Trying to learn from other pros' career ending mistakes. Is there any good book on infamous financial accidents and blowups like LTCM, Niderhoffer, etc?
though not a book, Trader magazine often has Biggest Losses or Biggest Oops and so forth. in fact, this month's issue has something along those lines. you might see if they have articles or archives online .... actually looks like they do. http://tradermonthly.com/ hth take care omni
a529612, This book might be what you're looking for: "Risk Takers : Uses and Abuses of Financial Derivatives" by John Marthinsen Take a look at its contents: http://search.barnesandnoble.com/bo...y&ean=9780321197481&TXT=Y&displayonly=TOC#TOC Here's the Amazon.com link: http://www.amazon.com/gp/product/03...coding=UTF8&m=ATVPDKIKX0DER&v=glance&n=283155 Richard
In addition to tradermonthly mag previously mentioned, another mag that has feature interviews, not blowups per-se but the subject comes up frequently in interviews, is Stocks Futures and Options mag. http://www.sfomag.com/
Trader Daily The Big Hurt One person's good trade is, by definition, another's bad one. After a year of record earnings, we tally the slip side -- the 10 biggest losses of 2005 -- and what the rest of us can learn from their mistakes. By Rich Blake and Andrew Barber with Alex Koppelman By: Rich Blake , Alex Koppelman , A.D. Barber Issue: June/July 2006 , Page 76 -------------------------------------------------------------------------------- Article Tools Print this page Send to a friend Subscribe Page 1 of 4 » Next Feature Package From where we stand -- unleveraged, with pens and notebooks, not billions -- there's some honor in losing hundreds of millions (along with irate clients and, in some cases, more free time). With the exceptions of the rare frauds and clerical mistakes, you must be one hell of a player to have both the reputation to control that much money and the fortitude to trade it. Besides, massive losses offer one thing that massive gains don't: lessons to make you a better trader. Winners, after all, generally make it slow and steady. As is evident from this roundup, a huge loss often stems from one or two really bad ideas. Let the pain begin. Spreads contracted to nearly nothing. Relative-value portfolios got gored. -------------------------------------------------------------------------------- Oh, Henry! John Henry's futures-trading prowess is unquestioned. But boy, did the Boston Red Sox owner strike out in 2005. Losses stung eight of nine strategies at John W. Henry & Company, with the firm's Original Investment Program down 27.6 percent. The flagship Strategic Allocation Program, which had $1.7 billion (at least it did at the end of 2005), lost 19.2 percent. Mainstay energy and metals bets weren't the problem, but heavy losses on bond and currency bets burned the Boca Raton, Floridaâbased icon. "This performance was an aberration in JWH's nearly 25-year history," wrote president Mark Rzepczynski in a letter to clients at the start of this year. He later told Trader Monthly, "We are shaping up to have a good 2006." Indeed, smart money seems to be sticking with Henry, even though his portfolio continued to suffer through the first quarter, prompting the managed-futures kingpin to retool and even reduce leverage. Maybe that's a good explanation as to why the Bosox couldn't afford to re-sign Johnny Damon TOTAL ESTIMATED LOSS: $500 million -------------------------------------------------------------------------------- Vega Bomb Vega Asset Management entered 2005 on top of the world. With $11 billion under management, strong performance and luxurious new headquarters under construction, the caballeros from Madrid were living high and wide -- until the U.S. yield curve flattened, that is. When bond-market spreads contracted to nearly nothing, Vega's relative-value portfolios, managed by Ravinder Mehra and Jesus Saa Requejo, got gored. "Credit spreads blew out," says a rival. "These guys were most likely short treasuries and long corporates." Almost by definition, such a strategy has to be leveraged, so Vega might have been forced to endure twice the pain. At the same time, a dearth of opportunities dragged down performance for the firm's macro portfolio, helping spur customer redemptions. Faced with mounting redemptions, the remaining traders at Vega soldiered on. While assets under management have declined to $7 billion, it would be premature to write off Vega just yet: Last year was the first losing year in its nearly quarter-century existence. Hey, we've heard that one before. TOTAL ESTIMATED LOSS: $350â$500 million -------------------------------------------------------------------------------- Misery at Mizuho In early December, a single botched sell order in Japan caused the price of one firm's IPO to collapse, throwing the entire Tokyo Stock Exchange into turmoil and costing one of the country's largest brokerage firms a bundle. A trader at Mizuho Securities accidentally entered an order to sell 610,000 shares of J-Com at 1 yen instead of one share at the debut price of 610,000 yen. Mizuho's electronic trading platform accepted the trade, and the Tokyo Stock Exchange's system executed, hammering the stock on its debut day and providing a free lunch for traders who snapped up shares at bargain prices. The ensuing fracas drove down the share price of Mizuho's parent company and led to the resignation of exchange president Takuo Tsurushima and two other executives. After pressure from Japanese politicians, who condemned the actions of traders who profited from the sell-off, more than 50 firms and investors agreed to bust their trades. Just as many decided to keep the money, however, locking in a big loss for Mizuho. In January, Mizuho announced pay cuts for the bank's top executives and a "reprimand" of the trader who executed the fatal order. In Japan, it seems, lifelong job security remains alive and well. TOTAL ESTIMATED LOSS: $300â$350 million
and the conclusion on page 4: -------------------------------------------------------------------------------- Looking for Closure Last year's most notable fund closures Marin Capital wasn't the only fund that went down in 2005. Whether a result of too many people chasing too many ideas or merely lame performance, hedge-fund casualties were abundant. Just as the extended drought of opportunities in convertible bond arbitrage claimed Marin, other entities in that space died of thirst. Triborough Partners, which at one time managed in excess of $100 million, closed its doors, and SAM Advisors* threw in the towel on a $600 million converts strategy. Weak performance led to some long/short closure. The $400 million Agnos Group bagged it at the end of the year. Manager Anthony Anagnostakis focused on tech stocks but found only single-digit returns. Meanwhile, Richard Driehaus, a Chicagoan who increasingly spends much of his time in St. Thomas, ended his eponymous firm's long/short effort (which was actually run by Jeff James), opting to return capital. Driehaus continues to run $3.7 billion. Some big-time financial-services players, such as American Express, Bear Stearns and Mellon Financial, killed some affiliated funds. About a year ago, American Express bagged three funds (a converts strategy and two market-neutral strategies) with $500 million in combined assets. Finally, there was Bayou Capital, which collapsed amid allegations of fraud. Then again, the folks at Bayou weren't really trading much of anything -- unless you count their souls. Page 4 of 4
Isn't it obvious?..................Chapter-1: They all let small losses grow into be huge losses. The End.
I am just wondering how those trend fellowing funds have done nowadays... Are they on the winner side nowadays?