David Kuo talks to David Jones from IG Group.
You can listen to or download this podcast here.
David:
This is Money Talk, the weekly investing podcast from the Motley Fool. I am David Kuo, and I have heard that a volatile market is a spread better's friend. I don't know how true that is, but I know a man who might be able to shed some light on that assertion. He is David Jones; he is the chief market strategist at IG Group (LSE: IGG); and he is with me now. So welcome back to Motley Fool Money Talk, David.
David J:
Thanks for asking me back.
David:
Well yeah, you were so good the first time that I had to get you back the second time, especially in these volatile markets. Now, for those people who don't know, David has an encyclopaedic knowledge of spread betting, and later on in this podcast I will present him with a chart, a chart that he hasn't seen yet, of a popular share, and he will talk us through how to spread bet this share. To see the chart, please go to fool.co.uk/spreadbet. Now David, I said at the beginning of this podcast that we are seeing some very volatile markets right now. There was one particular week I remember in August, and the FTSE had swung 600 points in a week. It was absolutely extraordinary. Now, what is behind the explosiveness that we tend to associate more with emerging markets than mature, developed markets like the one we're in now?
David J:
I think it's unfortunately the same problem that's been nagging markets for about 18 months now. It's the concern first of all about the levels of debt, particularly European countries, are carrying, and of course at the beginning of August, we had that downgrade by the credit agency for the US credit rating; that really didn't help matters. Against all this, we've got the backdrop of the global recovery has really started to stutter in recent months, and we've got poor economic data. So we've got markets really hit by a wall of doom and gloom through August.
David:
But surely, the markets are based on valuations, and we see in the FTSE at the moment, the valuations are around sort of eleven times earnings, and we're getting yields of around four or five percent. Surely that should attract people into the market, rather than just sort of see this kind of volatility.
David J:
I would agree to an extent, but I also think unfortunately markets are seldom logical. I think it definitely has a manic depressive personality, if we could make it out to be a person, and it just swings from one extreme to another. Along the swings, somewhere along the way, we pass the fair value, and then we overshoot it on the downside, and overshoot it on the upside. The relentlessness of this European sovereign debt has really spooked markets, and I think the fact that it looks to be, in the near future anyway, no immediate end to it, we are seeing a lot of, throwing the baby out with the bathwater, and everything being sold off.
David:
But to the point where we see 600 point swings in a week? I mean, we've never experienced that kind of volatility before.
David J:
I think we've got to go back – it does bear comparing with what we were seeing three years ago, with when, of course, Lehmans went to the wall, September 2008, and we had the banks on their knees. It's a similar sort of panic that has gripped markets this time round, but this time round it's a degree bigger, because we're not just worried about HBOS and Lloyds, we're worried about Greece, Italy and Spain.
David:
Now, some people have blamed this volatility on automated or robotic trading. What do you understand by "robotic trading"?
David J:
I think there are plenty of big fund managers and hedge funds who'll have algorithms that will react to the price, and will trade and will put in automatic orders, and of course that does go on. I think there is an element of these big moves fuel more big moves in the market, so if the market's down 200, let's sell lots of futures, for example, and then it will push the market even further. That isn't a new thing though. Back in the crash of 1987, automatic or portfolio insurance, as it was called by the big insurance companies selling options, was pushing the market around back then, but maybe we have a more exaggerated thing now, I think, because so much more of it is driven by technology. But a bit part of it is still raw, human sentiment, and it has been fear and panic that we saw in markets in the first couple of weeks of August.
David:
So is there a case for banning automated trading, banning this robotic trading, this black box technology that we have where no human beings actually touch the market at all, but it's all driven by technology?
David J:
I don't think so. It's unfortunately the price of progress. The price we pay is for having sophisticated approaches to markets now, or so-called sophisticated approaches to markets, is maybe this increased volatility. Maybe, when markets move to being quoted all day long, rather than just one price a day, people thought, well actually, is this progress? – and I think unfortunately the volatility is a factor of the technology now in markets.
