How To Start Your Own Hedge Fund
A big hat tip to The Reformed Broker for finding this gem.
Imagine becoming a hedge fund manager with no formal training whatsoever. It's the dream of every early finance major at some point. Skip all this BS school and the debt that goes along with it, just publish my own research on Seeking Alpha, and let the money come rolling in, right? Well that's exactly what Andy Zaky did - and it cost his investors every penny they sent him.
To be fair, Zaky first established himself as a sort of AAPL wunderkind. Though he had no formal training in financial management or analysis, he did graduate from UCLA and UCLA Law School. He took to writing about Apple on Seeking Alpha and developed a healthy following because of the accuracy of his predictions. He claimed to have learned all he knows about stocks and finance from the Internet.
Then he started a subscription newsletter which was all AAPL, all the time. At first he charged $49 a month, but when the newsletter grew even more popular he raised the price to $200 a month - and still signed up 700 subscribers. I'll give you a minute to do the math on that.
Meanwhile, AAPL kept burning up the index and making Zaky look like a genius. So he did the only thing a rational newsletter publisher could do: he started an all-AAPL hedge fund.
Fuh...what???
Yup.
With a minimum investment of $250,000, Zaky quickly signed up 28 LPs (at an average of $378,000) and then raised the minimum to $500,000.
You can probably guess how the rest worked out, but it's worth reading the article to see just how badly the wheels fell off. To make a long story short (no pun intended) Zaky bet the ranch on AAPL calls while the stock went into the dumper and he lost every penny. To make matters worse, the Joe Six-Pack's who didn't have the money to join the hedge fund but traded off his advice from the newsletter lost entire retirement accounts. Oops.
It's a pretty fascinating tale, really. Only in the Internet age could a guy like this make this happen as quickly as he did. I'm not saying that there weren't no-name analysts who made it big before the Internet - there certainly were. But the Internet tends to speed the whole process up and, once you're Internet famous, it has to be difficult to resist the temptation to cash in on it. I have no doubt that Zaky's intentions were pure, but this is what happens all too often when you start believing your own press.
So be honest - how many of you are now inspired to start writing for Seeking Alpha in a bid to avoid the whole two-year analyst grind in the hopes of a jump to the buy side? Two percent of $10 million AUM is still $200,000, which is nothing to sneeze at. Not to mention the $140,000 a month you're pulling in monthly newsletter subscription fees.
If Zaky proves anything, you don't even have to know what you're doing...
Comments
Edmundo Braverman: Then he
Then he started a subscription newsletter which was all AAPL, all the time. At first he charged $49 a month, but when the newsletter grew even more popular he raised the price to $200 a month - and still signed up 700 subscribers.
FTW? For real? Damn. There really is a sucker born every minute.
I'll give you a minute to do the math on that.
I went and plugged it in a calculator because I didn't trust my mental calculation of $140k per month for writing an AAPL newsletter.
Turbo leverage for capital explosion -- BD Capital
My WSO Blog
I used to see this dude's
I used to see this dude's stuff on Seeking Alpha and said to myself...surely no one takes the Apple fanboy seriously and stopped reading his stuff. hah
pick em, lick em, stick em
So SirTradesaLot - when
So SirTradesaLot - when should we expect your new newsletter?
What blows me away is that people were handing over this kind of money to someone covering 1 stock. You would think if his client base came from seeking alpha they would have *some* idea about the investing world.
Edmundo Braverman: To make a
To make a long story short (no pun intended)
This is one of the best puns I have heard to date. People that don't appreciate puns should be pun-ished.
And I think it's gonna be a long, long, time
CivilServant: So
So SirTradesaLot - when should we expect your new newsletter?
Working on it now. Need to do some research on this guy's letters as my first step.
Turbo leverage for capital explosion -- BD Capital
My WSO Blog
Edmundo Braverman: So be
So be honest - how many of you are now inspired to start writing for Seeking Alpha in a bid to avoid the whole two-year analyst grind in the hopes of a jump to the buy side?
If I hadn't read the article, and only read this one line, I would've called you crazy for suggesting that such a strategy could work. Wow, just wow. Anyone have any contacts at Seeking Alpha? Apparently, I need to get a writing gig there immediately.
"My caddie's chauffeur informs me that a bank is a place where people put money that isn't properly invested."
Edmundo Braverman: A big hat
A big hat tip to The Reformed Broker for finding this gem.
Imagine becoming a hedge fund manager with no formal training whatsoever. It's the dream of every early finance major at some point. Skip all this BS school and the debt that goes along with it, just publish my own research on Seeking Alpha, and let the money come rolling in, right? Well that's exactly what Andy Zaky did - and it cost his investors every penny they sent him.
To be fair, Zaky first established himself as a sort of AAPL wunderkind. Though he had no formal training in financial management or analysis, he did graduate from UCLA and UCLA Law School. He took to writing about Apple on Seeking Alpha and developed a healthy following because of the accuracy of his predictions. He claimed to have learned all he knows about stocks and finance from the Internet.
Then he started a subscription newsletter which was all AAPL, all the time. At first he charged $49 a month, but when the newsletter grew even more popular he raised the price to $200 a month - and still signed up 700 subscribers. I'll give you a minute to do the math on that.
