Authors: William Poundstone
Tags: #Business & Economics, #Investments & Securities, #General, #Stocks, #Games, #Gambling, #History, #United States, #20th Century
“We
own
Kinney”: Bruck 1994, 239. This was reported by two FBI investigators and may not be quite verbatim.
“Fat Tony” a friend of Kimmel’s: Bruck 1994, 242.
Cafaro’s account of labor racketeering: Bruck 1994, 239–42.
“a devil’s pact with La Cosa Nostra…careful, surgical action”:
Newsweek
, July 11, 1988, 33.
“Freedom is the willingness of every single human being”: Barrett 2000, 6.
132 assistants in 1986: Barrett 2000, 138.
“would review press releases like they were indictments”: Barrett 2000, 148.
“He wanted to achieve the Thomas Dewey identity”: quoted in Barrett 2000, 161.
Prosecutors noted parallel between Mafia and Wall Street criminals: Stewart 1991, 404.
“There’s a lot of money to be made”: Stewart 1991, 84.
“Greed is all right”: Stewart 1991, 261.
“I doubt that”: Stewart 1991, 349.
“I know”: Stewart 1991, 350.
Doonan was “Bill”: Stewart 1991, 363.
Giuliani approved Freeman arrest: Stewart 1991, 379.
“You’ve got to be careful”: Stewart 1992, 336.
“I’m very close to the people buying the stock”: Stewart 1991, 194.
“I didn’t leave”: Stewart 1992, 407.
Description of tax implications of parking:
Forbes
, Oct. 2, 1989, 222.
“didn’t have the manpower to sort out”: Stewart 1991, 408.
Hale’s grand jury testimony: Stewart 1991, 407–8.
Details of raid: Stewart 1991, 409; Tudball 2003, 34;
Wall Street Journal
, Jan. 13, 1988, 24; Thorp, interview.
The Wall Street Journal
says that six hundred boxes of evidence were taken.
1985 trades:
Wall Street Journal
, Mar. 21, 1989, A12.
“Were you parking for them?”: Stewart 1991, 410.
“We were hoping you would be willing to cooperate with us”:
Wall Street Journal
, Mar. 21, 1989, A12.
Thought raid was nonsense: Tudball 2003, 34.
“Everybody lawyered up”: Thorp, interview.
$15 million withdrawn after raid; some put in wives’ names: Baird and Vinson 1990, 1028.
20 percent interest; Milken helping Mattel: Tudball 2003, 34;
Business Week
, Aug. 14, 1989, 46.
C.O.M.B.’s business: The company now appears to be out of business. It took out ads in
The Wall Street Journal
; see, for instance, Sept. 28, 1988, p. 10.
Stock-manipulation scheme: Tudball 2003, 34; Stewart 1991, 411;
Business Week
, Aug. 14, 1989, 46.
“It’s not fun anymore”: Stewart 1991, 412.
“You’re a sleazebag”: Stewart 1991, 412.
“I think I’d be very good”:
New York Times
, Dec. 3, 1987.
“I cannot leave unless I’m sure”:
New York Times
, Jan. 11, 1988.
“It would be wrong for me to leave this office now”: Barrett 2000, 172.
Coached by attorneys, asked for extra time:
Wall Street Journal
, Mar. 21, 1989, A12.
Cap saying
SHIT HAPPENS
: Stewart 1991, 435.
“I carried plenty of positions”: Stewart 1991, 411.
Charges “too complicated” for jury: Stewart 1991, 435.
“If I do, I’m going to take the Fifth”: Thorp, interview.
“My theory on taking the Fifth was, I didn’t know anything”: Thorp, interview.
“not a novel approach…when we believe the magnitude of the crime warrants it”:
Wall Street Journal
, Aug. 12, 1988, 4.
“You’d have to be a fool”:
Wall Street Journal
, Aug. 4, 1988.
Giuliani denied making offer:
Wall Street Journal
, Aug. 4, 1988.
“If you cooperate, fine”:
Wall Street Journal
, Aug. 5, 1988, 3.
Harvard and Weyerhaeuser invested in fund:
Wall Street Journal
, Sept. 28, 1988, 10.
“frightening…It seems clear”:
Wall Street Journal
, Aug. 4, 1988.
Paid taxes twice: Thorp, interview; Tudball 2003, 34;
Wall Street Journal
, Jan. 10, 1989.
“My personal opinion is that he was afraid”: Thorp, interview.
Giuliani threatened to support defendants: Stewart 1991, 438.
Reversed threat to dismiss charges against Milken: Stewart 1991, 438.
Jones and O’Neil met with prosecutors, letter about refreshed memory:
Wall Street Journal
, Mar. 21, 1989, A12.
