of people think Tesla's business model is selling cars, but I would do more research if that's what you think. But Tesla will make more money with industrial solar and residential solar than cars and they will be basically turning the whole automobile industry from selling cars into a TAS, transport as a service. So yeah, long story short I'm very sure on Tesla. So I'll have basic cryptos, Tesla, and then guess what? In a year, two, three years time, or any time from now to the next couple a years, it's going to be an absolute playground if you have the skills of buying businesses. I mean we have the baby boomers, there all between the age of about 68 to 75 years old right now. As a demographic, a lot of them have businesses. They have a higher proportion of business owners than most other demographics. And guess what? They're all selling and a lot of them are selling for pennies on the pound because technology has actually just removed a lot of barriers to entry. It's never been easier to set up a business these days. You can set up a website, take money from your website, get loads of eyeballs on your website very cheaply. Whereas back in the day you couldn't. So a lot of businesses now are having to undersell in order to bang out. So yeah, but again, this is all very well me saying that 'cause I can trade and I have a bunch of businesses. I guess for the average person out there, it's a lot harder. I'm trying to imagine someone who hasn't been in business before, doesn't invest, doesn't know how to trade, et cetera. What does that person do? And I think it would be very wise to use this time to develop new skills. We're stuck at home, we're under house arrest pretty much. It's like Christmas. Everything's shut, the fridge is full of food. You need to be developing new skills and I think the new skills for the next few years are gonna be I guess anything online related. Trying to come up with an online business. I guess online marketing skills is gonna be very good. I mean how, what does a business get sales? You need leads. How do you get leads these days? Online. So, I think learning online marketing I guess is probably a good prudent skill. Going back to the average person, what do they do? I think the simplest thing to do is have a little bit of bitcoin, have a little bit of gold and silver, maybe buy a little bit of Tesla when it gets lower. Go to cash.
- So Siam, we're obviously in the middle of a crisis right now, but if we look out, the next three to five years, what are your thoughts on the future of the global economy?
- I think it's gonna be extremely prosperous. Basically every demographic has a thing which they latched onto as they hit peak earning part of it. So peak earning is between 35 and 45 years old. If you go back 20 years, the Generation X, they converged with the internet and then that has created everything basically. So now, we have the Millennials, which is the biggest demographic in history, human history, all converging on about 10 technologies which are in exponential growth. From 3D printing to AI, et cetera. So I think from three years onwards it's gonna be extremely bullish. I think there's gonna be all sorts of amazing industries being built like virtual reality, augmented reality, et cetera. So yeah, it's gonna be amazing once this passes.
- Fantastic, okay, well that's great advice there and those of us who follow you on the Facebook may have seen you wondering around the streets of Norfolk in a dinosaur after this Siam. Should we be worried about the impact on your mental health of this lockdown?
- Yeah. I think I'm doing the typical Zoom thing right now. I'm dressed from the waste up .
- That's too much information. Siam Kidd, thank you very much for joining us.
- Thank you.