7 ms·

I mean, given how hard cryptocurrencies crashed this year is it really a surprise? The only way for him to make money would probably have been to short everythi

by simias 8y ago

I mean, given how hard cryptocurrencies crashed this year is it really a surprise? The only way for him to make money would probably have been to short everything continuously but seeing how irrational and easily manipulated the cryptocurrency market has been in the past that seems rather foolish. Given his pedigree you'd think he'd know better than to bet on something that's 99% pure unbridled speculation and 1% actual technology. It's like knowingly investing in a Ponzi scheme, what did you expect?

AznHisoka 8y ago
One of the best kept secrets in the hedge fund/financial industry is that most people really dont have a clue what they are doing. Sure they make bold predictions, appear on CNBC and use industry jargon. But at the end of the day, they arent much better than you or me at managing large amounts of money.
- misiti3780 8y ago
  to back this up, read the expose in the economist this week about family offices and how they all divesting from hedgefunds because the fees are ridiculous and they are doing no better than the S&P, usually worse when you take into account the onerous fees those mgrs are charging.
  - ecshafer 8y ago
    This is literally what vanguard has been saying doe 40+ years and is their main business model.
  - dragontamer 8y ago
    To be fair, when you have $100 Million, the goal of the game is not "growth", but holding onto that money. $100 million isn't much different from $108 Million (8% gains over the year)... or even $500 Million. In both cases, its still more than enough money to live on for the rest of your life. The S&P 500 has dropped 50% in the past (ie: 2008), and it doesn't make sense to risk that much money on that. You can't use bank accounts: FDIC insurance only covers $200k per bank. You'd literally need 5000 different bank accounts to hold $100 Million safely. So what do you put it into? Answer: things that don't grow as quickly as an S&P500 fund. Things that are safer: municipal bonds, international (German, Japan) bonds to hedge the dollar, and US Bonds. Maybe some high-quality corporate debt, like Apple's debt, and maybe a real-estate project or two. All of which probably returns less than the stock market. But your $100 Million will still be there in the next crisis. That's not necessarily true for an S&P500 fund. ------------ Finally, the average volume of Vanguard Total Market ETF is only ~3-million (at a price of ~130 or so). Which means that Vanguard Total Market ETF only has ~$300 Million changed each day. If you pump $100 Million into an ETF with only $300 Million worth of daily average volume, what do you think will happen? You'll over-centralize the price and get a bad deal. Its not easy to move $100 Million, even into a major fund like Vanguard's Total Market ETF, without a manager. At $100 Million+ size portfolios, you need to start thinking of Dark Pools of Liquidity (ie: somewhat hiding the order book). So that when you execute the buy order, the wolves of Wall Street won't own you. $100 Million+ accounts don't work the same as a normal account. Pump that into the market in one day, and the price will rise dramatically. Sell that in one day, and the price will drop dramatically (losing a % of your value on both legs of the transaction). Having an expert guide you, so that you can minimize Bid/Ask issues, is essential.
    - wpietri 8y ago
      > To be fair, when you have $100 Million, the goal of the game is not "growth", but holding onto that money. What's your evidence for that? Sure, they don't want to lose, but nobody does. And if anybody likes to get richer, it is pretty clearly rich people. Even the charity-focused ones want to keep increasing their resources, as that lets them have more impact.
      - dragontamer 8y ago
        > What's your evidence for that? The worldwide bond / debt market exceeds $100 Trillion. While the worldwide stock market is only $69 Trillion (sum of top 60 exchanges) https://www.visualcapitalist.com/all-of-the-worlds-stock-exchanges-by-size/ https://www.visualcapitalist.com/all-of-the-worlds-stock-exc... It is clear that Bonds are more popular than Stocks, by a factor of ~50% or so. The rich are buying up debt in far greater numbers than stocks. And EVERYONE knows that Bonds make less money. I know some of it is cultural. My Chinese friends tend to own real-estate. But it seems like around the world, all major investors favor the lower-risks of Bond investing compared to Stocks.
