Video: Retail Trader vs. Hedge Fund Manager: Where Is the Real Alpha?
URL: https://www.youtube.com/watch?v=neLapYFcNoY
Channel: Odds on Open
Uploaded: 2026-09-24
Duration: 1:29:02 (89 minutes)
Source: YouTube auto-generated English captions (cleaned: timestamps and duplicate rolling-window text removed; transcription errors from the auto-caption engine preserved as-is)
Format: First-ever debate episode of Odds on Open. Chris Camillo (retail investor, compounded ~$20K into ~$80M over 18 years via "social arb") vs. Tom Costello (former Tudor/Moore/Caxton PM, now runs a market-neutral fund targeting ~20% annual returns with ~1.4% peak drawdown).
Who is better? adapted to risk: retail traders or hedge managers funds? We have no partners. with limited responsibility. IN we have no ransoms shares. We don't have investment mandates. We don't have comparative indices. We don't have targets volatility. We have a better structure . We have more people, who really know in management science risks than in ordinary retail investor. When does it appear? exceptional opportunity , I always prefer invest your own funds. We have huge internal advantage for acceptance of such concentration level.
But you, like Ken Griffin , —an exception compared to with other retailers investors. You too you know, most of retail investors cannot even find your own hat with both hands. Chris, Tom, thank you for came to Odds on Open. Thank you for inviting us. . Yes, I'm glad to be here, manly. Who is better? adapted to risk: retail traders or hedge managers funds? Chris, let's get started. from you. Oh, just a little. I guess it all depends. from what you are understand by risk, right? You probably know, will have to admit, that the hedge fund is a little better positioned in terms of control and survival in conditions risk, right?
Because in them is laid diversification. THERE ARE hedging methods, execution of agreements, teams from financing, right? I'm sure some built-in quantitative risk systems management. But, You know, I think that qualified individual investor is better adapted to adoption concentrated risk. The reason is because we don't have partners with limited responsibility, in we have no ransoms shares with which have to have thing, right? IN we have no mandates, comparative indexes, none targets volatility. And what important, we don't have career risks. This can sometimes lead to inconsistencies incentives. We don't need to support a certain product designed in a specific way. So we have a lot more flexibility to to take such a risk, especially if we understand time horizon investment.
Therefore, if you are at risk do you mean him minimization, then hedge- the fund has certain advantages. And if you do you mean freedom to go to large asymmetric risk when you see an exceptional opportunity which is the basis of my style, —I always I prefer to invest own funds. And I I think we have huge internal advantage to take such a level concentration, have full control over to be him really maneuverable when it is happening. Therefore I I think everything is true. depends on how you define the risk. Tom, we would like to hear your thoughts. Yes. So, first of all, I I hope we still let's go back to your comment about incentives. But in view of on this, I think that's all actually revolves around how you identify some of the these categories, you know , one of mine The main theses are: in that profits hedge funds distributed by Pareto law, right? Yes? So, guys on top earn 80% money.
Top 20% earn approximately 80% of the money. And they they do everything right, and theirs view on management risks—that's exactly what What are you describing, where is it? strictly limited; but this imposes restrictions that, obviously not relate to retail investors. But retail trade— this is also a distribution Pareto, and someone on like you, Chris, you affirm these things from my perspective, but you, like Ken Griffin , is a kind of exception compared to other retail investors. And you too you know, most of retail investors cannot even find your own hat with both hands, and that's okay because they limit themselves certain actions. They recognize that actually don't know, What are they doing? Therefore they buy index fund and return in five years to see what is happening. But for in order to be active daytime trader, someone from your level of success there is again a significant exception, and not standard. So yes, I really am I agree with you. I I think that in general speaking, degrees freedom much bigger for retail investors. You can to do a lot the smaller things that are too expensive with points of view received dollar profit for a hedge fund.
But a hedge fund is much more institutionalized . We have the best structure. We have more people who truly trained management science risks than in typical retail investor. And one more thing worth having look, —okay, let's forget about all of this. Who is better? Let's think about it. over the word "best". This is what you should do. to determine by results, right? And from this point of view, I think, who is better at acceptance of these risks—this is perhaps a draw, because the boys from the top Pareto distribution among retailers investors earn a lot more money than the guys from below who lose. And this is more steeper progression, than in the world of hedge- funds, where, as is known, approximately 25% hedge industry funds every year stop activity and replaced by others 25% . Approximately 40%— the indicator varies year after year, but close 40% work with each year losses.
And I would say that among the active traders who match yours profiles similar to you, the number of those who is losing money constantly, probably, even higher. Odds on Open program sponsored by Onyx Capital Group, leading market- maker in the market oil derivatives . They just released the fourth Flux terminal version, and there are two things in it, which are worth knowing about, if you work with oil. First, he broadcasts fair real value time for 800 oil curves, including those which are difficult to assess. On- second, it contains their own data about positioning, therefore you can see how the market is set, for purchase or sale, and at what price are they entered. You can find it on flux.live, The link is in the description. Chris, some comments? No, I think, I think, that it is fair, and I I think we both are. we agree on how you determine the risk, and also how would you defined the word " better". Hmm, I guess I am I agree with this. Definition of the word " "better"—this is probably the most important thing that you have to find out to answer this question, isn't it?
For "better" means a lot of things. "Better" means a lot various things. Hmm, how you say, for individual investor sometimes risk to some extent doesn't even have value, because subsidence, which was would absolutely unacceptable for distributor capital in view of structure, landmarks and everything else, set for of this fund. This would be completely unacceptable. For example, 40 or 50% subsidence it would be quite rational. Yes. Yes. But this is quite rational and expected subsidence for concentrated retail investor who has perennial perspective whose goal —get complex percentages, much higher than those that can be to get on the market, just being in diversified funds. So, this is really depends on your goal, because I think that many retail investors I I am trying to convince to have a "basket" capital with high risk and high profitability in their lives. And this one capital with high risk and high profitability usually has duration in decades.
And I say they should expect 70% maximum drawdowns, if they are invest with leverage, which I, actually, surprisingly, I encourage you to do it with this part venture capital. So, again, there are a lot of "gray areas" here », but I think I should like the flexibility you you get as retail investor, when do you become qualified and Do everything right. Of course. I had many situations when most of my management was, let's say, market- neutral, or somehow formally structured hedge product, designed for decrease volatility and use of levers to increase profitability. It was many circumstances when I have seen situations for example, when S&P collapsed during mortgage crisis bonds. I would I bought S&P with pleasure in your institutional portfolio. I then worked at Tudor, but not could do this because this is not the kind of business that I suggested. I offered market- neutral strategy , which had clear boundaries. And the truth is that they still don't wanted to pay me for S&P risk. Tudor already has there was a guy who did.
His name was Paul. Tudor Jones. He doesn't it was necessary that this I did, right? So, yes, that's great limitation; retail investors can to do anything, and when you see something like this a dramatic event, you can you get it use. And I I think the difference is consists of the following, it is thinner than I think that's why I I'm simplifying a bit, but actually everything revolves around beta, right? I take from people "two and twenty" »(commission 2% per management and 20% from profit). They are not want to pay me " "two and twenty" for beta. You are in control. with your own money. It your beta. You must to be the one who leads this beta, and this means that you need another one approach to the expected drawdowns, because, using S&P as example, she will have dispersion.