Thorp unaware of stock parking, manipulation: See Tudball 2003, 34.
“We didn’t really connect well as people”: Thorp, interview.
View of Princeton-Newport’s record as definitive example: See comments quoted in Tudball 2003.
“add or subtract something like $5 from the buy-back price”:
Wall Street Journal
, Mar. 16, 1989.
Stocks parked, recipients of list:
Wall Street Journal
, Mar. 15, 1989, A6.
“Told me it was illegal”:
Wall Street Journal
, March 16, 1989.
“a long litany of lies”:
Wall Street Journal
, Mar. 22, 1989.
“very seriously”:
Wall Street Journal
, Mar. 23, 1989, A3.
“psychiatric counseling on the advice of her lawyer”:
Wall Street Journal
, Mar. 24, 1989, B3.
“I don’t have to show you any stinkin’ badges”: L. Gordon Crovitz writing in
The Wall Street Journal
, Oct. 4, 1989, A30.
“Arnold Schwarzenegger couldn’t play a scarier role”: Letter from Martin I. Klein to
The Wall Street Journal
, Nov. 13, 1989.
“‘imaginative’ prosecutions under RICO…bargaining tool”:
Wall Street Journal
, Jan. 26, 1989.
Law changed so that both sides of hedge short-term:
Forbes
, Oct. 2, 1989, 222.
Former IRS commissioner not allowed to testify: Tobias 1989.
“I did not commit a crime”:
Wall Street Journal
, July 11, 1989.
“the judge seemed to be saying by his sentence”: Tobias 1989.
“When half the leadership of your firm is convicted”: Schine 1989.
“The destruction of wealth was huge”: Thorp, interview.
“There was an explosion in the hedge fund world shortly after”: Thorp, interview.
“we’d be billionaires”: Thorp, interview.
“You’re all right”: Stewart 1991, 430.
VI. BLOWING UP
Betting on blackjack, horse race, Cubs games: Lowenstein 2002, 6.
Interest in horses: Dunbar 2000, 109.
Rosary beads in his briefcase: Lowenstein 2000, 9.
“It’s gonna be a great investment”: Thorp, interview (this is Thorp’s recollection of what he was told).
Like having Michael Jordan and Muhammad Ali: Lowenstein 2000, 31.
“martingale man…The general chatter”: Thorp, interview.
Possible 30 percent return after fees: Lowenstein 2000, 35.
Harvard invested in LTCM: William Ziemba, interview.
Gray market in shares, 10 percent premium: Dunbar 2000, 169.
$7. 1 billion by October 1997: Perold 1999, C12.
“many went kicking and screaming”: Loomis 1998, 114.
Samuelson’s doubts: Lowenstein 2000, 71.
Vacuuming nickels pitch: Lowenstein 2000, 34.
Investor told return was 67 basis points: Loomis 1998, 114.
Role of Merton, Scholes, in fund: see Lowenstein 2000, 65.
“There aren’t that many opportunities”: Lowenstein 2000, 33–34.
1 percent chance of 20 percent loss: Loomis 1998, 114.
“I’ve got a bad feeling about this…”: Wilmott 2001, 356.
“We spent time thinking about what happens if there’s a magnitude ten earthquake in Tokyo”: Dunbar 2000, 187.
Boesky offered expertise to Russia: Stewart 1991, 532.
Caesar Kimmel ran Moscow casino: Bruck 1994, 11.
$4. 5 billion of $17 billion loan went to offshore accounts: Dunbar 2000, 200.
“Where are you?”: Lowenstein 2000, 156–57.
“A banker is a fellow who lends you his umbrella when the sun is shining”: Kargin 2004, 2.
“John, I’m not sure it’s in your interest”: Lowenstein 2000, 153.
“When they first started losing”: Wilcox, interview.
Fisher’s visit, details of “Risk Aggregator”: Lowenstein 2000, 186–89.
“I’m not worried about markets trading down”: Lowenstein 2000, 189.
$28 million down from $1. 8 billion: See Dunbar 2000, 224, and Lewis 1999, 31. Lewis puts the sixteen partners’ loss at “roughly $1. 9 billion.”
Merton lost $100 million: William Ziemba (interview) said he had heard this figure as a rumor.
“ten or 15 guys with an average IQ of maybe 170”: Loomis 1998, 116.
“A man who risks his entire fortune acts like a simpleton”: Bernoulli 1954, 29.
“How the Eggheads Cracked”: Lewis 1999.
“swapped their laurels for the booby prize”: Loomis 1998, 111.
Leverage figures for investment banks: Perold 1999, A23.
“People think that if things are bounded”: Thorp, interview.
“had forgotten the predatory”: Lowenstein 2000, 173.
