Lessons from a Hedge Fund
Amaranth hedge fund participants lost half of their money as the fund suffered the losses from several bad bets, $5 billion in the last week alone. Analysts suggest that Amaranth was overly dependent on bets on natural gas and on one trader in particular, 32 year old Brian Hunter of Calgary, Alberta. Analysts further suggest that Hunter illustrates the problem of over dependence on debt by hedge funds, estimating that Hunter had to borrow $8.00 for every $1.00 of funds in order to cover his positions.
Broader diversification within the fund would have mitigated losses, though at the expense of the better than 20% returns that the fund had been enjoying. Still, the staggering losses of the past month underscore the value of the diversity principle, that the standard deviation of a portfolio is less than the weighted average of the individual components.
| This entry was posted on Sunday, September 24th, 2006 at 10:57 pm and is tagged with staggering losses, calgary alberta, brian hunter, hedge fund, hedge funds, standard deviation, weighted average, diversification, dependence, bets, natural gas, principle, diversity, participants, money. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback. |
3 Responses to “Lessons from a Hedge Fund”
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Just finished reading Sykes mediocre book on hedge funds. Its an empty and uninspiring story about Tim Sykes, a self-absorbed irresponsible stock trader. This book is NOT a “classic”and story is NOT “Rocky-like” (as author Sykes claims).
Sykes put the term “stock operator” in title in order to confuse all future book searches for Jesse Livermore’s excellent story (Reminiscences of a Stock Operator, by Edwin Lefavre (1923)). This cheesy trick might help book sales, but needless to say, Sykes has nothing in common with the great trader Livermore.
Sykes comes across like a hyper/immature/video player-type Trader, which worked for him for a few years; then the law of averages caught up with him. His “return to the mean” continues during the past two years; and his very poor investment strategies are DOWN -36% since Jan 2006. His continous bad performance throughout 2007 shows that he does not learn from his mistakes; and readers can only cringe while watching Sykes slow motion demise.
I READ SYKES WORTHLESS BOOK AND IT HAS NO SUBSTANCE AT ALL. THERE ARE PLENTY OF OTHER BOOKS THAT COVER THE SAME SUBJECT MATTER FROM PEOPLE WHO HAVE A RIGHT TO EVEN AUTHOR A BOOK ON THE SUBJECT.
THIS WORTHLESS BOOK IS JUST AN ATTEMPT AT COMING UP WITH A CATCHY TITLE TO GENERATE HITS ON A SEARCH ENGINE. SAME OLD TIRED INFORMATION PRESENTED.
SYKES IS A FAILED HEDGE FUND MANAGER, NOW BECOMING A SNAKE OIL BOOK SALESMAN. BOOK NOT WORTH $20.
Re: Sykes amateurish hedge fund book:
Is it more sad or amusing when someone’s young ego spurs them to write a book when they possess neither literary skill nor talent? Sykes has commented elsewhere that his goal to become “a great teacher, not a great investor” but in this sad excuse for a tutorial he proves to be neither as his amateurish errors practically drive him from the market, credibility (what little he had) completely shredded. Perhaps, however, it’s not truly his fault: let’s face it, when it comes to imparting wisdom from Wall Street it is simply not possible that a raw twenty-something simply has much to say.
Not that Sykes doesn’t try however. In perusing the “comments” portion of Amazon book reviews, he’s certainly not reluctant to chime in and offer a defense at nearly every turn. Find me ONE other author at Amazon that feels so compelled to argue his own incompetence.
Tim Sykes should end his determined quest to become a media personality as his grating manner and decidedly non-telegenic looks suit him far better to shine shoes.