So, you need to be correct determine the size positions and, perhaps, try right choose a moment if This suits you. But This is a risk I won't take. I can go. So, you know , sometimes you will have much higher profit than mine, and sometimes a lot lower, right? Ago what are we trying to do to do two absolutely various things. Yes. I, I, I think it is one of the biggest problems with quantity funds that allocated to funds, which aim to achievement low-volatility alphas, that's right is predominant majority institutional Wall- street And from some for a strange reason Yes. And, and, I think, worth putting important question: why , because there is, of course, certain types, uh, you know, certain types investors or capital, where are you, you Do you want this low? volatility. It there may be, you know, people at the end careers that are going to leave to retire. This can be different pensions funds that simply need to be carried out certain payments, right.
Uh, certainly, it has great sense. But I I think that for the vast majority people who have usually temporary horizon, say, 10, 15, 20 years and more, mostly for their money, they lose a lot for this low volatility, to which seeks most funds. And I I just have to ask, why. It's because of this, this, this fear get a slump by 50% in any year, which is quite irrational if think. Uh, and, and, this simple, but again yes, I think, the institution as a whole, I I'm not clinging to you or any specific institutions, but that's all product, right? It industry, and much it's easier to sell what looks like, uh, you know, less volatile alpha, where you don't have to outperform the S&P 500, where you just have, uh, uh, the structure you you collect, uh, this difficult products. Yes. Yes. It seems difficult. , you know, we can to argue whether reaches the majority funds even this one goals. But even if they have achieved this goals, this is the goal that can be done product, which seems unattainable for the majority investors.
So this is sounds like: "Well, Of course, I have to. invest your "They have money." But is it Is it worth it at all? to do with your own money, if temporary the horizon is 15-25 years old, right? Like, why are we like this? we lose a lot for the sake of the interim low volatility when it's not really affects how we we want to multiply your capital, and when we plan to get access to our capital is still very much, very, very soon. IN I have another way. to say the same thing as you just said, namely that the product that my company offers, and offered by others companies with similar institutional direction ah, implies a certain element of knowledge for portfolio formation. So, the endowment Texas university not needs me for investing their beta. And separately for the investor it can be necessary. But assumption, embedded in my product, consists of because I have a wonderful way for you beat the S&P. Buy S& P with marginal shoulder 2: 1. Give Give me the rest of the money. I I will provide a stable , permanent income, which you will add to the S&P minus cost financing. You have it will still be deep drawdown, but because my product added to this, the drawdown will not be so deep.
You beat the market, you know, my foundation, how example, gives about 20% annual at very, very low drawdown. You can finance this on margins around 5% . This means that you will outperform the S&P by 15% annually, investing in both these products. Do you have S&P index on margin, and in You have assets with us. A combination of these two income together gives you best portfolio. And this general principle strategies for obtaining alphas without betas: remove all beta, remove as much as possible more gamma, or at least have gamma strategy, Yes? You want, you know. , have a small exposure to interest rates or a little exposure to time, theta- component. But the truth is that these risks, if only you are not a bank with unlimited credit shoulder, not very manifest in hedge profitability funds. This is mostly beta and gamma. Therefore.
Yes, I mean, if your fund issued 20% per year, then, firstly, Is this a complete anomaly? wrong? Three years in a row. Well, We are doing well. We have determined. OK. I thought that was it. over a longer period of time . So it seems that there is certain. There is a certain, I am not much I know about your foundation, but . This is a huge number. for the fund, right? Is there any hidden risk concentration?
Is there some, I'm not very familiar with your fund specifically, but this is obviously a big figure. For beta with low volatility. Sorry. And the goal is, to use leverage in a smart way. So, how about profitability without leverage, u I don't have exact numbers. data at hand, but finished to argue that without use of credit these approximately 20% annual , probably, would become 11%. But since we used leverage when quantitative statistics pointed out that, we received significantly more. Hmm, strategy has certain deviations, but they are very, very insignificant. Our profit from taking into account risks quite high, but this is not something unusual. Well, you know, I am in the financial sector. for 35 years. I started as a quantum researcher at exotic tables swaps.
I studied risk management in banking sector. I worked at JP Morgan, like many my colleagues. From there I moved to Moore Capital, then in Cton, then in Tudor Investments, where I was briefcase manager who provided—or at least tried to provide— profitability, similar to the one I have I have it now; working in the same way, finding quantitative indicators for getting alpha from excluded beta and gamma. That was the goal. , isn't it? Um, no. everything always works out. But, generally speaking, those guys in that Ethan would call it a "sub- "shops", say, in Millennium, where I consider Tudor also a kind of "under" "shop", although, perhaps , a little bigger scale. Majority people in positions portfolio managers are engaged in similar things in different ways markets: someone discretionary, someone on quantitative basis, but they all strive one—to win every day, if that perhaps. So this is different, and, I find it very difficult not to agree with your with a view towards retail investor, because retail investor doesn't know enough about portfolio formation. He will think: "Great, I'll buy S&P, I'll take leverage three to one, or four to one, or how many you will be able to persuade there date broker; deposit all the money and I'll beat the S&P with a huge by a distance." This is it. the case when people overestimate your strength, you know? Portfolio formation —it's not easy adding credit shoulder.
Quick, Tom. Chris said that he would almost encouraged people pass by because of these 70 percent drawdowns. Um, I don't. I can't interfere. What do you think about this? Hmm, well, I think why are you trying to teach children today? you know, uh, I, you know, I had setbacks. Not 70%. But the drawdowns in I was there. Painful drawdowns. Drawdowns on amount, enough big to inflict I am in severe pain.
Um, and you really are learn from this. But I, you know, am a thing to which I am very sensitive—I am not I want to give to someone. advice that is more likely to lead to to the negative result than before positive. You are you going to give them advice that they should survive this 70% drawdown. And small part of the people who listen to your advice, will gain from this significant benefit and will achieve much better results at 10-15 years old the horizon you are on indicate. And a lot Which of them will suffer? collapse. Undoubtedly, at least half those, you know, engineering students, who want to become day traders, go bankrupt because Chris told me that 70% Drawdowns are not problem. So this is the moment when I I am going to- real use credit shoulder. Simply I am going or hold on until will reach zero. I have I mean, you know, that many people will think exactly like that, truth? That's why I always very careful to not to give any direct advice if chances are that it is will benefit the person I'm with I'm talking, I'm not. higher than the opposite.
I think, you know, the way in which I I approach this kind of talk about risks, is to because most independent investors are not understand the concept risk distribution capital by baskets. Yes? So, they hold more part, if not all your investment capital on one account in which invested equally , right? And sometimes this money are invested too much conservatively. Uh, sometimes this money are invested irresponsibly. AND You know what I I'm trying to teach people, this is what very important to distribute their money in baskets and invest them according to the goals this risky basket. Yes? So what? in most people no, it's an account, Where are they really? can take on concentration where they can take leverage for account, designed for investment for decades, Yes? And for the account where it would be okay, if you had credit shoulder 50, 60, 70%. And you have acceptable level concentration in this briefcases, so that in the worst times could there will be a drawdown of 70 %.
