Meet America's Hedge Fund Billionaires

1998 long-term capital management long-term capital management was a very non-conspicuous name for the biggest hedge fund during the 1990s a hedge fund that single-handedly almost collapsed the entire financial system yet another world-changing event that has slipped under the public's consciousness the whole uh economic system was going to collapse if the bailout didn't happen they got some very high returns during the first few years 21 43 and 41 in their third year for reference the stock market typically returned seven to ten percent on average so their returns understandably attracted a lot of attention and money and before long every bank and even universities got greedy and wanted to lend ltcm as much money as they could so ltcm could grow it for them and by 1998 ltcm raised 4.7 billion dollars from practically every single important financial institution they took that 4.7 billion and borrowed 125 billion dollars to play around with a 25 to 1 debt to equity ratio so imagine whatever money you have in your bank account right now borrow 25 times that in debt and use that money to do super complex trades based on brand new mathematical models that probably no one double checked or fully understood besides the math experts that made them but they didn't stop there no no no ltcm took that 125 billion in debt and turned it into 1.25 trillion dollars 100x on the money they already borrowed these guys in a room took 4.8 billion got knucklehead over here to give them 125 and then got these knuckleheads to sell them positions and all of a sudden 4.8 billion equaled 1.4 trillion this since all the major financial players had a ton of money tied up in ltcm if ltcm went down they would go down too or in other words this single hedge fund became so big that it was too big to fail and the time of reckoning came in mid-1998 multiple factors like the 1997 asian financial crisis and the 1998 russian financial crisis all crescendo together into the perfect storm their mathematical models broke down and because they were so leveraged 4.7 billion to 125 billion to 1.25 trillion their losses got insanely amplified and by september 1998 ltcm was out of options and since everyone's money was tied into this one hedge fund everyone on wall street thought that if they fell the entire system would collapse we can't let that happen so the federal reserve bank of new york stepped in and coordinated what do you know a bailout a bailout of 3.6 billion dollars from other major banks chase deutsche goldman sachs merrill lynch lehman brothers practically all the major players steve cohen 0.72 force 400 rank number 36 net worth 14.5 billion dollars 2019 net worth 13.6 billion up almost 1 billion dollars steve cohen runs point 72 asset management the 21st largest hedge fund in the world he's the owner of the new york mets owns one of the world's most valuable art collections worth over 1 billion dollars and in 2007 time magazine named him one of the top 100 most influential people and his name may sound familiar after the whole game stopped mania cohen's fun lost nearly 15 percent this year during the gamestop short squeeze because his fun invests in melvin capital one of the main hedge funds that was short in gamestop cohen was also one of the two hedge funds that bailed out melvin capital with 750 million dollars when they were on the brink of collapse this led to him getting death threats on twitter which made him delete his account if you want to learn more about the gamestop short squeeze we have the most detailed documentary on it with the link below what you may not know is that steve conan walked away from one of the biggest insider trading scandals on wall street in 2013 his original hedge fund sac capital advisors pled guilty to insider trading wire fraud four counts of security fraud and paid 1.8 billion in fines the biggest fine ever levied against a hedge fund cohen was banned from managing outside money for two years and after that ban was lifted that's when he started his current fund .72 this whole scandal was one of the big inspirations for season one of the show billions i employ hundreds of people directly thousands indirectly what do you do nothing gabriel plotkin melvin capital during the fallout of steve cohen's first hedge fund sac capital gabriel plotkin was one of the traders who received the illegal insider information according to federal prosecutors after sac capital pled guilty to insider trading and closed shop gabriel plotkin would go on to create melvin capital raising one billion dollars with a focus on short selling although not a billionaire according to some estimates melvin capital is still worth covering in melvin capital's first year they returned an incredible 47 in 2020 melvin capital shorted game developers cd projects making millions when cyberpunk 2077 flopped and after the gamestop short squeeze melvin capital was down 53 ken griffin citadel force 400 rank number 34 net worth 15 billion 2019 net worth 12.7 billion up over two billion dollars ken griffin found a citadel an american multinational hedge fund with two main businesses citadel the world's ninth largest hedge fund with over 34 billion under management and citadel securities which is what's called a market maker when you buy or sell a stock on an app like robinhood firms like citadel securities are the ones that actually fulfill the order for you in fact citadel executes one out of every three stock orders from retail investors so if you've