7 ms·

The Banker Who Said No

135 points by dangoldin 18y ago

ggchappell 18y ago
FTA: > "This is the opportunity of my lifetime," says Beal. "We are going to be a $30 billion bank without any help from the government." (A slight overstatement: He is quick to say he relies on federal deposit insurance.) And he pays for it, too (premiums, y'know). That's not "help" as we usually mean the word; that's a purchased service. Now, as for the bailouts -- which Beal is not getting -- that is "help".
- jhancock 18y ago
  It is a good read and he obviously is a "good" banker for not overextending his bank. But to say he doesn't rely on government help makes it sound like he runs a normal corporation. Banks are not normal corporations. Mine can't loan out money at 26 times my deposits. Can yours? Of course not, your not a bank. This is the rub with banks. They want to behave like private entities, but they leverage government backed currency which normal corps cannot do. I think we need a new class of corporation for banks and possibly insurance companies. A class that recognized they are hybrid entities, and not the same as a typical private company. It turns out we sort of do have this class (there are lots of hoops to jump through to become a bank). But this class is built on top of the normal rights and privileges of the standard corporate entity.
  - jonknee 18y ago
    > Mine can't loan out money at 26 times my deposits. Can yours? Of course not, your not a bank. Does your corporation have to abide by all of the banking rules? Of course not, you're a regular corporation. If you want to be a bank, start one. It's a pain in the ass but can be lucrative.
    - jhancock 18y ago
      Even very large companies, such as PayPal, find that its far easier to buy an existing licensed bank than to start a new one.
  - mynameishere 18y ago
    Lot of upmods for an extremely confused post. Mine can't loan out money at 26 times my deposits. Can yours? Of course not, your not a bank. ...oh kay. A class that recognized they are hybrid entities, and not the same as a typical private company Umm. You seem to be getting at GSEs, a standard corporate form. http://en.wikipedia.org/wiki/Government-owned_corporation http://en.wikipedia.org/wiki/Government-owned_corporation Generally, this doesn't seem to work out too well with financial companies, see Fannie Mae/Freddie Mac (which weren't GSEs, but close enough...) The truth is, the vast bulk of banks were perfectly healthy and responsible. Almost all the trouble came from a few gigantic ones, and the reasons for their behavior were many.
    - byrneseyeview 18y ago
      Is it really responsible for a bank to back 30-year loans with demand deposits, at 25-to-1 leverage? I really can't imagine that happening without government intervention, and if it only happens when the government makes it happen, there's a good reason to expect that it's irrational. Banks are hybrid companies in the sense that FDIC insurance means they are basically conduits for lending to the government. If I deposit $100 with my local bank, I don't care whether the banker keeps it in cash, invests it in penny stocks, or spends it on whores -- no matter what, the government backs my deposit. This is for other promises from companies. E.g. if I pay someone $100 now for $100 worth of lawn care over the next five years, I make damn sure I can trust that person. If I pay the bank $100 for a CD maturing in five years, I don't. This gives all banks an incentive to take undue risk, balanced by government regulation, which gives them a secondary incentive to find clever ways to take big risks (which they do by hiring clever people who would otherwise do more socially useful stuff).
      - anamax 18y ago
        >E.g. if I pay someone $100 now for $100 worth of lawn care over the next five years, I make damn sure I can trust that person. If I pay the bank $100 for a CD maturing in five years, I don't. > This gives all banks an incentive to take undue risk Actually, you've just demonstrated that FDIC insurance gives you an incentive to take undue risk. You'll deposit your money at any bank without regard for whether said bank is trustworthy. BTW - It's curious that you seem to believe that better rules will help since you also seem to believe that "clever people" can always get around the rules. As to whether a govt-run bank would do any better, feel free to point to the fraction of govt enterprises which are run as well as you'd require of govt run banks. Which states' DMV is "good enough"? How about the post office?
  - ggchappell 18y ago
    > But to say he doesn't rely on government help makes it sound like he runs a normal corporation. Banks are not normal corporations. Mine can't loan out money at 26 times my deposits. Can yours? You might have a point there. I guess the question (regarding whether my point was valid) is whether federal deposit insurance is underpriced. I suppose there is a good chance that it is.
    - jibiki 18y ago
      It's the kind of thing that can't be priced (as AIG found out.) The distribution of the default rate is unknown and unknowable (fat tails and black swans and so on.) Also, if you increased the price of FDIC insurance, banks would need to make greater interest rates, and therefore would need to make riskier loans. You could make FDIC insurance contingent on taking less risk, but that sort of regulation always seems to backfire. (Of course we already have such regulation, the article even alludes to it. But increasing the strictness of risk-taking regulation would just solidify the major players.)
