Transcript: Investment Masterclass — confessions of a top ex-Citibank trader

This is an audio transcript of the Money Clinic podcast episode: ‘Investment Masterclass — confessions of a top ex-Citibank trader’

Gary Stevenson
For me, trading is like looking at the weather forecast. To stop trading would be like to stop watching the news. Like it’s the only way that I know. It’s like the world reveals itself.

Claer Barrett
It’s how you make sense of the world.

Gary Stevenson
Yeah, exactly.

[MUSIC PLAYING]

Claer Barrett
What would you trade for the chance of earning a multimillion pound bonus? My guest today grew up in east London, in the shadow of Canary Wharf skyscrapers, but dreamt of making it big in the world of finance. In his first year as a trader, he earned a bonus of £400,000. By the age of 24, he’d become Citibank’s most profitable trader in the world, trading almost $1tn a day. You might think, well, where do you go from there? And the answer is Gary Stevenson quit his job, wrote a bestselling book, and has reinvented himself as the people’s economist. And he’s here in the Money Clinic studio to tell us all about it. Welcome to Money Clinic, the weekly podcast from the Financial Times about personal finance and investing. I’m Claer Barrett, the FT’s consumer editor.

[MUSIC PLAYING]

There are so many lessons that today’s guest, Gary Stevenson, has to offer listeners. So let me start, Gary, by welcoming you to the studio. Thanks for joining us today.

Gary Stevenson
So nice to meet you.

Claer Barrett
Well, obviously we’re going to talk about your unputdownable book, The Trading Game. But before we do that, the question that I ask guests who come on the show is, what’s your earliest money memory?

Gary Stevenson
I was probably about six or seven, and my parents sent me to the Esso garage with a pound coin to buy lemonade, and I dropped that pound coin at some point on the trip and, panicked, sort of scrabbling around the drains, ducking under the cars for this pound coin. And, in my memory, I must have thought I was looking for it for hours. It’s probably only about 20 minutes. I went home in floods of tears. My main memory as a kid was that we didn’t have any money. I was that kind of kid. You get your clothes in black bean bags and people at church giving you their sort of old hand-me-downs. And that was that was it. There wasn’t a lot going around, basically.

Claer Barrett
Now, you were fantastic at maths at school. You got a degree in maths and economics at LSE. And then one of the things that you really detail in the book in perhaps some of the most addictive pages as a reader is how you ended up getting a job at Citibank. So it was really a matter of chance.

Gary Stevenson
In a sense. Yeah. So yeah, as you said, I was a very good maths student growing up and always got quite good grades. I went to LSE school economics, very fancy university, and I just sort of assumed if I studied hard then I would get good grades, I would get a good job. But the way it actually happened or at least it did when I was in university, you come in for your second year of a three-year degree. Basically everybody goes totally mental. They start wearing suits into lectures. They start talking entirely of three-letter acronyms. You never heard of. (proceeds to list different economics acronyms). All of this stuff. And basically they stopped caring about their exams. Everyone started solely applying for internships.

Claer Barrett
Yeah.

Gary Stevenson
So really, how did the banks determine who they give the internships to? And what it comes down to is CV and cover letter. And LSE has a lot of very wealthy students. It’s very international. It’s kids of very wealthy people from countries all over the world — people from India, Pakistan, China and Latin America.

Claer Barrett
On your first day, you turned up wearing a tracksuit.

Gary Stevenson
Yeah, wearing an Ecko tracksuit with a big rhino on the front. But then you look around and you say, I’m competing with these guys on CV and cover letter. Everyone you look at has been trained up since they were a kid. Basically, you know, one kid would be head of the junior United Nations and other kids, like, founded a charity that drives dirt bikes through the Sahara Desert for some reason. And other kids played the oboe at the Royal Albert Hall. And I was sitting, I was fluffing pillows at DFS sofa store in Beckton next to a sewage works. And you realise basically there’s no chance I’m going to get in.

