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Yes, he has always been on the "bleeding to death" edge though. In the
previous years it was no longer a surprise for him to loose over 40
percent of fund's value in days (as he states in the book). This time it
must have hit where it hurts though.
Guess it'll take me a while to understand what "the higher the risk, the
higher the gain/loss potential" really means.
Also, what this tells me: If someone as smart, who has spent many years
as a pro trading the markets gets sliced like this.
What o what kinda slice is the market saving for the much less
experienced "speculators" ?
Tugrul
bobrabcd wrote:
> This example of over leaverage and its real consequences is an
> excellent
> example of what not to do that has been touched upon many times over
> the
> last year on RealTraders. Somewhere risk reward was over run by
> overconfidence and exposed more than the entire portfolio...Lesson
> Number
> One. Now we know why his book was selling for $19.95 or was that
> $29.95
> last year. Maybe Eddie and John will reopen RT for VN. We could
> learn
> something from him.
>
> BobR
>
> At 06:59 PM 10/29/97 -0600, Michael E. Strupp wrote:
> >Here's something I scraped of "TheStreet.com" on the subject:
> >
> > Fund Watch Features: Hot Copy: Straight
> > From The Fax Machine, Niederhoffer Tells
> > Customers The Bad News
> >
> > By
> > 10/29/97 6:13 PM ET
> >
> > The following unsigned letter was faxed to
> >clients of Victor
> > Niederhoffer on Wednesday, October 29, 1997
> >after 5:00 p.m.
> > EDT:
> >
> > October 29, 1997
> >
> > To:
> > Limited Partners of Niederhoffer Intermarket
>
> >Fund, L.P.
> > Limited Partners of Niederhoffer Friends
> >Partnership, L.P.
> > Shareholders of Niederhoffer Global Systems,
>
> >S.A.
> >
> > Dear Customers:
> >
> > As you no doubt are aware, the New York
> stock
> >market dropped
> > precipitously on Monday, October 27, 1997.
> That
> >drop followed
> > large declines on two previous days. This
> >precipitous decline
> > caused substantial losses in the fund's
> >positions, particularly
> > their positions in puts on the Standard &
> >Poor's 500 Index. As
> > you also know from my previous
> correspondence
> >with you, the
> > funds suffered substantial losses earlier in
>
> >the year as a result
> > of the collapse in the East Asian markets,
> >especially in
> > Thailand.
> >
> > The cumulation [sic] of these adverse
> >developments led to the
> > situation where, at the close of business on
>
> >Monday, the funds
> > were unable to meet minimum capital
> >requirements for the
> > maintenance of their margin accounts. It is
> not
> >yet clear what is
> > the precise extent (if any) to which the
> funds'
> >equity balances are
> > negative. We have been working with our
> >broker-dealers since
> > Monday evening to try to meet the funds'
> >obligations in an
> > orderly fashion. However, right now the
> >indications are that the entire equity positions
> in the funds has
> >been wiped out.
> >
> > Sadly, it would appear that if it had been
> >possible to delay
> > liquidated most of the funds' accounts for
> one
> >more day, a
> > liquidation could have been avoided.
> >Nevertheless, we cannot
> > deal with "would have been." We took risks.
> We
> >were
> > successful for a long time. This time we did
>
> >not succeed, and I
> > regret to say that all of us have suffered
> some
> >very large losses.
> >
> >
> >
> >
> >
> > © 1997 TheStreet.com, All Rights Reserved.
> >
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