Not 100%, not 90%, but again, if in you leverage 50-60% and there is a certain measure concentration. And under By this I mean not investing everyone your money in one share I translate into the language, which you are used to, while you you speak. Yes. What's the worst? from the scenarios it would be it's okay to have account sinking by 70% if you keep doing contributions during a certain time. So, this is what most people people are not ready put up. But if you want to get profit doubled higher than the market price, in 2.5 times or even more, you should have an account where you ready for a certain asset concentration and use leverage. AND this can begin even with 5 dollars, Yes? This can begin. from compromises in your life, because, you know, you invest money that , in your opinion, can grow to 30, 50, 80 times for 20, 30, 40 years, right? on concentrated credit account shoulder. So you just otherwise look at capital and go to compromises in your life, because you have account where you can to do it. Isn't that right?
Listen: most wealthy people have money, distributed so that undertake concentrated risks in various fields, be it then venture capital investments in early stages or sector real estate, right? Or perhaps a certain type of funds, and in ordinary people there is simply no such thing risk basket, which just madness. It can start with 5 dollars, right? You just need this have. You must have possibility to increase capital and multiply it for 20 or 30 years with indicators that significantly exceed market profitability. AND everyone has the opportunity generate significantly above market price compound interest on account that has slightly higher degree concentrations and using leverage. Here and that's it. So, okay. So, here it is. What do I think you are? mix two different topics.
First of all, regarding your discussion about management risks, you are essentially you claim that people must to apply such the same approach as, let's say someone on like Paul Tudor Jones: have a lot baskets, many different strategies, many different things, which, hopefully, not correlate with each other and will bring you benefit different ways. Some of they will be high-risk, some—no. This part your conversation impossible to refute She absolutely correct. I think that statement that for I can't stand it. criticism, what with me the biggest the problem is yours words that everyone has opportunity to get profit in two, three or more times higher than market. And I don't I think that was it. somehow proven. Yes, they can and should to have a suitable a look at how manage risks. Yes, they should. have different strategies, which are not correlated between yourself. And if they strive for optimization , then some of these strategies should be with higher risk and bigger concentration. But How would they know? I have I mean, I met I don't want to say. nothing more specific , but I met farmers who have achieved wild success and earned 20-30 millions, but not understood nothing in technologies, although thought it was worth it them to invest.
IN he is not there expertise for concentrated rates. What is he on? bases this concentrated bet ? Uh, you know, they say, I talked to a friend, and he said that he I really like this one. product. Even this they don't have it; they have the news that someone is eating told, or else worse—something they read in social networks. Do you know where this is? Information is everything about, uh, you know, expressed preferences against detected preferences. People they say many things, which are not necessarily reflect their true feelings, yes ? So, as a function risk management, I am completely with you. I agree. Ahem. have ability.
I think empirically possible to say that, based on past testimonies, many people don't have it. You have. I am not I argue. You have perspective and vision, how to carry out such type of trade, and, according to everyone messages, you achieved in this great success. Well done. But most people don't can be compared with your combination skills, analytics, intuition and everything another, what are you doing this on actually based. On in my opinion, this combination of things is not inherent in everyone. Yes. Yes, listen, this is process of achievement result, but you know, I think, the most interesting thing in my experience what I I just don't have any. examination, which traditionally associated with finances, technologies or mathematics. I met with by many thousands people in the last 20 years, and I can't to speak for each profession, for example, farmer, right?
But I I think there is a certain curtain, as usual the person does not have necessary skills. I I would argue that on the contrary—ordinary people have the best skills, because they deeply rooted in the real world. Not definitely simple reading social media, and in many ways simple being part of of this world and deep immersing yourself in conversations about what people do every day: what we feel, on that we spend money, how ours is changing culture, as behavior changes consumers, as commodity prices are shifting trends. that the majority ordinary people are perfect in order for the time from time to see things in the real world and connect them with extremely large investment opportunities. And I I think that these stories like Tesla in the late 2010s, and this not just Tesla, but hundreds companies that ordinary people—and I I know this because I've been doing this for two years. decades, communicating with people—see these trends in advance. They saw AI. They seen AWS in advance . They saw Salesforce in advance, because worked in the company, which began use Salesforce, and everyone on this conferences with sales took place the same process adaptations, and they they said, "Dude, this something grand will happen ". At an early stage, Yes? When Salesforce actually determined, what is CRM, and you just worked in corporate America in office with sale. There are hundreds and hundreds of examples, and you don't need guess them all.
You need to hit only one goal, two or three times in total your life, right? AND when you see these things, just Yes. Apple, for example, with iPhone. I mean, there is so many examples. When you are browsing largest investment over the past 30 years, which may or may not could have been made private individual, 75% of They were easy. noticeable to the ordinary people first, yes ? So, if you just retrain your brain to watch the world and connect periods, that's all I I do. I don't have any. financial infrastructure. I I use null fundamental analysis, zero technical analysis. IN I am practically gone. tools. All, What I do is I am watching the world, I see changes that taking place in it.
Changes may be technological, like AI a few years ago, Yes? The cloud is different. the side I'm talking about I can tell you. How am I? I earn a living, What I do is I'm looking for errors, right? When someone buys, when it's worth it to sell, and sells, when is it worth buying, and so on—this is how mine the fund receives profit. We we calculate fair value or something that reminds. We have model that we use for definition fair cost and term structures in different dimensions, and when something comes out equilibrium when S&P falls, you know, by 40% day, we buy part, right? And you know , it looks like complaint economists. All they always say that economists predicted 10 out of the last five recessions. Well, yours retail investors, maybe they guessed from Apple , Tesla, the AI boom and other things, but meanwhile they were wrong in 50 others cases and also bet on them .
So, in this and the problem is, yes ? You, maybe you...I don't I know. We met. for the first time. We never We haven't talked before. Um, but I think... judging solely from this conversation, what is your approach, perhaps, a little more disciplined, than most people , and you tend to think for the longer term. So you are not looking for that, What will happen, you know? grow today or this week, and then fall next, or something like that. You are not fall into a trap attempts to accept rational decision on time horizon, shorter for the necessary adoption rational solution—a trap, in which gets very many traders, and not only individual, but also institutional, right? This is a common problem, which one is the best quantitative strategies earn a profit for decades now. So, maybe this is it. and there is a secret. I don't know.
I know for sure that I I know a lot. retail investors who earned a huge amount of money. I know very, very little action traders, that is, those who who is having a period the retention is shorter, you know, than a day or a few days or something of this kind. I will repeat. what I just said: I I know a lot. retail investors who only made money because they held assets for a very long time. I I know very little. day traders who once earned at least some real money. The vast majority, I would say, probably, about 99%, inevitably lose. This is extremely rare case, when retail trader with short holding period earns a lot money in long-term perspective. Yes, I am. I think to contribute To be clear, Tom, I don't day trader. I am very against any who, ordinary people or professionals, this actually not even It matters. I just not at all I am interested in this world.