So this is my first realisation that the jobs are not perhaps distributed on a fair basis. And what I did was I started to be quite aggressive in lectures basically. So because I was known as a smart student, I thought if I could make myself stand out, I might get a chance in some way. And that basically worked. I was sitting in the library one day, and the kid from the above, who was also a maths student said, Are you Gary Stevenson? I said, yeah. He said (inaudible) a card game, which is basically a maths game. I heard you’re good at maths. You should enter that game and if you win you can get a job in. And that’s what I did.

Claer Barrett
Well the rest, as they say, is history. You got on to the trading desk at Citibank in 2008. Of course, lots of things were going on in the world at that time, midway through the credit crisis. And your job was to bet for or against the recovery — what would happen and to what degree. What were the main lessons that you learned in your early years in that job?

Gary Stevenson
So my job, as you say, was to predict interest rates. And I started full time in the middle of 2008 just before the Lehman crisis. Rates collapsed to zero very quickly. Nobody had predicted that. In 2009, everybody was predicting a rapid bounce back in rates, a rapid economic recovery, quite reminiscent to what a lot of the media was saying during Covid crisis. We’re going to get V-shaped recovery. We’re going to get a short bounceback because of the really low interest rates. Didn’t happen in 2009. Everyone said 2010, they’ll go up. Didn’t happen in 2010. So my first sort of three years as a trader were basically witnessing phenomenal failure of the entire economics discipline, essentially. And that went on for years.

Basically, economics predicted interest rate recovery every single year from 2009 to 2020. It was only fine in 2020, when everybody agreed rates would never go up again, immediately before they went up to 5 per cent. So the first thing I learned really in my first two years was these are the best paid economists in the world. Their job is specifically to predict interest rates, and they are always wrong at predicting interest rates. So what I learned in my first few years is that basically we as a society are phenomenally bad economics, phenomenally bad. And that to me meant dollar signs, because if they couldn’t do it and I could, then I’d make the money. And that’s what I wanted to do.

Claer Barrett
Now, making money is something that you certainly did. This is the standout theme in the book. And everyone wants to earn more money, especially in a cost of living crisis. I’m sure that listeners would dream to have a bonus the fraction of the size of some of the ones that you were earning back then. But it struck me, reading that section of your book, that the more money you earned, the less you seemed to like yourself.

Gary Stevenson
I think a big turning point for me was this first bonus, this £400,000 bonus, which you mentioned. I come from a poor background as I mentioned. People out there who grew up poor like me, they’ll know you don’t buy clothes, you don’t go to restaurants, you don’t go to shops. You know, you always buy the cheapest thing. I used to go to Tesco when I was at uni. I buy two Scotch eggs, 75p every day for lunch. You do that every day, every day. And then suddenly someone drops 400 grand on your head and you look back and you think, all those Scotch eggs, you know? And but it’s not just that, you know, I thought about my dad. My dad worked for the Post Office for 35 years. He started work really early. He used to take a train that went past the back of the house. I could see it from my bedroom window. My mom would wake us up and we try and wave to my dad going in. He started work really early, come back really late, tired all the time for like 20 grand a year, you know what I mean? And then you sit there and I think because it was so big, I knew immediately I couldn’t tell anyone about that. My money.

Of course, I needed, as a human, I needed to tell someone. And there’s this sort of couple of scenes in the book where I tried to tell my girlfriend about it, and I see immediately the change in her face and I realised immediately this amount of money is going to change the way she sees me. It’s going to change our relationship, it’s going to change the way we relate to each other. And what it does is it separates you from everyone you’ve ever known. But also at the same time, you know, if I made 400 grand, what did that guy make? What did that guy make? What did those guys other than me. So you want more. And I think it, that simultaneous putting stars in my eyes and filling me with ambition, whilst also separating me from my support networks, led me on a pretty dangerous path, I think.

