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

“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”

• 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.

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

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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