  - kragen 18y ago
    You ask: > Mine can't loan out money at 26 times my deposits. Can yours? Of course not; you're not a bank. Actually, I think that if someone loans a hypothetical non-bank US corporation money, it can legally loan out 100% of that money, without retaining any of it as a reserve. This is probably not a good idea, since it means it won't be able to pay any of its bills next week, but it's not illegal. What you wrote makes it sound as if, when depositors loan a bank $100 000, the bank can then loan out $2 600 000. That is not the way fractional-reserve banking works. The actual amount the bank can legally loan out in that case is more like $90 000. A non-bank corporation would be able to loan out a larger amount (up to $100 000) in that case, not a smaller amount, as your post suggests.
    - jhancock 18y ago
      sorry, I was vastly oversimplifying the mechanism. I was speaking off-hand assuming most on this forum are well read on how these mechanisms work, it certainly sounds like you are. To be more precise: The effect of banks, in aggregate, on the money supply results in a multiplier, which today runs at, in average, 26 times deposits. Here are a few overviews: http://en.wikipedia.org/wiki/Fractional-reserve_banking http://en.wikipedia.org/wiki/Fractional-reserve_banking http://en.wikipedia.org/wiki/Reserve_requirements http://en.wikipedia.org/wiki/Reserve_requirements http://economics.about.com/cs/money/a/reserve_ratio.htm http://economics.about.com/cs/money/a/reserve_ratio.htm
deleted 18y ago
[deleted]
jmtame 18y ago
To prepare bids he locked himself in his office to write a computer program with 50 variables (now 250), ranging from home price changes by neighborhood to interest rates to origination dates. Yep, he's a hacker.
- BobbyH 18y ago
  This sounds like a multi-variable linear regression he did in Microsoft Excel?
  - jmtame 18y ago
    That's very possible. Reporters tend to exaggerate certain elements, but he has a pretty strong math background. Either way you look at it, he's hacking the numbers to increase his own odds of investing in the right stuff.
    - kqr2 18y ago
      Actually, from the description of his high stakes poker games, he ran computer simulations in order to gain a competitive advantage so I wouldn't be surprised if he actually wrote a program. Beal, for his part, took a mathematical approach, at one point running millions of computer simulations of various poker problems, in search of an edge against the pros, who rely on an uncanny intuition honed by thousands of hands http://www.amazon.com/Professor-Banker-Suicide-King-Richest/dp/0446694975 http://www.amazon.com/Professor-Banker-Suicide-King-Richest/...
  - jrockway 18y ago
    Programming is more than software engineering. Some things don't need to be engineered.
  - joeyo 18y ago
    Other than excel having some floating-point arithmetic problems, what difference does it make what tool he uses? Most things are linear to a first approximation anyway.
bilbo0s 18y ago
"To prepare bids he locked himself in his office to write a computer program with 50 variables (now 250), ranging from home price changes by neighborhood to interest rates to origination dates." - Forbes.com 2009 "Beware of geeks bearing formulas" - Warren Buffet 2008
- karl11 18y ago
  On the other hand, Warren Buffett is equally contrarian, and is doing a lot of similar things with his money, though on a larger scale (writing massive loans to Goldman, Harley, GE etc for 10-15% interest rates). He also has the same complaint about the government. His AAA rated business pays much higher rates to borrow money than Citi, BoA or any of the now gov't sponsored entities. In any case, everyone loves a good contrarian.
- catz 18y ago
  Didn't Berkshire Hathaway loose a lot of money because of the current mess?
  - karl11 18y ago
    They went down as the market went down and did have some losses, but they also had an enormous pile of cash and not very much debt. Buffett has been waiting for the market to go down like it has so he could make his move with that cash. As a result, I think he's going to make out extraordinarily well in the coming years. Sorry for the Buffett fanboyism, but he's the man.
    - jibiki 18y ago
      Yes. He was one of the early warning voices (2003?) about the dangers of complex derivatives.
    - catz 18y ago
      As I understand it he made some serious missteps in the recession. WP: > Berkshire Hathaway acquired 10% perpetual preferred stock of Goldman Sachs at $123[40] only for it to fall to below $60. Furthermore some of Buffett's Index put options (European exercise at expiry only) that he wrote (sold) are currently running around $6.73 billion mark-to-market losses. Warren Buffett tarnished as Main Street oracle http://www.thestar.com/Business/article/604619 http://www.thestar.com/Business/article/604619 Buffett suffers big losses at Berkshire Hathaway http://www.bloggingstocks.com/2009/02/28/buffet-suffers-big-losses-at-berkshire-hathaway/ http://www.bloggingstocks.com/2009/02/28/buffet-suffers-big-... (d Berkshire's net worth dropped a whopping $10.9 billion in the final three months of 2008. Berkshire's shares have fallen 44% since the end of February 2008. ) etc...
smanek 18y ago
Does anyone know if it's possible for an individual to buy a CDO? Supposedly everyone wants to get rid of these things and is desperate for cash, which makes it seem like a decent opportunity for buyers. If I had $10,000 I could afford to lose (and was willing to take a long shot with) is there some market where I can buy those sort of assets?