I think one of the biggest traps, in which are caught ordinary private investors, that is attempt to repeat actions institutional players, whether it's a day trading, or technical analysis, or any other short-term strategies. And this was never mine approach. I, in fact, I don't even look at stock market most of the time, especially every day, Do you understand? So, 95% my attention focused on observed by the world, combined facts and deep analysis of that, how public the company can win or to suffer from global changes through technology, culture, behavior consumers—anything. Uh, the weather, whatever. So I never I'm looking at stock prices. , on the actions of others traders or what takes place on market during the day. The point is actually in therefore, I think... I would say that you you are promoting exactly that, on what, in my opinion, should concentrate retail investors —long-term horizons. Don't be afraid. volatility, because the S&P index is rising, then it falls. Yes organized market.
You you can't get profit without periodic subsidence. And not try to accept decision in time, smaller than that necessary for rational conclusion. If you it takes two days analysis for rational solution, not try trade every day because by definition you do irrational choice . You just you try, you know, to join the crowd in the hope that you will be on time go out. This is fatal error. So yes. And Ethan, this takes us back to beginning, right? I mentioned at the beginning, that we probably let's agree with many questions. I completely agree with everything he says. I think this is correct. approach to risk.
I think this is correct. approach to the horizon planning and attitude towards volatility. I have there really aren't any remarks. The only one the difference is that we we are trying to do different things for different people groups of people. Yes, Tom, I want to give you question, because it often lately are discussing. I don't know. why, but in the last months this topic constantly occurs among investors. It seems like a hot topic now. So, uh, ETFs with triple credit shoulder. OK. Uh, because you...because you mentioned it. You mentioned, you know. , a little bit of technology earlier regarding simple entering the S&P with using levers, right?
So, you looking at ETFs with triple credit shoulder length many decades, and I don't mean highly specialized ETFs. I'm talking about the S&P or yeah, S&P 3X or something similar. I don't know ticker. I would never this did not come close, but yes, we now have many studies, who are trying reconstruct it for a very long period, because they are so many didn't exist, right? ? Therefore they are trying go back to 80 years ago and do the reverse engineering. And this really interesting if you use strategy cost averaging investments almost during any long period, you you get about 2 -multiple profit. Conventionally, on an ETF with 3- you are a multiple shoulder you get about 2 -multiple market profitability broad S&P index or something else. Or wrong? Listen, I I just want to to ask this question, because it is very controversial, and I I understand why: it's a 3x ETF, and most people They say: "Hold on." away, never invest long term", but in there are many of us who are significant research data, extrapolated to 80–90 years old, which show that, especially with strategy cost averaging , they are, in essence...well, in there are no lives guarantees, right? All will remain the same certain level tail risk, or wrong?
Theoretical tail risk, but if you look at this theoretical risk and that how much he low, and compare its with 2x profit, right? That is, you can bring strong arguments that people should consider it as part of your long-term strategies. No. I would said that the only the problem is because you are taking risks themselves, which not really You understand. For example, why 3x S&P 500 brings not 3x, but 2x? The answer is in because there expenses are incurred, which are not 100% understandable to the person who buys 3x fund, and they are related from theta futures, expiration dates and rollovers, which they are used to to provide credit leverage in this ETF. Just imagine that in you have unlimited credit on your brokerage account . You bought the S&P with leverage 2:1, and they charged you 5% for it. Well, this 5% is a clear the amount you know, what are you paying for leverage, truth? It's simple. a number that is easy understand.
But how these ETFs with leverage working with futures , embeds a time futures collapse, which much more difficult analyze and to highlight. So, beautiful the news is that that you mentioned about tail risk events. Yes. But, um, during enough serious tail events, you know, all assets correlate with unit. So, you already insured or not Yes? If it happened tail event, me it would be very difficult imagine that 3x ETF with leverage will show much best result on falling than on growth. Um, uh, you know, you can get maybe 3- multiple result during the fall, certainly, in that the very moment, but in total you will get something close to similar function leverage, since theta is independent. This, uh, time function. The question is how decomposes quickly this futures? Perhaps, appear on the market innovations that can make it easier.
For example, there is such a called perpetual futures, which became very popular thanks to the cryptosphere, what does this theta- component a little clearer for most people. It can be combined with Leveraged ETF, and then you get an ETF with leverage, where can you verify coefficient in documentation regarding distribution, and everything will be OK. But at the same time, yeah, look, I'm not I have no If you wanted to take on risk and were sure that you are on the right track side, and that the market is now will only grow, good. Certainly, buy 2x, you know, buy 3- multiples. This is not what I would do it because what you really want need it, this is beta in this agreement. Um, you don't Do you want all those others? risks that accompany this. But if the numbers they look good, then they look good. Here really nothing to say argue. Yes. I mean, Listen to me, everyone. comes down to only statistical data, Yes?
So, again yes, extrapolating for 70-80 years, I think, what about averaging investment costs, they bring about 1.85 market profitability, right? Through good and bad times, right? Of course, both good and bad. And you should to be able to count on long-term horizon, because there is, you know, considerable short-term risk, you know, I, I, if you need withdraw your money during, you know, yes, you must have ability to endure your time. Without any doubts. Yes. But this, this is simple, I think it's interesting, again, because, I think the sphere risk management and concept leverage and concentrations are one of the most important for ordinary people who crazy because people They go crazy when I do this. I say, they say: " Wait, you can't. to talk about leverage and concentration with ordinary people." AND I say: it is possible. It is possible, if it is within the limits a specific account, which has the correct goal and understands how it will fluctuate with sometimes, right? Therefore, again, the language is not it's about taking money for your education children, you know, their college.
And it's not about to take yours retirement savings , which you absolutely need needed, but I I definitely promote, that we all should to have another separate one capital. Uh-huh You will get there better result than at the table for playing cards bones. That's right. So the money you would leave it in the casino on the way to your numbers, better invest in 2x ETFs. I I am sure that in long-term in the future you you will get more. Yes. Hey, market profitability 1.8, you know, people would go for all this, Yes? And we have tool that theoretically, well, you understand, provides this with to some extent extreme risk, because we don't we understand how much it could be worse future compared to past, of course, right? You know, the last 90 years not necessarily is real determiner the next 90 years. Uh-huh , we can get the market that actually will fall by 96%.
It theoretically possible, Yes? But, again, This is something to look at. Yes. However, you need to think about what when it will happen, will take place and other things, and the only a product that will have at least some value, when the S&P drops to 96 %, can become bullets, for That's right. Absolutely right. And we all we are so worried these things. We we are worried about these theories, without understanding, that you are in trouble a hundred times other ways, if it will happen, right? Here like today so many people plan in case failures, and very few who really plans success, right? Or prepare themselves and make strategic steps, assuming, that everything will be fine, and historically everything is like that goes when it's time concerning finances, because they are agreed upon incentives in markets capital for them protection, which continue to operate. Everything is going well until does not suddenly stop, and then everything goes somersault immediately, for example Yes, I mean, Listen, things are going well. not according to plan.
