Originally Posted by
Dbs6582
Don, yes I am aware of this. I am very aware that Ed Thorp is worth a lot, and he made most his money running hedge funds on Wall Street. And yes, I understanding leveraged trading contributed to Thorp’s success. What I’m calling into question is a different point. Did all this have anything to do with bj or his experience in casinos? Many people made/make this type of money on Wall Street and they didn’t play bj or know the math behind bj. I think it’s kind of silly to attribute Thorp’s success on Wall Street to bj.
All math in the stock market is based on using the past to predict the future. Most of the time this works since our markets are some of the most stable in the world. But when an unforeseen even happens, this math breaks down. Are you aware of what happened at Lehman Brothers? Their complicated math models broke down due to an unpredictable event, the housing bubble and crash.
Since what Ed Thorp did occurred over the short run, he succeeded. This happens with gamblers too. We don’t know what would have happened with Throp’s strategy in the long run. I expect the same thing that happened to Lehman’s Brothers, since no one can predict the future no matter how good their math is. What we’re in essence talking about is using math to predict the future in stocks, since the data that will be used is alway from the past. One of the first things most investors learn is that “the past does not predict the future”.
I just found a quote from Ed Thorp on what happened to him in 2008. He said: “At 2008, I didn’t have any place to hide”. He lost a significant amount during this time and he said he still hasn’t fully recovered from that. It appears his great math model failed him during this time.
Don't worry Don, many of my big time Wall Street friend don’t understand this either. They also disagreed with me, but they were more polite in their disagreement. When someone has had success doing something in the short run, they start thinking the’ve figured it out. The good news for our Wall Street buddies is when they mess up (which inevitably happens) we know our government will bail them out. That’s what happened during that last financial crises 10 years ago. If it wasn’t for our government bailing them out, many big banks and financial institutions would have gone under, doing pretty much what Ed Thorp was doing. So the big guys win, and us little tax payers lose, even when the big guys are wrong. I don’t agree with that, but that’s part of our system.
Btw, did you know one of Ed Thorp’s hedge funds was shut down due to being embroiled in the junk bond schemes from Michael Milken? Just because someone made a lot of money doesn’t mean they made it an ethical way. A person’s net worth does not indicate his intelligence. Think about that for a while.
One last comment. Did you know Ed Thorp has paid to have his body cryogenic frozen when he dies so he can be brought back to life in the future when our technology is further ahead. I’m not making this up. Look it up. Ed Thorp has actually given the odds that he will be brought back to life at 2%. Do you think this is smart too? You may since Ed Thorp is worth $800 million. That appears to be your measuring stick for how you determine if someone is smart. If they are wealthy, then you believe they must be smart. Btw, I give the odds of Ed Thorp being brought back to life at 0%.
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