Meanwhile, AAPL kept burning up the index and making Zaky look like a genius. So he did the only thing a rational newsletter publisher could do: he started an all-AAPL hedge fund.
Fuh...what???
Yup.
With a minimum investment of $250,000, Zaky quickly signed up 28 LPs (at an average of $378,000) and then raised the minimum to $500,000.
You can probably guess how the rest worked out, but it's worth reading the article to see just how badly the wheels fell off. To make a long story short (no pun intended) Zaky bet the ranch on AAPL calls while the stock went into the dumper and he lost every penny. To make matters worse, the Joe Six-Pack's who didn't have the money to join the hedge fund but traded off his advice from the newsletter lost entire retirement accounts. Oops.
It's a pretty fascinating tale, really. Only in the Internet age could a guy like this make this happen as quickly as he did. I'm not saying that there weren't no-name analysts who made it big before the Internet - there certainly were. But the Internet tends to speed the whole process up and, once you're Internet famous, it has to be difficult to resist the temptation to cash in on it. I have no doubt that Zaky's intentions were pure, but this is what happens all too often when you start believing your own press.
So be honest - how many of you are now inspired to start writing for Seeking Alpha in a bid to avoid the whole two-year analyst grind in the hopes of a jump to the buy side? Two percent of $10 million AUM is still $200,000, which is nothing to sneeze at. Not to mention the $140,000 a month you're pulling in monthly newsletter subscription fees.
If Zaky proves anything, you don't even have to know what you're doing...
Even better, let's combine this idea with the fax scam you came up with earlier. Create multiple accounts on seeking alpha, write highly specific, contrarian opinions on a bunch of stocks with each account and wait until you hit one. Look like a genius and start your own newsletter. Milk it for all it's worth until everyone figures out you don't know anything.
"Social cohesion and puritanical morality place roughly on my list of concerns between whether I'll pick up jock itch at the gym this week (not likely, since I don't go the gym) and whether it'll rain in Christchurch, New Zealand next Tuesday."
-Eddie
Yours for $400 (plus
Yours for $400 (plus commission)!
The stock market, it's where
The stock market, it's where popular delusions go to die.
Going Concern: Edmundo
To make a long story short (no pun intended)
This is one of the best puns I have heard to date. People that don't appreciate puns should be pun-ished.
Surely excessive punishment would be punitive.
(sight puns are acceptable on the internet)
Why, oh, why would you pay
Why, oh, why would you pay two and twenty for someone to buy AAPL? Haven't these people heard of Scottrade or Interactive Brokers? It baffles the mind. I suppose the marketplace is designed to separate fools from their money in the most peaceable way possible, so I guess this nets out for society's general benefit.
Bene qui latuit, bene vixit- Ovid
rls: Why, oh, why would you
Why, oh, why would you pay two and twenty for someone to buy AAPL? Haven't these people heard of Scottrade or Interactive Brokers? It baffles the mind. I suppose the marketplace is designed to separate fools from their money in the most peaceable way possible, so I guess this nets out for society's general benefit.
People pay that for Paulson to buy GLD for them
I hate victims who respect their executioners
Follow BH & Co. on Twitter: @DumbLuckCapital
twitter.com/DumbLuckCapital
Also, Eddie, why isn't this
Also, Eddie, why isn't this entitled- "How NOT to Start Your Own Hedge Fund"?
Bene qui latuit, bene vixit- Ovid
BlackHat: rls: Why, oh, why
Why, oh, why would you pay two and twenty for someone to buy AAPL? Haven't these people heard of Scottrade or Interactive Brokers? It baffles the mind. I suppose the marketplace is designed to separate fools from their money in the most peaceable way possible, so I guess this nets out for society's general benefit.
People pay that for Paulson to buy GLD for them
Technically, there is also some stock selection in the Advantage Plus Fund. But, to the extent that is true and GLD is a big position (which I've heard it is), they've lost money to this point (and will always underperform GLD net of fees). Just because its a big fund doesn't make it any less stupid.
Bene qui latuit, bene vixit- Ovid
rls: Also, Eddie, why isn't
Also, Eddie, why isn't this entitled- "How NOT to Start Your Own Hedge Fund"?
Too easy. Besides, he made money even if his clients lost all theirs. Isn't that the definition of a hedge fund?
Edmundo
I hate victims who respect their executioners
Follow BH & Co. on Twitter: @DumbLuckCapital
twitter.com/DumbLuckCapital
BlackHat: rls: Why, oh, why
duffmt6: Even better, let's
Edmundo
pick em, lick em, stick em
Edmundo
Bene qui latuit, bene vixit- Ovid
Thank me
I know very little about
Some people just don't make sense.
rls: Second, this guy's
OilBaron: Thank me
"My caddie's chauffeur informs me that a bank is a place where people put money that isn't properly invested."
duffmt6: Even better, let's
thaimint: duffmt6: Even
I hate victims who respect their executioners
Follow BH & Co. on Twitter: @DumbLuckCapital
twitter.com/DumbLuckCapital