But, but, but of course it seems that everything is going wrong to a lesser extent than in past, because again incentives, market incentives capital, incentives governments, well, essentially world, I will use the word " too big to to go bankrupt, which is very important statement. It the statement that we infrequently used after 2008, but, but, listen, I learned this lesson in 2008 and in fact I didn't forget him because I think we probably we live in one of the largest periods "too big to to go bankrupt" in stories about which Nobody is talking. Everyone is incredible now. concerned about the market, artificial intelligence and because AI stocks are getting so big part of the market, right? Yes? And there is such a highly concentrated industry, right? Everything is spinning. around one the product, in essence, or wrong? However, this the product quickly becomes industry "too much" big, so that to go bankrupt" in on a global scale among governments, society, security and national sovereignty. Of course? In your I have never in my life saw that the sector " too big to go bankrupt" arose so quickly, like this one. But again Yes, I think people just afraid theoretical risk, whereas they should to be afraid of what they is not part of probable reality the growth of what is capital markets.
And we we know that the best investors in history are like that because they use leverage, right? Yes? They just use credit leverage. I big fan so that ordinary people understood that such a leverage, and responsibly used it on accounts where the targets justify using leverage and concentration. You've probably read about what happened to situational awareness fund, who created that silly guy from the Zatoka district. I I just can't. to remember too much. There is such a concept as excessive credit shoulder and excessive concentration, right? Yes? I mean, I wish you success in promoting your message from prudence, but I I can find a bunch. guys like him —one visit to Reddit, in financial Twitter or how is it now is called, will give I have 10,000 guys who think about markets That's right. All crypto industry, by In fact, he thinks so, because they all are came from the world venture capital, where do you invest in 10 projects: five going bankrupt, two come to zero, three- two earn a little, and one is an asteroid, and you earn in total, and your goal is 20% per year, Well, somehow.
Here's how they are thinking about risk. But that's not the case. works. in the crypto world . Everything in cryptocurrencies correlates. How are you? are you going to invest in 10 things , which are 98% correlated? You don't invest in 10 things. You invest in one thing. And now for the whole planet is full of engineering students undergraduate are building shopping malls models, thinking, "Oh, Yes. I just need to accumulate enough, you know, mood or something else , find a way to concentrate all your risk, buy this perpetual futures, and if it increases by 10 %, this means that in I am 10% older. leverage. So I will buy it for another 10%, and if it grows even more 10% off, I'll buy more, Do you understand what I mean? They are trying use this as a multiplier for lottery ticket, and this, man, fatal error, as they say in the Situational fund Awareness.
I have thoughts from about this, and they quite categorical, because I was one of such children, Do you understand? I was such a child back then when no one does this did, long before crypts. Long before how ordinary people started use leverage, I invested in options, you know, still in the middle 90s. Trade through push-button telephone in colleges, you know, with payphone, was engaged This is how I lost everything. your money, right? But The truth is that while We are young, we have something. lose, but the amounts smaller. And this is the best time to learn these really hard lessons. AND Probably so. It's like fray. Do you want? to go through all your fights when you were still child, because An eight-year-old won't be able to to hurt you serious harm, Do you understand? Yes.
You you get rid of this, while you are a child, and everything is fine. When are you? you come in biker bar at 28, you avoid fighting because already participated in a bunch of fights, you understand. That's right. And listen, all these guys are 20 with something years. They lose a lot money. They earn a lot money, lose a lot of money. They will learn their lesson. Their brain will finish forming , right? Until then they will be under 30, I hope they will understand better risks. These lessons will be significant, with considering the money that they lost.
I I truly believe, and in recent years I'm starting to see that with age, experience and losses most, I I would say almost all of these young traders pretty quickly evolve, becoming significantly more responsible. I I see that now they invest significantly more diversified. They diversify your capital through wide range investments. They more responsible use leverage, right? Yes? This is what is happening to us, when we grow up. We become wiser, truth? Always there will be players- adventurers. Listen, you know, this the guy who is still on hippodrome, in their 60s or 70s, but you can't do it control. It there will always be only a minority of humanity.
I'll be honest, me too I saw it. Earlier, 10 years ago, I received letters, message in social media or somewhere else from students colleges who wrote:" Hey, I have a great one. backtest "." I sure that he will bring a lot of money. "Everything I need need—this investment "." You can take a look? "And that was it." always the same. Some kind of tailored quantitative data strategy with 20 variables that traded only S&P futures, used crazy credit shoulder—it was just fantasy about backtesting, and I I don't get it anymore. such letters. I think, this is because everyone understood: backtesting is a work of fiction that in the quantum world doesn't mean anything. It unrealistic. This can to be an indicator that where to look, but that's not what someone will invest money. I used to received them whole mountains. And I think that world of young people enough investors enlightened to know: backtest is just starting point.
It doesn't mean, "Hey, in I am now beautiful. model ". You see, What am I talking about? They learned something about refitting models . These were two the biggest mistakes, which ones are they assumed decades ago. Now in fashion high-frequency trade, right? All are trying to get in there, because Jane Street will pay a million dollars for the first year or something like that. But this one the path also runs end. Now they exploit almost all the expected alpha in this area. Although I am sure that there will be new ones achievement. They will earn more money, it doesn't matter, but the growth rate will be significant reserved.
And I think, that young people do this too understands. So, in general saying, I agree with you. You are right . I think in the last 10-15 years ago significant improvement among the youngest investors. I still I see them everywhere on Twitter, where they write absolutely meaningless nonsense, why me, honestly saying, even glad, because I earn money from these mistakes, you know. So at least at 10 times more. But remember, remember this: in we appeared, that, 30 millions of new investors over time pandemic, for the first time. So we never had such an avalanche newcomers who come to the market, and they must pass because of all this, right? Yes? They must to go through all of this.
How you must have passed because of this, when there were very young. I went through this teenager. All these books, all strategies, everything to somehow find yourself as an investor. AND you can tell them , but they just have to go through this themselves . They have to earn. money. They have lose money. They must understand that I really have no idea. what the hell take it, they do , right? Hundreds of times. Uh-huh. Nothing will teach this. , in addition to experience, in this has no doubts.
Unfortunately. And losses, and losses. Ethan, what do you think? It's all part of it. process. Guys, I I want some. to talk about how you are looking at strategies. I am glad that we are in many ways agree, although, for the sake of justice, was It would be cool to add a little fire in conversation. You know, it was a bit in the middle, but. No, it wouldn't. E-m. Um, I want to to talk about strategy building.
So, Chris, I think you touched their strategies where you see changes and make them bet on them, but whether could you provide more comprehensive review of this strategy, and I would really like to Tom criticized her. as an institutional manager? Yes. You know, I made it up. this was back in 2007, it seems, or in on the eighth, when he began write your book. Uh-huh , social arbitration , right? I guess then I called it informative arbitration. AND today I call it social arbitration, but you are essentially revealing behavioral changes in world, or, frankly saying, any changes. Um, you convert these changes in economic consequences. You recognize the gap in expectations. OK. Uh, and you define the size of the deal.
So, this is maybe observation of any significant a shift that is happening in the world. These can be technologies such as development of AI, mobile phones, cloud computing or CRM systems. Often this changes in consumer products, right? As- here are the changes in behavior buyers, right? For example, what becomes popular. This can be fashion trends. It it could be the weather. One of mine most famous deals consisted in the assessment hailstorms each spring through search ask people about roof repairs that gave understanding seriousness damage to in real time, and then trade company shares, as Beacon Roofing, a month before report output insurance companies, which were used hedge funds for valuation demand for Beacon services Roofing. So I was ahead of the curve. hedge funds on whole four weeks, because they then they didn't know how right use Google Trends, believe it or not, 16 years ago. Or to them was not enough creativity.
