Monday, 12 January 2009

Million dollar dopes

Did you see the BBC's latest reality show - Million Dollar Traders? The plot is quite simple, a lucky trader who has made some millions on the market has put up $1m so that a group of novices whose sole qualification appears to be able to multiply 32 by 32 (1024 for those not quite up to the standard required), can try and make a profit over a couple of months trading. Their preparation for this is a two week course in finance which the entrepreneurial backer of the show thinks is sufficient to learn all they need to know.

Well you have guessed it - they haven't done very well. Apparently they believe or have been taught that they can hedge a short position in Citigroup by going long in a UK bank! Nobody told them that going long in a company about to make a rights issue might not be a good idea (especially when it was HBOS) and so on... But worst of all nobody told them they would be playing a roulette wheel - with day trading market movements essentially random and trading on news broadcast by the BBC hardly likely to be a winning strategy. It was all very sad - but one thing I did find very believable: the professional traders involved in the programme talk nonsense all of the time. They even maintain that traders in the CoL do not take time out for lunch - oh yeah!!!


Adam Gallagher said...

Hi Bob

Missed the programme - I take it this post means you are still a firm believer all stock movements are through luck? The time for abnormal returns must be now?


m said...

Great posting Bob!
I saw the programme and plan to use it as an example of stupidity and greed in our investment management class. This is a clear demonstration that you cannot make money with day trading. Not surprisingly the hedge funds lost a lot of money: making money regardless of the market conditions is simply impossible.

Their instance to get the trader in and out of their position was, to say the least, silly. As an example a trader would have been better off buying gold and sit tight till the end of the trial.

I was shocked by the "professional" investors in the show that recommended a sick person to use a trash bin not to waste the time to run to the toilette. How pathetic.

Even more pathetic was on episode 3: he didn't pay anyone anything as they didn't make enough money. I applaud all these participants that left before the end of this circus.

All these greedy hedge fund managers deserve all they get. Hopefully many of them will close shop this year!

David from Zurich