- Tangurena 18y ago
  To start with, you have to be what is commonly called an "accredited investor." This is a requirement because almost none of the "investments" sold as CDOs are registered with the SEC. The accredited investor loop-hole is the one you'll need to invest in hedge funds and the like: it means something like you're a big boy now, and you don't need the feds protecting you from crooks. Alternatively, your organization will need to be qualified as an institutional investor. http://en.wikipedia.org/wiki/Accredited_investor http://en.wikipedia.org/wiki/Accredited_investor http://en.wikipedia.org/wiki/Institutional_investor http://en.wikipedia.org/wiki/Institutional_investor Ask your broker if they've got any they want to unload.
  - smanek 18y ago
    I'm a bit short of the wealth requirements to be called an accredited investor ... (1M net worth + 200K/year income). That just seems blatantly unfair to me. It's the government setting up a different set of rules for the rich.
    - anamax 18y ago
      > I'm a bit short of the wealth requirements to be called an accredited investor ... (1M net worth + 200K/year income). >That just seems blatantly unfair to me. It's the government setting up a different set of rules for the rich. Those rules are set up to protect you from unsafe investments, scams, and the like. After all, you need to have enough money to keep paying taxes....
    - gscott 18y ago
      > That just seems blatantly unfair to me. It's the government setting up a different set of rules for the rich. There was one VC here that mentioned how someone emailed him about also investing in 3 of the companies that he had invested in, and how he couldn't let the person do it because the person didn't fit the requirements to be an "accredited investor" then he mentioned what three companies they were. They were all money pits with no path to profitability. I believe the "accredited investor" bit helps people from having there life's savings thrown away on a unregulated bad investment. The ultra rich either inherited money or built a real business from the ground up and sold it. I would suggest one of those paths instead :)
gills 18y ago
I think it's pretty telling that this guy was investigated for not consuming the fraudulent crap coming out of Wall Street. Wouldn't that be like a 1999 startup being investigated because they didn't have exponential growth projections in the IPO prospectus?
- ori_b 18y ago
  Well, if someone does something completely out of the ordinary for [what the investigator thinks are] no apparent reason, then that should raise red flags to investigate. I'm not surprised he was investigated; Massively different investments, raising money without buying anything apparent, and not trying to cash in whenever possible do point to an anomaly -- possibly even a fraud -- happening. So long as he's not wrongfully convicted, I don't have a problem with investigations.
  - endtime 18y ago
    Well, if someone does something completely out of the ordinary for [what the investigator thinks are] no apparent reason, then that should raise red flags to investigate. Yeah, that's the point...that it was extraordinary to behave sanely (as opposed to "consuming the fraudulent crap coming out of Wall Street").
wyclif 18y ago
Buy low, sell high. This is not rocket science.
- grinich 18y ago
  However, he does know that too.
numair 18y ago
> Beal shrank his bank's assets because he thought the loans were going to blow up. He cut his staff in half and killed time playing backgammon or racing cars. I have always respected a man who drives his cars hard and plays a mean game of backgammon -- and actually makes money while doing it. Upvoted.
kqr2 18y ago
He's also behind the Beal Conjecture which offers a $100,000 prize for either the proof or counterexample: http://www.math.unt.edu/~mauldin/beal.html http://www.math.unt.edu/~mauldin/beal.html BEAL'S CONJECTURE: If A^x +B^y = C^z , where A, B, C, x, y and z are positive integers and x, y and z are all greater than 2, then A, B and C must have a common prime factor.
toffer 18y ago
This is a great article. If anyone is interested in learning more about Andy Beal's million-dollar poker games with the best players in the world in 2001, you should check out this book: "The Professor, the Banker, and the Suicide King: Inside the Richest Poker Game of All Time", by Michael Craig. It's got a pretty complete profile of Beal, and tells all about the games.
TweedHeads 18y ago
Beal Bank? I am more interested in the story of how he started the bank. How can an individual with the government's blessing can start a bank like that. Don't they need huge funds and deposits and a million financial and security hurdles? Where did he get it all?
- TweedHeads 18y ago
  Furhtermore, I wouldn't trust my money to a bank where the owner spends millions playing poker and brags about it. WTF?
  - nsrivast 18y ago
    Poker inculcates many of the skills needed for finance, and if you're good it can simply be a profitable investment.
    - Rod 18y ago
      Exactly! When interviewing for hedge funds for a quantitative analyst / trader position one should expect to be asked about poker / blackjack / backgammon. A classical interview question / challenge would be to invent a new card game and ask the interviewees to devise an optimal strategy for that game.

