Genesis Investment Partners (Stamford, Ct)

[JCVR]

Thats rough man, sorry to hear it.

When I met with Genesis, the founder (forget his name) painted them as a high frequency shop which didn't allow many overnight positions. I daytrade but I think the bigger money is in swing trading so most of my positions need to be held for days, if not weeks and months and can take drawdowns in the meantime, so it just really wouldn't have worked for me.

Based on the timetable of the losses it sounds like you guys were trading mainly on the long side?

 

[Esq Esq Esq]

that does suck.
but unfortunately that's what happenens to most "prop" firms.
Unless they have something solid to teach you - they will die.

On another note - do not confuse GIP (genesis investment partners) with genesis securities (sponsor on this site, and our trusty broker.. well the broker of the firm im with).

 

[Anaconda]

Quote from Esq Esq Esq:


but unfortunately that's what happenens to most "prop" firms.
Unless they have something solid to teach you - they will die.

BINGO!

Any experienced "prop" trader could have seen that their model was a failure & a waste of money. I always wonder who is stupid enough to fund these ventures.

There are edges & tricks out there that you can teach to new traders, but not in the US equity markets. Those have been dried up years ago.

 

[monty21]

Quote from JCVR:



Based on the timetable of the losses it sounds like you guys were trading mainly on the long side?

I think many of us did have a long side bias in 2009, especially in February when the S&Ps were down over 200 pts year-to-date. One of the things I regret is applying the concept of (reversely Newton's law) what goes down, must come up. That being said, most of us were very short-term traders/scalpers and it wasn't our directional bias that hurt us but rather the behavior of the market. I personally performed better when the market was chaotic... extremely volatile/sideways/up & down. When it trended in one direction, however, I was less successful.

I'd also like to respond to several of the posters that criticized the prop model and so forth. First, the amount of money that we collectively lost is basically peanuts to our owners. A trader at our parent company (mostly International arbitrage) can make up for our cumulative losses in one or two good days of trading. It was a high-risk/high-reward scenario and the amount of money the firm cost the owners is financially irrelevant to them. It's more painful to their egos because everyone is competitive and failure was not an option. Secondly, the model was very intuitive and we were not trained like robots. We weren't thought any "tricks" or whatnot, though the strategy of "relative strength" was recommended. Nevertheless we were encouraged to develop our own styles of trading and strategies... the bottom line was to be profitable. I will add that our main boss traded alongside all of us and without exaggeration he was profitable about 85% of his trading days. Each of us had a monitor with his platform so we could see all his trades live. Although I admit he wasn't the greatest mentor, I believe that his trading was all intuitive/instinctive and therefore difficult for him to teach.

I'm not sure what some of you guys expected from this so-called Genesis "model". How many 2008 college grads with bachelor degrees have an opportunity to trade an account of minimum of $350,000 in capital after three months of finishing college? We also were also not responsible for any costs whatsoever (no commission fees, no desk fees, etc.) I could jokingly say that the S&P 500 is down over 40% in 1 year, whereas the Genesis fund overall is probably down less than 10%. It was not closed down because our financial losses were too great, but rather because we failed to improve as a group and it was a issue of potential. Again in humor, we "technically" outperformed any market benchmarks and the majority of hedge funds with Ph. D quantitative finance traders.

 

[overbay21]

Quote from monty21:

I think many of us did have a long side bias in 2009, especially in February when the S&Ps were down over 200 pts year-to-date. One of the things I regret is applying the concept of (reversely Newton's law) what goes down, must come up. That being said, most of us were very short-term traders/scalpers and it wasn't our directional bias that hurt us but rather the behavior of the market. I personally performed better when the market was chaotic... extremely volatile/sideways/up & down. When it trended in one direction, however, I was less successful.

I'd also like to respond to several of the posters that criticized the prop model and so forth. First, the amount of money that we collectively lost is basically peanuts to our owners. A trader at our parent company (mostly International arbitrage) can make up for our cumulative losses in one or two good days of trading. It was a high-risk/high-reward scenario and the amount of money the firm cost the owners is financially irrelevant to them. It's more painful to their egos because everyone is competitive and failure was not an option. Thirdly, the model was very intuitive and we were not trained like robots. We weren't thought any "tricks" or whatnot, though the strategy of "relative strength" was recommended. Nevertheless we were encouraged to develop our own styles of trading and strategies... the bottom line was to be profitable. I will add that our main boss traded alongside all of us and without exaggeration he was profitable about 85% of his trading days. Each of us had a monitor with his platform so we could see all his trades live. Although I admit he wasn't the greatest mentor, I believe that his trading was all intuitive/instinctive and therefore difficult for him to teach.

