Poisoned minds
LP nightmare

Black Swan

James Cordier, in a dark suit, cuff links and expensive-looking watch, sits in a brown leather chair and stares into a camera, his hands folded in front of him.

Then he delivers the bad news.

His voice near-breaking at times, the hedge fund manager employs nautical terms to tell his clients in a roundabout way that he’s lost all of their money — in the neighbourhood of US$150 million, according to one estimate.

Oh, it gets worse:

[...] FCStone borrowed on margin against the accounts to cover money-losing positions. In the end, the clients didn’t just lose all their money, they also now owe FCStone for the loans [...]

Losing all the money in a speculative enterprise is bad enough, this genius borrowed money and lost even more! Why did he put himself in a position where the catastrophic loss would be over 100%? Apparently, he thought that he's an expert who could beat the cruelty of probability:

The collapse is a stunning turnabout for Cordier, who literally co-authored a book on the topic, “The Complete Guide to Option Selling.”

He should have read N. N. Taleb.


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