Yesterday I wrote Is bad ready bad? Today we follow up on this idea by looking at the work of legendary traders/investors.
Over the past few years I have noticed some good coming out of what I first thought was all bad. When I lost my mom there was at first only loss, but then I recognized some good. When my dad had a stroke it was at first so horrible, but then some good. When we lost a mess of traders in 09/10 I felt sick to my stomach for months, but then found some good. Lately I am starting to feel we now have the best core of young traders we have ever had. Maybe none of that happens without the bad. Are things really bad or just a wave we clear before the good?
As traders we experience so much failure. Like baseball hitters our win rate can be lower than our success rate while overall still being outstanding in our craft. Is that rip really bad or just a moment before something good? Is that negative month really bad or just a month of valuable trading experience? Is blowing up an FX account really bad or just a signal to get better training? Is failing at swing trading really bad or just an experience providing information that that isn’t your best time frame as a trader?
Below are some examples of bad things before good for legendary traders/investors. As I gain more market experience and get older I find it harder and harder to determine what really is bad. Perhaps this thought can be helpful to traders as they experience losers.
-In 1978, Paul Tudor Jones was working in New Orleans for one of the greatest cotton traders of all time, Eli Tullis. Jones’s job was to man the phone all day during trading hours and call in cotton prices quotes from NY into Mr. Tullis’s office. Being fresh out of college, though, Jones enjoyed the night life a bit too much and was eventually fired for falling asleep on the job. Turning his anger into motivation to prove that he wasn’t a failure, Jones called a friend and secured a job on the floor of the New York Cotton Exchange. Today, Paul Tudor Jones is best known for founding Tudor Investment Corporation and becoming one of the most successful hedge fund managers of all time.
-Jim Cramer got involved with journalism while at Harvard, eventually becoming the president of The Harvard Crimson. After graduation, Cramer worked several entry-level reporting jobs. Around the time of working as a journalist for The Los Angeles Herald Examiner, Cramer was robbed and was left with nothing more than his car and the things in it. Living out of his car for nearly nine months, Cramer continued to do reporting and eventually entered into Harvard Law School. While working toward a JD, Cramer started investing his own capital and even began promoting his holdings by leaving stock picks on his answering machine. Cramer would eventually go to work for Goldman Sachs, start and run a successful hedge fund, run a well-known radio program, start the website The Street,write several books, and become the highly energetic T.V. host that we all know today.
-After graduating from the University of Nebraska-Lincoln, Warren Buffett enrolled at Columbia Business School after learning that Benjamin Graham and David Dodd, two well-known securities analyst, taught there. After Buffett graduated from Columbia, he wanted to work on Wall Street, but both his father and Graham urged him not to. Even offering to work for free, Graham refused. He moved back to Omaha to become a stockbroker and even purchased a gas station for a side investment which later failed. About four years later, Buffett was able to acquire a job at Graham’s partnership. After Graham’s retirement, Buffett started his own partnership which began to lay the foundation for Berkshire Hathaway.
-After graduating from Columbia Business School, Martin (Buzzy) Schwartz joined a local Jewish firm as a drug analyst. Quickly getting the opportunity to join a high profile analyst group, Schwartz switched groups only to be left completely devastated when one of his analyst reports was unknowingly leaked. He was let go and no other firm wanted to bring him on due to the scandal. After attempting and failing to generate some income with trading tips from friends, Schwartz found himself in the unemployment line. He eventually managed to get another analyst job, build a nest egg of nearly $100K, and start his career on the AMEX. Schwartz has since won several trading competitions with his outsized returns and wrote a book about his journey in life (Pit Bull).
-After leaving Harvard, Bruce Kovner sought after a Ph.D. Having suffered a severe case of writer’s block and overreaching of subject matter, Kovner never finished. For the next few years, he attempted a myriad of side jobs; he worked on political campaigns, studied the harpsichord, became a writer, and a cab driver. Just freshly being married and still driving cabs, Kovner discovered commodities trading. His first trade was borrowed against his MasterCard and netted him a solid profit in soybean futures after a wild ride. Continuing to learn more about the importance of risk management, he eventually became a trader under Michael Marcus at Commodities Corporation. Today, Kovner’s global macro hedge fund has an estimated $14 billion under management.
no relevant positions
HT @Ramblin_Rebel13 for his research for Part I and Part II