The Power of Hormones 

SAC Capital is a powerful $10 billion hedge fund run by superstar trader Steven A. Cohen, one of Wall Street’s most prolific players who regularly takes home $500 million a year. What’s their secret? Telling their traders to swallow female hormones to trade better. It was alleged that one of Cohen’s top bosses at SAC chided traders for being too aggressive - and that they must use a soft feminine touch to score in their trading pitches.

One junior trader claimed that the boss, Ping Jiang, a key producer at the big hedge fund, demanded that the young trader take female hormone pills to help erase his aggressive male ways so he could be more effeminate in his trading style. Eventually, the hormones caused the junior trader, Andrew Tong, to start wearing dresses, avoid his wife’s touches altogether and allegedly begin a sexual relationship with his boss, the trader claims. Tong said that when he was instructed by Jiang to start taking an unspecified dosage of the pills to improve his trading.  Tong had to search the illegal black market to find his hormone pills.

The method apparently worked for Jiang, who’s listed by Trader Monthly magazine as one of Wall Street’s top 100 traders, with estimated income of $100 million a year.

 Only 25 And Morally Damaged For Life

Desperate to find a husband who makes at least $500,000 a year, a hungry 25-year-old has removed her craigslist ad off the Internet after causing quite a stir. She’s sparked a flurry of debate from cyberspace to Wall Street about her sanity and scruples. Craigslist officials said the ad is legitimate and that she got 40 responses before removing it. I know the length is a bit much, but you have to read the entire thing…

What am I doing wrong? Okay, I’m tired of beating around the bush. I’m a beautiful (spectacularly beautiful) 25 year old girl. I’m articulate and classy. I’m not from New York. I’m looking to get married to a guy who makes at least half a million a year. I know how that sounds, but keep in mind that a million a year is middle class in New York City, so I don’t think I’m overreaching at all.Are there any guys who make 500K or more on this board? Any wives? Could you send me some tips? I dated a business man who makes average around 200 - 250. But that’s where I seem to hit a roadblock. 250,000 won’t get me to central park west. I know a woman in my yoga class who was married to an investment banker and lives in Tribeca, and she’s not as pretty as I am, nor is she a great genius. So what is she doing right? How do I get to her level?Here are my questions specifically:

A Response That Could Not Be Put Any Better:   I read your posting with great interest and have thought meaningfully about your dilemma. I offer the following analysis of your predicament. Firstly, I’m not wasting your time, I qualify as a guy who fits your bill; that is I make more than $500K per year. That said here’s how I
see it.Your offer, from the prospective of a guy like me, is plain and simple a crappy business deal. Here’s why. Cutting through all the B.S., what you suggest is a simple trade: you bring your looks to the party and I bring my money. Fine, simple. But here’s the rub, your looks will fade and my money will likely continue into perpetuity…in fact, it is very likely
that my income increases but it is an absolute certainty that you won’t be getting any more beautiful!So, in economic terms you are a depreciating asset and I am an earning asset. Not only are you a depreciating asset, your depreciation accelerates! Let me explain, you’re 25 now and will likely stay pretty hot for the next 5 years, but less so each year. Then the fade begins in earnest. By 35 stick a fork in you!

A Parting Thought From Dr. Brett Steenbarger

When I talk with traders, I can often sense within the first few minutes of conversation whether the trader is successful and talented or not. What hit me was identifying, consciously, how I was arriving at that assessment.The really good traders tend to have differentiated market views. Their thinking is of a higher order of complexity. So, for example, they may be bullish on certain themes, bearish on others. They like some stock market sectors, avoid others. They see in range bound terms sometimes, trending on other occasions.

The really good traders see a large playing field. If they see a weak dollar, they think about how that affects bonds, metals, energy, and international returns. If they see a breakout from a multiday range, they see a swing move in the making, not just an opportunity to make a few ticks. They can be daytraders or portfolio managers–it doesn’t matter.  They see how markets are interconnected. They see how the morning trade relates to the overnight range, and how today’s trade is connected to what we did yesterday. And the less successful traders? They’re bullish or they’re bearish. That’s it. They think in simple terms of causation: We’re having a housing slump; that means we’ll have a bear market. We’re making new highs; that means we should buy because we’re in an uptrend. The news is good, so we’ll buy. The news is bad, so we should sell. No complexity. Sadly, we see much of that kind of thinking in the financial media.

