Becoming the “Macro Tourist”
How I Got My Start in Finance
Featuring Kevin Muir
Published on: August 12th, 2019 • Duration: 12 minutesKevin Muir, author of The Macro Tourist, joins Tony Greer of The Morning Navigator to talk about Muir’s abnormal career path. Muir discusses choosing work over school early on, the family emergency that forced him to change his career plan, and his return to the financial industry after two decades of trading his own account. This clip is excerpted from a video published on Real Vision on April 15, 2019 entitled, “Prepping for a Market Melt-Up.”
JUSTINE UNDERHILL: Welcome to How I Got My Start in Finance. This week, author of the Macro Tourist, Kevin Muir, talks to Tony Greer about his exposure to finance at an early age. Growing up hearing about the stock market at dinner, he tells Real Vision how that set the table for his career in finance.
KEVIN MUIR: Well, so I grew up in a household where my father was a research director for an equity or an equity shop in Canada. So, I grew up listening to a lot of stock market talk at the table. And when you combine that with my love of games, like even he said, from the time I was a little kid, I would come up and want to play games and games and games, I always knew that I wanted to be a trader. My mom wanted me to be a lawyer or a doctor. And so, I was a disappointment because I went off and followed in my father's footsteps in the capital markets.
TONY GREER: That is amazing. That was the same exact thing with me where purely, my father was an over-the-counter trader and he was for 30 years. And it was just dinner table conversation that made its way into your blood. And so, when I get out of school, I was just determined to get a job on a trading desk. What was your first practical application in the markets?
KEVIN MUIR: So, I actually got a job. Just like you, I didn't even finish school to be truthful. I was at University of Toronto when I started to get a job at a discount stock brokerage division. And next thing I knew, I was the manager of that, and I was rearranging my school so I go at night. And then I actually had a brief stint where I tried Chicago, I went and I decided I wanted to be an open outcry trader, and I realized that wasn't for me. And I came back to Canada and I put together all my skills, and I realized that what I really wanted to do was work on an institutional equity desk.
So, I applied and I was lucky enough to get a job at RBC Dominion Securities on the institutional equity desk, even when before I've finished my degree. I eventually got it at night. So, for anybody- my kids if you're listening, make sure you finish your degree, but I-
TONY GREER: Just an educated man, that's for sure.
KEVIN MUIR: That's right. I did get it at night, but I was lucky enough to get a job in the early '90s at RBC Dominion Securities and RBC was just a magical place. It was terrific. I got to sit with some really smart traders that I got to learn from. And it was off. It was unbelievable, great learning experience. What was really good about RBC was that they let you go with it like they didn't care if you were young, they didn't care if you had new ideas. If they thought you could make money and they gave you responsibility.
And so, before long, even though I was young, I was handling all the risk for the equity derivative book. And so, I did that in the '90s. And then in late '99, my wife got pregnant and then we had our first daughter and she was born with a heart defect. And it was fixed at birth. And it was a very emotional time for me. And I realized I had one of those moments where I realized what was important in life. And even though I loved RBC, I hit this point where I questioned what I wanted to do, and I decided that I was going to take some time off and think about it. So, I quit.
And I quit to spend some time with the family. And while I was thinking about what I was going to do, I decided I'd start trading my own account. And I figured, you know what? If I trade my own account for a year, I can always go get a job somewhere else. Well, one year turned into two and two years turned into five. And then next thing you know, I gone 20 years, basically just trading my own account. And my daughter was off to university and I realized that I hadn't had a real job in a long time. So, I reached out to one of my friends East West Investment Management that was my competitor at RBC, and he was kind enough to take me in and it's been great getting back into the swing of things there.
TONY GREER: What type of fund is East West Management?
KEVIN MUIR: So, we're a portfolio manager, it's a family office that we also advise a high net worth individuals and families and it's a lot of that and it's been terrific in terms of expanding my getting out there and listening to different pitches from different fund managers has been a wonderful experience and something that I really enjoy actually, just getting listening to the different ideas. I've never had any idea of all the different ways that you can make money in different kinds of funds out there. So, it's been fascinating.
TONY GREER: Well, clearly, you found a couple of the ways if you're working for yourself for 20 years. I think it's really interesting that you said you didn't really like open outcry. And then you wound up evolving into having essentially the job of a local trader. Where you're trading your own money, you're on your own for a long time.
KEVIN MUIR: That's correct.
TONY GREER: Obviously, you were very astute at that and able to make it through and continue being successful. I feel like we both came from the early '90s, what I call the Renaissance age of interdealer banking, trading. And I'm open and honest with everybody and I miss breaking phones. I really do. That's one part about the newsletter business that I don't get very often. And that was like the release like a big play on a sports field or something like that. Have you got any good phone breaking story from those days?
KEVIN MUIR: You know what's interesting? You say that you like breaking phones and that was actually the genesis of why I started writing the Macro Tourist letter- was because people used to ask me, what do you miss not sitting on an institutional desk? And that to me, I didn't break any phones. But I missed the camaraderie and the betting and the gambling and being around and hearing the trading talk. And so, I missed that.
