An American Hedge Fund
With thanks to Marc Keller for his generous gift, much appreciated. Tim Sykes can be found here at http://timothysykes.com/
I recommend to read this story purely for entertainment value. This kid didn’t know what he was doing, knows that he didn’t know, and still feels entitled to some bigger form of success. To some extent we are all guilty of that; but then there isn’t much that can be learned from “learning his lessons”. Rather, this is an entertaining account of the trading environment between 1999 to 2005. Little more.
- Introduction
- Prologue: A View from the Top
- Start Me Up
- Bitten by the Bug
- Show Time
- The Freshman 107,000
- Happy New Year
- Once in a Lifetime
- When the Levees Broke
- Margin of Safety
- No Business like Hedge Business
- 2004: A Hedge Fund Odyssey
- The Year that Cygnus Built
- I Love New York!
- Pink to Red Ink
- I am a Warrior
- Lessons Learned
- The Numbers
Extracted quotes
With thanks to Marc Keller for his generous gift.
- Introduction
- I have no extraordinary talents and yet I was a millionaire by the age of 22. Most people are reluctant to talk about how much they earn, while my profession is defined by it. Most people mismanage money; my wealth is built on the backs of other people’s financial mismanagement. I take from the middle and upper classes and give to myself.
- Prologue: A View from the Top
- Start Me Up
- The tests were conclusive; I had almost no cartilage left in my elbow. Drilling holes into my rackets to string faster helped me in the short run but hurt me in the long run. My obsession with winning had led me to take shortcuts that undercut any possibility for long-term success.
- Bitten by the Bug
- Started out with Supercuts and Viacom and Boton Celtics
- Used online discount brokerages
- Internet at school
- Bought microcaps, penny stocks, and tech stocks.
- I was about to discover I was in the perfect place with the perfect naivete at the perfect time in tock market history.
- Show Time
- The importance of mentions of microcaps in large cap news releases.
- The market value of adding a .com to your name
- Usage of margin
- Using online forum posts to gauge interest
- The Freshman 107,000
- “I hated Tufts University from the start.”
- IPO breakout strategy, which quickly faded.
- Writing an investment newsletter
- Reading books
- OTCBB trading
- Happy New Year
- “Frequently there were a dozen colege students staring at me in awe while they watched me make $10,000 to $30,000 in one sitting.”
- Using small orders for execution
- Holding for gap-ups overnight.
- Trading mishaps – roommate’s girlfriend.
- Once in a Lifetime
- Illinois Superconductor – $123,000 gain.
- $70,000 for taxes.
- Strategy’s collapse due to the popularity of his message board – deleted the group.
- “Boiler rooms were shady brokerage houses that existed solely to pump the owner’s stocks.” He was a beneficiary.
- When the Levees Broke
- Nothing seemed to work.
- Liking Tulane.
- Discovering short selling
- 9/11 – staying away from shorting
- Averaging short position higher
- Margin of Safety
- Starting a scholarship at Tulane
- No position sizing
- Semester at Sea – action and suspense
- Starting a fund – choosing between working for a prop firm, starting a mutual fund, or a hedge fund.
- Professional computer setup, and $160,000 in a 5 year CD
- No Business like Hedge Business
- Cilantro
- Razor thin profit margins.
- Need to seek accredited investors.
- Losing money
- Joining hedgefund.net for $12,000
- Rejecting third-party marketing firms, and introducing brokers.
- One IB introducing him to PIPES and SPACs but never came through.
- Keeping trading account at bad broker because of availability of borrowable shares.
- Breakeven for the year
- Spending in New York on socializing.
- 2004: A Hedge Fund Odyssey
- Nanotech market craze
- Moving to Orlando
- Making debt investment to Cygnus
- 13% monthly return – industry top performer.
- Summer Trip to Madrid – traveling.
- Similar funds exposed as outright frauds.
- Using physical training to keep himself disciplined, and personal chef.
- Creating marketing materials
- The Year that Cygnus Built
- Reverse merger with pink sheet-listed company
- Restricted vs. unrestricted shares.
- Sloppy prospectus writing
- Landing his first FoF investor.
- Shorting a stock where insiders bailed out.
- I Love New York!
- Connecting with fellow starters in New York
- Trader Monthly 30 under 30
- Investing more in Cygnus
- Pink to Red Ink
- Cygnus nonresponding. Adding more liquidity.
- Businessweek feature.
- Quotes on Trader Monthly, Reuters, and Institutional Investor. Debut on CNBC
- Using preborrows
- I am a Warrior
- Wall Street Warriors on MOJO, Dealbreaker.com, Online Trading Academy, etc.
- FAIL at trading.
- Enjoying writing about industry regulations and his experiences. Wallstripped.
- Lessons Learned
- The most important quality for a trader to develop is discipline.
- My greatest loses have always resulted from trades motivated by anger, revenge, and pride.
- The worst time to look for a new partner is when you are on a rebound.
- Regulatory Restrictions on hedge fund operations. Freedom of Finance
- “Even though the industry has evolved, many small hedge funds like mine will most likely never achieve critical mass.”
- Start Me Up
- The Numbers
- 1999: SP500: 21.04%, personal account 910%
- 2000: SP500: -9.1%, personal account 560%
- 2001: SP500: -11.89%, personal account 47%
- 2002: SP500: -22.1%, personal account: 98%
- 2003: SP500: 28.69%, Cilantro account: 6.06%
- 2004: SP500: 10.88%, Cilantro account: 20.47%
- 2005: SP500: 4.91%, Cilantro account:23.56%
- 2006: SP500: -22.1%, Cilantro account: -25.83
