ep 009: the market speculator - victor niederhoffer

By Nikita Fadeev   •   01, Jul, 2020 
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victor niederhoffer
Lifelong Trader and former partner of Soros Fund Management
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Victor Niederhoffer has specialized in trading futures and options since 1979. He began his business career after studying statistics and economics at Harvard (B.A. 1964) and the University of Chicago (Ph.D. 1969), and teaching at the University of California, Berkeley (1967-1972). In 1965, he founded Niederhoffer, Cross and Zeckhauser, Inc., which became one of the leading finders involved in selling privately held firms to public companies. With Dan Grossman, his partner for 40 years, Niederhoffer also bought many privately held firms. In the 1960s and 1970s, he wrote numerous academic articles about markets that led to the founding in 1980 of a trading firm, NCZ Commodities, Inc. (aka Niederhoffer Investments, Inc.).

Niederhoffer Investments became one of the top financial advisers in futures, options and stocks. George Soros said in one of his books that Niederhoffer was the only one of his managers who retired voluntarily from trading for him while still ahead. Niederhoffer Investments returned 35% a year from inception through 1996, when MAR ranked it the No. 1 hedge fund manager in the world. Disaster struck the following year, mainly because of excessive speculations in Thailand. Since that time, Niederhoffer has been crawling back up the stairs, not entirely without success. He began trading for his own account in 1998, after mortgaging his house and selling his collection of antique silver trophies. He began managing money for offshore clients in February 2002, investing his own money pari passu with the fund. The firm employs proprietary programs that predict short-term moves based on the interactions between multivariate time series. From 2000-2003, Niederhoffer wrote a widely read weekly column on the markets with financial journalist Laurel Kenner for CNBC MoneyCentral (www.moneycentral.com). Their book, Practical Speculation (John Wiley & Sons, February 2003), was called “the best trading book of the young millennium" by Active Trader magazine. Niederhoffer’s life story, tips for studying markets and love for his father, Arthur, were detailed in a previous book, the 1997 best-seller Education of a Speculator.

Niederhoffer is proudest of having a benevolent influence on people that came in contact with him. At least a dozen employees whom he started out or taught became billionaires or multi-centimillionaires, including Monroe Trout, Stu Rose, John Hummer and Roy Niederhoffer, all of whom are famous in money management or M&A. Niederhoffer’s interests include the study and implementation of counting, ecology, electronics, entrepreneurship, free markets, music, sports, statistics, and strategy in checkers and chess. Favorite authors include Patrick O' Brian, Cervantes, Galton, Rand, Jack Schaeffer, Hugo, Melville, and Twain. He is well known in the field of racquet sports, where he was the undefeated national squash champion for a decade (1965-1975) and claimed the world squash title in 1976. Victor Niederhoffer is married to Susan Cole Niederhoffer and has seven children. Victor Niederhoffer believes the purpose of life is the pursuit of happiness and achievement, and that the voluntary transactions that flow naturally out of an enterprise system are the key to material and personal freedom, and peace.

topics discussed:

  • Statistics and its financial application

  • Becoming an active market participant

  • From 50k to 20 million in 6 months

  • Partnership with George Soros

  • Parting ways with Soros

  • Debacle in 1997

  • Learning lesson from blowing up

  • Innovation during the early days

  • The importance of signal generation, execution and risk management

  • Jesse Livermore and his story

  • A trader you look up to

  • Trend is not your friend

  • Advice to younger self

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