Jean Piaget, the developmental biologist, emphasized that cognitive development occurs through a process of assimilation (taking in new information) and accomodation (integrating that new information with what we already know). Over time, that enables us to develop increasingly complex (and accurate) models of the world (schemas). I strongly suspect that process is at work in the development of successful traders. Interesting!

We often hear advice to the effect that traders should keep things simple. Complexity for its own sake is not helpful in the least. Still, when I talk with successful traders, I am impressed by the relativity of their views: they look at how this is related to that and how they can profit from the relationship. It may be a simple relationship, but it’s not simplistic. The difference is important.

Women need to “connect” with investing because we live longer

Women now hold just over half of all professional and managerial positions, but investing skills and confidence haven’t kept pace. According to the research organization Catalyst, women now occupy 50.6% of workplace managerial and professional positions. Yet as investors, women still don’t get involved or they invest too conservatively, leaving money on the table.  

• Education. Women growing up are simply not socialized as investors. 76% of women wish they had learned more about investing while growing up. Parents, get your daughters involved.
• Experience. Most women don’t take the investing helm when married.
• Fear. Some 90% of women fear “losing it all,” and even 48% of those with incomes exceeding $100,000 annually cite that fear.
• Adviser Disconnect. Most financial advisers are men, and they’re still geared to talk to men. Most advisers still talk in jargon. There’s still a “tendency to tell women what they want to hear, to comfort them, instead of talking about the opportunities in a situation.”

About 80% to 90% of women will be solely responsible for their finances someday, according to the National Center for Women and Retirement Research. Here’s a fun stat: 96% of men think that financially secure women are sexy. Perhaps because too many women can’t get finances the moral way.

For women who may still be reluctant to wade into investing waters:

1. Think like a business owner.  Business owners understand how businesses work and how to handle the ups and downs. Women are good at this in the business world.
2. Buy businesses you understand.  If inclined to buy individual stocks, this is a fundamental Warren Buffett value principle. As a woman, you probably understand some businesses better than your male counterparts — use this to your advantage.
3. Get the right advice.  Research shows that women prefer the help of advisers. Some 75% of women who rely on advisers are “more comfortable with investing.” That said, finding the right one is important — one tuned in to the needs of women.
4. Follow role models.  In business and in investing it always helps to find good role models and to study their actions and response to business and market stimuli. Buffett, an investor role model for years, is a great place to start.

An Effort To Attract More Consumers

The Wall Street Journal announced Monday that it will launch a glossy monthly magazine next year that it will distribute with the Saturday edition of the newspaper. The magazine, to be called “Pursuits,” marks the latest expansion of the Journal’s efforts to attract consumer advertising with coverage of leisure activities and lifestyle topics. The Journal said in a statement Monday that it expects to launch the magazine in September 2008.

Nothing Better To Do With Investor Money? Why not act like idiots to the fullest extent possible

The controversial Florida-based startup, PayPerPost, is leading the effort to tarnish the blogosphere makes another PR blunder. The company has been chronicling their startup days on a video blog called RockStartup. There have been some embarrassments before with the video blog.

What kind of embarrassments? The most recent episode is when all employees of the company were taken on an all-expenses-paid trip to Club Med, where as far as they spent their time getting drunk and dressing up as Native Americans, complete with lots of red face and body paint (something many Native Americans find both racist and offensive). The company also hired something called a “Creative Thinking Coach” to guide them through the whole experience. There are hundreds of companies out there doing it tough with little or no VC money - and then you see this. Way to go, Ted!

You’ll Always Be Watched

Li Runsen, best known for leading Project Golden Shield, China’s intensive effort to strengthen police control over the Internet, took an additional title: director for China Security and Surveillance Technology, a fast-growing company that installs and sometimes operates surveillance systems for Chinese police agencies, jails and banks. Hedge fund money from the United States has paid for the development of not just better video cameras, but face-recognition software and even newer behavior-recognition software designed to spot the beginnings of a street protest and notify police. Yikes! The ties between China’s surveillance sector and American capital markets are starting to draw Washington’s attention. So what’s scary? A recent report in The New York Times about the development of surveillance systems in China by another company, China Public Security Technology, which, like China Security and Surveillance, incorporated itself in the United States to make it easier to sell shares to Western investors.