135 points by dangoldin 18y ago

FTA: > "This is the opportunity of my lifetime," says Beal. "We are going to be a $30 billion bank without any help from the government." (A slight overstatement: He is quick to say he relies on federal deposit insurance.) And he pays for it, too (premiums, y'know). That's not "help" as we usually mean the word; that's a purchased service. Now, as for the bailouts -- which Beal is not getting -- that is "help".

jhancock 18y ago
It is a good read and he obviously is a "good" banker for not overextending his bank. But to say he doesn't rely on government help makes it sound like he runs a normal corporation. Banks are not normal corporations. Mine can't loan out money at 26 times my deposits. Can yours? Of course not, your not a bank. This is the rub with banks. They want to behave like private entities, but they leverage government backed currency which normal corps cannot do. I think we need a new class of corporation for banks and possibly insurance companies. A class that recognized they are hybrid entities, and not the same as a typical private company. It turns out we sort of do have this class (there are lots of hoops to jump through to become a bank). But this class is built on top of the normal rights and privileges of the standard corporate entity.
- jonknee 18y ago
  > Mine can't loan out money at 26 times my deposits. Can yours? Of course not, your not a bank. Does your corporation have to abide by all of the banking rules? Of course not, you're a regular corporation. If you want to be a bank, start one. It's a pain in the ass but can be lucrative.
  - jhancock 18y ago
    Even very large companies, such as PayPal, find that its far easier to buy an existing licensed bank than to start a new one.
- mynameishere 18y ago
  Lot of upmods for an extremely confused post. Mine can't loan out money at 26 times my deposits. Can yours? Of course not, your not a bank. ...oh kay. A class that recognized they are hybrid entities, and not the same as a typical private company Umm. You seem to be getting at GSEs, a standard corporate form. http://en.wikipedia.org/wiki/Government-owned_corporation http://en.wikipedia.org/wiki/Government-owned_corporation Generally, this doesn't seem to work out too well with financial companies, see Fannie Mae/Freddie Mac (which weren't GSEs, but close enough...) The truth is, the vast bulk of banks were perfectly healthy and responsible. Almost all the trouble came from a few gigantic ones, and the reasons for their behavior were many.
  - byrneseyeview 18y ago
    Is it really responsible for a bank to back 30-year loans with demand deposits, at 25-to-1 leverage? I really can't imagine that happening without government intervention, and if it only happens when the government makes it happen, there's a good reason to expect that it's irrational. Banks are hybrid companies in the sense that FDIC insurance means they are basically conduits for lending to the government. If I deposit $100 with my local bank, I don't care whether the banker keeps it in cash, invests it in penny stocks, or spends it on whores -- no matter what, the government backs my deposit. This is for other promises from companies. E.g. if I pay someone $100 now for $100 worth of lawn care over the next five years, I make damn sure I can trust that person. If I pay the bank $100 for a CD maturing in five years, I don't. This gives all banks an incentive to take undue risk, balanced by government regulation, which gives them a secondary incentive to find clever ways to take big risks (which they do by hiring clever people who would otherwise do more socially useful stuff).