David:
Now, I said at the outset that volatility could be a spread better's friend. What are your views about this? I know it's certainly a friend of IG Group!
David J:
I was going to say! – it's fantastic for businesses like us, because ultimately our business model is geared around client volumes, so if clients are trading more, there's a little bit of profit for us hopefully from the spread on each and every trade. We've broken all our previous records for trading volumes in August because of the volatility. But to look at it from a client's point of view, I think it's easy, if you haven't traded in financial markets so much before, to look back in hindsight and think, fantastic – the FTSE has moved, two, three hundred points today. If I'd been on the right side of that, £10 a point, that's a two, three thousand pound tax-free profit – isn't this brilliant? And I think if you were a slightly more cavalier representative of the spread betting industry than I am, you could really push that point of view. But of course, it's important to balance it off against the risk. When we have markets chopping around, in enormous daily moves across all sorts of markets – gold, indices, currencies – everything seeing massive volatility, you have the opportunity to lose money very, very quickly. So yes, there is the opportunity there, but you have to be sensible, and not just think, oh, this is a one-way bet. It's more important than ever, in these volatile times, to look at the risk management. Look at sizing your trades, so if it goes wrong, it doesn't mean you can't pay the mortgage this month, and look at sensible things like stop losses, so you get taken out if the market goes too far against you, rather than hoping it's going to come back. We saw, at one point I think in August, the FTSE was down a thousand points, it was a thousand points lower than where it closed in July in a matter of weeks. If you're the wrong side of a thousand point move, that could be incredibly painful.
David:
Now, I'm glad you touched on gold, because gold is one of my pet topics. Do you think gold at this price is over-valued? – or don't you have a view on this?
David J:
I do have a view on gold, and I am very much a trend-following person. You cannot argue with the trend in gold. It's being going up for -
David:
What – the trend is your friend?
David J:
The trend is your friend – it's that old cliché, but the cliché is true when it comes to gold. It's been going out for about ten years now, and the latest bit of the trend run has been going up for three years. I talk to clients every month, and every month there are plenty of people saying, it can't go any higher – I'm going short gold, it's going to blah blah blah blah blah. Of course, when it's rallied so much, something like eightfold since the year 2000, then that is an incredible run, but it's still strong, and you can see why. To an extent we have, it's a classic safe haven in times of trouble. We have all this concern about sovereign debt. We have a stumbling economy. We have worries about the US dollar. You can see why, even though it's gone up so much, it's still popular. If I was a betting man, my money would be on it going higher still.
David:
So you wouldn't bet against gold?
David J:
Definitely not – not a raging trend like this. You're just standing in front of a runaway train. At some point, of course, gold will roll over and start heading lower. Maybe it'll start doing that tomorrow; maybe it won't start doing that for ten years. But there'll be plenty of time, when gold changes its trend, to get on the short side of gold, but I think at the moment the trend is so strong, it's very dangerous to short.
David:
But some people are going to get their fingers burnt, aren't they?
David J:
Completely. I think, like we saw, if we compare it to maybe the NASDAQ in the latter part of the twentieth century, where it was going vertical and going parabolic, if you elate to the party there and had no strategy for getting out if things turned, again it would be a horrible time.
David:
Yeah, because the second part of that adage about the trend being your friend is that, until it bends at the end, yeah?
David J:
That's very true, and human nature being what it is, everyone focuses – well, not everyone, but plenty of people focus on trying to catch the bend at the end, rather than focusing on the trend. Again, even though the bend at the end can be quite dramatic, I think more people get burnt going against major trends, whether they're up or down.
David:
Okay, now, let's go back to these volatile markets. Recently there was a fund manager on CNBC, who said that volatility is likely to persist for years. So I'd like to have a look at some of the strategies that spread betters should be adopting in these conditions. I know you touched on a few, so one of those that you touched on was stop losses. Now first of all, can you explain to the listener, what are stop losses, and how do stop losses help in these conditions?