Wall Street executives also defend the industry as necessary to keep the peace at a time of rapid change in China. They point out that New York has begun experimenting with surveillance cameras in Lower Manhattan in places like convenience stores and automated teller machines. Over the last year, American hedge funds have put more than $150 million into Chinese surveillance companies. Executives of Chinese surveillance companies say they are helping their government reduce street crime, preserve social stability and prevent terrorism. They note that London has a more sophisticated surveillance system, although the Chinese system will soon be far more extensive.

China Security and Surveillance has been aggressively raising money in the United States, including $110 million in convertible loans so far this year from the Citadel Group. The company has used the money to acquire or make a deal to buy 10 of the 50 largest surveillance companies in China. China Security and Surveillance is involved in some of the most controversial areas of public security. The government is trying to clamp down on users of the cafes in order to discourage pornography and prostitution. Critics say the surveillance is aimed at catching democracy advocates, Falun Gong adherents and others the Communist Party regards as threatening, noting that rules for nightclubs are less rigorous. Here’s another great article on surveillance in America. The term “Revolution” will be eliminated in all Chinese dictionaries..

For Millions and Millions and Millions

The Lauder family is cashing in part of its $3.6 billion cosmetics fortune while its Estee Lauder Cos. manages to keep a step ahead of Wall Street’s woes. Family scion Ron Lauder, 62, sold about $113 million of shares in one move. His brother, Leonard, 73, who’s chairman of the empire, cashed in nearly $36 million in the past 12 months, while family trusts sold about $40 million in a series of sales in recent weeks. Founders received sizable options awards after the company went public in 1995. Despite the sale of several thousand shares of supervoting Class B stock, there was little chance of upsetting the 82% voting power held by the family through their 67 million shares of Class B stock.The family owns about 46% of the company’s shares for both classes, giving them a stock wealth of about $3.6 billion, based on yesterday’s closing price of $40.20.

Brett Steenbarger’s two cents

Responding to his column on creating change through powerful emotional experiences, Brett Steenbarger’s reader indicated that his dreams of trading riches had died and that he had to “just be happy with the person I am“. Here’s what good ‘ol Brett had to say:

So let me start by saying that I have felt much the same feeling. There’s a part of me that would love to be a super-successful trader, even as I know deep within myself that this is neither where my greatest talents nor passions lie. It must be how many decent college basketball and football players feel. They’ve excelled in high school and made it to their university teams, but they never quite make it to the pros. They’re good–but they’re not among the elite. Those dreams of success in the “big leagues” can be difficult to put aside. Some of those competent college players–Bob Knight, Dean Smith, and Jim Boeheim in the basketball ranks come to mind–end up becoming superlative at coaching.

They’ve made the transition from mourning the loss of a dream to crafting a new one. Most important, they’ve brought something from their first, sports endeavors (discipline, competitive drive, self-development) to their new pursuits. So, hopefully, it can be with trading.When the trading dream dies, it is a loss and that can feel depressing. The challenge is to figure out how that trading experience is going to equip you for the next dream, the next pursuit that may be better suited to you and your talents and interests.

My experience, particularly with young traders, is that trading often doesn’t express a dream. A dream is what motivates an entrepreneur: someone who founds their own business, develops their own products, and spends long hours refining those, marketing them, and finding financing for growth. For many young traders, however, trading is a fantasy. It is not connected to a concrete business plan, and it certainly is not accompanied by long hours of dedicated effort. What makes it a fantasy is that it is an effort to achieve success without such effort. When that fantasy dies, it opens the door to reality. That is sobering, to be sure. But it is also the first step in finding oneself: discovering a career and calling that are so meaningful and stimulating that the real work necessary for success won’t feel like work at all.