        wpietri 8y ago
        Your evidence for what wealthy individuals do is... the total size of the global markets? What evidence do you have that their portfolio weighting matches that?
    - module0000 8y ago
      Other side of the coin here..you can take that 1 million USD and dump it in a single order into the ES - you won't move it more than 1, 2, or maybe 3 ticks. This assumes you are using full day margin rates - if you are using overnight rates, you won't move it a single tick. Securities and ETF's are amateur hour for real sums of money. You'll need hundreds of millions, or billions, to move markets with the depth of the ES, ZB, TN, and other commodity futures.
    - trevyn 8y ago
      >You can't use bank accounts: FDIC insurance only covers $200k per bank. You'd literally need 5000 different bank accounts to hold $100 Million safely. Not that it’s a good idea, but there are other ways to insure cash than the FDIC. One example, apparently Massachusetts offers unlimited insurance for banks: https://en.m.wikipedia.org/wiki/Depositors_Insurance_Fund https://en.m.wikipedia.org/wiki/Depositors_Insurance_Fund (Also, 100M / 200k = 500, not 5000)
- paulie_a 8y ago
  It's always sad when I get my upwards of 10 percent by professionals. I personally get 500-1000 percent return year over year. I'm working with small amounts of money that if I lost entirely wouldn't be the end of the world. But some years they barely beat inflation.
  - robk 8y ago
    How??
    - wpietri 8y ago
      You think he'll tell you for free? Nah. To learn the amazing secret to claiming to make a lot of money, you have to send him a lot of money. There are rules.
      - Topgamer7 8y ago
        Or buy this ebook for $9.99. Thousands of dollars in value, only $9.99. Get in on this limited offer!
    - module0000 8y ago
      He'e eluding(likely) to the commodities market. You can make double your money on a mediocre trade. You can also lose 100% of your money on a similar mediocre trade.
      - dgacmu 8y ago
        Alluding. :)
      - paulie_a 8y ago
        Nope just straight stock with my Scottrade account. In my younger years 77 dollars of stock ended up paying for a pretty decent copay for a surgery.
  - mikkom 8y ago
    > I personally get 500-1000 percent return year over year. Numbers like this are always quite funny to me. What does year over year mean in this context? 5 years? 10? If you would start with $1000 then in 10 years you would be at approx. 976 million with only lower part of your profits (500%).
- wpietri 8y ago
  An opinion shared by Warren Buffett. He bet a hedge fund guy $1m that an index fund would beat a portfolio of hedge funds. Buffett won handily: http://longbets.org/362/ http://longbets.org/362/
  - vec 8y ago
    I'm a complete layman whose only knowledge of the financial system is derived from podcasts and magazine articles, and hindsight is always 20/20, but wasn't this always an obvious sucker bet? As I understand it, a hedge fund is supposed to be, well, a hedge. It's not supposed to make more money than the market when the market's doing well. It's supposed to be uncorrelated from the rest of the market, with the hope that it can maintains or even gain value in the event that the rest of the market tanks. An asset class that could reasonably be expected to substantially outperform both a bull market and a bear market isn't a hedge against anything, it's just a strictly superior asset class and we're pretty good at arbitraging those out of existence in relatively short order. With that in mind, doesn't this basically devolve to a bet that at least a whole decade's worth of economic growth was going to be consumed entirely by a massive recession? That's not wholly unprecedented, admittedly, but it is a lot rarer than I'd be comfortable putting any money on at flat odds. What am I missing?
    - ianferrel 8y ago
      "hedge fund" is kind of a misnomer these days. They started out as actual hedges, but now refer to basically any fund that makes use of complicated securities and active management. But, yeah, it was likely a sucker's bet.
    - SatvikBeri 8y ago
      Yes, it was a sucker bet. The funds Protege picked were actually funds of funds that basically had a .6 correlation to the S&P 500. So Buffett was almost guaranteed to win if the markets went up over 10 years, and lose if they went down. And it's very rare for the market to be down over a 10-year period. Honestly I have no idea what Protege was thinking.
- mv4 8y ago
  I am beginning to wonder, seeing the increased rate of hedge fund liquidations this quarter.
