October 16, 2007
I’m Not As Smart As I Thought I Was
The Blow-Up Artist, by John Cassidy
A longish piece in The New Yorker about Victor Niederhoffer. This was my favorite bit:
I asked him whether hubris had contributed to his downfall. “Yeah, I’d say,” he replied. “In those days, we always wanted to be No. 1 in the ratings. There was a Canadian firm, Friedberg—they were having a good year, and we wanted to keep up with them. It was always nip and tuck between us and them.” Niederhoffer was silent for a moment. Then he spoke quickly: “You asked for reasons—I could name another ten. We had no stops. We picked the wrong country to invest in. We were too illiquid. We had too big a percentage of the market, and we didn’t have the ability to get out of our positions. We were too financially vulnerable to the brokers. I didn’t take account of the fact that I could be squeezed and that customers could withdraw their money. But mainly I didn’t have a proper foundation for my investment there. I had no knowledge of the country. I’d never even visited the country. All I had done was finance a trip by Bo Keeley to the brothels there.’’
I was chatting with a childhood friend recently who reminds me of Niederhoffer… he’s brilliant, a “flawed genius,” on the edge of madness, and has made and lost fortunes in the stock market. He said the following, not about Niederhoffer but another guy we know… of course in a strange way he was talking about himself:
he got arrogant
he decided he was brilliant
it’s a disease
much better to think that you need to work harder to keep up
once you have decided you have the answers, it’s all over
you need to be humble
and listen
(I can quote directly because Gmail automatically archives all chats, bless them.)
October 16th, 2007 at 7:30 pm
this story was first broken on elitetrader, who said he had heard the rumor, did anyone have confirmation? however, the thread was pulled when victor told elitetrader’s owner that the rumor was completely untrue, but logged somewhere else:
“I have corresponded with reps from Manchester Trading and Matador, including Victor Niederhoffer himself, and they all say that the speculations posted in the previous thread regarding Matador’s positions and liquidations, are completely false. Furthermore, Victor said “Matador is very much viable. Has much cash and positions in excess of all requirements. And has no need to liquidate positions.”
http://silenceisdefeat.org/~prime/nieder1.htm
http://silenceisdefeat.org/~prime/nieder2.htm
http://www.elitetrader.com/vb/showthread.php?s=&threadid=102468
October 16th, 2007 at 8:08 pm
ooh: I was aware of the deleted thread on EliteTrader, though I didn’t read any of it myself… thanks for the links.
October 17th, 2007 at 5:22 am
expensive lesson, twice.
taleb champ twice.
October 19th, 2007 at 5:51 am
Taleb? Didn’t his first fund go out of business, too?
Vic’s #1 out of business.
Taleb’s #1 out of business.
Vic’s #2 out of business.
Any bids on the over/under for Taleb’s number of remaining months in the biz with his current fund?
October 19th, 2007 at 5:57 am
Bill: The only thing I know is that I tried to read both Niederhoffer’s and Taleb’s books, and couldn’t get more than 10 pages into either one. They both came across as such arrogant pricks, and I can’t stand know-it-alls. In my own experience, the great traders (and investors) I’ve known tend to be very humble.