J.P Morgan wasn't Rich, Ashley Cole isn't but Sauros will

Last weekend, as I was to the loo for a moment and without my blackberry (big mistake), I had a look to one of my wife's magazine. I found out that Ashley Cole, the English footballer who has been appearing frequently in women's magazines after he cheated on his wife, has a wealth estimated to £14m (before divorce). 14 million quids... The guy is an international star, he has the most selective job on Earth as zillions of guys would kill to be in his shoes (and have tried to), he's able to make dream millions of people, he's married to an absolute bombshell modeling for L'Oreal because she's really worth it and the guy is... even not rich! According to Felix Dennis, the UK self-made multimillionaire, the "lesser rich" level starts at £15m. It reminds me a paragraph I read in Lords of Finance by Liaquat Ahamed (I've still not finished the book but I can tell it's really a great read) about John Pierpont Morgan, who left when he died in 1913 an estate valued $80m (while the average guy at that time earned maybe $1,000 a YEAR). John D Rockfeller, who was then worth $1 billion, is said to have shaken his head and said "And to think he was even not a rich man"

Well, J.P. Morgan wasn't rich (mmmmh... OK, OK, I know...), Ashley Cole isn't but Sauros will. I found (incidentally) last week the Trading Holy Grail! Finally!!! It was lying there, where I didn't expect It to be... The irony is that I was told which path to follow to find It years ago but I wasted my time searching in other ways: from technical analysis, chart analysis, fundamentals or crowd psychology to voodoo or omen reading, I even read a book on Elliot Wave Theory : I think I've tried everything! Back to 2001, I was then a Padawan Trader who had just started to run the Orc race with Investment Banks and I was seated with a prop trading desk, next to a girl, a prop trader. What was funny with this girl was her ability to switch from casual conversations focused mainly on her new born baby to selling and buying Bund and Bobl futures or trading bonds or CDS though her dealer board that was shouting prices from brokers all day long : “My baby said aguuu for the first time… Wait... I buy 100 Bobl Jun01”. From time to time, between two conversations about her baby, she gave me some tricks: “here’s what we call head and shoulders” (for me head and shoulders was a shampoo, to a large extent it still is).

One Friday, as the stock market was rising, she told me something I should really have cared about: “You see, Young Sauros, very often the market rallies on Friday, it is what we call Friday’s short squeeze, lots of guys cover their short positions for the weekend”. The thing is I didn’t give attention to what she said. Maybe because I crunched the data and haven’t found any statistical relevance for “Friday’s short squeeze” but more probably because the girl ultimately left the bank after she took huge losses in 2001 as she was massively long Xerox, Marconi and Enron… making me think that her advises were probably not the best. But she was right: Statistical Arbitrage is the clue.
Read the full post

Great Post Sauros. Ashley Cole is too much of a playboy to maintain Capital Reserves. I love your story though. Sometimes information that seems egregously insignificant can turn out to be be incredibly useful. Though, I do not believe in Holy Grails. This may be do to my lack of experience in trading, or because I just finished Lowenstein's "When Genious failed" about LTCM. However, I'd like to learn more about "statistical arbitrage." I have been studying yield curve arbitrage lately, and it can definately be deployed through algo's and formulas to make mozzarella.

Batman wrote:

Great Post Sauros. Ashley Cole is too much of a playboy to maintain Capital Reserves. I love your story though. Sometimes information that seems egregously insignificant can turn out to be be incredibly useful. Though, I do not believe in Holy Grails. This may be do to my lack of experience in trading, or because I just finished Lowenstein's "When Genious failed" about LTCM. However, I'd like to learn more about "statistical arbitrage." I have been studying yield curve arbitrage lately, and it can definately be deployed through algo's and formulas to make mozzarella.

Thanks for your comments.I was of course ironic about the Holy Grail and stat arb. I don't believe them neither, the money making machine is more a common fanstasm than a thing you really need to seek for. What's commonly called stat arb refers to high frequency strategies. Most of the players there rely on the same statistical models (GARCH) and the name of the game is to put on the position faster than the competitors and ultimately, you need to have good execution time with your brokers. Now regarding patterns, I think when you spend most of the days for a few years watching at quotes screens, you end up seeing patterns a bit everywhere whether they are real or not. I wouldn't rely fully on those but I think they could provide a good guidance and provide an additional edge to your trading.

lol i always love reading your post sauros, can't wait ot graduate so i can follow everythign full time! ugh