Therefore, can be evaluated by any what, what's happening in world, and you just combine facts with economic consequences of this events, as well as determine whether he sees this is investment world or not. Right ? And this is where it arises informational asymmetry. Also there is an evaluation process whether they are happening in this sector or companies other things, equivalent or even more important than the one you discovered and which, in your opinion, will have economic consequences? And is there time frame when you can you predict, when other investors will begin to see what you found, as in in the case of hailstorms, Yes? You know that this insurance report falls into the hedge- funds in a specific date, and you know what that's when they will see this data and will start trading. Therefore you can open an option agreement with a term ending soon after this period. This could be something. as simple as a movie, about which, in your opinion opinion, the world is not guesses, how much will it be important. As then, when I traded Lionsgate shares when they let go, oh my god "My, how is this..." "The Hunger Games"? "The Hunger Games." Yes, " The Hunger Games, true ?
The one and only movie changed an entire public company, right? AND all because I was able to to assess in time cultural resonance book series and that how big this movie will be. It became real breakthrough. Or even "Strange Miracles" for Netflix. You know, there was a time when it was impossible to truly appreciate, how much each show influenced increase in number Netflix users, because there was only several indicators, what funds used for view ratings. But the truth is that every top Netflix show a little about the same audience. For example, " Orange is a hit season" had about the same viewers, how many " "Strange miracles." But if you could appreciate depth of cultural interest in the show, that is, not how much people are watching it on Netflix, and how much people are discussed him in the smoking room on work, right? It then spreads among family members and friends, and people say: “You know what? I I keep hearing about this one. "Strange Miracles" series.
Maybe I'll arrange it. a Netflix subscription and "I'll look at it." Or wrong? When I was able to do this to evaluate, it became one of the largest deals in Netflix history, truth? Exactly at that time quarter when they left "Strange miracles", and that, To what extent is this realistic? increased the number new subscribers for Netflix. Well, the only one way to evaluate this was monitored conversational data and volume of discussions around this show, comparing them with famous historical indicators of others Netflix hits, right? And " "Strange miracles" were about three times more popular than any what other show are they ever created in history companies, right? Therefore, this was an anomaly for Netflix. But if you don't monitored data on conversations, what, actually, no one but me then didn't do it, in such a keys, you just don't had an idea about it. So again, this is the concept of what I am I call it social arbitration. It real informational asymmetry when ordinary people looking where institutional traders and and investors in general usually not focused. Right?
We are not trying to play the same game as hedge- funds. We are playing in a completely different game with a completely different alpha. Of course? We are not we are trying to compete on equal terms with hedging strategies funds. We we are trying use our own ideas as ordinary people who deeply rooted in the real world, and we we constantly see these things because we We live life. Then like, you know, Is it good or bad? mocking Tom, but majority institutional finance, most institutional finances usually look like equally, belong to one demographic type, well-off, living in the same areas countries, right? reading the same thing himself, offends in the same way life uh, points of contact, then like ordinary people have much more access to more diverse data Well, on a daily basis. So, this is the concept social art. So, um, there are a few moments. So, according to first, what you Do this, it's worthy. admiration that you they came up with it themselves, but it's kind of imitation of the fact that what good ideas appear simultaneously everywhere. If you went to "tiger cub", um, or, you know, to a company, who had a big long -short, uh, you know, hedge- low-cost fund leverage, or even more, a hedge fund, focused only on long.
This is exactly the type information on which they were watching. Well, no. it takes a lot knowledge to find out, how is it arranged company, as cash streams are recognized through processes companies that, you know, What does this affect? something like that. The difference in because you can to go out a lot industries, anything in the US or the world, and those hedge- funds, generally speaking , these guys are driven into a certain industry for expertise. So the media person will know about your Netflix history, and someone else will know about, you know, the story of roof or something whatever. This, but such an analysis is, is input data for companies, and all of them this was analyzed. That which you seem to be received early, that's what that you drew all this information from the internet, which, as I probably have one now. standard in many companies. Actually, I would wondered if they did not buy systems, to make it easier extract this information from the internet. the same kind of information. You know, they have significant resources in hedge- stock industry. Um, considering that, I I think this is wonderful. agreement. This is wonderful. strategy.
I think, uh, especially considering the other tips you have you offer. She relevant even today. I just, I I wonder if industry caught up most of the alpha, which she generated from sometimes. None the strategy does not last forever, right? You thought about it first, therefore earned on this a lot of money. The guy who thought about this in 10 minutes after you, earned on this is less than you. AND the guy who thought about this in three years, Well, you already pulled it out, you know, I don't know, 50 million dollars from market in this way. So, these 50 million dollars to him unavailable, right? So he will earn more from this less, and deals become crowded. All, what do you say seems right, Yes?
But it's just not Yes. This surprises me. Well, you know, I spent five and a half years. I had company. I had a company called Ticker Tags. This was the first analysis company social data. We sold services hedge funds, right? Therefore , I was selling most of the big funds. In the end I sold the company to Jefferies , and then M Science. But I spent 5 years of his life, working with the largest hedge funds funds of the world, teaching them work with data observations and conversations, and also because how to interpret our data as part their trade analysis.
And that was it. madness for me, because these funds 2007, right? Or 2011. No, no, it's 2015, 2016. Uh, and in these funds for that time has already passed huge departments quantum analysis, in there were many of them fundamental analysts, but they simply could not put everything together. They are simply, essentially, refused it do. So, I will give an example for you, you know, one of mine the largest deals were with the company E.L.F. cosmetics. I don't know if you know each other. with E.L.F. That's enough for now. big company, but then they just sold cosmetics at Walgreens and CVS. It was cosmetic brand with pharmacy chains. 7 dollars per product.
AND one influencer, on name Jeffree Star, made a video that gained 10 million views, telling about one of their products, which was the same good as a product for 60 dollars. He was called E.L.F. Primer putty. And I thought, "Wow, this a real breakthrough." As if the whole teenage makeup like the whole internet talked about this product, right? So I went to Walgreens, sat there for a whole day and watched, how mothers come from with their daughters- teenagers and they buy everyone E.L.F. product from the shelves, and I thought, "This is it." And I made a huge investment in E.L.F. because of this one video. But I called. to analysts from Wall Street Streets that follow these are the biggest analysts at Wall Street Street, right? Which are watching cosmetic sector , and I said, "Hey, you saw Jeffrey's video Old? Have you seen Jeffree Star video? " And they answered: "Who Is that Jeffree Star? "AND I even called fund, the fund I'm talking about knew that they were actively trade cosmetic promotions , and I talked to one of them and said: "Hey, I want to to put only one question.
Have you seen Jeffree Star video? " Who is Jeffrey? Old? So, even among investors, the whole their job is to monitor only for this sector. That is, it is theirs. specialization. They trade stocks eight or nine companies in this sector, and that's it, right? They were like this ignorant about, you know, this creator content that made random video on YouTube. They are just very far from it world. Even today, in 2026, one might think that they already caught up. It's over. almost 10 years, right?
