This keeps up, I might begin to question exactly how smart these Wall Street guys really are

Harvard Biz grads unwittingly wave the fickle finger of fate

Harvard Biz grads unwittingly wave the fickle finger of fate

Hedge fund wiped out by “unexpected” surge in the Swiss franc.

Hedge fund manager Marko Dimitrijevic is closing his largest hedge fund, Everest Capital’s Global Fund, having lost almost all its money after the Swiss National Bank (SNB) scrapped its three-year-old cap on the Swiss franc against the euro, Bloomberg news reported on Saturday.

Citing a person familiar with the firm, Bloomberg said the fund had been betting that the Swiss franc would decline. The fund had about $830 million in assets at the end of 2014, according to a client report cited by Bloomberg.

The SNB triggered big losses around the globe on Thursday when it removed a three-year-old cap on the value of the Swiss franc against the euro, allowing it to soar.

More than three years of stability between the euro and Swiss franc ended suddenly this week, as the Swiss central bank abandoned attempts to cap the currency’s value.

The bank previously aimed to let the franc rise no higher than 1.20 to the euro. As soon as the change was announced, it smashed immediately higher, breaking through the previous “ceiling.”

Foreign-exchange brokers who had relied on the stability of the Swiss franc, which until Wednesday was pegged to the euro, were taken by surprise when the Swiss National Bank abolished its controls, and millions of dollars were lost at firms around the world.

The euro plunged against the franc, going down by nearly 28% as the news broke. Associated Press reported that in the world of currencies, a move like that “can seem as rare as Halley’s Comet.”

I thought the idea of a hedge fund was to hedge one’s bets, not put everything on red at 50-to-1 leverage, but I’m naive. More important, how dumb are these guys to bet on what was in effect a scheme of artificial price control, counting on it continuing indefinitely? Wage and price controls have never worked, can never work, and if these  traders were surprised by that fact, they should probably demand their tuition back from their lefty professors at Harvard who told them otherwise.

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73 responses to “This keeps up, I might begin to question exactly how smart these Wall Street guys really are

  1. AJ

    A Jon Corzine protégé?

  2. Anonymous

    Harvard grads are smart, but not necessarily street smart or educated. They are protégé of their lefty professors. The hedge fund money lost was likely all OPM, and they have done exactly as trained in their liberal studies.

    • It does surprise me, from time to time, how little history some of these very bright people know. It’s liberating not to be troubled by memories of what went wrong in the past, but I can’t help but think that the Obama crowd might benefit from a solid understanding of European history from, say, 1919-1939, and young traders could do with a bit of study on free markets and the results of manipulation thereof.

      • Call It Like I See It

        Ten or so years ago I mentioned to a new and younger staff member that “today is Pearl Harbor Day.” Obviously it was on December 7th. He is a very smart man of color, who was born in Africa, a friend to this day. He felt that WWII ancient history and had very little bearing on geopolitics of today. “It was so long ago.” Not wanting to get into a debate, imagine that, I did not say anything. I get the feeling that this is the standard thought process of most younger Americans, white, black, or otherwise. I am sure that they feel the same way about economic history. They can’t comprehend long gas lines or 13% mortgages. Reading and studying it is one thing, but they can’t imagine it ever happening in their lifetimes. They feel the government will always take care of them, and if it doesn’t they will call a lawyer, probably Harvard trained.

      • Babylon Sister

        Most universities – especially the Ivy League variety – are leftist seminaries. They can’t teach real history because it’s fundamentally incompatible with their ideology.

  3. these grads should be starting their first jobs just in time to be drafted into WW3.

    and they’ll still have those loans to pay off when they see that first flash from a 10 Megiton bomb….., oh boy, another banker war

  4. dboyle1997

    Many years ago, hedge funds were designed to deliver reasonable risk-adjusted returns in all types of markets. That changed 10+ years ago and now most “hedge funds” are merely making huge leveraged bets with other people’s money. The sad part is that these failed managers will set up another fund, attract a large pool of investor funds, and start the process all over again.

  5. Anonymous

    This guy is closing one fund that had $830mm. He still has $2bn in other funds that remain open. BTW Marco is not young.

    Everest, based in Miami, will stay open and continue to run more than $2 billion in other of the firm’s funds that don’t have exposure to the Swiss franc, a person familiar said.

    Marko Dimitrijević, CFA, Everest Capital’s founder and Chief Investment Officer, has over 33 years of experience in international investment management and research analysis. Prior to establishing Everest Capital in 1990, he was an analyst on Wall Street and managed large securities portfolios for a Fortune 500 company. A strong believer in conducting on the ground due diligence, Mr. Dimitrijević has traveled to more than 100 countries. He is featured in the books Inside the House of Money and Investing with the Hedge Fund Giants. Mr. Dimitrijević is a member of the Executive and Investment Committees.