“When the young Fis[c]her Black had crossed the Charles river bridge”: Dunbar 2000, 224.
Enron, telecommunications, portfolio insurance as “overbetting”: Wilcox 2000, 2003, 2004.
“I could see that they didn’t understand”: Tudball 2003.
“a whole lot of bets on Southeast Asian debt”: Thorp, interview.
Contrast of two mappings: See Figure 1 in McEnally 1986, which I have adapted here.
“Convergence trades are a real snake pit”: Thorp, e-mail.
Koonmen bio, Eifuku history: Sender and Singer 2003.
UBS was LTCM’s largest investor: Lowenstein 2000, 158.
“preserve and maximize any remaining equity”: Posted on Turtle Trader web site, www.turtletrader.com/trading.html.
“John Koonmen will try to contact each investor”: Posted on Turtle Trader web site, www.turtletrader.com/trading.html.
Shannon on hedge fund manager’s motives: I am referring to the untitled and undated (evidently circa 1961) notebook in Shannon’s papers, LOC.
Overlap between hedge fund managers and gamblers: Thorp and Ziemba both make this point (interviews).
“Like all of life’s rich emotional experiences”: Schwed 1940, 70.
VII. SIGNAL AND NOISE
28 percent return: Hershberg n.d. [1986].
Hershberg thought of writing an article on the Shannons’ investing success: Letters, Philip Hershberg to Claude and Betty Shannon, dated June 23 and August 28, 1986, with Shannon’s papers, LOC. Betty Shannon supplied me with a transcript of the interview.
“In a way, this is close to some of the work I have done”: Hershberg n.d. [1986]. Similar views on the part of Shannon are expressed in Philip Hershberg, e-mail.
Tried Kentucky Fried Chicken: Hershberg n.d. [1986].
“If we try it and don’t like it”: Hershberg n.d. [1986].
“is a very difficult field”: Letter, Shannon to Dr. George A. Roberts, Nov. 5, 1978, Shannon’s papers, LOC.
Warren Buffett praised Singleton: Quoted in Train 1980.
Downloaded stock prices: Arthur Lewbel, interview.
Portfolio value on Jan. 22, 1981: computer printout in Shannon’s papers, LOC (this is on the back of a sheet filled with juggling machine diagrams and formulas!).
“We have not, at any time in the past 30 years”: Hershberg n.d. [1986].
“I am willing to borrow on our investments if necessary”: Hershberg n.d. [1986].
Check-printer company returns: Hershberg n.d. [1986].
“I have personally tried to invest money”: Roll and Shiller 1992.
Weather effect: Hirshleifer and Shumway 2001.
“Then some business school professor”: Buffett 1984. Fred Schwed, Jr.,’s
Where Are the Customers’ Yachts?
makes a similar case, in equally amusing terms (pp. 159–61). Shannon cited Schwed’s 1940 book as his favorite on investing.
Returns for 1980–82: Ziemba 2003.
Bamberger forbidden to go into computer room: Thorp 2004–5.
“How often do you have a tuna salad sandwich”: Thorp 2004–5.
“I had an interest list”: Thorp, e-mail.
Mizusawa scanned news; “restricted list”: Thorp 2004–5.
18 percent after fees: Computed from data supplied by Thorp, e-mail.
47 percent return: Kurson 2003; Thorp, e-mail.
“The advantage scientists bring into the game”: Turtle Trader web site, www.turtletrader.com/trader-simons.html.
20 percent return and 6 percent standard deviation: Thorp 1997 (revised 1998), 38.
“To help persuade you”: Thorp 1997 (revised 1998), 38.
“pointed to me in the audience”: Haugen 1999, quoted in Thorp 2004–5.
Sports betting system, experiment: Thorp, interview; also Thorp 1997 (revised 1998).
“by far the most popular form of recreation”: www.hong-kongracing.com/trackside.html.
More wagered on single races than in year’s betting elsewhere: www.hong-kong-racing.com/trackside.html.
$150,000 seed money: Kaplan 2003.
Kelly formula that takes into account effect of bet on odds: See Benter 1994 and Kallberg and Ziemba 1994.
“I would have benefited by not telling anybody”: Kaplan 2003.
“I like going to the seedy girlie bars in Makati”: Kaplan 2003.
Instant messages: Kaplan 2003.
Lost $100 million by shorting NASDAQ: Kaplan 2003.
“When you look at how much money I have consistently made”: Kaplan 2003.
“Perhaps the impact Shannon and Kelly have had on finance”: Golomb, Berlekamp, Cover, et al. 2003, 11.
Alzheimer’s symptoms: Robert Fano, interview. Put in home in 1993: Chiu, Lin, Mcferron, et al. 2001. Tinkering with walkers, fax machines: Coughlin 2001.