AND anyway I always I communicate with foundations. and their leaders, they They ask me what I am. I see, and I think: how are you? ...They refuse read comments in TikTok. Good, because that's it. from there I get most of its alphas, from the comments in TikTok, and they just refuse this do. They just consider it nonsense. Um, I I think there is a gap. still exists. Or it will be filled with sometimes when people will they get younger? You know, older people are leaving the industry. Younger people who are from the internet environment, social networks and content creators, are becoming, I think, fund managers and investors. Yes, with eventually this alpha will disappear . But it's impressive.
I I'm already doing this. almost 20 years, trading on this strategy, and alpha today almost as big, just like then. How are you? What do you think the chances are that no one in Citadel looking at this information? What is the probability that you would Did you give? Uh, it's not that, to get information, and in that, to really... although this is certainly the beginning, right? I have on mean, maybe they just wrong interpret. Maybe you see in this is something like that, what they don't see. Perhaps. I don't know. I I'm not even talking about that.
You just...You hit it. straight to the target. The matter is in order to be able to to understand correctly, interpret and to evaluate what is happening. It cultural aspect, Yes? Sometimes the wording is the words they don't even understand, because they are not 19 years old girls, right? So, this is inability...it real absence interest in ensuring that immerse yourself in this rabbit hole and become very good at this specific method. AND I won't name the company. . I'll just tell you like this. Almost everyone large companies, with with whom I collaborate, they all looked at what I was doing. and said: "We are not we understand how systematically institutionalize this approach because words constantly are changing. "They will never be able to develop a 5-year correlation analysis between growth number of conversations and by stock movement or change income, because the product is not even existed. The method in what people say about this now, differs from what happened 2 years ago so, right?
IN social work professions arbitration There are so many traders nuances that are completely arrange private investors because they are ready to delve deeper. They are very deep strongly and become obsessed. Probably this too will arrange institutional investors. The only one the problem is that this level of analysis data, apparently, reserved for quanta, and they want something regulated and structured I would said now, you know, I have been working for a long time. with analysis natural language, and I I am sure that LLM, most likely, will solve the problem, which you are describing here for quanta. So I would said you were right. Probably some kind the guy at the Citadel or the boys' team in Citadel to use an example of a market leader, studying this information, rather than everything, they train model with a longer horizon. involved in trade. And as soon as they do it will do, you know, Half a year will pass, and everyone others will start it too do. You are right. Ahem. AI will lead us to this, isn't that right?
Even with Someone has AI, again yes, there are many " "gray areas" in such a methodological approach. So you you can have a system AI, but there is almost infinite number of ways interpret how trade for these data. Therefore, over time all alpha will disappear. I I agree. Any type alphas in the end theoretically disappear, and a new one will appear, because The world has changed, and people do other things, assuming others errors. I absolutely I agree with this. I tell investors to focus on the next few years, right? Because I have quite clear idea of the next few years and enough high level confidence that you can to be social arbitration trader and still to find a huge alpha in the market, because the topic is endless, or wrong? This is every piece of information in the world, every change, what is happening, and that how is it related to every public company, almost infinite number of ways. Therefore, it will take some time. time, and I think that everything there is still plenty of time, to be social arbitration trader as an ordinary person, and mostly you don't compete with institutions, because they do not use this strategy.
Yes, you are probably right. Average workers —you probably still ahead of them, even in the world of hedge funds. I I would be surprised if market leaders are no longer were doing something similar, but it's still far from complete exhaustion, and how do you you say it's wide a range of possibilities. AND Here's something else. Even when this is completely implemented in hedge- the stock industry, they do everything they can you say do. IN them is an AI that performs all other things that, on in your opinion, complex, and all of this is being counted. All it is traded. All will remain the same millions of possibilities . they will just be smaller and shorter-term. AND it has always been a field, where retail investors had advantage. You can do an agreement on which, on in your opinion, you will earn half a million dollars.
And for a private individual This is a substantial deal. For hedge fund for 20 billions of dollars a little more complicated to get involved in something, why are you going earn only half a million, because you need to do something to others. You see, about What am I? If you don't you will find a way systematized to work on this information so that these half a million seemed like part 20 million per year or something like that, actually there is no point to spend on it resource. So yes, in you have a model that is clearly works. Um, you know, I I wish you good luck with it. Yes. Listen, and The great thing about this is that it is available to an ordinary person, where an ordinary person has a significant advantage. Here, you know, recent example—I don't know if Do you know Vita company? Coco, this is a company with production coconut water, right?
AND they are public traded on the stock exchange. So it's like highly specialized , very simple company. They had sound, song became viral on TikTok somewhere, I don't know, seven or eight. months ago. And this one the song that became viral on TikTok, because in they are these viral sounds, right? About which most managers hedge funds, probably they don't even know what means viral sound. If I were with them talked, almost I guarantee they would said: "Chris, about What are you even talking about? "? Type: "Viral" sound in TikTok? You are not Do you know what this is? Well, The viral sound became incredibly popular, he was associated with Vita Coco, and shares as a result increased, it seems, by 30 with a few percent after the report on profits through traffic growth Generation Z to the brand thanks to that viral sound on TikTok .
In the end, this provided them the best quarter in company history; out of nowhere promotions jumped 34% on income statement, Yes? And this is just one of thousands of examples social arbitration opportunities where an ordinary person who knows how to search information on TikTok, to identify relevant events and connect them with public companies, maybe to predict economic consequences, isn't that right? And again yes, could they hedge- funds to do this in future? Of course, they could. Today, judging by my conversations with representatives of hedge funds funds, they are still in in complete darkness, focused on others things that are more systemic, repetitive and where can be invested big money. Okay. So again, how retail investors, you could earn a million dollars for that deal with Vita Coco— a whole million, and for you this is a deal that life-changing. You don't necessarily earn 400 millions on this agreement, right? So we Let's play another game. AND so I try tell retail to traders: not to us need to compete with institutional players in their game.
We can play a completely different game and win. Therefore, The only thing I would advise is and what is possible problem—it's one of things that limit us in the world of hedge- funds. For people who are engaged in discretionary trade, similar to yours, this is what you trade your own money. It unties your hands. This is important. In our The world needs this. You must be able to to convince people of because of discretionary agreement are weighty reasons, right? You are not just appointed for position. Congratulations. You now allowed to decide and to bet, let's say 50 million credit dollars funds daily for stock market.
It It doesn't work that way. These ideas are being developed. There is control process structures, and this control, probably will limit the speed, with which hedge funds will be able to accept such an approach, because it has to be done within the limits discretionary trade. So this is still one argument on business support the model you promote. I want more details to stop at incentives. Um, yes. You know, this brings us back to beginning of the conversation. Tome , you said, let's go into more detail let's stop at this and would like to hear from you. Can you disassemble this component: how much this is important for everyone fund managers and how does this affect our current conversation? Of course.
So, Ethan knows that at one time I headed the department stock trading in quantum fund volume of about billion dollars. To I was visited the boys with their strategies, you know, several times a day day. Um, I took it. interview around 10 o'clock them for a week, somewhere yes for a couple years. I, um, people came to me from those overoptimized tests for historical data. I said: "Well, that's it just a backtest." « Come back when you will have real results. If they are were returning from real results, very often these results contained beta- component. I said: " Well, I don't need to, so that you trade "beta". I can get your own beta. You have to give me what is different from beta. So, according to essentially, what a hedge fund, from my point of view, always searched for, is uncorrelated profitability.