  6. anonymous

    WSJ article yesterday says that college grads are unprepared. A version of this article hits one news outlet or another annually.

    “Four in 10 U.S. college students graduate without the complex reasoning skills to manage white-collar work, according to the results of a test of nearly 32,000 students.”

    I’d hire a kid who can chew gum and cross the street before a Harvard ‘elite’.

    • I’m currently interviewing candidates for a manager level job in the IT department I run. So far, the two best candidates have both gotten their undergraduate degrees part time from a local Catholic college. No time for PC BS or vicitmhood studies and they paid for it themselves.

      Go figure.

    • Call It Like I See It

      Older grads too. I personally know two Wellesley grads, both in their sixties. Both have been unable to hold a job for most of their lives. And they love to put on the air of sophistication. They make Obama look conservative. Can’t make this stuff up. Our youth will be much better prepared for life skills if they go to UCON. But then again, go to Wellesley. marry rich and become a Greenwich housewife.

  7. how smart are those Wall Street gals?

    http://www.businessinsider.com/lazard-intern-quits-to-pursue-porn-2015-1

  8. AJ

    You might begin to question exactly how smart these Wall Street guys really are?

    When it comes to selling woo and collecting management fees, there are none smarter. I mean, look at your friends the Antares boyz. Pretty good at raising cash, eh? It’s not their fault that the real estate bubble burst. And what about derivatives, didn’t Wall Street just get you, the taxpayer, to cover their future losses on worthless paper to the tune of 600 quadrillion? How smart is that?

    And what about the Swiss franc? Didn’t the Swiss say they were never going to unpeg it: no way, no how, never going to happen? If anything, the Swiss are very precise, at least the German Swiss are, the French Swiss? meh. Who would have guessed they’d signal left and turn right?

    Hey, but when it comes to fees, these Wall Street guys, they’ve got you covered — coming and going. Smart, very smart.

    • AJ

      P.S. And what about your friend P.T. Barnum “Walt” Noel? You didn’t think he’d be dumb enough to buy what he sells?

  9. AJ

    Investing 101, it is written: risk not thy whole wad.

  10. Sand Castle Contest Winner @ Saline

    It’s not about their intelligence level. It’s purely about greed and living the grandiose lifestyle. These megalomaniacs all look up at the Titans and do the math on their “two and twenty” net proceeds. And the only way for them to deliver alpha, stay open, grow, and repeat at what feels like the end of another bull market, is to do it with leverage.
    If you’re levered 5:1 and your up 5% for the year, your clients see a return of 25% on their statement. Your fund makes headlines, and your 500 million under management becomes 5 billion.
    Walk to train in Riverside becomes a chaffuered maybach from Conyers.
    And weekend jaunts are now from Westchester to wherever the F you want.
    Until it turns of course, then you’re f’d and so are your clients.

    What’s that little red dot of flickering light on your Sebonack golf wind jacket…it’s Pacino and his casino boys circa 2015. Any last words?

    • Forex Trader

      Pesci*

    • Accolay

      I’d be much happier with the stable walk to Riverside lifestyle. I’d imagine there’s happier people there than in Conyers.

    • AJ

      I think it has more to do with the adrenaline rush than anything to do with greed. Of course it’s dangerous: being leveraged 50:1 as was Jon Corzine with MF Global, but that’s what makes it exciting — rolling the dice. And then it comes up snake eyes, but then that’s always someone else’s fault.

      “A high-rolling gambling addict has lost his High Court bid to sue Melbourne’s Crown Casino for losses of $20 million.

      Gold Coast property developer Harry Kakavas accused the casino of unconscionable conduct after it allowed him to gamble millions of dollars when staff at the casino knew he had a gambling addiction.

      Between 2005 and 2006 Mr Kakavas turned over $1.4 billion at the casino when the losses were made. . . .”

      http://www.abc.net.au/news/2013-06-05/high-roller-high-court-bid-crown-casino/4734224

      • I agree, AJ. I don’t gamble precisely because I’m an adrenaline junky and with my personality profile, I don’t trust myself – easier to avoid a problem than to extricate myself from one.

        • Accolay

          It is all about the adrenaline. These top finance guys do the most drugs, have the kinkiest sex, etc. What goes on in these fancy UES co-ops (and Greenwich homes for that matter) amazes me…

        • AJ

          One part adrenaline, two parts ego.

