This has been posted in elitetrader. If I post member's name people will jump on him. Annual returns 2002: 105% 2003: 120% 2004: 118% 2005: 90% 2006: 57% 2007: 150% 2008: 382% 2009: 51% 2010: 31%
That could very well be the annual return profile of a futures trader, even a trend follower perhaps. In fact I think I know one or two traders who have similar results although I don't believe quite as high in 2008 but definitely like 200%+ in 2008. I'm not commenting on the quality of the original posts I'm just saying these are not outlandish claims, particularly someone trading futures who knows what they are doing and maybe starts with 100 K in 2002. Who knows if people are drawing on their account, what kind of leverage they are using, what kind of taxes they are paying, etc. The key values should be return, draw down, and are you trading with 6 figures or more at risk (to avoid the microcap guys). I've found that most people, who aren't here to sell anything, fairly believable regarding performance. Of course you hear more about the good and not bad so much, this is normal. For every winner there is 8-9 losers at the least...
I do not want to say anything bad about any trader but when the profits are high there is always a possibility of a big loss. If this trader started with $100K in 2002 he would have $1100000 in 2010 at 1100% without compounded. Now if there is loss of -100% for 2011 he will lose everything. If all depends on the capital he is risking while trading. Correct me if I am wrong. I am really confused why there are only 1000 or 2000 billionaires when there are many stories of high proifts.
Of course this is all hypothetical, but I agree this individual is using too much leverage for my taste, and I can almost certainly assure you he/she is trading futures. The returns are plausible in futures and I bet the max drawdown is probably 50-80% for those types of returns. Nerves of steel required. Keep in mind, 11mil on, say a global futures portfolio of 100 instruments, is not much money. You won't be having liquidity problems of significance as long as your instrument selection is broad enough. Hell you could just trade the energy and financial complex and 11mil is no big deal to move around.
Why would anyone want to be one? I bet most of them are pretty unhappy, as almost everyone in their lives wants something from them. Big money also produces big problems. Sure, make the money but give most of it away, surely most people can do without 5 houses etc when 1 billion people on the planet live on less than $1 a day. As for there being secret ones, of course but they're the clever ones.
Liquidity is a major problem once you hit a certain size, I haven't gotten there yet (not even close) but we know it is out there. Another major, major problem is taxes. It is a major issue for those of us who are U.S. citizens (or North Koreans, Cubans, or Belarussians). Look at what happens to your compound growth rate when you are eating 40-50% a year in taxes. Compare it to your competitor who is not a citizen-slave, who can sit in a tax haven and compound nearly unfettered (depending on instruments he trades). You are at a massive disadvantage if you have an uncompetitive tax structure. Very few people become supremely rich speculating. I argue that when someone does, it is because there is a flaw in society. We are parasites, not wealth creators. We grease the wheels by taking on risk other people don't want, but we do not create. We are a necessary evil if you will, note I do not lump long term equity investors in this group.
If billionaires live in 1 house there will be more unemployment. 5 houses means more jobs. 10 cars means more jobs.
That should actually be what a normal traders account looks like. Assumming a $50k starting balance in 2002 and withdrawing $50k per year to live on, his account should be around the $300k range right now.
When America has to rely on billionaires to create an extra 5-20 jobs here and there they've got more of a problem than most people think.