Hedge fund apologist

[LC]

https://www.youtube.com/watch?v=VNYNMM0hXXY&feature=youtu.be

 

This Hedge Fund manager just lost all of his clients' money over the course of a couple weeks (hundreds of millions of dollars), made this cringy "apology" video while wearing a Rolex, then shut his site down and went dark

 

 

This was a pretty sad watch. But important too as a reminder of what can happen quickly!

[John Hjorth]

LC,

 

It appears authentic, which makes it absolutely sad and terrible. From the video I understand, that he by this has lost friends, too.

 

Seeking Alpha - Contributor Profile page - James Cordier.

 

So he has not gone totally dark, personally [, at least, as of now].

[LC]

To me, it is crazy. Imagine constructing a portfolio where a relatively normal 3-week period in November can totally ruin you? Honestly, I don't think I could do it even if I tried. I say that not to make light of his situation, but essentially as a warning to myself.

 

Literally on Nov 1 he authored a post entitled, "Option Selling Opportunities So Good They're Scary"

 

Wow.

[John Hjorth]

Yes, LC,

 

I noticed that, too. Mr. Cardier betted the whole shop [including client capital], and lost ... - it all!

 

Somehow, it feels comforting not to have done so - With no "smart" articles on SA, right?

 

Edit:

 

I wonder if there has been some kind of moral hazard involved here, to try to keep up?

[Gregmal]

Maybe I’m missing something but given the name of his site and blog this seems like more of a “product” selling platform than a real money management operation. Don’t judge a book by its cover, maybe, but I would never think putting money with a firm called optionseller.com or whatever was prudent.

 

This guy got his Rolex selling product and that product blew up. Not an uncommon story on the street.

[DTEJD1997]

Hey all:

 

You have to wonder how goofs like this get going and get AUM in the 1st place.

 

What could possibly go wrong with incredibly leveraged options?

 

The opportunities are SO GOOD, I am going to bet your house on them!

 

Crazy!

[DooDiligence]

Apparently, the guy is an idiot & that video is a piss poor apology.

 

All he needed to do to cap off the video was to say "but hey, at least I'm not Jacob Wohl."

 

---

 

From the linked article:

 

Moreover, he said, FCStone borrowed on margin against the accounts to cover money-losing positions. In the end, the clients didn’t just lose all their all their money, they also now owe FCStone for the loans, he said.

 

https://www.bloomberg.com/news/articles/2018-11-19/hedge-fund-s-accounts-liquidated-amid-energy-market-volatility

[wachtwoord]

Is that even possible? I mean that clients are on the hook for losses of the hedge fund exceeding the capital?

[Gregmal]

Apparently, the guy is an idiot & that video is a piss poor apology.

 

All he needed to do to cap off the video was to say "but hey, at least I'm not Jacob Wohl."

 

---

 

From the linked article:

 

Moreover, he said, FCStone borrowed on margin against the accounts to cover money-losing positions. In the end, the clients didn’t just lose all their all their money, they also now owe FCStone for the loans, he said.

 

https://www.bloomberg.com/news/articles/2018-11-19/hedge-fund-s-accounts-liquidated-amid-energy-market-volatility

 

Thanks for the article. This guy is a world class tard... I bet you he went to a nice school and has an MBA too.

[Gregmal]

Is that even possible? I mean that clients are on the hook for losses of the hedge fund exceeding the capital?

 

This is a sham. Despite what is claimed, I guarantee he doesn’t manage a hedge fund. These are SMA’s.

[John Hjorth]

Hey, take it easy! Here, LC and I were having a cosy & sad sentiment conversation [having our butts covered with a lot of Berkshire], after which you bullies starts raiding the topic. [ ; - ) ] - And by the way : That Rolex may be a cheap fake!

[wachtwoord]

Is that even possible? I mean that clients are on the hook for losses of the hedge fund exceeding the capital?

 

This is a sham. Despite what is claimed, I guarantee he doesn’t manage a hedge fund. These are SMA’s.

 

Ah that makes a lot more sense.

[randomep]

Is that even possible? I mean that clients are on the hook for losses of the hedge fund exceeding the capital?

 

This is a sham. Despite what is claimed, I guarantee he doesn’t manage a hedge fund. These are SMA’s.

 

Ah that makes a lot more sense.

 

And those SMAs are empty but are still getting margin calls to bring their accounts to zero!

 

[LC]

Not sure how this guy is raising 100+ MM with SMAs

[DooDiligence]

Hey, take it easy! Here, LC and I was having a cosy & sad sentiment conversation [having our butts covered with a lot of Berkshire], after which you bullies starts raiding the topic. [ ; - ) ] - And by the way : That Rolex may be a cheap fake!

 

Sorry for throwing a wet towel on the thread & you're right, he could be wearing a Folex, which would probably be appropriate for him.

 

Hey, at the risk of sounding like an idiot (like I've never done that before, right?)

What's an SMA? I Googled it & came up with "spinal muscular atrophy".

[wachtwoord]

Hey, take it easy! Here, LC and I was having a cosy & sad sentiment conversation [having our butts covered with a lot of Berkshire], after which you bullies starts raiding the topic. [ ; - ) ] - And by the way : That Rolex may be a cheap fake!

 

Sorry for throwing a wet towel on the thread & you're right, he could be wearing a Folex, which would probably be appropriate for him.

