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A few years ago I was talking with a friend of mine who ran money for a Brazil-based fund of funds. They had about $400 million under management and were sweating bullets. "What the problem?" I asked him after the 10th time he complained about his lackluster returns.
"Why not just put more money with him?" "That's the problem! He just gave us our money back! He was making so much money he's just been returning money to his investors. You should write to him. Those guys are the smartest guys in the business. They even look at things like, 'What happens when five inches of snow fall in Central Park?' and they develop trading patterns off of that." So I wrote to Jim Simons and asked if I could maybe trade some money for him. He wrote back a nice letter but concluded by saying "we only hire Ph.D.s". Since I was thrown out of grad school in 1990 (although the dean of the school who signed the letter asking me to leave later became my chess student and ultimately a good friend), I was not qualified for Renaissance. But I decided to follow up on the one clue my Brazilian friend gave me: What happens when five inches of snow fall on Central Park?
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James Altucher is a managing partner at Formula Capital, an alternative asset management firm that runs several quantitative-based hedge funds as well as a fund of hedge funds. He is also the author of Trade Like a Hedge Fund and Trade Like Warren Buffett. At the time of publication, neither Altucher nor his fund had a position in any of the securities mentioned in this column, although positions may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Altucher appreciates your feedback; click here to send him an email. Interested in more writings from James Altucher? Check out his newsletter, TheStreet.com Internet Review. For more information, click here.
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