Recently, Andrew Lahde who shot to fame with an 870% gain last year, wrote a farewell letter to all its hedge fund clients. After reading the letter and some comments I just realized that everybody focused on the "Harvard Idiots" and the "Hemp" parts but nobody said anything about the key of his success.
Read carefully the section below:
I have no interest in any deals in which anyone would like me to participate. I truly do not have a strong opinion about any market right now, other than to say that things will continue to get worse for some time, probably years. I am content sitting on the sidelines and waiting. After all, sitting and waiting is how we made money from the subprime debacle. I now have time to repair my health, which was destroyed by the stress I layered onto myself over the past two years, as well as my entire life – where I had to compete for spaces in universities and graduate schools, jobs and assets under management – with those who had all the advantages (rich parents) that I did not.
Well, did you get the idea ? The guy reiterates what other market wizards have always said :
- invest only when you have a strong opinion about the market
- waiting on the sidelines is sometimes (or most of the times) a good position
But there's a thing Andrew said nothing about: THE RISK . As long as the guy is retiering we can assume that he is smart enough to realize he will be unable to reproduce this 1000% return in the future and I guess he is aware of the huge risk he took.
Here's the comment of Cullen on the risk/reward matter :
Sounds like Andrew knew he had rolled the dice on an incredibly risky bet that just happened to go his way. A year earlier and he would have been writing a "Our timing was wrong..." letter. The smartest thing about a guy like this is that he knows he made a huge wager that likely couldn't ever be repeated and knew when to walk away from the table. Good for him. But I would die to know his risk adjusted return. Sounds like he was using the same leveraged high risk trades that got a lot of people in trouble....
Well, that's it, ...there is only one thing to say:
So long suckers !
