A 300 million USD hedge fund manager "trading mistake" after Japanese earthquake

In our occasional series on the impact of the March 11 earthquake and tsunami on Japan-focused investors, here’s an intriguing tale of Philip Jabre’s $300m blunder.

It’s rare to hear such admissions — let alone explanations — from the mouth of the former star trader at GLG. And it kind of makes us wonder why anyone, having made such a colossal miscalculation, would want to talk about it.

It could be that market rumours got to the point where speculation was worse than reality. Either way, perhaps in Jabre’s world, any publicity is good publicity.

From the Wall Street Journal on Friday:

Few investors have made as many mistakes navigating markets over the past two weeks as Philippe Jabre.

Mr. Jabre, one of Europe’s best-known hedge-fund managers, bought Japanese stocks on news of the earthquake, and then suffered when the Nikkei Stock Average quickly tumbled 13%. Making matters worse, Mr. Jabre got nervous and sold his shares last week, just before a rebound in Japanese stocks. The miscues cost his firm about $300 million, the worst few days of his career.

But as Mr. Jabre reflects on his decisions, he isn’t sure he made many mistakes. “I keep thinking about it, what could I have done differently?” said Mr. Jabre, who manages $6 billion hedge fund Jabre Capital Partners SA. “I spent all last weekend asking questions” of friends, colleagues and clients, he said. “We couldn’t take the risk of the Tokyo Stock Exchange closing down, so we sold” Japanese shares.

http://ftalphaville.ft.com/blog/2011/03/28/528341/jabres-300m-error-japan-dunnit/?updatedcontent=1

Errrrrrrr...... :eek:

 

Well it was nice of him to provide much-needed liquidity. I wonder if he was curious why his fills were so good.

 

It sounds sensible to me...

He cut the losses short.

Ninna

 

Always hard when right but timing is off by a day or so.

 

i am sure he made lots of profits before on this trick. It was time to pay back and maybe a bit more

any system can be and will be hijacked.

 

bought Japanese stocks on news of the earthquake,

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I wonder what he was thinking on that one.

Re the Japanese earthquake, my first thought was Livermore and the San Fran quake destroyed the infrastructure of the railroads and if memory serves me railroad stocks did not react, yet livermore shorted the railroads.,, and was dismayed because they kept going up.

ps. I suppose I should finish the rest of the livermore story but I don't feel like it. read the book.....

 

1) I'll summarize.
2) Livermore made AND lost a lot of money, 3 or 4 times, and then got a really bad headache. The End.

 

I understand and respect him for talking about it. Everybody has bad trades. Trying to shuck and jive when miscalculations are made does not engender trust. He showed self-confidence in owning up to it.

 

His mistake was that he couldn't take the risk of the Tokyo Stock Exchange closing. If you buy in a situation that involves a large earth quake and a nuclear disaster you should make sure that you're capitalized for a situation in which the exchange closes.

 

Agree, he made a mistake but with the best of intentions. Intentions reveal so much.