Today’s WSJ front page – Deutsche Bank Fallen Trader Left behind $1.8 Billion Hole. Now we have be inured to news of billion dollar losses? in the midst of Made-off, trillion dollar stimuli and Wall Street’s meltdown but.. really now. Boaz Weinstein is leaving and going to create his own hedge fund.
Mr. BW is a chess and poker whiz according to the article. So how is it that someone who is so good a figuring out probabilities got into such a mess? I am sure he is saying it was because of the unprecedented move in credit default swaps and other esoteric instruments and that excuse will be bought by untold number of investors.
The problem is, just like Brian Hunter (also formerly of DB if my memory serves me right) brought down Amaranth in 2006 with his second set of “unusual markets”.
See probabilities are not enough if you don’t also listen to your instincts and learn to tolerate the miserable feelings of being nervous or predicting that something could go wrong. That kind of Emotion Analytics would have saved Boaz …. or Brian or…..
Those who survive and thrive in these markets are those who will learn to do both. In fact, the “alpha” edge will most certainly go to those who learn the chess of the markets – which is a game about people and not about statistics.