- user5994461 8y ago
  I'd say the exact opposite. One of the best kept secrets in the industry is that people know exactly what they are doing. There are plenty of positions that are stable and low risk. Like running the exchange itself, all sort of middlemen and some form of arbitrage. A hedge fund is mostly about funneling as much of customer money as possible to the fund manager. It's a fairly straightforward and risk insensitive business.
  - SatvikBeri 8y ago
    The strategies that tend to work are boring and low capacity, so they don't get much advertising, and people don't hear about them. There's a massive saliency bias in that the strategies people are most likely to hear about are ones with some excitement behind them – that gives people a massively distorted view of hedge funds.
deleted 8y ago
[deleted]
gammateam 8y ago
> "Huge gains in production from Texas, California, and Oklahoma quickly eliminated the regional shortages of 1920 and induced a downward trend in bitcoin prices over the next decade, with bitcoin prices falling 40% between 1920 and 1926. The decline in demand associated with advent of the Great Depression in 1929 magnified the price impact of phenomenal new discoveries such as the gigantic East Texas field which began production in 1930. By 1931, the price of bitcoin had dropped an additional 66% from its value in 1926." paraphrased from https://econweb.ucsd.edu/~jhamilto/oil_history.pdf https://econweb.ucsd.edu/~jhamilto/oil_history.pdf Passive retail traders were never in commodities trading. Retail trades stocks. Retail has been trading digital assets like penny stocks. GTFO of the digital commodities market if you don't swing trade supply and demand or actually use it.
- JohnJamesRambo 8y ago
  I keep rereading this comment, trying to understand what you are trying to say.
  - gammateam 8y ago
    Commodities are volatile and seasonal Bitcoin is a commodity steered by the same level of supply and demand pressures but held to a higher fictional standard by people that trade and evaluate it like a different asset class (equities)
    - tim333 8y ago
      It's not really a commodity like oil. I feel The Onion was closer in calling it "crazy imaginary internet money" https://www.theonion.com/bitcoin-plunge-reveals-possible-vulnerabilities-in-craz-1821134169 https://www.theonion.com/bitcoin-plunge-reveals-possible-vul...
      - gammateam 8y ago
        Why isnt it also a commodity like oil? it is the fuel for its blockchain. You cant use that public resource without it. It is built to plunge and surge just like oil prices do, based on supply and demand, which also comes in seasons just like oil. Most commodities have seasonal patterns. Bitcoin trades like those. It isnt controversial when a conmodity plunges and surges. Its actually better for different parts of the population at different times.
thesausageking 8y ago
> Given his pedigree... Novogratz is a fun character and a good fundraiser, but he doesn't have a pedigree as an investor. He became famous (and a billionaire) by taking Fortress public. Under his watch, it then went from $35 to down below $2. After he was demoted, he ran a macro fund there which performed awfully and, in 2015, it was shutdown and he was forced into "retirement".
- Alex3917 8y ago
  I was in his office chatting with him a year and a half ago, on the exact day of June or whenever the market hit its bottom, and he called that that day was the bottom. He does things that don't always make a lot of sense to me, but he wouldn't be a billionaire if he wasn't getting a lot of stuff right also. E.g. he also bought 500k worth of ETH and sold it for 250M. Paid his taxes, bought a new plane, and donated the rest to charity. His LPs might be nervous, but he's probably doing just fine.
  - thesausageking 8y ago
    Hard to verify what you're saying. June wasn't a bottom for ETH and the most he could've made with that trade was ~4x. But even if you're right and he did make a great trade, that doesn't make him a genius. He's a gambler and sometimes gets a great hand. He was super bullish on EOS before it tanked. He very publicly called a bottom[1] for BTC on Sept 13th when it was $6,300 and it's down by ~50% since. [1] https://twitter.com/novogratz/status/1040288811643809798 https://twitter.com/novogratz/status/1040288811643809798
    - Alex3917 8y ago
      Ahh I was thinking of July 16th, 1017. ETH went from over $400 in June down to $133 in July. https://coinmarketcap.com/currencies/ethereum/historical-data/?start=20130428&end=20181219 https://coinmarketcap.com/currencies/ethereum/historical-dat...

