How to make money from charts, the Marber way

24 November 2007

Many people working in the City today were not even born on 8 January 1975, when Brian Marber called the end of the cataclysmic bear market of the early 1970s.

Marber’s skill, which has won him a band of devoted clients and followers, me included, is painstakingly to plot charts of prices every day and to interpret their patterns. Technical analysis is a religion, he believes, and it requires intense discipline to keep the faith and not be tempted by other factors, especially fundamentals. “Price contains everything you need to know about everything,” he writes.

Most of us are, however, prone to “good old extrapolation” when a trend has been going on for a while. Nobody imagined in their worst nightmares in the heady days of 1972 that the stock market could drop by 74%, anymore than they thought it could recover from the depths. The same was true in 2000, during what we now call the dotcom bubble, when a “new paradigm” was heralded by people old enough to know better – until the market crashed not long afterwards. “The new paradigm is the oldest ballgame in the world,” writes Marber sagely.

Technical analysis may sound dry as dust but the results are fascinating because the art of charts is more about crowd psychology than numbers. In his book, Marber quotes from the forward of the 1932 edition of Extraordinary Popular Delusions and the Madness of Crowds by Charles Mackay: “All economic movements by their very nature are motivated by crowd psychology. Without due recognition of crowd thinking (which often seems crowd-madness) our theories of economics leave much to be desired.”

Marber, whose elder son, Patrick, is the well-known playwright and who told his father to write no more than 600 words a day, would rather have been on the stage than in the City. At Cambridge, where he read economics and law, he was president of the Cambridge Footlights and claims, along with the writer, Frederick Raphael, to have discovered Jonathan Miller. “I prefer to make people laugh than make them money,” he once told me. But although his clients often get to chuckle at his reports, he has been more successful at making them money despite very occasionally getting it wrong.

Marber joined the small broking house of Schaverien in 1955, left to try his luck at the BBC but retreated back to the City, becoming a chartist for Bernie Cornfield’s IOS and then joining NMR Rothschild as its highest paid fund manager. He was the first British fund manager to use only technical analysis. But Marber’s volatile personality did not suit institutions, and by the mid-1970s he had his own company and has remained independent ever since.