David J:
Yeah, it's a very simple risk-management tool. Let's say, let's leave spread betting to the side for a minute. Let's talk about, let's say you buy a share at 100p, and you fully accept that you don't have a crystal ball, and you may be wrong in thinking this share is going to go up. So you decide, if it drops to, let's say, 85p, so if it drops 15%, you're going to get out. You're going to take a small loss, and move on to another investment. That's all a stop loss is – it's a, usually an order with your broker or with your spread betting company, where okay, I've bought or sold here. If the market gets to here, I would like the position to be closed out. So, for example, if I buy the FTSE at 5,300, because I think it's going to go up, but I think, well actually, if it drops as low as 5,200, for example, I'm going to be wrong, I want to get out, I put a stop loss in to sell at 5,200, so my risk in that example would be 100 points. So it's traditionally an automated order that kicks in, if the market trades at that level, to try and minimise your losses.
David:
But in a volatile market, should you be widening that stop loss? Should you actually sort of be saying, I'm going to set my stop loss a lot lower than 5,200, because as I mentioned at the outset, the FTSE swung 600 points in a week.
David J:
That's very true. Well, there are lots of conspiracy theories about markets, and one of them comes with setting stop losses. There are people who have used stop losses in the past, and say, I'm not going to use them any more, because just the market goes to where my stop loss is. But that's not the market's fault; that's your fault, as you say, for setting the stop loss too tight. Now, if we're trading in incredibly volatile markets that can move 50, 60 points, sometimes in the blink of an eye, if you're going to trade the FTSE with a 10 or 15 point stop loss, that is nothing. You're just going to be chopped out time and time again, so I completely agree with what you say. You need to give the market a bit of room to move around, even more so at the moment. So it does mean setting wider stop losses, and probably dialling down the level of your trade. So your financial risk is still the same, because you're trading smaller, but giving the market more room to prove you right, because it will be incredibly frustrating if you're trading far too tight – you'll just be stopped out time and time again. Just because you've decided the market needs to go up, maybe the market's going to take a bit of time to come round to your way of thinking, so give it that little bit of time.
David:
Now, you also said you should be reducing the amount of money that you put on each bet, in other words, reducing the risk that you have in the market. How do you decide how much of your capital you should be risking on any trade?
David J:
I think it's really down to the individual, but again a common theme for all of us when we first start is, we probably risk far too much. Let's say we've got ... to make the numbers easy for me, let's say you've got £10,000 that you're trading with, and you're risking losing £2,000 on each trade.
David:
20%?
David J:
Yeah, that's just stupid, in my opinion. Let's say you're trading the FTSE with 100 point stop, and you're doing £20 a point, that's a £2,000 risk – it's only four, five trades, and you're wiped out, your account is gone. Fortunately, if you trade for long enough, you are going to have losing streaks where you have five, six, seven losing trades on the trot, the same way if you trade long enough, you'll have a string of winners. So it's very important to protect yourself from the risk of ruin. So most sensible approaches to short-term trading, and it's something again lots of people don't want to hear, is to only risk 2 – 3% of your account on any one trading idea. So if you've got a £10,000 account, if any trade goes wrong, if it's costing you more than £300, many people would take the view, and I definitely would – you're trading too big. Now people don't want to hear that, because people want to hear, I can open my spread betting account with £1,000, and in six months' time I'll be down the Lamborghini showroom, choosing what colour Lamborghini to have. But again, it's very much to treat it as, it's a cliché, but a marathon, not a sprint. Look to take on sensible, low-risk trades, and to ensure you're still in the game in a year's time, and you're not just taken out by a string of losses, just normal losses where the market moves against you, because you're trading too big.
Another good one is, if you're lying awake at night worrying where the FTSE's going to open tomorrow because you've got a trade on, there again you're probably trading too big. It's difficult enough to figure out, should I buy or should I sell, without the additional pressure of piling on a lot of financial pressure onto yourself.