Claer Barrett
Well, because of course, the next bonus was substantially bigger than the £400,000 one, which at the time had seemed like it was just dropped from the moon. But as the sums got bigger and bigger, they weren’t making you any happier. I mean, one of your colleagues says to you at the time, like, you know, why aren’t you enjoying this money, Gary? Why aren’t you spending any of it? You bought a flat, but you haven’t bought the furniture.

Gary Stevenson
I just became kind of a machine. I think I’m the kind of guy that gets a bit obsessed about the things that he’s doing. I love trading, and I still love trading, and I wanted to be the best trader in the world. For me, trading is like looking at the weather forecast. To stop trading would be like to stop watching the news. It’s like the world reveals itself to you.

Claer Barrett
It’s how you make sense of the world.

Gary Stevenson
Yeah, exactly. And it was not only that, but I was in a situation where everyone, the top level traders, were consistently predicting everything wrong. So you’re seeing this massive flaw in our society, and you’re competing with the best people, and you realise there’s something missing. You must be like, if you’re a scientist and you realise there’s a massive discovery here on the edge of our field, everyone’s wrong about something. There’ll be a lot of people out there who they understand. It’s in your job. You want to be the best at your job. And I became so obsessed with my job that even though it was about the money, it kind of wasn’t about the money. And I just said, and I never basically spent any of it. I didn’t need it. I didn’t want a fancy car. I bought a bike. I still got a bike. I just think that, I don’t know that the stuff that we bought with money, to be honest, I think a lot of it is nonsense.

[MUSIC PLAYING]

Claer Barrett
Now talking about inequality, you describe yourself on all of your social media channels that you set up since quitting that job as an inequality economist. Tell us what that means.

Gary Stevenson
So when I was a trader, I was, I’ve become obsessed with this clear fact that we as a society have been terrible at predicting the economy and interest rates for at least since 2008 now. I studied economics at LSE, which is one of the most prestigious economics universities in the world. You know, the theory is when interest rates are zero, people like you and I and people like the listeners should have very cheap access to loans. You know, they can borrow money, businesses can borrow money. They’re going to go and spend. It should stimulate the economy. But it wasn’t happening and it never happened after 2008. It’s basically never happened. Early 2011, I recorded some meeting where we went through the financial situations of all the major European governments: Italy, Spain, Portugal, Greece.

Claer Barrett
How much debt they’re holding.

Gary Stevenson
But also spending all their income every year, debt increasing, losing their assets. So you had a situation where the people are losing their assets and the governments are losing their assets. And this is impossible unless all of the assets are disappearing, which they’re not, and you can’t be in debt to nobody. So I looked around me and I realised the wealth of the middle class have been lost to the rich, the wealth of governments are being lost to the rich. I think really the history of modern economics of the last 15 years, in my opinion, is basically terminal cancer being misdiagnosed as a series of seasonal colds. And that’s what I realised as a trader.

So I put a massive bet on that interest rates would stay low for the next three, four years. Basically, they’ll never be at recovery, and that made me Citibank’s top trader in the world in 2011. And, I don’t think history has done anything but prove me right in the time since. And that’s why I quit my job to become an inequality economist, because I’m from this country and I don’t want to see it collapse.

Claer Barrett
How would you give people who are listening any kind of hope that it’s possible to change this?

Gary Stevenson
I think if the majority of people in this country and across the world — because this is not a totally UK specific problem — if they recognise that the falling living standards were due to growing wealth inequality, which I think is true, and that wealth inequality is going to continue to grow quickly, which I think is also true, they would have to accept what I’ve said and they would demand change in their governments. And that change is possible.

You know, we’ve seen inequality doesn’t only rise. We saw especially in the period of the Second World War, we saw dramatic decreases in inequality and dramatic increases in living standards. And that was because people across the continent and across the world demanded it. If we realised the truth of the problem, which is growing inequality, which up to now we’ve done nothing to fix, then we can fix it, then we can reverse it.