by simias 8y ago

AznHisoka 8y ago

One of the best kept secrets in the hedge fund/financial industry is that most people really dont have a clue what they are doing. Sure they make bold predictions, appear on CNBC and use industry jargon. But at the end of the day, they arent much better than you or me at managing large amounts of money.

misiti3780 8y ago
to back this up, read the expose in the economist this week about family offices and how they all divesting from hedgefunds because the fees are ridiculous and they are doing no better than the S&P, usually worse when you take into account the onerous fees those mgrs are charging.
- ecshafer 8y ago
  This is literally what vanguard has been saying doe 40+ years and is their main business model.
- dragontamer 8y ago
  To be fair, when you have $100 Million, the goal of the game is not "growth", but holding onto that money. $100 million isn't much different from $108 Million (8% gains over the year)... or even $500 Million. In both cases, its still more than enough money to live on for the rest of your life. The S&P 500 has dropped 50% in the past (ie: 2008), and it doesn't make sense to risk that much money on that. You can't use bank accounts: FDIC insurance only covers $200k per bank. You'd literally need 5000 different bank accounts to hold $100 Million safely. So what do you put it into? Answer: things that don't grow as quickly as an S&P500 fund. Things that are safer: municipal bonds, international (German, Japan) bonds to hedge the dollar, and US Bonds. Maybe some high-quality corporate debt, like Apple's debt, and maybe a real-estate project or two. All of which probably returns less than the stock market. But your $100 Million will still be there in the next crisis. That's not necessarily true for an S&P500 fund. ------------ Finally, the average volume of Vanguard Total Market ETF is only ~3-million (at a price of ~130 or so). Which means that Vanguard Total Market ETF only has ~$300 Million changed each day. If you pump $100 Million into an ETF with only $300 Million worth of daily average volume, what do you think will happen? You'll over-centralize the price and get a bad deal. Its not easy to move $100 Million, even into a major fund like Vanguard's Total Market ETF, without a manager. At $100 Million+ size portfolios, you need to start thinking of Dark Pools of Liquidity (ie: somewhat hiding the order book). So that when you execute the buy order, the wolves of Wall Street won't own you. $100 Million+ accounts don't work the same as a normal account. Pump that into the market in one day, and the price will rise dramatically. Sell that in one day, and the price will drop dramatically (losing a % of your value on both legs of the transaction). Having an expert guide you, so that you can minimize Bid/Ask issues, is essential.
  - wpietri 8y ago
    > To be fair, when you have $100 Million, the goal of the game is not "growth", but holding onto that money. What's your evidence for that? Sure, they don't want to lose, but nobody does. And if anybody likes to get richer, it is pretty clearly rich people. Even the charity-focused ones want to keep increasing their resources, as that lets them have more impact.
    - dragontamer 8y ago
      > What's your evidence for that? The worldwide bond / debt market exceeds $100 Trillion. While the worldwide stock market is only $69 Trillion (sum of top 60 exchanges) https://www.visualcapitalist.com/all-of-the-worlds-stock-exchanges-by-size/ https://www.visualcapitalist.com/all-of-the-worlds-stock-exc... It is clear that Bonds are more popular than Stocks, by a factor of ~50% or so. The rich are buying up debt in far greater numbers than stocks. And EVERYONE knows that Bonds make less money. I know some of it is cultural. My Chinese friends tend to own real-estate. But it seems like around the world, all major investors favor the lower-risks of Bond investing compared to Stocks.
      - wpietri 8y ago
        Your evidence for what wealthy individuals do is... the total size of the global markets? What evidence do you have that their portfolio weighting matches that?
  - module0000 8y ago
    Other side of the coin here..you can take that 1 million USD and dump it in a single order into the ES - you won't move it more than 1, 2, or maybe 3 ticks. This assumes you are using full day margin rates - if you are using overnight rates, you won't move it a single tick. Securities and ETF's are amateur hour for real sums of money. You'll need hundreds of millions, or billions, to move markets with the depth of the ES, ZB, TN, and other commodity futures.
  - trevyn 8y ago