David:
Now the thing is, you gave me a cliché there – you said that it's a marathon, not a sprint. Now, I've come up with another cliché, which is, you've got to think big in order to win big. Surely if you're only betting about 2% of your portfolio, you're not really thinking big, are you?
David J:
No, that's very true, but again I think, if you could sit there and ... let's go back to the £1,000 account. Let's say in a year, and again people don't want to hear this, but in a year on a £1,000 account, you could clear £150 profit. That's 15% return, tax-free of course, because it's spread betting, and that's a cracking return if you could do that, year in, year out. But people want to hear, oh, I can turn £1,000 into £10,000 in a very short amount of time. So I think with trading, thinking big can be dangerous. So I would always err on the side of caution.
David:
Okay, now we touched on stop losses earlier on. Now there is a big difference between normal stop losses and guaranteed stop losses. Sometimes, when the market is as volatile as it is now, you could actually drop through your stop loss, couldn't you? So do you think guaranteed stop losses are a good idea in a volatile market?
David J:
I do. I think again particularly for people who are new to any form of trading, whether it's spread betting or something else, just to explain what a guaranteed stop is, particularly relevant to what we've just been through. The London stock market shuts at 4.30, and there's a whole world of things that will affect the stock market when it opens: the US is still open till nine o'clock; we have the Asian markets. Let's say at 4.30, Barclays shares close at 150, and then in evening trading, the US banking sector gets enormously hit, gets downgraded and we see big falls in US banking. Barclays shares are not going to open the next day where they closed the previous day. There's no rule, as we all know, that says, shares have to open where they closed the day before. So they closed at 150 -
David:
They should have that rule though, really.
David J:
But unfortunately, in the real world, we don't have that.
David:
I don't think it's fair, really. I mean, the sun always rises in the east and sets in the west. Now, if one day the sun didn't actually rise in the east just as the shares didn't actually open at the previous day's close, it's not fair, is it?
David J:
If only markets were that predictable though. So let's say the next day, Barclays opens 10% down, so they open at 135 from closing at 150 the day before. If you had a stop loss at, let's pluck a figure out the air – 145, your stop loss is triggered, because the market has gone through that level, but unfortunately it hasn't traded at 145. It's opened up at 130, in this example. So your trade is exited at a much worse price than you're expecting. Now, this isn't a spread betting risk; this is a financial markets risk. This is how financial markets work. So that's one risk with stop losses – it's this thing known as slippage, where you get a much worse fill on the trade that you were expecting. Guaranteed stop losses – eliminate that, because they are, as it says, guaranteed. If your guaranteed stop loss is 145, your trade is filled at 145, even if you wake up the next day, and although it couldn't happen, Barclays have gone bankrupt, and they're trading at zero, you are still out at 145. So it's insurance which is, again I think, particularly relevant in volatile markets. You do pay for it – you pay a slight premium. No insurance is free, you pay a little bit extra spread, but it means that you absolutely nail down your maximum risk.
David:
But in your example there, staying awake all night doesn't really help you at all, does it? – because you can't even trade the share when you're actually sort of watching bank shares in America being creamed?
David J:
That's very true, I think, and if you do find you're sitting up in your jim-jams at 2.30 in the morning watching the Nikkei, you do maybe want to question just how much stress you're taking on through your trading.
David:
Some people might enjoy it, David!
David J:
Well if they enjoy that, however they get their kicks is fair enough. But other markets, like the FTSE Index is a 24 hour market; the Dow is a 24 hour market. So you can, if you were worried about a bigger move down, you can hedge some of that risk away, but the easier way of doing it, if you're worried about overnight risk, or of course weekend risk, is to use a guaranteed stop loss.
David:
Okay, now, whilst we're on the topic of stop losses, can you explain to me how trailing stop losses work?