If in I have, you know, the S&P 500 in one hand, and there is another an asset that is also growing, but completely uncorrelated, I I can combine them, use credit shoulder and get more higher profit than from each of them separately. So, this is portfolio formation in the style of a hedge fund. Ahem , you are dealing with completely different class of investors. They themselves control their beta. So I would say, what this beta creates a different set of incentives. But it's not because I don't I think that incentives in the world of hedge funds will allow us earn the same amount. For example, I think by mistake classifications say: "Well, a hedge fund even "does not beat the S&P." Well, my hedge fund does not overtake S &P, but gives 20% per annum. So add mine profit to S&P, and You know what? You you're beating the S&P, but I'm not I'm selling this beta. I am not I sell the S&P, so I don't I'm beating the S&P.
So, this is a kind of criticism incentives, which I think , is erroneous. And exactly hence the origin of that question, Ethan, on from the very beginning that we we are doing two different things . Chris, um, you are you talking about that still remains many opportunities for retail traders trade at your own discretion. Ahem, and Tom pointed out that you you pull a lot values, and you still you pull a lot values. Um, and you? you say it wasn't destroyed by competition . Hmm, maybe parts this will be. Hmm, why? you share this in the internet with everyone these retail traders? Why you? Are you writing a book? Which one is you are encouraged when you you can extract it yourself so much of this and obviously earn a lot money?
Well, I already did that, Yes? So, I'm finishing. his 18-year journey. I earned, I don't know, 80 millions of initial 20,000 dollars. For 18 years, I think about 60 of them by a percentage annual return . And I have no one anymore nothing is needed prove, right? As you know, I have charitable foundation. All what I'm doing now, this is a contribution to this fund. But my main goal in life—to help to bridge the gap in wealth. And I think, what is the best way to do it—to involve every person on earth before investing. AND one of the ways to achieve this— inspire people to be investors, right?
That's why I love to tell about your strategy, because Listen, I'm a human being, which has none interest in technical trading . I don't have any. desire to immerse in the deep fundamental analysis, right? I I think I am more similar to 99% of people in world than that technical or fundamental trader. And I want to people knew: investing can bring pleasure. You you can start invest, and if you will just notice one, two or three things throughout life— let's say, you'll see Jeffree Starr video and invest in time ELF, right? This could be a trip to Tesla when others not yet realized, how special there was that moment in the late 2010s, truth? When were you in one of the first electric vehicles. It there may be a moment, when you hold in iPhone in hand, the first iPhone, and you think: "This will change the world for humanity. Or you you can be engineer at the company and understand: "Oh God, cloud computing "take over the world." This Amazon's AWS will become a real breakthrough for the company. Or, honestly, this could be 3.5 years because when you first went to ChatGPT and thought: "My God, this is the most important event in all of me life.
"I will sit on a minute or so I will investigate who will receive benefit from this." This thing with artificial intellect. Okay. AND if you did that three and a half years therefore, you would quickly concluded that a company like Nvidia will become obvious main beneficiary, and would think: "You know what, it's simple "incredible." I never never seen in my life Nothing of the kind. I I am going to invest. money in this company, Nvidia. Yes? Every person on earth it can just to live one's life, to see how the world changes, and connect facts with investment opportunities. Not must be mathematical genius. It doesn't have to be. financially savvy graduate Wharton School, truth? Not must be such a person that to do what I did —earn tens millions of dollars. I just ordinary man.
I had regular work, and I I realized that I can do this. to do, and in two this decade multiplied. You don't need to be active trade. You can just being in the market. And the best thing is that just doing this and admiring that you are an investor, part investment community, you actually convince to invest more in oneself money in investments, rather than wasting them. AND already one does it you are the winner. Will you outperform the S&P? no—at this moment almost irrelevant . The thing is that I offered you a methodology that has meaning, which can bring pleasure, and, maybe you will succeed to achieve the incredible success. If you find the next Tesla , Elf or Nvidia during your usual life, you are ultimately put more money for your own investment account, although earlier You probably have it. there wasn't even truth? So, you already won, simply becoming part of investor grade and being interested by directing their funds for investment, and not only in consumption daily up to the end of his life. That's why I do it.
That's why I'm on YouTube. Here why am I in X. I share this method, therefore that I believe that I can to change the world for the better . I think I am, and I am this. did—dude, 15-16 years ago not there was such a concept, how social arbitrage trader in my opinion. Now we have hundreds thousands of social arbitration traders who trade every day communicate and they do the same thing as me: discussing what saw on TikTok, comments, trends, cultural changes, changes in fashion, weather conditions, politics—everything, what is changing; they connect these facts with investment opportunities, and I I like it, dude. . It's easy for me. I like it. That's right. interesting to see. Therefore, nothing against institutional traders, okay? Nothing against Tom.
We simply, we simply we play two completely different games. And, uh, That's very true. You know, we both, we we can both have radio. I know that you Do you want a big one? discussions, but we we can both have right in their fields for their own goals that we are trying to achieve. I like it. Tom, some final thoughts thoughts? Oh, no. This, this is what I expected. Listen, I, I despise private investors as a class just like private ones investors despise hedge funds, right? I, when I talk about private investors , I don't mean a guy like that Chris, who is obviously made some effort before that.
He has plan. He has methodology. She discretionary, so what? Most investments still like that. Um, so I That's not what I mean. I I am talking about that empirically preferable majority short-term private traders usually lose. This does not mean that they doomed to lose , and this does not mean that they are stupid. Actually , I would argue that intelligence is absent no relation to human success in the markets. Is there a mind? advantage? In general, Yes.
But I can show you a lot very intelligent people, which have repeatedly burned down, lost everything and still nothing have. So that's all not a question of intelligence. It is a question of knowledge. Chris found a way to structure knowledge in an important way, or, rather, look at information and to turn it into knowledge. Isn't that right? That, what do we do with institutional side, —that's another matter. We, this corresponds to that description. We take information and we turn it into knowledge. It's simple. another class information, and this is done with another purpose regarding risk management. You know, 20% profitability from maximum a drawdown of 1.4%.
4% quite powerful, in institutional world , in my opinion, Chris significantly exceeds me for the last, How old is he, 18 years old? but he had drawdowns, so this different, this is different discipline, that's all. Yes, I, I, I would finish. on your part, in words , that, well, institutional investors often have more resources and different types resources, we, as private investors, we have much more freedom. So the matter is not in the one who has the best car, and that's it , which advantage matters more for specific the possibility of which You are chasing. Me like to be private investor , because for our purposes this gives a lot of flexibility and the freedom to do everything what we want and how we we want. We can find niches opportunities that mostly not are interested in institutional traders, about whom they don't know or who don't want interfere. So, how do I I already said we can win both. We we can all win in this game. It's like a pie, which is constantly becoming bigger. Well said. I like it.
Thank you both for that. came to the podcast. That was cool. With pleasure. I was glad. to see you. It's nice to be here.
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