 

Hey, at the risk of sounding like an idiot (like I've never done that before, right?)

What's an SMA? I Googled it & came up with "spinal muscular atrophy".

 

Separately managed accounts. Basically putting this guy in charge of managing your portfolio.

[Eye4Valu]

I guess he's now the black sheep of the "family" due to the "rogue wave?"

[Cevian]

From what I understand basically the investment strategy was collecting pennies by writing out of the money options using a lot of leverage to amplify returns.

[John Hjorth]

From what I understand basically the investment strategy was collecting pennies by writing out of the money options using a lot of leverage to amplify returns.

 

Personally, I read it exactly that way. Mr. Cardier to me seems to be in his 40's. Now he'll spend perhaps 10 years of his life getting it straight, based on litigation against him - after which it most likely all starts all over again.

[james22]

I guarantee he doesn’t manage a hedge fund.

 

Yeah, if you manage to lose all your money you are not "hedged."

[Cardboard]

You guys should do a quick search on Google: natural gas widow maker.

 

This has happened every time that natural gas made a big spike up or down. Always some fund playing the futures. For a long, long time nothing happens, then bang, a "x" standard deviation move.

 

Cardboard

[writser]

I never know what to think about the clients in situations like this.

 

1. Greedy idiots willingly invested their money with another idiot, never asked questions when they were earning 28% p.a., they deserve to lose their money. Sue them to make them pay the margin calls.

2. My grandparents were suckered into something they didn't understand by an evil person, they probably didn't even know they could be on the hook for more than they deposited .. These poor souls deserve clemency.

 

Probably something in the middle. Can you rip off stupid people in a fair society? Should the government / somebody else protect them in some way?

[oddballstocks]

I never know what to think about the clients in situations like this.

 

1. Greedy idiots willingly invested their money with another idiot, never asked questions when they were earning 28% p.a., they deserve to lose their money. Sue them to make them pay the margin calls.

2. My grandparents were suckered into something they didn't understand by an evil person, they probably didn't even know they could be on the hook for more than they deposited .. These poor souls deserve clemency.

 

Probably something in the middle. Can you rip off stupid people in a fair society? Should the government / somebody else protect them in some way?

 

This is the best question.  I have two examples:

 

1) My grandmother was swindled by a financial advisor in 2006/2007.  Her brother recommended this guy because of all of these great returns. My grandma knows zero about finance.  She refinanced her house with a 100% interest loan, and he put all her money in some crazy variable annuity.  She ended up in financial hardship from the mortgage and he walked away with $30-40k in commission on maybe $150k in investment.

 

I dug into this guy, found out he had SEC violations etc.  Got my grandma's mess cleaned up, put what she had left into a Vanguard balanced fund and cash.  She's been fine the last ten years.

 

2) A friend's in-laws.  Guy was a vet, made $250k+ a year living in the sticks.  Lived "country rich" (anyone in the Midwest knows what I mean here..) and is always jumping from scam to scam looking for more money.  Dividend stocks, options, whatever is hot and on Fox he's jumping into.  The guy is retired, and has maybe $500k and has been treading water.  Dividend guru will promise 30% a year, guy gets in, does zero or losses and hops into something else.  I'm pretty sure his portfolio has stayed flat or lost money since 2008.

 

I'd say misplaced trust and greed.  Seniors get taken by this stuff all the time.  A family member told me they had all of their life savings with some "mutual fund guru" and it won't lose money because he's all over TV and is "safe". 

 

I learned long ago you have to choose, do you value the relationship, or do you want to fix the wrong financial thing?  I have picked relationships each time knowing that sometimes very close family members make terrible financial decisions.  That's life.  But by picking a relationship you open to the door to advice down the line.  I have some close family who eventually said "what should I do?" and the answer is almost always "Vanguard index funds, Vanguard balanced funds."

 

With parents/siblings there is a strange thing in getting advice from a sibling/kid.  It's really hard for parents, who saw you as a little kid, who changed your diaper to accept that you know more financially.  And siblings, well...that speaks for itself.  Patience works.

[Cigarbutt]

I never know what to think about the clients in situations like this.

 

1. Greedy idiots willingly invested their money with another idiot, never asked questions when they were earning 28% p.a., they deserve to lose their money. Sue them to make them pay the margin calls.

2. My grandparents were suckered into something they didn't understand by an evil person, they probably didn't even know they could be on the hook for more than they deposited .. These poor souls deserve clemency.

 

Probably something in the middle. Can you rip off stupid people in a fair society? Should the government / somebody else protect them in some way?

I assume that you already have strong answers to the questions you ask and that you look for better ones which makes it a hard undertaking.

Few thoughts:

-a stupid person is more dangerous than a bandit.

-a challenge is how to protect the helpless from the bandit.

-a bigger challenge though is how to deal with the super-stupids: "people who by their improbable actions not only cause damages to other people but in addition hurt themselves."

 

If you allow yourself to think only under two dimensions, you may find the following interesting:

http://advanced.jhu.edu/wp-content/uploads/2013/07/The-Basic-Laws-of-Human-Stupidity.pdf

[DooDiligence]

Coincidentally, we just had a poetry exam in Comp 2 & it covered:

 

Dramatic, situational & cosmic irony...