Brian Hunter left Amaranth

Rearden Metal · Sep 30, 2006

Quote from ang_99:

I see your point but call it what you want, its still almost risk free easy living. A million bucks pre-tax is still a million bucks pre-tax no matter how you slice it.

I'm not sure you're quite with me yet:

$100 in 1996 bought more goods and services than $128 does in 2006.

http://www.minneapolisfed.org/Research/data/us/calc

The cash portion of my portfolio loses purchasing power every day, despite the interest- Doesn't yours?
If you know of a risk-free way to gain purchasing power on your cash, I'd really like to know about it.

trend_guy · Sep 30, 2006

Quote from Rearden Metal:

I'm not sure you're quite with me yet:

$100 in 1996 bought more goods and services than $128 does in 2006.

http://www.minneapolisfed.org/Research/data/us/calc

The cash portion of my portfolio loses purchasing power every day, despite the interest- Doesn't yours?
If you know of a risk-free way to gain purchasing power on your cash, I'd really like to know about it.

Rearden,

You are correct, but I think the point is not whether his purchasing power is increasing or decreasing ... it's whether he can live rather comfortably for the rest of his life, which I believe he can with $20 million in his pocket book.

There is a difference between "living off the interest" if you plan on living forever or if your years are finite. If you could live forever, there is no way you could sustain a standard of living with t-bill interest and 35% taxes. Even if you compute 1 cent at the time of Christ earning 3% interest, nobody has anywhere near this amount of money.

Also, chances are if you are smart, you aren't paying 35% taxes if you have $20 million in the bank.

Rearden Metal · Sep 30, 2006

Quote from trend_guy:

Rearden,

You are correct, but I think the point is not whether his purchasing power is increasing or decreasing ... it's whether he can live rather comfortably for the rest of his life, which I believe he can with $20 million in his pocket book.

No argument here... But he'd be living off the principle, not the interest. Why is the 'living off the interest' myth so popular? I really don't get it.

trend_guy · Sep 30, 2006

Quote from Rearden Metal:

No argument here... But he'd be living off the principle, not the interest. Why is the 'living off the interest' myth so popular? I really don't get it.

You're right, most people don't get the fact they are eating principal not living off interest.

I think people embrace the idea because you can sustain yourself longer with t-bill interest than zero interest, in both scenarios you hit zero eventually but by making some interest it take a lot longer to hit zero.

eagle488 · Sep 30, 2006

"Once again, the 'living off the interest' myth rears its ugly head...
________________________

OK, say you invest in T-bills. One year later, you've made a 5% return. Congratulations.

The government taxes away 35% of your 'profit', leaving you with a 3.25% 'gain'.
Over that year, the CPI rises 4.25%

I still can't understand why most people consider that a 'gain'."

I agree with you to a certain extent. I dont think a person with a million dollars only could live off of the interest. However a person with 20+million could probably make a go of it.

He could probably just live off of the millions of dollars he has without investing it anywhere. In any event, I believe Brian would probably invest in other avenues rather then just live and do nothing.

Someone once asked me if I had tens of millions of dollars would I simply retire? For myself, the answer is no. Of course, I would live a very comfortable life. However, I would have to involve myself in some sort of enterprise.

If I had the Brian Hunter money, month long vacations to extravagant places would be an absolute must. Dates on Friday night would involve calling the local escort service. I did indeed see that happen last night at a NYC restaurant. Ferrari pulls up to the curb, middle aged man jumps out and a young early-20s all slutted out comes out with him. Buying the newest M5 every 1-2 years would be a requirement. Nope, I dont like Ferraris.

Despite all the fun stuff, I would definately have to involve myself in an enterprise of some sort. . .

m4a1 · Sep 30, 2006

interesting thought: lets see if brian hunter can successfully trade his own money now that he's on his own.

JimmyJam · Sep 30, 2006

Quote from m4a1:

interesting thought: lets see if brian hunter can successfully trade his own money now that he's on his own.

yeah, that's actually what I was thinking ... and the answer will probably be "hell yes"!

he played high stakes games with OPM, with his own he's gonna run-circles around all of his friends in the hedge fund industry.

Later,

JJ

SethArb · Sep 30, 2006

I read today that the fund he was with "Amaranth"

will be closing down and returning any remaining assets

to its investors ...

sheesh ...

mschey · Sep 30, 2006

Quote from JimmyJam:

yeah, that's actually what I was thinking ... and the answer will probably be "hell yes"!

he played high stakes games with OPM, with his own he's gonna run-circles around all of his friends in the hedge fund industry.

Later,

JJ

Guys who can take shots with OPM, often can't take shots with their own money on the line. It's a whole different psychology when you are down on your own trades and faced with the decision to cut the loss or double down.

As for the interest discussion, some on here would be happy to have everything paid for, and earn a couple hundred k in a year from interest investments. They would be fine with 20 million in the bank and would never worry about. At that level, inflation doens't affect you, all your income is disposable.

Others, can't live below their means, make good investments, and manage their money well. The Mike Tysons of the world, they will end up broke. Brian Hunter probably falls in the category with Mike Tyson. His success in trading was due to a favorable market, a hurricane which wiped out a city in the US and had little to do with trading skill. A guy who took a shot in the right place at the right time, and when he tried to make that trade again, it wiped him out. How this escaped the risk managers at the fund is beyond me.

der_kommissar · Sep 30, 2006

Quote from mschey:

Guys who can take shots with OPM, often can't take shots with their own money on the line. It's a whole different psychology when you are down on your own trades and faced with the decision to cut the loss or double down.

As for the interest discussion, some on here would be happy to have everything paid for, and earn a couple hundred k in a year from interest investments. They would be fine with 20 million in the bank and would never worry about. At that level, inflation doens't affect you, all your income is disposable.

Others, can't live below their means, make good investments, and manage their money well. The Mike Tysons of the world, they will end up broke. Brian Hunter probably falls in the category with Mike Tyson. His success in trading was due to a favorable market, a hurricane which wiped out a city in the US and had little to do with trading skill. A guy who took a shot in the right place at the right time, and when he tried to make that trade again, it wiped him out. How this escaped the risk managers at the fund is beyond me.

very good post, Mschey