Adding to the list of traders who have been charged with insider trading or who simply blew up is now Steven Cohen, who was featured in the Stock Market Wizards book. In fact, in this same book, one trader blew up (Okumus) and another was charged (Lauer). How many more "wizards" will be added to this list? At this point I am wondering if there is anything to be gained from any book in this series. Thoughts?
http://en.wikipedia.org/wiki/Buddy_Fletcher Profiled in "Stock Market Wizards" circa 2000. The Wiki article does not have much info on the the recent history of his firm. It's bankrupt and he's being sued by a couple of pension funds in Louisiana for "guaranteeing" (and not delivering) very high annual returns. Lots of info online including several long articles by the WSJ. From my recollection of the Market Wizards interview, he started out in an obscure and profitable niche. Maybe it got crowded over the years and he resorted to a Ponzi-like arrangement, which eventually collapsed, like they all do.
Jesse Livermore blew up multiple times and blew away his head with a gun. Still read the book about five or so times over the last 15 years and will again.
I think they are all great traders with personal flaws. Market Wizards might be called the bible of trading but it's not the King James Bible. All these men are flawed. I have no doubt James Simons is a genius but did you read about that the crap he tried to pull on taxes? LOL. He dropped a few notches in my book on character but the guy is disgustingly smart.
Boosting your returns with insider trading or blowing up when when a bear market nullifies your "value" method is a pretty big flaw considering they are listed among only a handful of wizards. The question is: What % off their return had to do with real skill, vs . cheating or luck?
You will never have an answer to that question. Steve Cohen has traded for 3 decades, maybe more. Nobody has ever questioned his ability to trade. Are there guys at his firm that are doing illegal stuff? Sure. Did he know about it? Maybe. But Steve Cohen in a room by himself could make a nice living. As for a value investor blowing up in a market meltdown. Most value investors get hit hard in meltdowns. I remember in the late 90's when Buffet took a 50% drawdown and everyone said he was done. Julian Robertson comes to mind as well. I think you need to understand there is a big difference between trading and running a fund or a large organization. Most these guys are good traders, but might not be good at managing people.
He wasn't charged with insider trading. He was charged with not preventing insider trading at his eponymous hedge fund.