Why Do Traders Have to Stay in the Game?

Bill Perkins says the swings ran from down 50 percent to up 250 percent, on about $100 million and about $200 million. The book is rebuilt over a year, through the winter. The name of the game is to stay in the game. A market that rewards people who study it and keep their wits will eventually pay outsized returns if you are not knocked out completely. Hurricane insurers get called cowboys, then two storms make a terrible year and some nearly get wiped out. They keep writing policies, the price of insurance rises, and they make a great deal of money. Unless the work is pure arbitrage, a very bad year is part of it.

That stretch is not a calm one. Traders become obsessed with the puzzle, and that obsession is what builds the informational edge and the bets other people are not thinking about. With capital at risk you are never really off. Knowing that now, he would have gone into equities instead. Funds of $6 billion and $10 billion run on track records he calls only okay, the stock market adds an upward drift, and a $6 billion fund charging 1 or 1.5 percent turns its upkeep into a profit center because a fund does not cost that much to run. On personal wealth, that path would have made him much richer. He holds a basket of stocks with his own money now.