Hedge Fund CIO: “Trading Is Truly An Awful Pursuit”

By Eric Peters, CIO of One River Asset Management

Anecdote

“What are you thinking about markets here?” asked the entrepreneur, wedging the question into our conversation, but working hard to sound barely interested.

I laughed, unable to contain it. “Oh, so you really called to ask about bitcoin,” I said, smelling his quiet panic.

“Well, you know, yeah basically, I mean what do think about all this stuff going on?” he asked, not wanting anything other than reassurance.

“You don’t get to make a lot of money without enduring an even greater amount of pain – that’s just the way the universe works,” I explained, having a little fun while trying to be helpful. Don’t get me wrong, I’m not someone who enjoys the suffering of others. It’s just that I’ve endured so much of it myself that when I observe it in people who casually trade, thinking it’s fairly easy, I find it funny they believe trading somehow defies natural law.

Ask an athlete or actor how much pain they endured in exchange for glory. Ask an artist or entrepreneur the depth of their sacrifice, made in exchange for even a chance at greatness. You’ll hear stories of endless hours, repeated failures, humiliation, tortured lives, often nearly destroyed.

And never in those fields is there a guarantee of ultimate success. Quite the opposite – the odds are stacked heavily against survival, let alone triumph. In any game that does not award participation trophies, it can work no other way.

“This week was nothing compared to what you’ll need to endure in the years to come. Three negative headlines hit a market filled with leveraged retail longs,” I explained, sensing longer-term silver linings in each piece of bad news.

“It was the kind of week that can get even fairly committed traders to puke, cutting out the source of their pain. That’s how markets operate – trading is truly an awful pursuit,” I said.

“And you should generally hope for news that’s just bad enough to maintain the wall of worry, without being fatal. It’s only after the news becomes universally good, volatility collapses, and leveraged carry traders start picking up pennies that you should really worry.”