Really Rich Guys - Top 10 Traders

[El Diablo]

Barron,

"i bet you'd find a far higher % that blow up vs. your average population of traders."

That's very true. A progression like this is not all that uncommon (usually not for quite these stakes though):

Guy makes very risky billion dollar bet (after a decent career managing smaller amounts). Wins. He is +$300m.

Now can raise much more easily. Guy makes very risky two billion dollar bet. Wins. He is +$900m. Call it a billion after fees.

Guy raises ten billion dollars. Loses five or ten billion. Still makes $300m in fees.

Here's a situation where someone is now worth over a billion, but their net track record is down billions.

LTCM, Amaranth (guys who blew out taking the other side of the guy in spot #1), and other big blowouts are all good examples of this. And most key players involved in those blowouts come back again with huge funds.

A lot of times this is just two guys making low expectation super high variance plays. Given the fee/carry structure (common for them to charge 3% of money invested + 30% of profits. SAC in one of his recent funds switched that to straight 50% of profits, but I don't think he's still on that), all that guarantees is that some trader is going to get super rich and high-profile.

Very few of these guys have track records that can be attributed to much more than variance, even if they are really good and really smart.

[samjjones]

I'm guessing at least half of these dudes sit in their unfurnished penthouses watching "Wall Street" at least 3 nights a week.

I wonder what the life expectency of these guys is, too.

[Philuva]

#7 Paul Tudor Jones donated $20M to build UVA's new basketball stadium. Doesn't seem like that much looking at his income.

[crazy canuck]

[ QUOTE ]
i would LOVE to see the rolling list of the top 10 including those that fall out of that list year by year. i bet you'd find a far higher % that blow up vs. your average population of traders.


[/ QUOTE ]

I think I disagree based on the fact that a large % of traders blow up. Several of these guys were already in Market Wizards (Kovner, Druckenmiller, Tudor Jones) and others have years of impressive track records (Shaw, Simons). But yeah you're right regarding excess risk. I remember reading a paper at wilmott where the author showed that Buffet and Soros have equity curves similar to a Kelly better (a Kelly bettor has a fairly high chance of going busto).

I would expect mostly the energy traders to blow up. Many energy companies were forced to move into trading becasue there were no other easy alternatives left to improve profits. Of course trading is not as easy as it seems...

And yes El D is right...the incentive structure is pretty crazy. I heard Brian Hunter is starting another fund. [img]/images/graemlins/confused.gif[/img] And Meriwether from LTCM is still in the business. Merton didn't manage to raise funds last year so I guess investors are not entirely clueless.

It's also interesting to see George Soros' son at spot 20. I guess investing skill is transferable.

The most interesting person on the list in my opinion is Simons, because he was an extremely accomplished mathematician before he switched to finance. There aren't many people who can be successful at that level in 2 different fields.

[stoxtrader]

barron - 20billion?

[JoseGonzlez]

i used to work in the day trading industry and had 3 or 4 good years (just smalltime stuff compared to these guys but i was paid a few hundred K a year) (my trades dont work anymore.)

in all honesty it was not stressful at all. the lows and bad luck runs were never as bad as poker.

these guys dont have it as rough in the stress department as someone fulltime pokering and they are paid alot better.
in all honesty the guys who are uber successful at poker have alot of skills they need to do this type of work and at its roots is very similar.

so yeah if anyone has any opportunity to get into the trading business and is good at poker the skills transfer over really well.

[RunDownHouse]

crazy,

I thought Buffet had been a stud for three decades or more. Am I wrong? If not, is he a complete outlier or aberration? If not, what's the problem in your correlation between Kelly curves and market success?

My understanding of the Kelly criteria come almost completely from a paper by Stephen Levitt (author of Freakonomics), in which he discusses NFL gambling markets. From what I picked up, Kelly's criterion dictate an optimal bet size that dictate a bet size that guarantees NOT going busto.

Assuming that my understanding of Kelly is correct - that a perfect Kelly bettor has no chance of going busto, as you stated - I'm not sure where the disconnect is.

[El Diablo]

stox,

Let me translate for you:

Barronspeak: "guy who owns the hedge fund i work at is easily worth 20bil."

English: "guy who owns the hedge fund i work at may be worth over a billion dollars."

[ed8383]

my question would be, can an average joe do this? can an average joe pick up a bunch of books, learn the market and make himself rich if he is good enough and lucky enough? don't you need money to make money in this field? (unlike poker where a small deposit can lead to great things if you're good)

[xxThe_Lebowskixx]

Barron,

Lets kidnap him and extort randsom.