Friday, August 10, 2007

Top 10 - What You Should Do If You Are a Stat Arb or "Quant" Trader

As a newly-unemployed Stat Arb entering a period of diminishing liquidity, you will indeed need to re-acquaint yourself with life, the universe and everything in-between. You will need to stop obsessively checking your P&L and unwind (no pun intended). Here's a list of some suggestions to get you started....

10. Get to Know Your Kids.
As a work-a-holic with something to prove, who's spent the last decade commuting to London or New York from the suburbs, you should learn your children's names, find out what they like, and try to spend some quality-time with them, that doesn't include YOU reading the Wall St. Journal.

9. Apologize.
Most recovering addicts, whatever their addiction begin with an admission that there is a problem, before continuing on the making an apologiy and asking one's forgiveness. Given the large number of investors that will have been stung by your excessive leverage and your failure to recognize the similarity in positions across the market, you'll have a lot of potential work to do here to take your mind off of the model failure.

8. Do Some Charity Work
Nothing helps the soul more than helping someone else worse-off than you (unless you're a Ayn Rand or similarly-inspired Republican). Though failure may seem traumatic at this point in your life, there are people who don't drive BMWs, have good health and savings in the bank (though you should which one), and send their offspring to private school. Doctors Without Borders is excellent, as are Oxfam, Amnesty International and The Sea Shepherds (aquatic life has few other champions!).

7. Join The Peace Corps.
De rigeur in the 60's, there is still much thatyou can gain personally, and that your experience can deliver to the third-world experience. Think of all the potential sub-prime borrowers who could benefit from your modeling experience!

6. Get Yet Another Degree.
Since you've already got at least two degrees (and probably three), why not take the down-time to add yet another??! Perhaps "psychology", "or "behavioural finance", "game theory" ? Lord knows they might even be useful in avoiding the same again in your next incarnation.

5. Escape to an Ashram.

Ego's are easily bruised, especially when they are large and outsized. When David Weill went nuclear and lost boatloads of Rothschild and GAM money in the mortgage disaster of the early 1990s, he completely wigged-out and ran off to an ashram in India to try to rediscover the real "him". Sometimes people need great ego shocks to kindle their inner spiritual awakening.

4. Get Religion.
Heck, maybe it happened to YOU because you didn't have faith in your respective deity?? The The Hebrew God it must be said has been to smite mightily in the old testament. And Jesus always preached charity, and helping the less fortunate. Perhaps your fee deferral has transgressed your deity of choice's charitable sensibilities? Stranger things have happened (remember those 40 days and 40 nights of rain and that mad-man with the ark?!?)

3. Get Around to All That DIY.
OK, You've been busy, and paying someone else to do all that DIY in the home. Now, of course, you'll be wanting to save money and you'll have lots of time on your hands, you might as well put that engineering degree to work and get down to it. Needless to say, building materials are a "buyers" market at the moment.

2. Start a Blog.
Ahem. Well errrr it IS cathartic not to mention a hoot. And one DOES meet lots of nice people (even if they might be 13 yr old with braces and a large vocabulary for his age). And who knows...maybe it will form the foundation of investment strategy newsletter, tipsheet, or you'll use the material in a book one day...

1. Non-Mea-Culpa - Do it All Over Again.
Never admit responsibility. But of course, none of this was your fault. You were innocent roadkill. So you can take the time to conjure up exceptionally profound explanations and positive spin as to why you did better than the average stat arb, and would have made money if ONLY you been able to hold your positions. Ans like JWM and Brian Hunter and a Phoenix, you will rise yet again so that you can fulfill your destiny.


Anonymous said...

Before you reach acceptance stage

11. Yep that's why they call it that

12. Acknowledge... you havent found a system

13. Actually visit Monte Carlo

14. Stop hanging around the shops'
watering hole

15. Stop waiting for them to call back

Anonymous said...

16. Try to get through "Atlas Shrugged" without vomiting.*

*Chapter six P.B.