Victor Niederhoffer's Matador Fund is down 12% in 2006

[NTB]

To increase your bets when one is ahead is a 'trend-following' mentality a la George Soros- ie. "....it takes courage to be a pig". The logic is routed in the fact that you are trading in the "Zone" and that should continue and/or you've caught a "trend" and and big money is made by riding and pyramiding a trend in motion. The logic is NOT routed in 'playing with the house's money' as there is no such thing. Once you've earned profit (realized or unrealized), it's yours and any loss of that profit is indeed a real loss.

To a mean-reversionist a la VN, I would have thought that one should reduce positions after a large gain as 'trend following' seems to be a dirty word. While I cannot comment on the man's mathematical studies of the trendiness of P/L, as a casual observer, the philosophy seems to be counter to his general mean-reversion tendencies. Certainly his +30% ytd return (through April) could have been considered an anolomous move and many std deviations away from his mean performance in a normal year. I would have thought that VN would consider fading rather than pyramiding a move of this nature. Nevertheless, the next few months will be an interesting test of the man's ability and internal fortitude in the face of adversity. Let's see if he can rise to the occasion.

 

[mschey]

Quote from Bitstream:

our situation is a whole diff matter, first hes not tradin' but relyin' on mkt direction, second hes managin' a fund and the returns he'd achieved were more than respectable, should have been become more prudent after 3good yrs and a bull mkt likely closin' in to an end and concentrate protectin' those gains and mantain' his investors happy, not get greedy and push his luck even furhter....at least for the time bein', innit.

It's pretty easy to make that call after the fact, but the reality is, one never knows when the bull will end, nor when the market turns. He makes his returns by being aggressive and taking risks and if you want the excess returns he can get, then you have to be willing to take the risk.

I don't get why everyone hates this guy so much. It's not like anyone on here lost any money because they invested in his fund. He's got balls, takes his shots, been knocked out of the game only to get back in and back on top. He is a true competitor, and I admire his ability to constantly take his game to the next level.

 

[stock777]

you know, I like Nied and he writes well, and has some interesting stuff on his site.

But I'd hate to conclude that his best performance comes from leverage and playing russian roulette with the fat 'tail' man.

So he borrows 3-6X , which makes a 50% gain not so amazing after all. It's only good if you are protected from blowing up in some rational way.

Otherwise you are simply providing disaster insurance for the market at the expense of your own hide.

 

[riskarb]

You can't call it trading. A monthly, indiscriminate vega bet isn't trading. He must be hesitant to make macro-bets [Thai Baht fiasco]; so he seems to be leaning on gamma/vol as would a chimp with a sell-ticket. Sell vol at any price. Is Don Bright on the payroll?

I predict he sells vol [big suprise] into this Israeli/Lebanon volty and cleans up in the last half... then begs off and retires from active money management. Only one opinion.

 

[OddTrader]

Quote from richardyu301:

The hedge-fund firm he runs, Manchester Trading LLC, took a beating in May, when stock prices swooned. That month alone, the fund lost about $100 million, or almost 30% of its assets.

How many existing investors would be still comfortable?

 

[stock777]

I'd say anyone that books 50% in a year HAS to expect that kind of downside, or they have no right to collect the winnings in the first place.

"Hey Vic, nice year, 50% on my mad money, hey can you do 75% next year, we need a new vacation home , the old one's getting boring"

"Hey Vic, what's this about losing 30%, I told you I want a conservative allocation, this is important money for me and my loved ones".

 

[smilingsynic]

Quote from marketsurfer:

what better time to increase the risk, than when one is up huge---30plus % for the <b>year</b>? Those who don't understand, or simply refuse to understand the nature of risk taking continually neglect the fact that risk is increased and decreased based on a variety of factors---one being prior performance--- superior prior performance allows one to increase risk, whereas inferior performance forces one to pull back and play it safe.
surf

The best time to increase the risk is when the potential and probable reward is greatest in proportion to the risk. Past performance, over months or years, is irrelevant. Outstanding performance in the past ALLOWS one to increase the risk by the mere fact that one has more capital to do so. But that does not mean that one should.

On a longer scale, VN had YEARS of superior performance. They meant little during the Asian crisis, when a brief period of foolishness and hubris made him lose it all.

 

[smilingsynic]

Quote from riskarb:

You can't call it trading. A monthly, indiscriminate vega bet isn't trading. He must be hesitant to make macro-bets [Thai Baht fiasco]; so he seems to be leaning on gamma/vol as would a chimp with a sell-ticket. Sell vol at any price. Is Don Bright on the payroll?

I predict he sells vol [big suprise] into this Israeli/Lebanon volty and cleans up in the last half... then begs off and retires from active money management. Only one opinion.

riskarb,

Good to see you back. The ET community is much more interesting with you in it.

 

[steve46]

Quote from smilingsynic:

The best time to increase the risk is when the potential and probable reward is greatest in proportion to the risk. Past performance, over months or years, is irrelevant. Outstanding performance in the past ALLOWS one to increase the risk by the mere fact that one has more capital to do so. But that does not mean that one should.

On a longer scale, VN had YEARS of superior performance. They meant little during the Asian crisis, when a brief period of foolishness and hubris made him lose it all.

So a little more than 2 days ago, you were asking everyone in sight whether Linda Raschke had the qualifications to teach you to trade. Today you are expounding on how a money manager should handle risk. Nice comedy routine. You fit right in with the bullshit artists, now all you need are a couple of aliases so you can congratulate yourself evey time you tie your shoes correctly.

 

[smilingsynic]

Quote from steve46:

So a little more than 2 days ago, you were asking everyone in sight whether Linda Raschke had the qualifications to teach you to trade. Today you are expounding on how a money manager should handle risk. Nice comedy routine. You fit right in with the bullshit artists, now all you need are a couple of aliases so you can congratulate yourself evey time you tie your shoes correctly.

You must have misunderstood (go back and read carefully, next time). I do not need anyone to teach me how to trade. Or for that matter how to respect risk. All I asked is whether anyone had any evidence about LBR's apparent trading ability. No one has presented any such evidence other than anecdotal. As I see it, LBR might well be a good trader now. But I'd rather see some proof before I'd take it any further than that.

I do not care to speculate on Dr. Niederhoffer's trading abilities, but his disregard for risk is legendary. And apparently he has not learned from his disaster, as testified by his dropping 29% in a moderately volatile month.

Steve-o, you don't have to be a "professional" take-20%-of-the-profits- yet-suffer-0%-of-the-losses "money manager" to understand that anyone who trades is indeed a money manager, and that risk is a double-edged sword. Something that Dr. Vic may one day himself learn.