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I don't think he did anything wrong - at least not that I'm aware of. Granted I didn't work with him or anything so there's no real way for me to "know." I was

I don't think he did anything wrong - at least not that I'm aware of. Granted I didn't work with him or anything so there's no real way for me to "know." I was just trying to spell out what's most likely going to happen and why it (i.e. massive loses) happen so frequently. These stories, as a whole, exemplify why I'll always have the majority of my money in a low cost, no load, diversified fund.

jodrellblank 18y ago
Ah, ok.
aswanson 18y ago
These stories, as a whole, exemplify why I'll always have the majority of my money in a low cost, no load, diversified fund. Good call: http://www.sanfranmag.com/story/best-investment-advice-youll-never-get http://www.sanfranmag.com/story/best-investment-advice-youll... http://www.fooledbyrandomness.com/fortune.pdf http://www.fooledbyrandomness.com/fortune.pdf
- lutorm 18y ago
  Awesome book. Check out "the Black Swan", too.
byrneseyeview 18y ago
But the agent-principal conflict shows up in every kind of business. You hire a plumber, and you have to accept that he can a) just do the job right, b) waste a lot of time, and still get it done, and charge you extra (how are you supposed to know?), or c) experiment with some awesome wrenching and piping methodology he picked up in the latest issue of Plumber Weekly. The difference between the plumber and Amaranth is that it's much easier to quantify when Amaranth is screwing around. Even before a blowup, some strategies have a 'signature' -- high leverage + low volatility + long illiquidity + short liquidity, for example -- that can tell you ahead of time when you're dealing with a crafty gambler.
- fallentimes 18y ago
  You're absolutely right, but realistically a plummer or consultant messing around and inflating his price or screwing around will cost a few hundred or thousand dollars extra. Not millions or billions except in the most ridiculous of circumstances. The main difference in this agent-principal conflict is the amount of capital one person is responsible for. It's actually very similar to the CEO agent-principal conflict.

jodrellblank 18y ago

Ah, ok.

aswanson 18y ago

These stories, as a whole, exemplify why I'll always have the majority of my money in a low cost, no load, diversified fund. Good call: http://www.sanfranmag.com/story/best-investment-advice-youll-never-get http://www.sanfranmag.com/story/best-investment-advice-youll... http://www.fooledbyrandomness.com/fortune.pdf http://www.fooledbyrandomness.com/fortune.pdf

lutorm 18y ago
Awesome book. Check out "the Black Swan", too.

byrneseyeview 18y ago

But the agent-principal conflict shows up in every kind of business. You hire a plumber, and you have to accept that he can a) just do the job right, b) waste a lot of time, and still get it done, and charge you extra (how are you supposed to know?), or c) experiment with some awesome wrenching and piping methodology he picked up in the latest issue of Plumber Weekly. The difference between the plumber and Amaranth is that it's much easier to quantify when Amaranth is screwing around. Even before a blowup, some strategies have a 'signature' -- high leverage + low volatility + long illiquidity + short liquidity, for example -- that can tell you ahead of time when you're dealing with a crafty gambler.

fallentimes 18y ago
You're absolutely right, but realistically a plummer or consultant messing around and inflating his price or screwing around will cost a few hundred or thousand dollars extra. Not millions or billions except in the most ridiculous of circumstances. The main difference in this agent-principal conflict is the amount of capital one person is responsible for. It's actually very similar to the CEO agent-principal conflict.