Thanks for update EPrado; and thanks to Pab(s)t Prime for getting the early scoop in Aug! No thanks to Surf! VICTOR HIT AGAIN NIEDERHOFFER CRUSHED BY SUBPRIME MELTDOWN By PAUL THARP Hedge fund titan Victor Niederhoffer in his Connecticut mansion.October 7, 2007 -- Victor Niederhoffer appears to be a two-time loser. Niederhoffer, the father of modern hedge funds, who lost his entire $130 million portfolio in 1997 when he bet wrong that stocks in Thailand were ready for a bull run but then slowly and carefully rebuilt his business and his reputation, was been forced to shutter his flagship Matador fund last month after getting blindsided by the subprime mortgage meltdown. The incredible story of loss, redemption and then loss again, which was lost amid the hedge fund disasters at larger firms like Goldman Sachs, Bear Stearns and Lehman Brothers, is unfolded in the next issue of The New Yorker, on newsstand tomorrow. The Brooklyn-born, Harvard educated Niederhoffer, 63 tells the magazine, the subprime mortgage mess âis one of the greatest turmoils in Wall Street history." âI was caught wrong-footed in the market turbulence," said Niederhoffer, whose $350 million of assets under management was puny compared to the multi-billion dollar blow-ups down the Street. âWe were prepared for many different contingencies, but this kind of one we were not prepared for." No, it wasn't the size of the blow-up that made it so poignant but that Niederhoffer was a lifelong gambler who'd tip-toed about the rim of stupid investment moves - and fallen hard - just 10 years ago. It was the so-called Asian contagion that did him in then. It could have been hubris that knocked him down this time. A member of the squash hall of fame and a collegiate champion at Harvard, Niederhoffer's first memory of putting money on the line was a $2 bet he placed on the Brooklyn Dodgers in 1951. On Yom Yippur that year, an eight-year old Niederhoffer sneaked out of synagogue to place his Dodgers bet - which lost spectacularly when Bobby Thompson hit the shot heard 'round the world. After losing his entire $139 million portfolio, Niederhoffer went into a depression for years. By 2003 he was finally ready to start anew. Using small investment from the few institutions that still trusted him, Niederhoffer set up an offshore hedge fund and it returned profits of more than 40 percent in each of the first two years. In 2005, it was up 56 percent and the world was starting to take notice that Niederhoffer was back. Still, the investor tells The New Yorker, he knew it was risky. âIf you are going to try and make forty or fifty percent a year, tremendous variations are inevitable." Niederhoffer tells the magazine his three decades as a professional investor were based on the widespread recklessness that fed the current mortgage mess. He said he made fortunes several times over âtypically by relying on methods that other traders considered reckless or unorthodox or both." Niederhoffer respects risk, and treasures a large 1820 painting of a whaling ship that was the inspiration for âMoby Dick," a sign of how quickly fame and fortune can vanish. His 20,000-square-foot mansion, with 30-foot-high ceilings and crammed with artworks and hunting collectibles, is as eclectic as his approach to investing. Niederhoffer, a child mathematics prodigy who holds a doctorate in economics, was still working his valued computer formulas earlier this year. He believes markets don't act randomly and that their swings can be predicted. Now, they were telling him it would be smooth sailing with little volatility. Then the incredible 100-point plus swings of July and august hit and Niederhoffer left himself without a safety net of cash. When the market dived and the investor was asked to double the amount of capital supporting his highly leveraged positions, he couldn't come up with the cash. The funds were forced to close. âMy basic ideas about the creative powers of the market, buying in panics, buying on weakness - I don't think what has happened has anything to do with that stuff," he said. âI am going to keep going, for better or worse."
No problemo...the whole story is in The New Yorker....very interesting..I posted the link in the other thread..... Pabst was right on target....
*boom* and the windows in brooklyn shake as I look north towards Connecticut to see a mushroom cloud rise into the partly cloudy NYC sky
No problemo...the whole story is in The New Yorker....very interesting.. http://www.newyorker.com/reporting/2007/10/15/071015fa_fact_cassidy Pabst was right on target....
From the article above: "Later in August, after the Federal Reserve cut the discount rateâthe rate at which it lends to banksâthe markets calmed down; but Niederhofferâs woes continued. In September, he was forced to close two of his funds, including his flagship, Matador, which had declined in value by more than seventy-five per cent. After cashing out many of his investments, Niederhoffer repaid his lenders and returned what money was leftover to his clients. He laid off several employees and consulted with his lawyers. Meanwhile, rumors circulated on the Internet that, for the second time in a decade, his funds had âblown up.â Had he been able to wait a little longer before liquidating his trades, his funds might have recouped most of the losses. After the Federal Reserve cut interest rates again, on September 18th, the stock market rallied further and volatility decreased. Still, Niederhoffer sounded philosophical. âThe market was not as liquid as I anticipated,â he said. âThe movements in volatility were greater than I had anticipated. We were prepared for many different contingencies, but this kind of one we were not prepared for.â Niederhoffer was still trading for his own account, and for some remaining clients. âMy basic ideas about the creative power of the market, buying in panics, buying on weaknessâI donât think what has happened has anything to do with that stuff,â he said. âI am going to keep going, for better or worse.â 75% drawdown in his main fund Matador....if that's not a blow up, I don't know what is.
so, when will the apologies come? from those who were blasting pa(b)st, calling him names, saying that it was without basis (or something pretty close to that)? in the future ,those who invest in these kinds of funds should be given a warning: take your money out when things are going well, because to achieve these kinds of 'outsized returns', we will likely eventually blow up.