    - anamax 18y ago
      >E.g. if I pay someone $100 now for $100 worth of lawn care over the next five years, I make damn sure I can trust that person. If I pay the bank $100 for a CD maturing in five years, I don't. > This gives all banks an incentive to take undue risk Actually, you've just demonstrated that FDIC insurance gives you an incentive to take undue risk. You'll deposit your money at any bank without regard for whether said bank is trustworthy. BTW - It's curious that you seem to believe that better rules will help since you also seem to believe that "clever people" can always get around the rules. As to whether a govt-run bank would do any better, feel free to point to the fraction of govt enterprises which are run as well as you'd require of govt run banks. Which states' DMV is "good enough"? How about the post office?
- ggchappell 18y ago
  > But to say he doesn't rely on government help makes it sound like he runs a normal corporation. Banks are not normal corporations. Mine can't loan out money at 26 times my deposits. Can yours? You might have a point there. I guess the question (regarding whether my point was valid) is whether federal deposit insurance is underpriced. I suppose there is a good chance that it is.
  - jibiki 18y ago
    It's the kind of thing that can't be priced (as AIG found out.) The distribution of the default rate is unknown and unknowable (fat tails and black swans and so on.) Also, if you increased the price of FDIC insurance, banks would need to make greater interest rates, and therefore would need to make riskier loans. You could make FDIC insurance contingent on taking less risk, but that sort of regulation always seems to backfire. (Of course we already have such regulation, the article even alludes to it. But increasing the strictness of risk-taking regulation would just solidify the major players.)
- kragen 18y ago
  You ask: > Mine can't loan out money at 26 times my deposits. Can yours? Of course not; you're not a bank. Actually, I think that if someone loans a hypothetical non-bank US corporation money, it can legally loan out 100% of that money, without retaining any of it as a reserve. This is probably not a good idea, since it means it won't be able to pay any of its bills next week, but it's not illegal. What you wrote makes it sound as if, when depositors loan a bank $100 000, the bank can then loan out $2 600 000. That is not the way fractional-reserve banking works. The actual amount the bank can legally loan out in that case is more like $90 000. A non-bank corporation would be able to loan out a larger amount (up to $100 000) in that case, not a smaller amount, as your post suggests.
  - jhancock 18y ago
    sorry, I was vastly oversimplifying the mechanism. I was speaking off-hand assuming most on this forum are well read on how these mechanisms work, it certainly sounds like you are. To be more precise: The effect of banks, in aggregate, on the money supply results in a multiplier, which today runs at, in average, 26 times deposits. Here are a few overviews: http://en.wikipedia.org/wiki/Fractional-reserve_banking http://en.wikipedia.org/wiki/Fractional-reserve_banking http://en.wikipedia.org/wiki/Reserve_requirements http://en.wikipedia.org/wiki/Reserve_requirements http://economics.about.com/cs/money/a/reserve_ratio.htm http://economics.about.com/cs/money/a/reserve_ratio.htm

deleted 18y ago

[deleted]

jmtame 18y ago

To prepare bids he locked himself in his office to write a computer program with 50 variables (now 250), ranging from home price changes by neighborhood to interest rates to origination dates. Yep, he's a hacker.