[MUSIC PLAYING]

Claer Barrett
Now one of the changes that could come along for the UK this year, of course, is political change with the general election. Prime Minister Rishi Sunak, for what it’s worth, has also been saying that he thinks it’s this year that the UK economy is going to turn a corner. I’d love to hear your thoughts on this.

Gary Stevenson
You know, Rishi Sunak’s done a great job of bringing down global inflation all by himself. Not only did he predict inflation would fall, he said I will make inflation fall, which is, it’s like me coming out and saying I will, I personally will make the average temperature in this city rise by at least 10 degrees in the next two months.

Claer Barrett
His predictions that the UK economy has turned a corner, we should disregard or they basically . . . what?

Gary Stevenson
Well, one thing I will say is I think anybody out there on average income and average wealth levels knows that is not true. I’ve been to LSE now and I’ve been to Oxford, I’ve worked in the city, and now I’m moving around in these fancy publishing circles and media circles, and we’re increasingly living in a society where in all the halls of power — government, media, banking, academia — almost everyone is from a rich background. So you get a situation where a bunch of rich people sit in rooms with other rich people. Their lives are getting better and better. Ordinary people’s lives are collapsing and they say, well done, guys, we fixed it.

Of course, the conservatives will say they fixed the economy. And, you know, in two or three years, Labour would probably be saying the same thing. But what I would encourage ordinary people out there is, you know, use your eyes. Look around you. Does it really feel like your kids’ lives are going to be better than yours? I think that’s the question to ask.

Claer Barrett
If, as the polls are predicting, we get a Labour government coming in, one of the big fears happened that they would introduce a wealth tax, which is something that you and a lot of other people, in fact, many FT readers even would support. But Labour’s already ruled that out. Do you think that’s the wrong call?

Gary Stevenson
You need to do something. You know, you have this aggressive yearly flow of wealth away from the middle class. How do you protect the middle class if they’re losing their wealth? You have to get your wealth back from these people. And, you know, consider Rishi Sunak. £700mn. He’ll get £30mn passive income a year. If you don’t tax him, he will use that money to buy your moms’ houses.

Claer Barrett
Do you think the answer is tax? Or do you think that the answer is something that goes beyond that? Like, what would you like to do if you were the prime?

Gary Stevenson
I think the answer is tax. I mean, OK, we could talk about things like enforcing much higher levels of spending from the rich, perhaps.

Claer Barrett
I mean, just to play devil’s advocate. I mean, one of the topics that we get a lot of correspondence from listeners about is how they, as you know, working class, middle class people feel that they are being taxed far too much themselves.

Gary Stevenson
Yeah, and they are. I suspect that these are not people with £700mn, you know what I mean?

Claer Barrett
I know but how would your tax ideas differ from the tax that is falling on our heads currently?

Gary Stevenson
Quite simply, I want to move into a situation where people who have received large amounts of money pay a higher level of tax than people who have received lower amounts of money. There’s this phrase people have to say, which is the top 1 per cent pay the top whatever X amount of tax, 50 per cent or whatever. It’s not true. That’s the top 1 per cent of taxpayers. But every year you can see the list of the top taxpayers, and you can see the list of the richest people, completely different lists. The top taxpayers are people like me, people who work for their money.

Claer Barrett
Yeah, you earn money.

Gary Stevenson
I worked in the city and I paid 60 per cent: 50 per cent income tax plus 11 per cent national insurance, and I had a few million pounds. And I think I should pay a higher level of tax than that. The Duke of Westminster, at the same time inherits £10bn, £10,000mn and pays nothing. It is indefensible.

[MUSIC PLAYING]

Claer Barrett
Let’s move on the conversation from tax. Now, a recent article that you did with us in the FT Magazine, you said that you don’t give money to charity. As a wealthy person, that might surprise some people.