David J:
The way they work, again it's a classic trend-following technique – let's say you buy something at £1, with a stop loss at 85p, and it goes up to £1.20, so you might move your stop loss up to £1.05, and then it goes up to £1.50, so you might move your stop loss to £1.20. So it's a classic way of trying to lock in some of the profits as the market, or the share, whatever it is, is moving in your favour, but still giving it a bit more wiggle room to try and make some more money. Again with us, we have an automated trailing stop loss, so you can say, right – if the market moves this much in my favour, move my stop loss up so many points as well. So it's a way of trying to follow a trend, lock in some profits, but still give the trade a bit more time to work out, and hopefully make some more profits.
David:
Okay, so it's a bit like letting the hem down on your trousers as you grow, yeah?
David J:
That's a very good analogy, yeah – it's that way of doing it, yes. So you're still in the trousers, but they are moving as you move, yes.
David:
Right, now then, I'd like to talk to you about fundamental analysis, because you kind of touched on that topic earlier on. How important is it for a spread better to look at fundamental analysis? – in other words, looking at what is going on in the economy, rather than just looking at a chart and saying, this chart looks to me like it's on a downward trend, just as you would talking about gold, but in fact looking at the wider implications of what's going on around the world.
David J:
I think it is very important. I think with trading, lots of people talk about charts, and my background is very much technical analysis. But there's no reason why, if you're a good fundamental analyst, you can't apply that approach to spread betting and trading. I think one of the misconceptions about trading is that you have to be sat in front of your screen 15 hours a day, buy/sell, buy/sell, buy/sell, buy/sell, all day long. Don't get me wrong – our finance director would love it if all the clients do that, because of course that's how we make monies off the spread. But I would say, from a client point of view, if you have got a three month view on Vodafone, or Marks & Spencers, or the price of gold based on the fundamentals, there's no reason why you can't carry out that opinion using spread betting, and run it for three months. Don't think you have to be a short-term nutcase day trader to be a spread better. If your style is more ...
David:
That's not very kind, to actually call your customers nutcases!
David J:
No, I would never say that, but I think day traders, I think, day traders are nutcases, I really do. I think there's a much easier way, and I would never say easy, but a more relaxed approach to markets, because so many of our clients have normal jobs. They've got normal jobs, they can't sit in front of a screen all day long, and they think, I've got to sit in front of a screen to trade. But you don't have to, and I think particularly with the moves we've seen recently, we had some ridiculous short-term moves. It's a much more, I'd say, relaxed approach as a client, to take a view on a market for days and weeks, and maybe even months, whether it's fundamental or technical, and just give the trade time to work out, rather than sitting in front of a screen all day long, and smashing your trades left, right and centre. I'll be in trouble with my finance director when I go back in, encouraging people to be more relaxed, but I think for all of us, it can take a lot of the stress out of trading. Again, if you have a fundamental approach, a fundamental view on the market over a few months, there's no reason why you can't apply and do it using spread betting.
David:
Yeah, I think the last thing you want to see is your dentist spread betting whilst removing your wisdom teeth at the same time, yeah?
David J:
That would be very worrying, yeah – one eye on the FTSE and one eye on your molars.
David:
That would be a complete nightmare! Now then, I said at the top of the podcast that we were going to look at a specific example, David. So you can now turn the paper over. Write your name in the top right-hand corner, and make sure that your name is written carefully. That particular share that we're looking at is Vodafone. So can you talk me through that chart, David, and tell me what you see, apart from just ink spots?
David J:
So we're looking at the last six months for Vodafone. As we said sort of through this, I'm a big fan of following trends. Clearly, over the last six months, the share price for Vodafone has been down. So at the moment we're trading, on this chart here, round about 160 a share, and we've dropped from 180, so we've come up about 12% in the last few months. Vodafone is definitely one of the less volatile shares in the FTSE.
David:
Less volatile – have you seen this chart?
