Memoirs of a Minyan: War Games
The purpose of the journey is the journey itself.
Chapter 16: War Games
The stress of a large hedge fund manager was one I wasn't going to miss. The outsized risk, the sleepless nights, the battling over positions, the gains and losses; my self-worth defined by green or red bottom lines each night.
There is a reason trading is considered a young man's game. While I was only 34 years old, my spirit and soul aged well beyond my years. I remember thinking I made a "lifestyle decision," that my new routine would facilitate an easier and more relaxing existence.
As the capital management paperwork went through the proper channels, I traded my personal account to keep my skills sharp. With a singular assistant, I squirreled away snazzy gains at my new digs. It was unfamiliar operating without a team but it didn't impede my success, as evidenced by my initial results.
It was a small base but I took calculated bets. My confidence grew -- maybe I was that good and the terms of my fund were warranted after all.
Minyanville transitioned to a pay site -- $10 per month to help offset the operational costs -- but it remained a loss leader. I received piles of checks each week and signed my name quickly.
I needed an income generator to feed the beast, the final piece of the puzzle that would tie it all together; my hedge fund launched in March 2003.
It was a tense time in the world as the US and UN danced around the prospects of war. I was certain the worst was to come, that the invasion of Iraq would plant seeds of global unrest; that the poltergeist had only just begun to stir.
As I watched "shock and awe" brought to the world on CNN, I thought to myself, "This is the end of the Roman Empire, a tipping point through a historical lens."
We opened for business almost to the day of the invasion and I used the rally to establish bets against the market. It was an opportunity to start my venture with a bang and I was excited for the next leg of my journey.
My stylistic approach incorporated four primary metrics -- fundamentals, technical, structural and psychology -- that served as the foundation of my analysis. While they assumed different weightings at different times, a collective assimilation was the most effective measurement of risk/reward.
Markets climbed the wall of worry at an astonishing pace; something powerful was afoot. Structural agendas pushed asset prices higher as policymakers lit fiscal and monetary matches under the market.
Alan Greenspan fueled the tech bubble to combat the Asian contagion and was intent on a repeat performance; the real estate bubble began, as did the early stages of the debt bubble.
Policymakers bought time for a legitimate economic recovery to take root and were unconcerned with the eventual ramifications. The stock market is the world's largest thermometer, a fact not lost on the boys from the Beltway. They needed the market higher by all means necessary.
It's clear with the benefit of hindsight but I didn't see it coming at the time.
I now appreciate the power of the collective agenda and the influence of a motivated Federal Reserve. At the time, it was a lesson in futility and failure, a stretch when I lost my discipline and got sucked into an emotional vortex, the cardinal sin of any trader. I wasn't used to losing and took it very personally.
I wrote about the percolating risks on Minyanville and put my money where my mouth was, scaling into short positions as a function of time and price. I expected the ramifications of artificial credit creation to come home to roost and failed to sync my time horizon and risk profile.
The only difference between being early and being wrong is whether you're there to collect on your bet. I won't rationalize my missteps; they were painful, public and all consuming. The fund was supposed to underwrite the collective costs of my various endeavors but I was furiously running in the other direction.
I worked four jobs -- managing the fund, running Minyanville, creating content and building the Ruby Peck Foundation. While I had some money stashed away, most of it was on the table with the rest of my chips. They were fading fast.
Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at email@example.com.
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