Gary Stevenson
I quit my job with enough money to work for free for the rest of my life. That was my plan. And I do work for free. Who do you think pays my YouTube channel? I pay for my YouTube channel. I run the YouTube channel for free. And the reason I can do that is because I’m an independently wealthy person.

Claer Barrett
You don’t pay advertising? You don’t want sponsors?

Gary Stevenson
No, I don’t. Listen, lots of people give money to charity and vote for the conservatives and vote to keep taxes low on the rich. I’m trying to achieve political change. And, you know, I’m happy for people to give money to charity. I’m going to keep trying to stop the country from collapsing.

Claer Barrett
OK, Gary, let’s talk a little bit more about trading and investment. This is an investment masterclass, after all. You do have a huge amount of experience as a trader. Can you pass on any lessons from the last few years of your trading experience?

Gary Stevenson
Between 2014 and 2017, I didn’t trade for a few years. I’d never stop looking at the markets. I pull up the markets and look at them. And again, late 2017, markets are saying there’s going to be a massive recovery, interest rates are going to come up. Interest rates are going to come up. And I just thought, these idiots. If you want to give me the money that badly, I will take it. And then I started trading again, betting again that interest rates wouldn’t come up.

The beginning of Covid was once in a lifetime trading opportunity. Unbelievably easy to make money. So I put a lot of bets on in the beginning of Covid. And those bets are still running and they have made me a lot of money. I trade, but I don’t . . . that doesn’t mean I’m putting trades in every day. I’ve always been a medium- to long term trader. It’s difficult to monetise right here, right now. Probably I wouldn’t advise buying a ton of assets right here, right now unless we get a dip. But the long-term direction is asset prices up. But really what that is devaluation of cash. And the reason the cash is being devalued is because the rich have unbelievably large amounts, you know.

Claer Barrett
Now, I mean, you say the rich, playing devil’s advocate here, you are somebody who has built up a lot of assets, you know, through your career in the in the city, however fleeting. You know, you’ve looked after that money, you’ve invested it, you made bets during the pandemic, but you know you are somebody who does have wealth.

Gary Stevenson
Yeah.

Claer Barrett
How do you reconcile that conflict with wanting to be somebody who’s taxed, wanting to be certain his wealth is taken?

Gary Stevenson
Listen, I don’t hate the rich. I’m a rich person. I’m not pointing fingers at anybody. I’m not pointing fingers at me. And of course I criticise people like Rishi Sunak and Jeremy Hunt. And, you know, I mean, a couple years time I will be criticising Keir Starmer and Rachel Reeves because these are the guys that make the policies and the policies should be better. I don’t think we get anywhere by putting down individual people and saying, you’re rich, you’re the bad guy. What do we achieve by that? There’s clearly a systemic problem. The economy is collapsing. Somebody like me gives my money away, then there’s just one less YouTube channel when the economy collapses, we need to stop it from collapsing. The way to do that is to change the rules of the system.

Claer Barrett
Even if that personally is to your detriment.

Gary Stevenson
I don’t need a lot of money that I’ve got. You know, I use it to try and fix the system. If this system wasn’t collapsing, I’ll be on the beach somewhere in the Philippines drinking pina coladas. I don’t need to be here, but this is my friends and family live here. I don’t want the place to collapse. And that’s why I wrote this book because I want people to understand the connection between systemic growth inequality and systemic collapse in living standards. And it’s not personal. If Rishi Sunak called me up and asked to go for a beer, I’d go with him.

Claer Barrett
Say he does, I’d love to be a fly on the wall if that was to happen.

[MUSIC PLAYING]

What would you say to the listeners of my channel, of Money Clinic about how they can use some of the arguments that you’ve made on the show today to better inform their future lives as investors?