  11. Anonymous

    The actually smart Ivy League grads are but a small minority. The majority of elite colleges are comprised of: (1) slightly above average or average intelligence rich and upper-middle-class kids forced by their parents to get straight As, attend private SAT tutoring sessions, etc. in order to fulfill their parents’ dream of having a kid in an Ivy; (2) even less intelligent athletes with rich and upper-middle-class parents who paid for them to attend sports camps every summer, hired private coaches, and/or made them do a PG year at a boarding school in order to fulfill their parents’ dream of having a kid in an Ivy/NESCAC; (3) affirmative action admissions; (4) legacies. For all the crowing against race-based affirmative action–which I oppose–there is little acknowledgement of the fact that you can basically buy your way into the best colleges in the country not with donations, but by investing thousands and thousands of dollars into subjugating your children to your own personal ambitions. This is a much larger problem–that you can take any average intelligence kid and transform them into someone a purportedly elite college will admit. Especially when the elite college imprimatur has such an impact down the line.

    So roughly 15%, at best, actually make it into elite institutions on merit. And those people are too smart to work on Wall Street, for the most part.

    And Wall Street ain’t really Ivy League anymore. It’s lots of people with marginal educational backgrounds and intelligence who are willing to put in punishing hours in work that is largely boring, contributes next to nothing to society, requires little skill or talent, and is unfulfilling except in monetary terms. I.e., they’re sociopaths. Kinda explains the Madoff/Noels of the world. The sun has set on the White Shoes.

  12. Anonymous

    “Hedge fund” is such a misnomer. I work with these guys all day long and the only true hedging going on is with their own careers–the existing fancy chair (a nice Aeron) vs. some mundane corporate job they’d otherwise be reasonably qualified to do.

  13. Greenwich Gal

    There us a great deal of truth in what you said, Anon at 11:46.
    Everybody I know who has a kid in the Ivies is in there due to family connections (development admit) and or an athletic admit (squash is quite hot right now). This is how you get above average white kids in. Then there are the Asian geniuses – or at least those that know how to ace standardized tests and what not. There is actually a cut off for Asians now – many of the schools will not go above a certain watermark. This is causing some problems in some communities as you can imagine. There are also other affirmative action acceptances as well, just as there are in all the schools. And don’t forget the big International Money – Arab oil sheiks, royalty, Chinese and Russian oligarchs. Celebrity kids. Brown loves those types. Harvard gets 37,000 applications for less than 2,000 spots. (1,600 I think in the freshman class?) For all these reasons, many of the schools are rising in prestige and influence. The #1 school right now is not an Ivy and many others are nipping at their heels for sure.
    But just because you went to an Ivy does not mean instant success.
    I think it opens doors, no doubt. BUT I also think it raises the expectations for the graduate – perhaps in some ways unrealistically. It can be like an anchor around one’s neck if you think about it. It can define you in ways positive as well as negative if you are not always on top. Mr. GG has always preferred to “not hire” from the Ivies. He wants a certain amount of street smarts in a new hire and someone with other intangible qualities as well a certain amount of humility.

    • Anonymous

      Some of the most successful traders/fund guys I know, the kind that don’t make any press and fly below the radar yet make very tidy 8 figure incomes, are street smart scrappy guys who went to regular state schools or in some cases specialized tech schools. Basically the kind of school where nobody talks about post-graduation or cares, because the only thing that matters is how well you know your subject matter (some personality is good too). At some point in one’s finance career, merit really kicks in. That’s usually in about the 6th or 7th year.

      Certain types of i-bankers, on the other hand, that’s a whole different ballgame. Especially generic corporate finance/FIG. One could be a successful dumbass for the most part for quite some time, provided the “right” pedigree is obtained and connections built.

      That said, regardless of how many Hermes ties are in the closet, the mirror doesn’t lie. In my very specialized position, being courted by those types, I’ve often enjoyed the post-meeting dialogue with my work colleagues, which occasionally goes, “That guy didn’t have the slightest fucking clue what he was talking about.”

    • Anonymous

      Looking beyond Ivies–which are themselves so arbitrary (hi, Cornell)–is the problem that we have a system that is easily gamed by money. Not tons and tons of money, even. Just upper middle class money. With enough money (and parental willpower) you can make an average kid get a great SAT score, take an average athlete and get them on a college team, take an uninterested kid and make their resume rival Kofi Annan’s.

      You end up with graduating classes from top schools full of people who utterly lack self-actualization, have no ambition beyond pleasing their parents, are totally dependent on others for validation and rudderless, and make very average employees.