bought or sold stocks in the past chances are you dealt with citadel without even realizing it citadel securities is also one of the firms robin hood sells your trading data to also known as payment for order flow during the first half of 2020 alone they doubled their profits to 4 billion dollars in revenue thanks to increased trading and volatility again to learn more about how this business works check out our documentary on the gamestop short squeeze below needless to say this makes ken griffin a very powerful billionaire in the world of high finance ken griffin was the other hedge fund to bail out melvin capital with 2 billion alongside steve cohen chase coleman force 400 rank number 85 net worth 6.9 billion dollars 2019 net worth 4.5 billion up nearly two and a half billion dollars when you imagine a young hyper-successful shark of an american hedge fund billionaire that's chase coleman charles payson coleman iii was born into new york aristocracy and trained under a legendary hedge fund billionaire julian robertson at 25 his mentor handed him 25 million dollars to start his own fund tiger global management his fund has seen insane returns over the years and in 2020 while the real world was descending into chaos chase let the hedge fund billionaire pack by gaining 2.5 to 3 billion dollars in net worth one can't talk about hedge fund billionaires without mentioning perhaps the most infamous one george soros 400 rank number 56 net worth 8.6 billion 2019 net worth also 8.6 billion before all the controversy and conspiracy theories surrounding soros today soros became known as the man who broke the bank of england and made a billion dollars in the process in the early 90s britain was in the middle of a recession and the british pound was continuously weakening over time and every currency speculator and forex trader knew that eventually the pound would have to devalue soon and if one could know when that happens or if one could make that happen one could short the british pound before it goes down making billions so in 1992 soros started building his position against the british pound by borrowing pounds from british banks and hedge funds basically he was taking out loans and then he started selling those pounds that he borrowed for german marks so that when the pound crashes he could buy back more pounds than what he sold for therefore the lower the pound crashes the higher his profit margin on money that wasn't even his pretty clever on september 16th soros exploited a vague statement made by the president of the german central bank to make it seem like the german central bank thought the british pound was in trouble kinda like how the media takes things out of context today that night sora sold 10 billion pounds he borrowed on the open market by morning that started a selling panic that the bank of england couldn't control by the next day the pound fell by 15 against the german mark and 25 against the dollar making source a billion dollars in a matter of a few days at the expense of 15 per person in the uk which is the perfect segue into the strategies you want to use as a hedge fund billionaire these are the apex predators of wall street they are in the business of shorting companies to destroy them i mean that is their business model and they are not academic traders okay who are just speculating on outcome they engineer the outcome right look at their tactics just watch the show billions right they hire pr people they hire private investigators they're participating on these message boards spreading disinformation they try to destroy companies to engineer that outcome they create nothing they're in the business of destruction now you may be asking yourself but jake not all hedge funds are bad right yes a hundred percent it's a spectrum there are big hedge funds small funds hedge funds that are extremely boring quantitative hedge funds that rely on math and computer algorithms hedge funds that focus on shorting for what they believe to be the greater good of the market everything under the sun ray dalio is a billionaire that founded the biggest hedge fund bridgewater associates that i have a lot of respect for but let's be honest you didn't come to this video to learn about all the legal things the morally white things hedge funds do no you came to learn about the shitty or morally gray stuff some of them or many of them pull off which usually involves short selling so if you want to learn how to be one of these billionaire hedge fund apex predators let's set our ideas of right and wrong aside just for a few minutes to learn the secrets of the trade [Music] soros's shorting of the british pound perfectly encapsulates your duty as a hedge fund manager your job is to not just predict where a stock a currency or any other security is going to go and just hopes that it goes there that is for trump's no your goal is to spot opportunities in the market and then engineered that outcome to happen because let's be honest in this world the only person you can rely on is yourself and your actions so make the outcome you want happen remember at the end of the day the stock market the currency markets whatever market you're trying to manipulate is made up of people no matter how complex a market gets no matter how many computer algorithms they use no matter if they have cdo cdo squares synthetic cdos it all comes down to human nature fear and greed and that's what all of our strategies boil down to triggering people's greed to create a buying mob or triggering