Top Biz News
Investment guru predicts full recovery by 2014
By Andrew Moody (China Daily)
Updated: 2009-10-19 08:57
By the charts
As well being a guest host on the CNBC Asia Squawk Box program, which provides live chart analysis of markets across the world, he also regularly appears on TV18 and Zee Business TV in India.
Guppy is what is known as a technical analyst, applying a "chartist" approach to analyzing markets.
This means he is more concerned about searching for trends in the graphs of markets and individual shares, rather than what causes them to go up and down.
"My basic assumption is that everyone in the markets knows a great deal more than I do. When people back their assumptions with money, my focus is on understanding that activity in the market, rather than understanding the reasons for that activity," Guppy said.
"If you look at charts you see certain patterns of behavior repeated, and it is up to me to take trading advantage of it."
Guppy does not have a conventional financial background and has never worked on a trading floor.
He studied politics and history at Le Trobe University in Victoria in Australia before becoming a teacher at a middle school for five years.
He then headed off to the Australian Outback, relocating to the Northern Territories.
"I wanted to search for gold in the Outback, shoot crocodiles and ride wild horses," he said.
What he ended up doing was operating heavy machinery and building roads while his wife, Marion, continued teaching.
"I saved up enough money to buy my own machine and created my own company doing road building contracts," he said.
Having saved A$2,000 ($1,807), he decided to invest in the stock market. Since all he knew was mining, Guppy bought A$2,000 of shares in Australia's Mount Isa Mines.
"I bought at 70 cents and then I see they have gone up to 140 cents. That is 100 per cent profit. Of course, living in the Outback, the newspaper I get is a week old. I then discover they have gone down to 60 cents, and I feel very stupid," he said.
However, he soon saw patterns emerging. He realized if he could understand these cycles and make purchases at key turning points, he could produce a major return.
Within a year, and by also trading other stocks, he managed to turn A$2,000 into A$100,000 (US $90,327).
"I was not aware of charting or technical analysis at the time. I just had an Apple computer and a spread sheet, and I used to record all the price details and produce weekly charts," he said.
Market behavior
"I actually linked trading to tracking animals in the Outback. Kangaroos will always come and drink water at 5 pm, so if you want to eat kangaroo you have to be at that spot at that time. You have to understand the behavior of markets to make the kill at the right time," Guppy said.
Guppy began writing books, the first of which was Share Trading. He became wealthy through his trading activity and by being a best-selling author.
The Australian is interested in Chinese investment behavior, too.
"Chinese investors are more traders than long-term investors, which are greater in number in Western markets, " he said.
Guppy believes there are dangers for China when the Shanghai market is finally opened up.
"If the market is opened up to Westerners too quickly, it will become overwhelmed by people who have more experience and a higher level of skill, which will be to the detriment of China. Money will be sucked out of China, as it was 100 or 200 years ago," he said.
However, some argue that whether you are a trend analyst or a value investor, the best way to make money in stock markets is to back a selection of shares and keep them for 20 years.
The Australian guru said that approach does not work.
"If you did that, you would go broke. If you had 20 shares, you would find that 80 percent of them would have de-listed or gone broke," Guppy said.
"You have only got to look at the constituents of the major indexes over that period. Only a fifth of the stocks have survived. The rest are new," he said.
Meanwhile, Guppy is confident the world has moved out of the recession, even though very slowly.
"Technical analysis shows us that the market moves four to six months ahead of the real economy," he said.
The market already told us we moved out of the recession about three months ago. It will be nice to get that confirmed, but we already know it," Guppy said.