      Of course it’s not instant success to go to an Ivy. An AA admit friend of mine at Harvard works at a bike shop, and has ever since graduation. I actually value graduates of small liberal arts colleges or those who excel at good, but second-tier universities over IL grads. My assumption is that if you went to an Ivy, you were there because your parents basically shoehorned you in–and you have to prove to me that you’re in the minority who really deserved to be there. A nightmare resume for me is Brunswick/GA/PA/Lawrenceville, then Penn/Brown/Dartmouth lacrosse/crew/sailing/squash. It tells me you have pushy parents, are spoiled and probably aren’t bright.

      The most interesting thing is the demographic shift. The old WASP families don’t have the money for top private schools and don’t place the same emphasis on ruthless success as do the up and comers. So the kid I described above with the “elite” educational background is much more likely to be the child of a Brooklyn-born immigrant’s son than a Johnson.

      • Anonymous parent of Ivy admit

        Average kids can get top SAT scores? You guys haven’t seen an SAT lately. You need a high IQ to get a high score. Advanced reading comp and math concepts can’t be gamed. Sure – with money you can take courses and add 100 points to your score, but the kids who score above 2300-2400 are really, really smart. You all sound like jealous people who were rejected by the top schools.

    • Anonymous parent of Ivy admit

      Greenwich Gal you need to meet more people. My kid is a legacy at one of the top 3 ivies. Has 1600 SAT’s and no grades under an A and unbelievable extracurriculars. She/he did not get in because of legacy status.

  14. Greenwich Gal

    Hey – no doubt your kid is a winner. All I’m saying is that an Ivy League education – which is no doubt a winning ticket signifying academic success -is no guarantee to life success.
    Your typical CEO and business superstar did not go to an Ivy.
    If you want to be on the Supreme Court – different story.

    • Anonymous parent of Ivy admit

      Absolutely Greenwich Gal. It’s no guarantee of success. I think that effort and stick-to -it-ed -ness matters much, much more

  15. Anonymous

    Anon ivy parent: there’s always exceptions. Kudos to you & your kids. I have family whose kids are brilliant and work their tail off. No legacy or big bucks to get ’em through to the successes they’ve had thus far, just good parenting and natural born talent, combined with hard work and humility. It can happen.

    It didn’t happen, obviously, to Mario Gabelli’s son!

  16. Anonymous

    Anon Ivy parent is really shattering the stereotypes by believing her kid is brilliant, perfect, and got in on merit!

    I’m never surprised by the inability of people to fail to admit, despite the astoundingly obvious evidence, that we don’t live in a meritocracy. Not even close. Think of it as a good thing! You were able, through hard work, to buy your child something that they probably couldn’t otherwise have achieved. (Unless you really think your kid’s one of the 4,000 most talented, smart kids out of millions in the country, in which case I have some lottery tickets to sell you.) That’s love!

    • Anonymous

      P.S.: No one’s child is the child who didn’t deserve to get in. It’s always someone else’s child. This pathology is known as self-serving attribution bias. Get well soon!

    • Anonymous parent of Ivy admit

      Anonymous@ 3:14pm: I was able to “buy” my child’s admission which he/she would not otherwise have achieved through hard work? Huh? Here’s the facts: 800 reading, 800 math (done in one sitting of SAT), over a 4.0 GPA, extraordinary extracurriculars and has been recruited (and not for sports – kid can’t do sports). This year only 400 girls and 800 boys (have fun with that statistic) achieved 1600 SAT’s in one day, so yes, my kid is one of those top kids. Doesn’t come from me – I am not that smart! Just a gift from God. Money is not necessary. Good parenting helps (“get off of facebook and do your homework!!”) as do numerous trips to the library starting at a very young age.

      • housecat

        Anon: the gene for intelligence is carried on the X chromosome. Males have only one, so if your mother was smart (since she gave you your single X), then you will most likely be smart, too. However, if you are female, with X chromes from both mom and dad, it can be a bit diluted. If you are a girl and also very lucky, both your maternal and paternal grandmother’s lines were smart. (The nice folks who decoded the human genome discovered this.) You mentioned having fun with the ratio of girls to boys, who scored a 1600, so…
        PS: upshot: Yes. More males test at genius level, as they only carry a single X chromosome, versus two. Kind of makes one chuckle, though, at all those smart guys who married the dumb but pretty girls, assuming their smarts would always carry the day. Oops.

