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6/10/2005
Victor Niederhoffer: Briefly Speaking

1. Nice scandal in New York, where hedgefundist Albert Vilar is in jail for converting money from his tech fund to pay for gifts to charities. He  is accused of robbing $5 million from girlfriend Lily Cates. The technique was allegedly to start a fund, get her to put $5 million into it near inception, and then use that money personally rather than sending it to initial third party institution. Reminds me of an experience that a certain chemist had,where a chronic bear, boastful of his million-dollar forays into shorting S&P futures on such things as employment data which hid the weakness in our economy, apparently planned to start a fund with the chemist, but then after the documents were signed and sealed became "unavailable". This might, and I hope was, purely a coincidence.
2. Excellent movie "Ladies in Lavender" shows two sisters in their 70s falling desperately in love with a young violinist, ruining their sisterly relation and equilibrium as the universal urge to compete and live through the genes strikes in all such triangles. Reminds me that competition is the main driving force responsible for the high standards of living and superhuman efforts that purveyors of products provide to satisfy our pitiless desires.
3. The excellent book Practical Biostatistical Methods by Steve Selvin provides a supplementary second statistics course with emphasis on useful and generalizable techniques for ascertaining the incremental fits of models and estimates that are highly appropriate for market applications. Very accessible chapters for layman on regression, analysis of covariance, discriminant analysis, principal components analysis, contingency tables, logit regression, and survival analysis.
4. The best way to get additional alpha for classes of investments like funds-of-funds where the levels, depths, extent and asymmetries of the fees place the take so high relative to the return, like the martingale systems the casinos all love, is to place less than 100% of your assets, or less than a proportion compared to your bogey, in such funds.
5. Thank goodness the Sage had Charlie to restrain him from speculating so much more against the dollar than the $22 billion he admitted to being short at Berkshire's last annual meeting. When will the first brave soul write about this terrible investment that since the end of the year may have created a greater loss in magnitude than all the other investments he has made up to that time? And how does he subtly engulf smart people like his surrogate son at the computer software company and get him to talk at Davos about dollar weakness and how the Chinese system is so much superior to ours because they put the really smart people in government positions there, without being too overt or pushy about it? Also, what will happen to the market when word gets out that the possibility or pressure to exit the position might at some time arise?

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