Make Millions With the "Seeing Eye"By Jim Fink, CFA
January 3, 2008 | Comments (0)
"Having eyes, do you not see?" -- Mark 8:18
Brothels in Bangkok? That's nuts
I used to think hedge fund manager Victor Niederhoffer had the seeing-eye gift. His 1997 book The Education of a Speculator was a fascinating look at how price patterns in the stock market are mirrored in nature -- be it musical notes, the life cycle of forests, elephant stampedes in Africa, or the laws of thermodynamics.
Soon after his book came out, however, Niederhoffer lost virtually all of his investment capital buying futures contracts on the value of Thai stocks that were in the process of imploding.The New Yorker quotes Niederhoffer as stating that he invested in Thailand because -- are you ready? -- a friend of his visited Bangkok and noticed that the brothels were cleaner and safer than usual.
Based on this "brothel indicator," which Niederhoffer interpreted as a sign that Thailand's developing economy was improving, he invested hundreds of millions of dollars worth of his clients' money. After it went up in smoke, he said:
I had no scientific basis for investing there. ... It was purely a qualitative idea ... I had no knowledge of the country. I'd never even visited the country. All I had done was finance a trip by [my friend] to the brothels there.
Wow
It's hard to believe that a sophisticated, Harvard-educated money manager entrusted with hundreds of millions of dollars could be so reckless with his foreign investments. Suffice it to say that I no longer believe that Niederhoffer has the seeing eye.
That (12 years)
Allianz (NYSE: AZ), Telefonica (NYSE: TEF)
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