people's fear to create a selling mob if you've ever been to a seminar where they try to sell you expensive stuff they always put the table to buy in the back of the room why so that when people buy the people sitting down see all those people getting up and walking to the back which makes them want to get up and buy which creates what marketers call a table rush of buyers that is the exact herd mentality we have to create in the markets and that's why the best hedge funds the best outcome engineers are really just the ones that understand human psychology the best and apply it to stocks or whatever there's a small group who can do the math there's an even smaller group who can explain it but those few who can do both they become billionaires you know jim cramer that kind of annoying guy always screaming about stocks on tv hey i'm kramer welcome to mad money welcome to create america what you may not know is that he used to be a hedge fund manager that was an expert at all these dirty tactics especially with short selling and in december 2006 when the internet was still young jim did an interview that he thought wouldn't be seen by the general public where he reviewed all his secrets what's important when you're in that hedge fund mode is to not do anything remotely truthful is to not do anything remotely truthfully is to not do anything remotely because the truth is so against your view right that it's important to create a new truth to develop a fiction friend running the markets let's say it's close to the end of the quarter you're not hitting your numbers and you've got to show that your hedge fund is in the green or else investors will withdraw their money and you won't get that big of a management fee now i gotta go into new york to try and save my [ __ ] quarter your longer stock so you want to make a particular stock go up so you do what's called front running the markets you dump a ton of money into a stock during pre-market hours i.e before the stock market opens people will see all this activity and growth in the stock before the market opens and they'll think to themselves man maybe they're gonna make a big announcement show off a new product that these stock traders know about i gotta get in on this so the herd would join you the trading algorithms will get triggered more of the herd joins you and boom the stock price soars and your quarter is saved back in cramer's days you need around five million dollars to dump into a stock for good effect if i were long and i would want to make things a little bit rosy i would go in and take a bunch of stocks and make sure that they are they're higher you know maybe commit 5 million in capital to do it and i could affect it today that might be 15 million 20 million or maybe even more killing the markets the opposite is also true if you're shorting a stock i.e profiting if it goes down you can create a negative stigma around the stock by selling a few million in the pre-market and just like how sore selling 10 million pounds the night before to create a selling panic that crashed the british pound you dumping a bunch of shares of a stock during pre-market hours would then trigger the herd's fear why is my stock going down so much before the market even opens what if it crashes even more when the market opens man should i sell and cover my losses so i'm not a bag holder and boom when the market opens a lot of people will sell up in your profits but it's a fun game and it's a lucrative game now there's nothing really illegal about these tactics they're pretty simple you just need a lot of capital to make it happen i would encourage anyone who's in the hedge funding to do it because it's legal right it's a very quick way to make money and very satisfying by the way no one else in the world would ever admit that but i care that's right and you can say that here i can't i'm not gonna say it on tv but beyond this that's where we get into fermenting fermenting now i'm definitely not advising you to ferment fermenting where you intentionally create the impression that a stock is gonna go up or down is in fact illegal i can neither confirm nor deny that hedge funds definitely do this but for educational purposes only lawyer let's go over how to create this fake impression around a stock if you choose to take this a legal route that is very hard to prove in a court of law that i'm definitely not condoning you know exactly what i mean you induced others to trade on information that you knew to be false hard to prove that you can't foment you can't create a yourself an impression that a stock's down but you do it anyway because the sec doesn't understand it so yeah i mean it's that's the only sense that i would say this is illegal but a hedge fund that's not up a lot really has to do a lot now to save itself so this is actually just a blatantly illegal but when you have six days and your company may be in doubt because you're down i think it's really important to ferment uh if i were one of these guys this is actually just a blatantly illegal but i think it's really important to ferment uh if i were one analysts have you ever wondered why stock analysts the people who predict whether you should buy hold or sell a stock never have a hit percentage next to them like a percentage on how accurate their predictions have been in the past kind of like how baseball players have their stats it's because they would be out of a job because they're usually wrong and yet they still hold a ton of influence over the market don't ask me