Words ought to be a little wild, for they are the assault of thoughts on the unthinking
- J.M. Keynes

Tuesday, 1 July 2014

Traders and poker

I chanced upon this Bloomberg story on how hedge fund guru David Einhorn crashed out of a poker tournament. Quite interesting given my latest piece on how trading skills don't transfer as easily to poker (and the large role that luck plays).

From Bloomberg:
"One of the most dramatic hands of Day One came 45 minutes into the tournament. With the blinds at 3,000 and 6,000 tournament chips, Trickett -- an Englishman and a former professional soccer player forced into early retirement by a knee injury -- raised from the button to 18,000 chips. Einhorn, sitting in the small blind with pocket jacks, raised to 51,000. Trickett called, and both men looked on impassively as the three-card flop came 2-jack-6. When Einhorn bet 75,000, Trickett paused just long enough, riffling two stacks of orange chips, to look as though he might raise. He called.
The next card, known as the turn, was a 3. This time, Einhorn bet 175,000, and he seemed startled when Trickett raised him to 475,000. When he looked again at the 2-jack-6-3 board, Einhorn decided he must be facing an underset -- one of poker's dream scenarios, in which your opponent holds a three-of-a-kind of a smaller value than the one you hold -- so he raised to 775,000 to make sure Trickett would call. And he did.
The next card, called the river, was a queen. Einhorn bet around 1,000,000, Trickett raised all in and Einhorn called. He flipped up his jacks, not loving the queen but still expecting to win the huge pot. Then Trickett rolled over the decidedly bearish news: the 4 and 5 of clubs, for a well-disguised straight."

It's nice to have some timely empirical backing.


"The role of chance means that even ‘‘skilled” traders may struggle to repeat their success in poker...In addition to luck, which may make it difficult to translate success in financial markets to the poker table (or vice versa), the risk-taking mindset required is also different...Given these differences and the fact that a winning strategy in trading is not suited to poker, the odds are against a trader having an advantage on a poker table. Therefore, the next time you’re sat opposite a trader on a poker table don’t bow out. Take a chance and follow James Bond’s advice in Casino Royale—play the man across.  

(Read more at: http://www.livemint.com/Leisure/91GhDegxrZ4LjUWdijx4TP/Do-successful-market-traders-have-any-advantage-in-poker.html?utm_source=copy)




The role of chance means that even ‘‘skilled” traders may struggle to repeat their success in poker.

Read more at: http://www.livemint.com/Leisure/91GhDegxrZ4LjUWdijx4TP/Do-successful-market-traders-have-any-advantage-in-poker.html?utm_source=copy
The role of chance means that even ‘‘skilled” traders may struggle to repeat their success in poker.

Read more at: http://www.livemint.com/Leisure/91GhDegxrZ4LjUWdijx4TP/Do-successful-market-traders-have-any-advantage-in-poker.html?utm_source=copy

Friday, 28 March 2014

The India Investment Story

“Should I be investing in India?”
 
The frequency with which this question was asked earlier has gone down noticeably since the heady days of 2009-10. Then, central banks had just rescued the global economy, and a “reformist” UPA-II, promising permanent prosperity, had been sworn in. Unfortunately for investors, the India story became a tragedy while politics descended into farce. The stock market (as measured by CNX NIFTY index) is up a mere 25% (as of 14 March 2014) since end-2009 (equivalent to roughly a 6% annual return), which hasn’t even protected against inflation. The plight of foreign investors is even worse. The rupee having depreciated 30%, they have earned negative returns on investment. Moreover, Indian bonds have provided no safety either with 10-year yields more than a percentage point (7.6% on 1 January 2010 to 8.7% on 14 March) higher in the given period (i.e. prices are down). Real estate may be the one bright spot, but that too has been moribund of late. Also, given the prohibition on foreign nationals buying immovable property, real estate is usually not in focus for most people asking the question above.
 
More in the latest column at LiveMint here 

Saturday, 1 February 2014

India - Voting for growth

In time to commiserate India's worst GDP print in some time, the latest column is now out looking at the Gandhi rate of growth.


Results of the state assembly elections on 8 December found that voters in four out of five states had dealt an unsurprising blow to the Congress party. The stock market duly rose the next day, reinforcing the narrative that ushering in the Bharatiya Janata Party (BJP) will automatically modify India’s growth trajectory to a higher rate. While it would take superhuman incompetence to match the abysmal record of the Congress-led United Progressive Alliance (UPA) government at the Centre, the belief that one party or leader can instantaneously change everything for the better is too facile. As this column has discussed previously, the structural problems facing the Indian economy can only be solved over time.
However, this is not to say that politics makes no difference to economic outcomes. Indeed, good leaders and good policies do make a difference. The difficulty is in figuring out ex-ante which candidate and party offers the two. “It’s obvious,” I hear you murmur. Let me point out the “dream team” of Manmohan Singh and P. Chidambaram that opened the UPA’s second innings. For the first time in Indian history, the stock market was halted limit-up a minute after it opened following the UPA’s election win in 2009. The markets went up more than 17% that day and you would have laughed at anyone who predicted anything similar to that shown in Graph 1.
 
Original column here.