Thanks for the feedback and insight. What size was your boss trading if you don't mind me asking? Thanks.

 

[monty21]

Quote from overbay21:

Thanks for the feedback and insight. What size was your boss trading if you don't mind me asking? Thanks.

Our boss trades 100,000+ on a slow day and upto a million shares if there was an opportunity. That number is skewed because 30,000 shares of C is like a couple thousand of GS or even less of SKF. He is pretty selective though.

He was actually the CEO of Broadway Trading in the 1990s and had 700 traders working under him. Apparently the size he trades today compared to in the past is a joke. I think he was also lucky to get out before the tech boom and when all those firms when under. Nevertheless, he is a pretty established trader. He started on the floor in the AMEX option pits. He was also featured in Trader magazine in September 2008 issue (or a month or two before) and referred to "King of Prop " or whatever. We all sat together at the same desk and I can say that he makes money almost everyday. Some of his buddies that he trained in past are also in Forbes magazines and routinely have $100,000 days. I think he started the Genesis fund as just a hobby... He doesn't care about the money issue in my opinion.

 

[operator]

Quote from monty21:

also featured in Trader magazine in September 2008 issue (or a month or two before) and referred to "King of Prop " or whatever. We all sat together at the same desk and I can say that he makes money almost everyday. Some of his buddies that he trained in past are also in Forbes magazines and routinely have $100,000 days.

I wonder why he couldn't make any of the new traders profitable... if he is the "king of prop" and has trained 100k traders in the past...

 

[monty21]

Quote from operator:

I wonder why he couldn't make any of the new traders profitable... if he is the "king of prop" and has trained 100k traders in the past...

He didn't really teach us too much... he just provided general guidance. He basically capitalized us and expected that we would become profitable with our own style. It was quite informal. Still, almost every trader had a month or so where they performed very well. I for example only lost money on four days in November and did very well until mid-December. Unfortunately we all lost a lot of money when we first started and our stop-loss was greater. The morale changed in 2009 resulting in people becoming cowboys and taking bigger risks with a tighter stop-loss. Consequently we were frequently stopped-out... it was our fault. The patience ran out for the owners of our fund too. I also don't want to blame the market, but not many people expected the market to correct up to 50% in one year.

Plus the market changed a lot since he last trained individuals in the 1990s. A lot of the guys he taught probably have their own strategies now. Remember that stocks traded in fractions...His firm was the SOES bandits or whatever the were called. The traders he took on had to change their style eventually when the market became more liquid and many stocks spread-less essentially. Today it's a little different because you can't really teach intuition.

 

[JCVR]

Thats great info, thanks monty. I think one flaw is the emphasis on day trading. It has it's place but very few are good enough to actually do it profitably on a consistent basis. Volatile markets like we are having can be great for daytrading but without a view of the longer term picture and the ability to operate in larger timeframes most people are just going to get whipsawed to pieces.

To go out and hire only kids right out of college was probably the biggest mistake though, that was destined to fail in the current environment.

 

[monty21]

Quote from JCVR:

To go out and hire only kids right out of college was probably the biggest mistake though, that was destined to fail in the current environment.

Ironically, the philosophy was to hire trainees who didn't really have a bias on how the market truly worked. He resented people that were too smart and overly qualified because their personality is not good for day trading. The kid with the highest SAT score and best University lost the most money and was first to be fired.

We also had a very intelligent Indian guy with a MBA that traded exotic options for UBS come work for us. He survived for only slightly over a month because his brain was wired in a way that he could not be profitable in day trading... as his performance indicated. We also had another market maker of 20+ years for UBS who was not great at trading. He made money when he piggybacked our boss, but his own ideas sucked.

Basically, if you are too smart, its tough to be a day trader. These people also cannot admit they are ever wrong and are not a good fit. That was the idea behind hiring recent B.A grads.

Think about how many "geniuses" worked at Lehman, Bear Stearns, hedge funds (Long-Term Capital) and many other banks...Those Ph. D traders ran companies into the ground... Bankrupt! The correlation between a good trader and education does not exist.

As young trainees, we had no egos, were probably faster learners because we were recently just students, energetic, and so on.