Almost everyone in the investment business is a great trader wannabe. Great traders get paid more money. They work bigger deals. But how do you get to the top of your game? And how hard do you have to work to get there?
To help answer these questions, let me tell you the story of an old (yeah, he's 34) face who reappeared on Bay Street in April.
Back in 1991, there was a smart kid in the generalist program at the investment bank where I worked. These programs are considered the Holy Grail of business students, because you move among departments and get to see what everybody does. You do grunt work and you're involved in some pretty important deals. Even assembling PowerPoint slides for a takeover bid is a big thing when you're a grunt.
This smart, skinny kid wasn't the son of some Rosedale doyenne who had buttonholed a senior banker for a job for her precious little boy. His name is Manos Vourkoutiotis. His parents were Greek (Yikes! And he's on Bay Street!), and ran the family pizza joint.
Manos bootstrapped his way through school. His first rotation was in our equity derivatives department, so we sat him down with our PhD-laden professor, whose brain smoked as he worked on structured products. Manos found the work easy. Really easy. He started trading convertible debt to pass the time. He'd found his niche right away.
I left the firm soon afterward, but I watched Manos move around a bit. His analytical skills needed more room, so he went to work for a hedge fund in Greenwich, Conn.-a really big, smart hedge fund. I called him a few times. He politely thanked me for the opportunity we gave him. He always seemed a step ahead, and he did it by working harder, thinking harder and trading harder-and in ways that the competition couldn't quite grasp.
Manos wanted to move back because he likes Canada and his family is here. His old boss in Greenwich, Nick Maounis, let him set up a Canadian office for the hedge fund. He and his colleagues now manage the largest pool of aggressive money in Canada. Amaranth Advisors (Canada) ULC is a subsidiary of Amaranth Advisors LLC, which has more than $3.2 billion (U.S.) under management. The new office is the biggest and smartest competition money managers here have seen for a while.
Which brings me to my other point. After meeting really smart investors, covering them as a sales mope, trading against them and working with them, here are my 10 rules for making serious money:
1. Economists say investing is a zero-sum game. It isn't. Money moves to smart hands quickly, and lazy investors pay a price. Tiger Woods became the best golfer by practising a lot. How many prospectuses have you read in bed after the news?
2. Really good investors rarely crow. If there is $5 to be made from a trade, there will be less than $2.50 after you've blabbed about how smart you are. There are traders who quietly take home $10 million a year: They live beside you in a modest house and drive a beat-up Nissan.
3. The best follow rules and they're patient. They may not invest for months. One great trader I know wanted to buy a house in a fancy neighbourhood. He spent more than a week in the registry office on his vacation, searching the title on each property in the neighbourhood to find what buyers paid and how much of that was mortgaged, going back 20 years. He got a good deal. He does the same amount of homework investing.
4. Sharp traders never add to losing positions. Too many headaches.
5. Smart investors, when puzzled about when to sell, wonder if they should buy more. If they don't think they should buy more, they sell.
6. The most information wins. If you like a company, phone some people who work there. Apply for a job. Try their products. Phone the shipping dock to find out if they're busy.
7. Get a Bloomberg terminal. Bloombergs have more information in them than you can use, but smart people use a lot of it.
8. Following really smart traders around the market is hard. Most have more money to invest in a position than the arbitrage or opportunity can handle. They leave few tracks.
9. Great investors are like great athletes-they see opportunities that others don't. Often you don't realize that what they've made the most money on is even fungible.
10. If you can't do it yourself, find someone who likes the foldouts in annual reports more than anything. Their management fees are usually worth it. And they usually don't have slick marketing brochures.