In this first of a three-part interview series, I sit down with Dr. Christian Kacher, former portfolio manager for William O’Neil + Co., managing director of VirtueOfSelfishInvesting.com, and chief investment strategist for MoKa Investors, LLC.
What do you get when you mix a classically-trained concert pianist and a Nuclear Physicist? A true blue market wizard, that’s what. Just how good is Dr. Christian Kacher? During the period of 1996 to 2002, the total return in his personal account was 18,241%, as verified by KPMG, the Big Four auditor. That works out to about a 110% return on an annualized basis…for seven straight years.
Now the former portfolio manager for William O’Neil is back and once again working in close concert with another O’Neil protégé: Gil Morales (pictured right with Dr. Kacher). Mr. Morales has launched VirtueOfSelfishInvesting.com along with Dr. Kacher; Mr. Morales’ own website, Gilmoreport.com, has grown exponentially over the last few years.
And why would it not? Mr. Morales, the onetime Chief Market Strategist for William O'Neil + Company, has quite the impressive track record himself: from January 1, 1998 to December 31, 2005, the total return in Mr. Morales’ personal account was 10,904%, as audited by Rothstein Kass & Company.
A musical prodigy, Kacher began his classical training on the piano when he was three years old. By five he was performing around the world as a concert pianist. This continued until the age of 12. It was around this time that he bought his first stock, too: Apple Computer. He would later go on to receive a PhD in Nuclear Physics from the University of California at Berkeley. Under the tutelage of the late Dr. Glenn Seaborg, the man who invented plutonium, Kacher helped to discover Element 110 on the Periodic Table of Elements and confirmed the existence of Element 106, which his research team named Seaborgium.
As it turns out, however, he was just getting warmed up. By 1995, while still a doctoral student, Kacher was running one of the very first stock advisory services online, the original “Virtue of Selfish Investing.” He then went to work for legendary investor William J. O’Neil.
Over the next six years, Kacher served as chief research analyst for William O'Neil + Company, a NYSE member firm, though probably best known as the publisher of the newspaper Investor's Business Daily (www.investors.com). There, besides his analytic responsibilities, he would work with the firm’s more than 500 institutional clients, advising some of the world’s largest and most successful funds. He also provided assistance to Investors Business Daily’s staff writers. In addition, he managed a portion of the firm's proprietary assets, quickly becoming one of the top portfolio managers at the company.
He has since gone on to record a CD of 21 original compositions entitled “Teardrop Rain.” Some of the tracks can be heard at TearDropRain.com. Beyond all this, he is also a certified practitioner of Neuro-Linguistic Programming and Hypnosis.
We sat down to talk in Gil Morales’ Playa del Rey office in Los Angeles, CA.
- - - - - - - - - -
John Ward: So, Dr. Kacher, how is it to be working with Gil again?
Dr. Christian Kacher: Well, I’m very excited to be joining forces again with Gil Morales. When we were working at William O’Neil, we had this great dynamic where we would talk about the markets and market history and sort of bounce ideas off each other. It was just a natural symbiosis that occurred. When I came back to California, we found that the magic was still there. It’s almost as if no time has passed, in fact. We’re right back where we were and it’s great. Also, I’ve been conducting ongoing research studies through the years and it’s certainly something that I still have an avid interest in. It’s something that Bill O’Neil took note of; eventually, he made me head of research at the company. Wherever I wanted to take my research, I could. If I had anything interesting I would share it with him.
Ward: And how did that develop, you going to work for William O’Neil? You were running your own website….
Kacher: I’d read his book (“How to Make Money in Stocks”) in the late 80’s, and it was the first book that really made sense to me. I’d read dozens of books prior to that one and I remember once telling my mother, who was a very successful stock analyst at Merrill Lynch, I told her that I believed the efficient-market hypothesis was right. I didn’t think there really was a way over many cycles to beat the market. Then I read O’Neil’s book and it shattered that view. So I started to study a lot of stock charts. UC Berkley had great business libraries. I found that in the early 90’s I was spending more time in the business libraries than at the particle accelerator.
It slowly became clear when I was a PhD candidate that what I really wanted was to be a stock portfolio manager. After surveying all the top performing equity managers in the United States, Bill O’Neil was number one. His track record is second to none. And I’ve always wanted to work for the best. That’s why I chose Glenn Seaborg. With Bill O’Neil, it was no different.
So I applied to a number of firms on Wall Street and in Los Angeles, including the Cedd Moses firm. But O’Neil was my first choice. So I did all these interviews and some of the Wall Street firms were inviting me back for seconds. Then I got a call from the O’Neil firm. I’d gone in for an interview and they now made me an offer. Frankly, it didn’t matter if they had offered for me to sweep floors, I would’ve done that. I just wanted to get my foot in the door.
Ward: When did you start working for O’Neil?
Kacher: I started in January of ‘96, after I’d finished my doctorate in late ’95. From the first day, it was the dream job of dream jobs. It was really something. The years I was at O’Neil’s firm were a very special time in my life. It’s great to wake up every morning completely energized. It has nothing to do with whether you’re making money or losing money, either, it just has to do with the fact that you know you’re exactly where you’re supposed to be.