Gauging Strength with the Relative Price Strength Rating

The CAN SLIM investment model stresses strength, not weakness. And there’s no better way to gauge strength than by the Relative Price Strength Rating. This compares a stock’s 12-month performance against those of all other listed issues. The results run from a worst-possible 1 to a best-possible 99. An RS Rating of 75, say, means that particular stock has outperformed 75% of all stocks.

By focusing on stocks with an RS Rating of at least 80, you’re zeroing in on the leaders of the pack. In a bull market, one can get confused by a substandard stock that’s climbing. If a rising tide is lifting all boats, it’s harder to see you’re in the wrong boat. But if your stock’s RS Rating is slipping, it’s a laggard — even if the price is rising. You’d be better off with an RS leader, which would be posting bigger gains.

A Reminder To Keep Your Cool

In the September issue of Money magazine, senior writer Jason Zweig offers five secrets of successful investing:

1. Don’t go back for more.  Anyone who has made a bundle off a lucky investment will be tempted to angle for a second windfall, but the odds of getting one are slim. “Be especially wary of investing in stocks or mutual funds that remind you of the one you made a killing on long ago,” writes Zweig, “Chances are, any similarities to another investment, living or dead, are purely coincidental.”
2. Don’t trust your instincts.  “Many of the world’s best investors have learned to treat their own feelings as reverse indicators,” Zweig writes. “Excitement becomes a cue that it’s time to consider selling; fear tells them they should be thinking about buying.” The lesson: when it comes to investing, your gut may be lying.
3. Beware your triggers.  “The stock market generates signals that can goad you into trading,” warns Zweig. Don’t be Pavlov’s dog. Avoid obsessively checking stock prices on the computer. And if you’re watching CNBC for stock updates, turn the sound down, so the bells and shouts of the trading floor don’t spur you into action prematurely.
4. Divide and conquer.  Investing requires being tolerant of risk, but you don’t want to jeopardize your entire nest egg. Play the odds by putting 90% of your money in a low-cost, diversified index fund. The other 10% can be used for purely speculative trades. But once it’s gone, it’s gone. Don’t dip into your savings to replenish it, Zweig cautions.
5. Stay calm. If great gains are driving you to buy, or losses propelling you to sell, think before you react. It’s always a bad idea to make investment decisions in the heat of the moment.

Where’s The One Place That Millionaire’s Feel Fortuneless

Silicon Valley is thick with those who might be called working-class millionaires — nose-to-the-grindstone people who, much to their surprise, are still working as hard as ever even as they find themselves among the fortunate few. Their lives are rich with opportunity; they generally enjoy their jobs. But many such accomplished and ambitious members of the digital elite still do not think of themselves as particularly fortunate, in part because they are surrounded by people with more wealth — often a lot more. When chief executives are routinely paid tens of millions of dollars a year and a hedge fund manager can collect $1 billion annually, those with a few million dollars often see their accumulated wealth as puny, a reflection of their modest status in the new Gilded Age, when hundreds of thousands of people have accumulated much vaster fortunes.

“Everyone around here looks at the people above them,” said Gary Kremen, founder of Match.com, a popular online dating service. “It’s just like Wall Street, where there are all these financial guys worth $7 million wondering what’s so special about them when there are all these guys worth in the hundreds of millions of dollars. You’re nobody here (in Silicon Valley) at $10 million.”

Not every Silicon Valley millionaire, of course, shares that perspective. Many of the more modest millionaires here feel sheepish, even guilty at times, about their piles of cash. Talent played in a role in their financial success, but so did being at the right place at the right time. No one knows for certain how many single-digit millionaires live in Silicon Valley. Certainly their numbers reach into the tens of thousands, say those who work with the area’s engineers and entrepreneurs. Yet nearly all of them still have all-consuming jobs, not only because the work gives them a sense of achievement and satisfaction but also because they think they must work so much to afford their gilded neighborhoods. Silicon Valley offers an unusual twist on keeping up with the Joneses. The venture capitalist two doors down might own a Cessna Citation X private jet. The father of your 8-year-old’s best friend, who has not worked for two years, drives a bright yellow Ferrari. Temptations loom everywhere. Other pressures can come from within the social circle. Children want the latest fashions their peers are wearing and the most popular high-ticket toys. Furniture does not seem up to snuff once you move into a multimillion-dollar home. Spouses talk, and now that resort in Mexico the family enjoyed so much last winter is not good enough when looking ahead to next year. Summer camp, a full-time housekeeper, vintage wines, country clubs: the cost of living bloats. Oh Boo Hoo!