BobbyH 18y ago
This sounds like a multi-variable linear regression he did in Microsoft Excel?
- jmtame 18y ago
  That's very possible. Reporters tend to exaggerate certain elements, but he has a pretty strong math background. Either way you look at it, he's hacking the numbers to increase his own odds of investing in the right stuff.
  - kqr2 18y ago
    Actually, from the description of his high stakes poker games, he ran computer simulations in order to gain a competitive advantage so I wouldn't be surprised if he actually wrote a program. Beal, for his part, took a mathematical approach, at one point running millions of computer simulations of various poker problems, in search of an edge against the pros, who rely on an uncanny intuition honed by thousands of hands http://www.amazon.com/Professor-Banker-Suicide-King-Richest/dp/0446694975 http://www.amazon.com/Professor-Banker-Suicide-King-Richest/...
- jrockway 18y ago
  Programming is more than software engineering. Some things don't need to be engineered.
- joeyo 18y ago
  Other than excel having some floating-point arithmetic problems, what difference does it make what tool he uses? Most things are linear to a first approximation anyway.

bilbo0s 18y ago

"To prepare bids he locked himself in his office to write a computer program with 50 variables (now 250), ranging from home price changes by neighborhood to interest rates to origination dates." - Forbes.com 2009 "Beware of geeks bearing formulas" - Warren Buffet 2008

karl11 18y ago
On the other hand, Warren Buffett is equally contrarian, and is doing a lot of similar things with his money, though on a larger scale (writing massive loans to Goldman, Harley, GE etc for 10-15% interest rates). He also has the same complaint about the government. His AAA rated business pays much higher rates to borrow money than Citi, BoA or any of the now gov't sponsored entities. In any case, everyone loves a good contrarian.
catz 18y ago
Didn't Berkshire Hathaway loose a lot of money because of the current mess?
- karl11 18y ago
  They went down as the market went down and did have some losses, but they also had an enormous pile of cash and not very much debt. Buffett has been waiting for the market to go down like it has so he could make his move with that cash. As a result, I think he's going to make out extraordinarily well in the coming years. Sorry for the Buffett fanboyism, but he's the man.
  - jibiki 18y ago
    Yes. He was one of the early warning voices (2003?) about the dangers of complex derivatives.
  - catz 18y ago
    As I understand it he made some serious missteps in the recession. WP: > Berkshire Hathaway acquired 10% perpetual preferred stock of Goldman Sachs at $123[40] only for it to fall to below $60. Furthermore some of Buffett's Index put options (European exercise at expiry only) that he wrote (sold) are currently running around $6.73 billion mark-to-market losses. Warren Buffett tarnished as Main Street oracle http://www.thestar.com/Business/article/604619 http://www.thestar.com/Business/article/604619 Buffett suffers big losses at Berkshire Hathaway http://www.bloggingstocks.com/2009/02/28/buffet-suffers-big-losses-at-berkshire-hathaway/ http://www.bloggingstocks.com/2009/02/28/buffet-suffers-big-... (d Berkshire's net worth dropped a whopping $10.9 billion in the final three months of 2008. Berkshire's shares have fallen 44% since the end of February 2008. ) etc...

smanek 18y ago

Does anyone know if it's possible for an individual to buy a CDO? Supposedly everyone wants to get rid of these things and is desperate for cash, which makes it seem like a decent opportunity for buyers. If I had $10,000 I could afford to lose (and was willing to take a long shot with) is there some market where I can buy those sort of assets?