    >You can't use bank accounts: FDIC insurance only covers $200k per bank. You'd literally need 5000 different bank accounts to hold $100 Million safely. Not that it’s a good idea, but there are other ways to insure cash than the FDIC. One example, apparently Massachusetts offers unlimited insurance for banks: https://en.m.wikipedia.org/wiki/Depositors_Insurance_Fund https://en.m.wikipedia.org/wiki/Depositors_Insurance_Fund (Also, 100M / 200k = 500, not 5000)
paulie_a 8y ago
It's always sad when I get my upwards of 10 percent by professionals. I personally get 500-1000 percent return year over year. I'm working with small amounts of money that if I lost entirely wouldn't be the end of the world. But some years they barely beat inflation.
- robk 8y ago
  How??
  - wpietri 8y ago
    You think he'll tell you for free? Nah. To learn the amazing secret to claiming to make a lot of money, you have to send him a lot of money. There are rules.
    - Topgamer7 8y ago
      Or buy this ebook for $9.99. Thousands of dollars in value, only $9.99. Get in on this limited offer!
  - module0000 8y ago
    He'e eluding(likely) to the commodities market. You can make double your money on a mediocre trade. You can also lose 100% of your money on a similar mediocre trade.
    - dgacmu 8y ago
      Alluding. :)
    - paulie_a 8y ago
      Nope just straight stock with my Scottrade account. In my younger years 77 dollars of stock ended up paying for a pretty decent copay for a surgery.
- mikkom 8y ago
  > I personally get 500-1000 percent return year over year. Numbers like this are always quite funny to me. What does year over year mean in this context? 5 years? 10? If you would start with $1000 then in 10 years you would be at approx. 976 million with only lower part of your profits (500%).
wpietri 8y ago
An opinion shared by Warren Buffett. He bet a hedge fund guy $1m that an index fund would beat a portfolio of hedge funds. Buffett won handily: http://longbets.org/362/ http://longbets.org/362/
- vec 8y ago
  I'm a complete layman whose only knowledge of the financial system is derived from podcasts and magazine articles, and hindsight is always 20/20, but wasn't this always an obvious sucker bet? As I understand it, a hedge fund is supposed to be, well, a hedge. It's not supposed to make more money than the market when the market's doing well. It's supposed to be uncorrelated from the rest of the market, with the hope that it can maintains or even gain value in the event that the rest of the market tanks. An asset class that could reasonably be expected to substantially outperform both a bull market and a bear market isn't a hedge against anything, it's just a strictly superior asset class and we're pretty good at arbitraging those out of existence in relatively short order. With that in mind, doesn't this basically devolve to a bet that at least a whole decade's worth of economic growth was going to be consumed entirely by a massive recession? That's not wholly unprecedented, admittedly, but it is a lot rarer than I'd be comfortable putting any money on at flat odds. What am I missing?
  - ianferrel 8y ago
    "hedge fund" is kind of a misnomer these days. They started out as actual hedges, but now refer to basically any fund that makes use of complicated securities and active management. But, yeah, it was likely a sucker's bet.
  - SatvikBeri 8y ago
    Yes, it was a sucker bet. The funds Protege picked were actually funds of funds that basically had a .6 correlation to the S&P 500. So Buffett was almost guaranteed to win if the markets went up over 10 years, and lose if they went down. And it's very rare for the market to be down over a 10-year period. Honestly I have no idea what Protege was thinking.
mv4 8y ago
I am beginning to wonder, seeing the increased rate of hedge fund liquidations this quarter.
user5994461 8y ago
I'd say the exact opposite. One of the best kept secrets in the industry is that people know exactly what they are doing. There are plenty of positions that are stable and low risk. Like running the exchange itself, all sort of middlemen and some form of arbitrage. A hedge fund is mostly about funneling as much of customer money as possible to the fund manager. It's a fairly straightforward and risk insensitive business.
- SatvikBeri 8y ago
  The strategies that tend to work are boring and low capacity, so they don't get much advertising, and people don't hear about them. There's a massive saliency bias in that the strategies people are most likely to hear about are ones with some excitement behind them – that gives people a massively distorted view of hedge funds.