        • anon

          Housecat: since a girl gets two X chromosomes and a boy gets only one (xy) wouldn’t that make geniuses MORE likely among the girls, since the x carries the intelligence gene? Your explanation said the opposite. Wouldn’t we expect to see more 1600’s from the girls? or perhaps my IQ is too low to understand your post 🙂

        • another ivy parent

          aha, my girl is even more special than i thought

      • housecat

        Anon: any lack of clarity was entirely on my part, not yours. 🙂 I wish I could link to the article I got that from, but I read it in print – “Scientific American: Mind”, I believe, about a year and a half ago. If I don’t get too distracted today, I’ll try to Google it and post the info here.

  17. Real Ivy Professor

    Anonymous parent of ivy admit is entirely correct. There are very few “gamed” admissions to the top 50 or so most selective universities in the US. These institutions are very close to a talent meritocracy on admissions with very little weight placed on legacy status or any other factors outside of GPA and SAT’s. You cannot game or “buy” a 3.75+ GPA or SAT scores above 2200.

    • thurston

      You and your ilk are a great reason not to send Jr. to an ivy league. Why would we want your kind polluting their minds with “check your white privilege” and all the other garbage you all are teaching?

    • aptitude in creative writing couldn’t hurt?

    • Another anonymous parent of an Ivy admit

      RIP, scratch that, doesn’t sound good, Real Ivy Professor: no you cannot game a high GPA. Even harder is to get one of those while going against the political views of the majority of the teachers. Now that is an accomplishment!

  18. Greenwich Gal

    Hey Real Ivy Prof-
    I assume you are not in the admissions dept.
    The Ivies cannot just admit the intellectual elite – entrances based on GPA and Board scores. If they did, the school would be 90% Asian and female. And that is a good thing! Schools should be as well rounded as they can. However – a huge chunk of admissions, preferred Early Action – are based on special talents. And there are academic floors depending on each departmental need. The football academic floor is lower say than the crew academic floor. I have met quite a few average to above average students who had their pick of Ivies due to their “special talent.” I know a kid who was one of the best hockey players in the nation. He could basically go where he wanted to go as long as he scored 1900 on the SAT. That was the floor. I also consoled quite a few mothers of kids who were vying for admission to a school and had the grades, the scores, a better transcript and did not get into a particular school but a fellow student who had a lesser resume but a certain billionaire father did. This is just reality.
    My point in this whole conversation is that the goods are spread all around. There is great talent and smarts to be found at UCLA, Berkeley, the University of Michigan, Texas, Tufts, etc etc.

    • Anonymous

      100% correct. Note that Harvard could fill entire entering classes with people who got perfect SAT scores and valedictorians. (At least that’s what they told me!) But they don’t. In fact, at least 25% of their entering classes have 700 or below on each section of the SATs. And that’s with a group of people who are, on the whole, extensively coached and prepped for these tests. Of course the average Harvardian is smarter than the average NCC student. But that’s not the comparison we’re making.

      The larger point is that a meritocracy requires as a precondition equality of opportunity. Any system that allows you to pay to do better on tests–gaining 100 points on one section of the SAT can easily take you from 85th percentile to 98th percentile, and put you well into the admissions range for Ivy League schools from being well outside of that range–fails on that score.

    • ROI

      Oh you can say it.
      PTJ’s offspring admitted early to Stanford.
      Big surprise.

    • anon

      Greenwich Gal – you’re right, the talent is spread all over the place. I have seen kids with super high everything passed over for someone with decent SAT’s but who is Puerto Rican. So, there are a whole lot of amazing kids who do not get into the Ivies because first they take 10% international students and another 25% minorities and 15% sports recruits.

  19. I like to lower the bar and bring humor to a family when children and grandchildren of friends are about to apply for college. I send them a basket of admissions movies – usually Risky Business, Legally Blonde, Rudy, How High, History Boys, and my favorite for lowering the bar, How I got Into College, a classically stupidly funny but spot-on 1989 flick.

    The advantage of having four children is after seeing the first one sweat out the SAT tutor and applications, our second third and fourth took the SATs only once, no do-overs, no tutor, they got the score they got naturally, and they picked a college that looked groovy to them. I gotta say the last three had far better experiences than the first. I think there’s something to be said in letting the senior find a college where they feel good, where they feel they can excel academically, where they can expand their friendships, and expand their horizons. Lastly, our philosophy was the college should be FAR away from home so there’s no coming home on weekends. We strongly felt they kids had to learn to sweat out the freshman ‘what am I doing here’ panic at least until Thanksgiving break. They haven’t written any Mommy and Daddy Dearest books (yet) so I think we’re safe. 🙂

  20. Anonymous

    Great article on FXCM. For those who say the game isn’t rigged (or attempted to be rigged), well….

    http://www.finalternatives.com/node/29677