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WHAT YOU NEED TO KNOW ABOUT MASTER TRADERS – PART 17
“You actually know less than you think you do. I found this fascinating and it had me drawing bikes on a blank piece of paper. The central issue is that we actually know less about the world than we think we do. These errors abound in simple tasks and in our understanding of the way the world works. It is natural therefore that such errors creep into the way we think the market works and the way it actually does work. More importantly such errors will creep into the way we think we operate and the way we think we operate in concert with the market.” – Chris Tate (Source: Tradinggame.com.au)
Name: Paul Singer
Nationality: American
Date of birth: August 22, 1944
Occupation: Hedge fund manager, activist investor, and philanthropist
VULTURE CAPITALIST
Paul was raised by Jews; a pharmacist and a homemaker. In year 1966, he got his B.S. in psychology from the University of Rochester; plus a J.D. from Harvard Law School in 1969. He then worked as an attorney in the real estate division of an investment bank.
The hedge fund he founded – Elliott Management Corporation (EMC) – engages in distressed debt acquisitions. He’s also the founder and CEO of NML Capital Limited, based in Cayman Islands. Hi firms have more than $27 billion in AUM.
Paul has been called one of the smartest and toughest money managers in the money management industry. He’s also called a “vulture capitalist.” His hedge fund is seen as a vulture fund. Wikipedia describes a vulture fund as a hedge fund or private equity fund that invests in debt considered to be very weak or in default, known as distressed securities. Investors in the fund profit by buying debt at a discounted price on a secondary market and then using numerous methods to gain a larger amount than the purchasing price. Debtors include companies, countries, and individuals.
He started purchasing sovereign debt from nations in crisis, like Argentina, Peru, Congo-Brazzaville (through various means). When a country is in financial trouble, he would purchase some of their debt, making millions of dollars in interest repayments and fees on the original debt” when the countries stabilize.
As of August 2015, Paul was worth $2.1 billion. A generous giver, he’s supported many causes, including entrepreneurial, educational, Jewish, political, sexuality, etc. causes.
Paul’s blessed with two children; and he’s been divorced since 1996.
What You Need to Know:
1. When professional speculators speak, we should listen. They’ve learned how to take advantage of the unpredictability of the markets. According to Wikipedia, hedge fund manager Jim Chanos stated in an August 2009 radio interview that he and Paul had met with G7 finance ministers in 2007 to warn them that the global financial system was increasingly unstable and approaching a catastrophe, with banks on the verge of sinking the global economy. The pair argued that decisive action was called for, but Chanos claimed they were met with indifference
2. Your past failure or disappointment can give you energy and motivation to move on to success. Paul suffered certain losses early in his career, which led to risk aversion that still guides his investing today. He never risks too much per position. He trades with caution.
3. A good strategy will have very few losing years (if any). Paul’s Elliott Management Corporation had only 2 losing years since 1977. Even in 2011, when most money managers lost, his fund rose 4.2%. Wasn’t that impressive? From 1977 to 2008, the fund had an average of 14.7% returns per year, beating the S&P 500. You don’t need to double your account every year to be called “successful.”
4. Paul himself says successful hedge funds will be entrepreneurial; it is the essence of the craft. He prefers situations, all else being equal, that are dependent in large part on their individual efforts, as opposed to those that are dependent solely upon market forces. Some added feathers to their caps and some had their businesses shattered.
Conclusion: Normally, the bigger you stake, the more your gains, but the more your losses as well (in case things go wrong). What master traders and newbies must agree on, is that dealing with uncertainties and uncertainties themselves aren’t a bad thing. You may face uncertainties with informed decision, win and then look for next opportunities in uncertain markets. Some also face uncertainties with the gambler’s fallacy – which is normally dangerous.
This piece is ended with a quote from Paul:
“The recent trading environment has felt something like walking into a place and having a sense that something is wrong and dangerous but not knowing exactly what will happen or when. “QE Infinity” has so distorted the prices of stocks and bonds that nobody can possibly determine what the investing landscape would look like, or what the condition of the economy and financial system would be, in the absence of Fed bond-buying.”
Source: www.tallinex.com
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