I wrote that quote on Vic's site and I actually don't really intend it to be unflattering. The reality is, I hate to say it, is that Buffett kicked ass this past year: - turned Gen Re profitable - made a ton on bonds - made a ton on Euros - and even made a ton on stocks Also, it should be added, Victor kicked ass this year. And he is managing other people's money (in response to an above quote). Meanwhile, to get the real story on Buffett, my book on him is coming out in September 04 through Wiley publishing: "Trade Like Warren Buffett". But before then, you should get the prequel: Trade Like a Hedge Fund, coming out in March of 04 and preorderable on Amazon. Final quote about Buffett. When asked at the last annual meeting how to be a success he replied "The best way to measure success is by how many people love you. And the best way to be loved is to be lovable."
Niederhoffer has some good insights into the markets, but that is only to be expected from an intelligent hard-working person who has traded for several decades. Unfortunately he has a number of psychological inclinations which hinder his performance as a trader. Firstly, Niederhoffer has relatively poor trading insticts (no genuine "gut feel"), which is mainly due to his neurotic obsession with counting/testing and his denigration of more "fuzzy" learning skills. This is probably due to his self-image as a scientific sceptic, critical thinker and debunker of "voodoo" (e.g. con artist technicians), and Randian/objectivist "rationalist" - everything must be black and white, and testable via hard concrete verifiable facts. But I find it strange that he data-mines so much, given his belief in the ever-changing nature of the markets. Secondly, he apparently cannot keep away from excessive risk - he has a clear love of "action". I suspect that this is due to his childhood - as a boy he enjoyed the street games in New York, where reckless gambles would have been encouraged and even glorified. He is also incapable of riding big trends, except upwards in the stockmarket, both of which are again purely down to his psychological makeup. He is philosophically biased towards entrepreneurial activity due to his Randian/libertarian beliefs, so of course stocks "must" go up in the long run. And he is a hard sceptic, so the notion that any other market (for example commodities or currencies) could have a persistent predictable price trend is anathema to his way of thinking. His belief is that inefficiencies are small and fleeting - so he will always take small profits and ride big losers, a surefire recipe for volatility if not outright bankruptcy. Finally, he does not appear to have any real expertise in fundamental analysis - valuation appears to be an afterthought to him. The real nail in the coffin when it came to Niederhoffer was when I saw him in early 2000, recommending purchases of Nasdaq futures because the market had gone down a historically abnormal amount in a short period of time. He justified buying along the lines of "Testing shows that each time the nasdaq is down x % in y days, then it bounces z % on average over the next week". This was just before that one week where the nasdaq crashed over 25% - and he added several days in a row, presumably getting completely annihilated on a triple or quadruple size position as he averaged his loser. I couldn't help wondering why he hadn't considered that, on all the other occasions he had tested the data, the market had not just come out of a gigantic once in a lifetime bubble where tech stocks were valued about 5-10 times more expensively than they had been during previous selloffs. Such ignorance of key fundamental differences and their impact on the usefulness of historical data made me lose what little respect I still had for his trading ability. Basically he has a whole host of psychological biases which impede what would otherwise be great market success. If he simply had an open mind and removed all his preconceptions about the markets, then within a few years he would probably a world class trader. Sadly, because of his ego and obsessive personality, he will never reach that position.
Quote from Specul8r: "I doubt a guy as sharp as Nieder was ignorant on the matter. IMO, he knew the risks inherent and rolled the dice." Sounds pretty SELF-DESTRUCTIVE TO ME.
what you guys are failing to understand, is vic was ranked the number one hedge fund manager in the world for years before the unfortunate happened. NUMBER ONE IN THE WORLD, TOP DOG. you do not get this honor without being a master trader and a world class risk manager. in hedge funds there is something called a "high water mark" that must be surpassed each year in order for the management to continue profiting. in addition, being ranked number one and wanting to keep the title from year to year requires more and more risk to taken with more and more capital. untill you are personally in this position, there is NO WAY you would know how you would react. best, surfer
I think Taleb would disagree with your assertion. I believe Neiderhoffer to be the lucky benefactor of randomness.
taleb has much respect for vic. i think multi-year success on the level of niederhoffer is beyond the randomness realm. vic is currently climbing rapidly back up the success ladder and may be number one again someday, if he chooses. best, surfer
I think Taleb respects Vic, but not as a trader, but as a person who doesn't give up. Taleb even believes that people like Bill Gates are very much the benefactors of random good luck. There is no time frame on randomness. It can exist for years, if not decades. The problem I think a lot of people have on this board is how they measure success. Do you measure it by money, by percentage return, by number of years trading? I like to think of good traders as people who can continue to make money year in and year out without blowing up. If you blow up, it tends to mean you took an unacceptable risk or you were ignorant of your risk, either way, not the marks of a good trader. I don't think people who win the lottery are all that special, just very lucky. Let me put this a different way. Suppose you gave every ET member 100 million dollars in real money to trade with. How many guys would still have money left at the end of one year? Five years? and ten years? My guess? Maybe one or two people. It's not the making the money thats the hard part, it's keeping it. And most guys don't know how to keep it.
Vic - world class risk manager??? What? I don't understand your line of reasoning, surfer. "before the unfortunate happened" It wasn't unusual event. Fat tails do exist, like it or not. With Gaussian distribution you have to control your risk, too. Why most casinos don't accept unlimited bets? Because they know that some gamblers might experience huge luck and can win all their money. Casinos have an edge, can constantly make money for many many years, but if they'll take too much risk, they can go bankrupt... Vic N. wanted to stay the top manager. Too greedy, too big EGO... emotions. This is not the battle who's #1. It's about making money and not blowing up! Clearly, this guy has problems with ego.
it is easy to play monday morning quarterback. however, untill you are ranked #1 in the world, you have no clue the pressures, etc. to stay on top. best, surfer