And then people ask me, what else do you miss? And I said, well, when I was at RBC and I was trading for our book, we would trade size and I would be setting prices. And so, someone would say, we're going up on a couple million or something, do you want to buy something? I'd say, yeah, I'll buy 250 or 500. And then when I went and started trading for myself, people used to phone me up thinking that I was a real shooter and they'd be like, we're going up on a couple million, do you want to buy any? And I said, well, I'll take 10 but I understand if you don't want to write the ticket.
So, I missed that. And that was one of the reasons that I got out and started writing the letter- was to talk to people and to put something out there so that I could meet wonderful people like you, and it was terrific that way. And so, now, in terms of remembering back to a story, we were the market maker for what were known as TIPs. And TIPs are not Treasury inflation protected securities in Canada, they were actually the Toronto 35 Index Participation Units.
And being the market maker, we were obliged to always provide markets like post-bids and offers out on the exchange. But we were also obligated to fill the trust that own the underlying index with the index rebalances. So, that means if something was going into the index, we had to sell it to the majority- to them at the close. And then if something was coming out, we had to buy it at the close. And so, anyway, so going to the like the index rebalance, we were obligated to go in picking like five stocks that were coming out of the index, we're supposed to buy these millions of shares, and then short that stocks that were going out.
And this was in early 2000. And what happened was, I don't know if you remember, but the market didn't top nicely. Like it didn't just go straight up and then go straight down. And this was in, I believe it was March and I went back and looked at the chart and I realized that between March, there was a two-week period where the NASDAQ went down 15% in a week.
So, it was one of these days when I got up. And we had to do this rebalance at this time. And one of the trades that I had to do was I was going to be long or short, we were putting the BlackBerry emotion, like our research emotion into the index. And I was going to be short like two or 3 million shares of BlackBerry at the closing price. And BlackBerry was trading at like 200 bucks, and it was a big momentum stock and it was lots of volatility. And I woke up, and on the day to rebalance and what had happened was the market had gapped down.
So, it was like the first really bad day that we've experienced in a while and the market gapped down and research emotion was down $35 like from 2, 10 to whatever.
TONY GREER: Yeah, 15%.
KEVIN MUIR: Yeah, and all of the sudden, we're trading long and I'm trying to buy some, and I hear over the hoot and holler system, I hear this client wants to bid on 50 research emotion Blackberry. And I say, okay, well the market was like let's say 180 to 182 and I thought I'll bid 178 and then he'll come back at 180 and we'll go back and forth, and it'll be like that. And he said, so I said 178 bid, you're 50 and all of a sudden, he said sold. And I was like, holy smokes and I think I lost like 2000 on the way down.
And so, I printed the 48 like the remaining 48 and I'm long at this price. And I'm like, what am I going to do? Like this stocks got no bid and it's just like the market keeps crapping out and I'm all of a sudden going, I know we're putting this into the index later but right now, this thing looks like it's just has no bid at all. And so, also and I'm trying to trade out of it. Next thing I know, I'm offside like three bucks and four bucks, five bucks. And this, the sales guy on the other side says my client wants to know if your client has any more to buy. And I said to him, I said, client?
TONY GREER: I don't have a client.
KEVIN MUIR: Yeah, like client? That was me. And he says, oh. And then I said, well, who's your client? And there was a pause. And he said, cap. And I looked at my buddy, and I said, who's cap? And I had no idea who cap was. It was capital like capital was a big, big client. And what these guys were notorious for was when they started selling, they sold and sold and sold and sold.
And so, it was like Fidelity- when they started coming for when they put it in an order, it lasted weeks. So, my buddy, my best friend looks at me and he says you're screwed. And I just had this like complete shed of panic. I was like offside, and all I could imagine was him continuing to sell and the market continuing to go down, down, down, down.
TONY GREER: My hands are sweating. All right. Well, I know that feeling.
KEVIN MUIR: Well, what happened was though, the market started to turn and I kept trading it around, I kept trying to make $1 and here and there and kept getting long and I eventually bought another 50 from them and another 50 and another 50. And by the end of the day, it was one of those emotional rallies. You know when the market like it was down all morning, and everybody's like everybody is sold. And then all of a sudden, the bids come at the end of the day and it just starts rifling up? Well, that happened. And then not only that everyone that had to rebalance had to buy research emotion.
So, we had taken that stock and it was like gone from 210 down to 180. And then it gone down to 160. And then we put it back into the index at like 220.
TONY GREER: Total reversal.
KEVIN MUIR: Total reversal. And we did it on size. And it was one of our best days. And it was scary. And it was fun. But it was definitely one of those moments you never forget.
JUSTINE UNDERHILL: Kevin Muir marches to the beat of his own drum. From working at an institutional trading desk to trading his own account and writing a macroeconomic newsletter, Muir has had a unique path to success.
For Real Vision, I'm Justine Underhill.