David J:
Yeah, there's a lot more volatile than that.
David:
It's gone from a low of 155 to a high of 180 – now that is hardly not volatile.
David J:
That's nothing. But there is a lot of competition, of course, with all the banks and the mining companies being incredibly volatile. But I'd say on Vodafone, for example, let's say you thought that stock markets were going to weaken further, and personally I do think that is a risk for the next few months at least, and you though Vodafone wasn't going to be able to sidestep that – it was going to get hit as well, one strategy is to sell short. Of course, with spread betting, one of the beauties is, you can trade markets in both directions. So if you thought Vodafone was going to slide further, we could sell Vodafone, let's guess they're at 162 now. Let's say we sell Vodafone, £10 a point at 162.
David:
David, you have just driven a spear through my heart, because I am a Vodafone shareholder, and you're actually telling me that it's going to fall further.
David J:
You can maybe buy some more cheaper for Christmas! You've got to be an optimist there.
David:
Okay, so you think Vodafone shares are likely to fall further?
David J:
I would say that's the risk for me at the moment. I don't think they're going to go plunging further, but I think the risk is, we'll maybe see a bit more easing off in the share price.
David:
So how would you spread bet this particular share, then?
David J:
We'd sell short, so you'd bring up, if you logged onto a spread betting platform, you'd see two prices – the bid and the offer, so Vodafone's very tight spread. So let's say it's 161.8, 162 is the price. So actually, let me make that easier – I'll say 162 to sell, 162.2 to buy. So I think it's going to go down, so if I think it's going to go down, I'm not going to buy; I'm going to sell, and we'll say, let's say £10 a point. So we sell £10 a point at 162. Then we have to wait and see what happens. If Vodafone drops, for every penny Vodafone drops, in this example, we'd have a profit of £10, because we've sold £10 a point.
David:
So my total liability is £1,620?
David J:
Exactly. The position you've got, you're short exactly that - £1,620-worth of Vodafone shares. But because we're trading on margin, you don't tie up £1,620 on your account. With Vodafone, I think Vodafone margin with us is about 5%. So we'd allocate 5% of 1,620 against this trade, so about £80 in this example would be tied up on your account against that trade. But it's important to understand, of course, you should have more than £80 in the account to do the trade, because we've got to make sure that we're insured against any moves against us. If the market starts to move against us by three points, four points, we'll be running a loss of £30 to £40 in that example, and we want to make sure that you've got the money in your account to cover those running losses.
What would also be sensible would be to put a stop loss on this trade, because we don't want to sit there and watch Vodafone from eight in the morning till 4.30 in the afternoon. That is like watching paint dry, I think, with Vodafone. So we'll put our stop loss, let's say 175 above the highs, late July. So we'll put our stop loss at 175, we're short at 162. So our risk in this example is 13 points, because if it got all the way to 175 and we got stopped out, we'd be losing 13 points.
David:
That's £130.
David J:
Yeah, £130 in this example, and now we can just get on with our life and do something a bit more constructive than watching Vodafone all day long. Of course, we can check it during the day, see what's going on. But if I've got a two or three month view on Vodafone, then I can just sit now and see what happens. What I could also do -
David:
Why did you pick 175, out of interest?
David J:
I think I was just looking at where it rallied up to in late July. I think we rallied up to about 173-ish, looking at the chart, and again a classic way of looking at charts is to look at previous support resistance. So when it ran up to 173 last time round, the sellers came back in and smashed it back down. So for me, if it went up through 173, it starts to look like, well actually maybe this time round it is different, so I want to think about getting out. So that's where I would place my stop.
David:
So what would happen if the great Ben Bernanke, the Federal Reserve chief, announced later on today that he was going to go for QE3, and he was going to pump $600 billion into the US economy. That could actually send that share soaring, couldn't it?
David J:
It could. It would still take ... our stop loss in this example is a little less than 10% away, so it could well pick our stop loss out, but that's what stop losses are for. If we get a reaction in the market that we weren't expecting, we lose money, but we get to lick our wounds and fight another day.