Gary Stevenson
I’ve been saying from the beginning of Covid that it’s going to make house prices go up massively. And it already has made house prices go up a lot. And a lot of people have been confused about why house prices didn’t fall when interest rates were not so much. And I think the missing gap in the knowledge there is to understand this massive accumulation of cash by the rich. If you can get property for yourself and for your family, great. Do what you can. Make your investments as best you can. As the prices go up, house prices will go up. But also, you have to do your bit to prevent the collapse of this country in this country’s economy.

Claer Barrett
And are there any practical tips that you learned from your time on the trading desk, trading investments that have stayed with you through the years? I mean, just like your process of looking at the markets every day. Divining from that information where to spot a potential opportunity.

Gary Stevenson
If it’s too good to be true, it probably is. If anybody’s telling you anything above 10 per cent a year, really. If anybody’s pushing we’re going to get you 10 per cent a year, it’s probably too good to be true. And some people will sell strategies that are much higher than that. If you’re trading a lot, you’re trading too much, in my opinion. Anyone who’s doing day trading in and out, day after day, you’re probably, you’re playing roulette, really.

Claer Barrett
One thing that you do talk about in the book is when you were trying to get to sleep at night, you can sort of see charts in your mind, you know, green and orange arrows. I mean, it sounds to me — I don’t mean to sound like your mom — reading the book that, you know, you were addicted to trading. It just took over so much of your life.

Gary Stevenson
Oh, yeah. There’s no doubt that I was. And I probably needed that, like, couple of years’ gap from trading. But I don’t trade every day now. I don’t, you know, I’ve got the positions on, they’re not, well they are quite big actually. But they’re in sizes I can manage.

Claer Barrett
An investor of your experience with that amount of money.

Gary Stevenson
Yeah. Yeah.

Claer Barrett
But does it worry you that there is this conflation in the retail investment world between gambling and investing, taking an approach of investing which is too high risk.

Gary Stevenson
Massively. Crypto, day trading, foreign exchange trading. I get attacked so much for saying stay away from crypto. Stay away from crypto. Stay away from it. Day trading. Stay away from it. These online YouTube guys saying we’re going to teach you guaranteed ways to make money trading the market. I think these are all really, really dangerous. But, you know, we’ve created a generation of young people who have been told your value is the amount of money you can make, and we’ve given them almost no legitimate way of making money. You know, my dad was able to work for the Post Office and raise a family. You can’t do that nowadays. Work isn’t working. So then young people, especially young men, they become very vulnerable to these kinds of ideas on the internet. And I think, what part have we played in creating a society that gives our young people so little chance to make money legitimately that they’re forced into playing roulette on the internet?

Claer Barrett
Well, Gary, it’s been an absolute pleasure having you in the FT studio. So thank you for talking so frankly about your life and your book, The Trading Game. If people want to hear more from you, where do they go to find you?

Gary Stevenson
Garys Economics on YouTube, Instagram, Twitter, TikTok, Facebook, all Garys Economics.

Claer Barrett
There’s also a link in today’s show notes if you want to read the FT magazine interview that Gary did with my colleague Miles Ellingham. Well, that’s it for Money Clinic with me, Claer Barrett, this week and we hope you like what you’ve heard. If you did, spread the word and leave us a review and keep your eyes on the money clinic feed. Our new mini-series, The Five Minute Investor. Is coming soon. We’re always looking to chat with people about their money issues for the show. If you’re interested in being part of a future episode, then email us. Our address: money@ft.com. You can also take a peek at our website, FT.com/money, grab a copy of the FT Weekend newspaper or follow me on Instagram and TikTok. I’m @ClaerB. Money Clinic was produced by Tamara Kormornick. The sound design is by Breen Turner and our editor is Manuela Saragossa. You heard original tunes this week by Metaphor Music. And Cheryl Brumley is the FT’s global head of audio. And finally, our usual disclaimer. The Money Clinic podcast is a general discussion around financial topics and does not constitute an investment recommendation or individual financial advice. For that, you’ll need to find an independent financial adviser. That’s all the small print for now. See you back here next week. Goodbye.