I just read a blog post at underthecounter (which references a NY Post article) that describes a hedge fund called MotherRock blowing up and losing “almost all of $450 m” after being in business for only two years.

Wow, that’s quite a failure, and fairly foreseeable. They didn’t seem to understand managing their risk and didn’t really care about the potential to lose it all.

This reminds me of some discussion of what it takes to win trading contests… a blatant disregard for risk management, luck, and very aggressive / speculative positions. It’s like these managers thought they were playing a game instead of actually trying to manage real money. After all, who decides on a Hail Mary play when you still have real money that you could return to your investors?

The good news? Trading is a zero sum game. These guys are the other side of the equation from you and I. If they’re making such big mistakes, that means there are still opportunities for us.