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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: John Pitera who wrote (1025)	4/16/2000 11:15:00 PM
From: August	Read Replies (2) \| Respond to of 33421

What happened to Niederhoffer's client in October '97 was truly tragic. Reading the first chapter of his book (available on internet), one gets the self-portrayal of a renaissance-man, a warrior(athlete)-scholar, a philosopher-king. One would think someone portrayed his book could easily deduce the ramification of the unfolding events, such as this Message 2524822 He was not like any thing he portrayed in his book. I don't think it was too hard to deduce the events that unfolded. Looked like his plan was to 1) bet against events progressing beyond one standard deviation, 2) bet the farm at two standard deviation against events progressing beyond that 3) assume that 10-yr flood will never ever happen With his inability to deduce unfolding of events, he should not blindly bet the farm at 2 standard deviation--the farm of someone else, no less. About a year later, when he was interviewed by some magazine in his mansion complaining about people no longer giving him money to manage, he had the gall to say something like "when you stop making money for people for a year, they don't call you any more. That's the nature of the business". Excuse me, such gall. Not only did he not make money for people, he lost their money. Not only did he lose their money, he lost every single last dime entrusted to him. Julian Robertson of Tiger Fund at least return much of the original capital to his clients. ---xxxx--- It was the same problem at Long Term Capital, despite all Meriwether's claim that the fluctuations of his different cross market bets will cancel each other out in the short term (and give him huge profit in the long term), all his bets were shorting "risk". When the price of "risk" went through roof, his clients were ruined. As Meriwether ruefully told reporters later that it was really not his fault but Wall Street's. He sullenly confided that in Wall Street, if you sold insurance for hurricane, some one will make sure to create hurricane so as to steal your money and ruin you. As if he was an innocent choir boy destroyed by the evil of Wall Street that he was not aware of. Meriwether was the one of the most powerful man on Wall Street, if not the most powerful, when he ran Salomon. He left Salomon, because of the vast treasury scandal involving hundreds of billions of dollars. I would not be surprised if in his days, he ordered hurricanes created for some other market participants. ---xxxx---- "The Education of a Speculator, Lesson II" is unfolding in front of our very eyes, if Niederhoffer uses anywhere close to the leverage he used before he would lose every last dime of his clients again. History repeats itself, although with a different twist.