Tangurena 18y ago
To start with, you have to be what is commonly called an "accredited investor." This is a requirement because almost none of the "investments" sold as CDOs are registered with the SEC. The accredited investor loop-hole is the one you'll need to invest in hedge funds and the like: it means something like you're a big boy now, and you don't need the feds protecting you from crooks. Alternatively, your organization will need to be qualified as an institutional investor. http://en.wikipedia.org/wiki/Accredited_investor http://en.wikipedia.org/wiki/Accredited_investor http://en.wikipedia.org/wiki/Institutional_investor http://en.wikipedia.org/wiki/Institutional_investor Ask your broker if they've got any they want to unload.
- smanek 18y ago
  I'm a bit short of the wealth requirements to be called an accredited investor ... (1M net worth + 200K/year income). That just seems blatantly unfair to me. It's the government setting up a different set of rules for the rich.
  - anamax 18y ago
    > I'm a bit short of the wealth requirements to be called an accredited investor ... (1M net worth + 200K/year income). >That just seems blatantly unfair to me. It's the government setting up a different set of rules for the rich. Those rules are set up to protect you from unsafe investments, scams, and the like. After all, you need to have enough money to keep paying taxes....
  - gscott 18y ago
    > That just seems blatantly unfair to me. It's the government setting up a different set of rules for the rich. There was one VC here that mentioned how someone emailed him about also investing in 3 of the companies that he had invested in, and how he couldn't let the person do it because the person didn't fit the requirements to be an "accredited investor" then he mentioned what three companies they were. They were all money pits with no path to profitability. I believe the "accredited investor" bit helps people from having there life's savings thrown away on a unregulated bad investment. The ultra rich either inherited money or built a real business from the ground up and sold it. I would suggest one of those paths instead :)

gills 18y ago

I think it's pretty telling that this guy was investigated for not consuming the fraudulent crap coming out of Wall Street. Wouldn't that be like a 1999 startup being investigated because they didn't have exponential growth projections in the IPO prospectus?

ori_b 18y ago
Well, if someone does something completely out of the ordinary for [what the investigator thinks are] no apparent reason, then that should raise red flags to investigate. I'm not surprised he was investigated; Massively different investments, raising money without buying anything apparent, and not trying to cash in whenever possible do point to an anomaly -- possibly even a fraud -- happening. So long as he's not wrongfully convicted, I don't have a problem with investigations.
- endtime 18y ago
  Well, if someone does something completely out of the ordinary for [what the investigator thinks are] no apparent reason, then that should raise red flags to investigate. Yeah, that's the point...that it was extraordinary to behave sanely (as opposed to "consuming the fraudulent crap coming out of Wall Street").

wyclif 18y ago

Buy low, sell high. This is not rocket science.

grinich 18y ago
However, he does know that too.

numair 18y ago

> Beal shrank his bank's assets because he thought the loans were going to blow up. He cut his staff in half and killed time playing backgammon or racing cars. I have always respected a man who drives his cars hard and plays a mean game of backgammon -- and actually makes money while doing it. Upvoted.

kqr2 18y ago

He's also behind the Beal Conjecture which offers a $100,000 prize for either the proof or counterexample: http://www.math.unt.edu/~mauldin/beal.html http://www.math.unt.edu/~mauldin/beal.html BEAL'S CONJECTURE: If A^x +B^y = C^z , where A, B, C, x, y and z are positive integers and x, y and z are all greater than 2, then A, B and C must have a common prime factor.

toffer 18y ago

This is a great article. If anyone is interested in learning more about Andy Beal's million-dollar poker games with the best players in the world in 2001, you should check out this book: "The Professor, the Banker, and the Suicide King: Inside the Richest Poker Game of All Time", by Michael Craig. It's got a pretty complete profile of Beal, and tells all about the games.

TweedHeads 18y ago

Beal Bank? I am more interested in the story of how he started the bank. How can an individual with the government's blessing can start a bank like that. Don't they need huge funds and deposits and a million financial and security hurdles? Where did he get it all?

TweedHeads 18y ago
Furhtermore, I wouldn't trust my money to a bank where the owner spends millions playing poker and brags about it. WTF?
- nsrivast 18y ago
  Poker inculcates many of the skills needed for finance, and if you're good it can simply be a profitable investment.
  - Rod 18y ago
    Exactly! When interviewing for hedge funds for a quantitative analyst / trader position one should expect to be asked about poker / blackjack / backgammon. A classical interview question / challenge would be to invent a new card game and ask the interviewees to devise an optimal strategy for that game.