2,500 Traders Surveyed On Their Likes and Dislikes

More than half of traders questioned in a recent survey said they would trade on illegal insider information if the deal allowed them to pocket a $10 million profit - provided there was zero chance they would be caught. If there was a 10% chance of getting cuffed by the Feds and perp-walked, then the percentage of traders willing to break the law drops from 58% to 28%. Only 7% of an obviously prison- averse trader community said they would do the crime if there were a 50% chance of an indictment. The survey, which polled 2,500 traders, was taken by Trader Monthly magazine. It is no surprise then that the do-the-crime-but-do-no-time traders said that the public figure they despise the most is Governor Eliot Spitzer. Spitzer is the former state Attorney General who made his mark during eight years in office by cracking down on Wall Street - specifically investment banks, mutual funds and insurance companies. 62% of traders in the survey cited Spitzer as being the most hated, far ahead of ex-New York Stock Exchange boss Dick Grasso, who finished second at 20%. While we’re talking about money, 21% of traders questioned said they didn’t donate any of their salary to charity.

Other topics addressed by the survey:

If you could swap lives for a year with one of the following traders, he would be . . .?    Stevie Cohen, 42 percent; T. Boone Pickens, 27 percent; Paul Tudor Jones, 25 percent; and James Simons, 6 percent. If you could have one super power that you could use to trade, it would be . . .?    Mind reading, so I could out-think everyone on the trading floor, 68 percent; Invisibility, so I could go around screwing other traders, like Patrick Swayze did in “Ghost,” 19 percent; and superhuman speed, so I could click my mouse faster, 13 percent.

Minimum Requirement: US$100 Million

Nasdaq is set to launch Wednesday what its executives are calling one of the most significant developments on Wall Street in decades — a private stock market for super-wealthy investors. Minimum requirement for traders: US$100 million in assets.

Any private firm can list on Nasdaq’s new platform, which is called the Portal Market, and raise money by selling stock to an elite group of shareholders. Once a tiny influence on the markets, private money has gained unprecedented power on Wall Street. This year, the biggest deals have been swung not by public companies, but by private-equity firms that are spending hundreds of billions of dollars to buy household names, such as Hilton Hotels, Sallie Mae and Chrysler, and turn them into private companies. The rise of private money has created a new class of powerbrokers on Wall Street who have enriched themselves even as they provided billions of investment dollars to companies in all kinds of industries. But the trend is causing a backlash among working-class Americans who generally are shut out from investing directly in those circles.

When Work Becomes A Part Of Our Personal Lives

If you’re going to climb the corporate ladder, and especially if you aspire to the executive ranks, work will infringe on your home life. That’s just par for the course. Even now, as a part-time consultant, Steve Tobak’s mind is on work when it shouldn’t be. “I get some of my best ideas when I’m in the shower, running, or lying in bed half asleep. I like to work at night when my wife is watching TV, or laying out by the pool on the weekend. Hell, I actually enjoy my work. And an occasional business trip gives my wife and me a reason to miss each other.” There’s nothing wrong with the pursuit of money, achievement, or whatever it is you call success. And, in this age of cell phones, BlackBerrys and notebook computers, work is more a part of our personal lives than ever before. It’s only a problem when work, or the pursuit of success, becomes so much a part of your personal life that it impedes your pursuit of happiness.

It’s all about knowing where to draw the line. Only you know when you’re not spending enough time with your family. Or when you’re not working out enough, eating too much fast food, or otherwise neglecting your health and well-being. You know when you’re not getting enough “me” time for you to effectively manage stress, relax and gain some perspective. The irony is that, if you’re a workaholic, you’ll be the last person to notice any of that stuff. The bottom line: Working hard and being driven are good things, especially in terms of climbing the corporate ladder. But you need to be mindful of overdoing it.