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Author: yodaorange Big red star, 1000 posts Feste Award Nominee! Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 458977  
Subject: To heck with those 10%/yr stock market returns Date: 5/29/2012 3:13 AM
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If I had to pull a number out of the air, I think most METARites would be happy earning the historical stock market return of ~10% per year. Some might reminisce about the good old days of the 1990’s and plan for 20% per year. The low returns of the 2000’s might have caused some to lower their goals to say a consistent 7%.

Some hedge fund managers are cut from a different cloth. Somehow through genetics and/or training they are only happy with much higher returns, say greater than 20% per year. Possibly the London based JP Morgan trader, Bruno Iskil, that put on the multibillion losing trade had this swing for the fences approach. The approach had been successful for many years until this trade went bad.

The magazine “Absolute Return + Alpha” has a fascinating story of a swing for the fences hedge fund manager named Michael Geismar. Geismar is the 41 year old co-founder and president of the $4.6 billion managed futures firm, Quantitative Investment Management. The story sounds like one of those urban legends that grow each time it is retold. In this case, the author claims that the facts have been verified by multiple eye witnesses.

Our friend Geismar attended a hedge fund conference called SALT earlier this month in Las Vegas. In between sessions, Geismar decided to play a few rounds of blackjack. Geismar is not a card counter, but has followed the work of Edward Thorp who was detailed in the book Bringing Down the House: The Inside Story of Six MIT Students Who Took Vegas for Millions.

Geismar first sat at the blackjack table on Tuesday, May 9th, with $300 in cash. He promptly borrowed $10,000 from the casino. Nothing like 33 to one leverage to help boost your returns.

On Friday, May 11th, Geismar played his last hand at the Bellagio blackjack table. He left after winning $710,000 in three days. And this was after giving $1,000 tips to the dealers and others at the table. The dealers reaped over $10,000 in tips during his run.

Suffice to say, Geismar is not welcome back at the Bellagio.

The story reads like one of the “Ocean 7” movies, except they are fiction and this is real.

Turning $300 into $710,000 in three days requires skill IMO and cannot be accounted for as a random walk. I think there really is something different about Geismar and his ilk. Several hedge funds do NOT look for fancy academic backgrounds, but instead hire based on how well the person plays poker. One hedge fund trader, Boaz Weinstein, is largely on the other side of the failed JP Morgan trade. Essentially he broke JP Morgan. Weinstein has also been banned from the Bellagio for beating the house. He was also a chess master at age 16. Maybe instead of reading and studying Macro Economics, we would be better served honing our blackjack/poker skills.

Geismar and Weinstein manage money a little differently than I do for the widows and orphans funds. . .

Thanks,

Yodaorange



Link to the short article about Geismar:
http://www.absolutereturn-alpha.com/Article/3035947/Michael-...


Link to medium length article about Weinstein:

http://www.nytimes.com/2012/05/27/business/how-boaz-weinstei...
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Author: captainccs Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 393357 of 458977
Subject: Re: To heck with those 10%/yr stock market retur Date: 5/29/2012 8:04 AM
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These articles read like thrillers but, is it investing? The second linked article says that Mr. Weinstein "blew up." Warren Buffett, Ben Graham, Peter Lynch and Walter Schloss might have made some bad investments (¿a textile mill?) but never blew up. Jesse Livermore, who also blew up at least once, said that to invest you should buy annuities, the stock market was for speculating.

Weinstein was deep in the hole before he landed the whale. It could have gone the other way. Would he have blown up again?

It is the fable of The Tortoise and The Hare all over again. http://childhoodreading.com/?p=3

BTW, I was in Las Vegas once, in 1978, and lost $800. I had some fun and learned a lot. It must have been the last time I was in a gambling casino having previously visited several in the Caribbean and in Europe. One should not gamble in casinos, just pay for the entertainment.

Denny Schlesinger

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Author: aspenglow Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 393359 of 458977
Subject: Re: To heck with those 10%/yr stock market retur Date: 5/29/2012 9:06 AM
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David Einhorn of Greenlight Capital is also a world-class poker player

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Author: captainccs Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 393361 of 458977
Subject: Re: To heck with those 10%/yr stock market retur Date: 5/29/2012 9:16 AM
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Warren Buffett and Bill Gates play bridge, don't they?

http://www.usatoday.com/news/education/2005-12-19-bridge-sch...

The Captain

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Author: hockeypop Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 393362 of 458977
Subject: Re: To heck with those 10%/yr stock market retur Date: 5/29/2012 9:36 AM
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http://www.bengrahaminvesting.ca/Research/Papers/Athanassako...

Not much new here other than to say that value investing involves making a few big bets with the odds in your favor. Maybe related.

Keynes had indicated “It is better to fail conventionally than succeed
unconventionally” [15].
....
Weaknesses of human nature and institutional biases are not going
to go away - just as portfolio managers do poorly not due to lack of
stock picking abilities, but rather due to institutional factors that
encourage them to over-diversify to protect their jobs and assets under
management, investors will also continue to believe the promises that
growth (glamorous) stocks make, overbidding them, and giving rise to
the value premium.


Like Berkowitz and others, you're "penalized" if you lose in the short term to get a lot in the long term. In poker it would be interesting to see if either gentleman was previously busted, and how many times.

Hockeypop

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