David:
Okay, right. So I would like to know, my final question for you is, do you see the UK stock market being higher or lower in five years' time?
David J:
That's a very good question, and I must admit, as someone who works for a spread betting company, I rarely look five years ahead. But obviously, like everyone else, I've got pensions and ISAs as well, and it's important from that side of things. I do think it will be higher, in five years' time. In five months' time? – I don't think so, but in five years' time hopefully, the European problems will be sorted out; I think that's going to take a long time to sort out, but they should be hopefully well behind us in five years' time, and we will have a more sustainable recovery.
David:
So then my question to you is, if you reckon that the stock market is going to be higher in five years' time, why would you give yourself all this anguish and spread bet in the short term when you know that, if you were to buy these Vodafone shares, they could be significantly higher in five years' time?
David J:
I think like most people, like I said, I've got a pension, I've got ISAs, and we've got the long-term investments. We'd always say, something like spread betting, or any form of short-term trading, should only be a small part of your overall portfolio. If you were spread betting your pension, then you do need to have a word with yourself. I think you need to make sure you've got either provisions there, and this is definitely a more aggressive, more short-term approach to the markets.
David:
So are you saying that this should be taken as a kind of recreation, rather than an occupation?
David J:
We do have clients who derive their full-time income from spread betting and trading. I think you need to approach it seriously. I think if you approach it recreationally, you will get a lot of entertainment, but you will probably lose money. I think you should approach it the same way that you approach other investments. You should weigh up the risk of the trade you're doing – does it make sense? Like I say, I think for most people, don't be afraid to dip your toe in, but don't think you have to be ridiculously short-term. I think a good way to start is with shares, the likes of Vodafone, for example – take a view on Vodafone over a few months, to start understanding how these things work. You don't have to be ultra short-term. I think a good way of looking at it, if you're looking at sort of a swing trading approach, is almost shorter term investing over months, rather than seconds.
David:
You see, this is where you and I take a contrarian view or opposite views over Vodafone. I would say, I'm looking at Vodafone now, and I'm looking at the price to earnings – in other words, the PE ratio is around 10, and it's yielding around 7%. I think people would be ludicrous not to actually pile in and buy Vodafone at these kind of levels, because I think it's just a cheap buy, and what are the chances of Vodafone ever going bust? – zero, I think.
David J:
I would completely agree with you, and I think from an investment point of view, if you're looking to buy and hold, those sort of numbers are very attractive.
David:
They are very attractive.
David J:
But from a short-term, momentum point of view, they're not that attractive. But no-one's got a crystal ball, and if I was that convinced, I'd be short on Vodafone already, and I'm not short on Vodafone. So let's just see where we are in a few months' time.
David:
Okay, well I think the fact that I look at things like PE ratios and yields makes me a very boring person, but did you know that my middle name is Dreary? – David Dreary Kuo? Thank you very much for coming in today, David. And now for the quote – I have a quote which I think you will possibly like, and the quote today comes from Jean-Claude Killy, who is an alpine ski-racer. He said, "To win, you have to risk loss" – is that right?
David J:
That is very true – but only sensible levels of risk, please.
David:
But you won't lose so much if you put a stop loss in place?
David J:
That's right, yes.
David:
Okay, well thank you very much for coming in, David.
David J:
It's a pleasure.
David:
I hope you can come in again maybe in a year's time, to see if I was right about Vodafone, and you were wrong.
David J:
Definitely.
David:
Okay, this has been Money Talk, I have been David Kuo, and my guest has been David Jones, chief investment strategist at IG Group. If you have a comment about today's show, please post it on the Money Talk web page, which you can find at fool.co.uk. If you have a suggestion for future shows, please email me at moneytalk@fool.co.uk. Until next week, don't forget those stop losses!
> The Motley Fool owns shares in IG Group.