deleted 8y ago

[deleted]

gammateam 8y ago

> "Huge gains in production from Texas, California, and Oklahoma quickly eliminated the regional shortages of 1920 and induced a downward trend in bitcoin prices over the next decade, with bitcoin prices falling 40% between 1920 and 1926. The decline in demand associated with advent of the Great Depression in 1929 magnified the price impact of phenomenal new discoveries such as the gigantic East Texas field which began production in 1930. By 1931, the price of bitcoin had dropped an additional 66% from its value in 1926." paraphrased from https://econweb.ucsd.edu/~jhamilto/oil_history.pdf https://econweb.ucsd.edu/~jhamilto/oil_history.pdf Passive retail traders were never in commodities trading. Retail trades stocks. Retail has been trading digital assets like penny stocks. GTFO of the digital commodities market if you don't swing trade supply and demand or actually use it.

JohnJamesRambo 8y ago
I keep rereading this comment, trying to understand what you are trying to say.
- gammateam 8y ago
  Commodities are volatile and seasonal Bitcoin is a commodity steered by the same level of supply and demand pressures but held to a higher fictional standard by people that trade and evaluate it like a different asset class (equities)
  - tim333 8y ago
    It's not really a commodity like oil. I feel The Onion was closer in calling it "crazy imaginary internet money" https://www.theonion.com/bitcoin-plunge-reveals-possible-vulnerabilities-in-craz-1821134169 https://www.theonion.com/bitcoin-plunge-reveals-possible-vul...
    - gammateam 8y ago
      Why isnt it also a commodity like oil? it is the fuel for its blockchain. You cant use that public resource without it. It is built to plunge and surge just like oil prices do, based on supply and demand, which also comes in seasons just like oil. Most commodities have seasonal patterns. Bitcoin trades like those. It isnt controversial when a conmodity plunges and surges. Its actually better for different parts of the population at different times.

thesausageking 8y ago

> Given his pedigree... Novogratz is a fun character and a good fundraiser, but he doesn't have a pedigree as an investor. He became famous (and a billionaire) by taking Fortress public. Under his watch, it then went from $35 to down below $2. After he was demoted, he ran a macro fund there which performed awfully and, in 2015, it was shutdown and he was forced into "retirement".

Alex3917 8y ago
I was in his office chatting with him a year and a half ago, on the exact day of June or whenever the market hit its bottom, and he called that that day was the bottom. He does things that don't always make a lot of sense to me, but he wouldn't be a billionaire if he wasn't getting a lot of stuff right also. E.g. he also bought 500k worth of ETH and sold it for 250M. Paid his taxes, bought a new plane, and donated the rest to charity. His LPs might be nervous, but he's probably doing just fine.
- thesausageking 8y ago
  Hard to verify what you're saying. June wasn't a bottom for ETH and the most he could've made with that trade was ~4x. But even if you're right and he did make a great trade, that doesn't make him a genius. He's a gambler and sometimes gets a great hand. He was super bullish on EOS before it tanked. He very publicly called a bottom[1] for BTC on Sept 13th when it was $6,300 and it's down by ~50% since. [1] https://twitter.com/novogratz/status/1040288811643809798 https://twitter.com/novogratz/status/1040288811643809798
  - Alex3917 8y ago
    Ahh I was thinking of July 16th, 1017. ETH went from over $400 in June down to $133 in July. https://coinmarketcap.com/currencies/ethereum/historical-data/?start=20130428&end=20181219 https://coinmarketcap.com/currencies/ethereum/historical-dat...