As far as my website, The Virtue of Selfish Investing, I had to shut it down. O’Neil is an SEC regulated firm and so a non-compete agreement had to be signed. It was a shame but obviously a no-brainer. I might add that I was one of only 12 stock advisory sites on the internet at that time. It was growing at an alarmingly fast pace. It’s great be able to resurrect it.
Ward: So you were right on the cutting edge.
Kacher: And it was great, too. I was charging $120 a year and these checks were coming in by the pound. Oh, and our overhead: $20 a month.
I had come up with the idea in ’94. I talked to a friend of mine, who was also a PhD candidate, and I just told him, “This is the lowest hanging fruit I’ve ever seen!” Well, he was very acquainted with html programming and he offered to partner up with me. That’s how The Virtue of Selfish Investing was born.
Ward: Do you remember the first day you met Gil?
Kacher: Yes. That was back in ’98. And I remember (laughing) -
It is here that Gil Morales, who had been working at his desk, chimed in: I found him in the closet.
Kacher: Right. I was one of about eight people in a firm of around a thousand who had their own closet. And I felt very privileged to have that closet, too, because I loved having my own space, not a cubicle but my own sanctuary. When Gil first came into my office, I instantly liked the guy. He’s real straight forward. You know, you get a sense about somebody the first time you meet them. I don’t think there was really any lag between the first time that I met him to where we were talking regularly on the phone. It was almost from that day on.
Morales: And just to fill that story out, O’Neil was telling me that I needed an analyst. “We have to get you an analyst,” he’d say. “You need an analyst.” I go, “Well, I met this guy in a closet….” (Laughter)
Chris seemed pretty smart. I thought that considering how smart he was that he had to be working on some big projects. Otherwise, why would they have him in this closet hidden away? And when I asked Bill, I said, “What about this guy Chris, what’s he doing?” He told me he wasn’t working with anybody. After that we just kicked ass. That’s the best way to put it, right? It’s still our motto.
Kacher: And that closet turned into a trading laboratory. When people would come to the firm as visitors and see my office, which had floor to ceiling charts, it would leave a distinct impression on them, like this guy has insane focus. We came up with that phrase: “Insane Focus,” and it kind of stuck. I think that’s a great way to describe something that you’re truly passionate about. You give it your all.
It was quite characteristic of that 1996 to 2001 period. I remember the president of the firm coming to me and saying, “You’re topping out your vacation time,” which I think had never happened or only happened once before. It’s very tough to top it out. In fact, I think it’s almost impossible. Yet because I only took vacations on regular holidays when the market didn’t trade, such as on Christmas Day or Thanksgiving, I topped out my vacation time. The reason being, I didn’t want to miss one day of the market during those go-go years. I figured, what’s the point in taking vacation when my mind would just be focused on the market anyway? That all changed after March of 2000, naturally, when the market started to upset
Ward: We’ll get back to those go-go years, as far as the big winners that you owned and what it was like, but it’s my understanding that in 2001 you left the firm…
Kacher: End of 2001, yes. To focus on music.
Ward: Was that because you felt you couldn’t serve two masters, as it were, both the markets and music at the same time?
Kacher: Some personal issues required attention, and I had had thoughts on starting my own fund anyway, plus the tasks at the company were getting a little rote. There wasn’t much to do trading-wise, unless you wanted to lose money. For almost six years I’d had such insane focus on the market that I’d decided it was wearing a little thin. It was time to switch gears. Even though I took time off and focused on music, I was still looking at the markets; in fact, in 2002 I did place a couple of trades that ended up being quite profitable. This was only because I still had my finger on the pulse. But the time away allowed me to do things that I hadn’t been able to do for six years, things like travelling and composing. I started composing in earnest in 2002, and I’d say about half the tracks on my CD are from that period
Ward: Bill O’Neil, the trader. Best you’ve ever met?
Kacher: In terms of long-term track record, yes. He has the best numbers. If you go back 20-25 years and you stack all the guys together that have been in the market that long, Bill’s got the highest returns. Higher than Peter Lynch. Higher than Buffett. It’s fantastic. I’ve painstakingly studied each of the firm’s market calls from I think it was 1968 onward because I wanted to see exactly where O’Neil was saying buy and sell. It just struck me, this accumulation/distribution and follow-through day technique works great because he’s never missed a major bull or a major bear market.
When the markets are poor, he’s very good at staying on the sidelines. There are periods when the markets are, shall we say, uncertain. He might get a bit of a haircut, but the markets always go back to a trend; therefore, if you just stick with the system, you will do very well.
From shorting Certain-teed to playing Syntex in the early 60’s, to buying his seat on the exchange –basically, going from a few thousand dollars all the way up to the hundreds of millions when I was trading for him…I assume he’s now beyond that - it just goes to show you how effective this technique is if it is applied diligently. That’s the biggest challenge, I think, to most people: not to learn the rules, but to get past one’s own inner psychology. That can be the biggest barrier to successful trading.
Disclosure: No positions