why especially in smaller stocks people still take them seriously which makes analysts a great tool for our manipulation since analysts work for hedge funds investment banks etc they can't bite the hand that feeds them so if you want to buy a stock or you're shorting a stock you can theoretically have analysts downgrade that stock if you want to sell a stock at a higher price you can have analysts theoretically upgrade that stock a lot of analysts work for investment banks or banking sectors of some kind or supported indirectly by investment banks right analysts are supposed to be independent most of the time but give me a break these analysts are getting the checks cut by the investment banks so do you think the investment banks are really going to go against what their short shareholders and what their investments are in journalists journalists are arguably even more powerful than analysts because if a journalist publishes a news story about stock people outside of wall street are influenced as well and journalists are also very easy to manipulate if you want a stock to go down journalists have an incentive to publish bad news because bad news gets more clicks more clicks equals more money for the publication more money for their employer equals better career prospects for them this is coming from personal experience as a youtuber kinda like what we're doing in this video and this is very easy because the people who write about apple want that story and you can claim that it's credible because you spoke to someone at apple because apple isn't and it doesn't right they're not going to comment you can leak a juicy story to a journalist directly then you would call the journal and you get the bozo reporter or you can spread it to others on wall street knowing that it will eventually make its way to a journalist and the way you would do that is you pick up the phone you call six trading disks and say listen i just got the phone with my contact there's no room for apple they want too much that we're not gonna let them in this is not we're not gonna let them do what they did to music and you know i think that's a very effective way to keep a stock down right anonymous articles let's say you're even lazier than that you don't want to deal with journalists or you want to avoid any potential lawsuits or damage to your reputation an even easier route you can take is to post anonymous hit pieces about companies on influential websites like seeking alpha now this may sound kind of silly like who in their right mind would base their investments on anonymous articles on the internet but the results speak for themselves december 2015 anonymous short seller investor for truth pushes united development funding 4 down 35 after much speculation kyle bass of hayman capital management reveals that investor for truth is him ironically kyle bass has been featured on this channel bank of california an anonymous article by short seller aurelius caused the stock to plummet by 29 the ceo and vice chairman stepping down and the sec initiating an investigation all from one anonymous article bank of the internet has been the subject of around 30 short seller pieces over three and a half years bringing it down as far as 37 percent arrows international short attacks pushed the indian bollywood filmmaker down 50 percent acoustics technologies short attacks push it down 43 at one point why does this work because you don't need to convince a lot of people all you need to do is to instill a little bit of doubt in some they will sell maybe some journalists will pick up the story giving it credibility which will cause other people to sell which will trigger a domino effect of herd selling and next thing you know a stock is down 50 thanks to a few anonymous articles making you at least a 50 return and maybe if you borrow some money to trade with ie trading on margin you can make upwards of a hundred percent on just one short attack and the best part about all these strategies it's that it's hard to prove and the sec are too incompetent to prove it the way that the market really works is to is to have that nexus of i've hit the brokerage houses with a series of orders that can push it down then leak it to the press and then get it on cnbc that's also very important and then you have a kind of a vicious cycle damn right it's a pretty good game these are all the things you must do on a day like today and if you're not doing it maybe you shouldn't be in the game so tran capital our venture capital firm will now be opening up its own hedge fund division and we will be employing all the tactics we went over in this video so that you know your money is getting put to good productive use if you are new here and you want more dark sarcasm and only the best video essays on the most provocative thought-provoking stuff in the world of business just like this one there is a red button below that says subscribe that you can click for more free videos just like this every single week and the best part is that you can dislike unsubscribe leaving your best hate comments whenever you want so you have nothing to lose and everything to gain and you can also turn on that notification bell to get notified when new videos come out if you want business memes behind the scenes stuff day in the life kind of stuff you can follow me on instagram at jtrend.io where we have a ton of fun over there that is going to wrap it up for this video thank you so much for watching stay dangerous out there and i will see you guys in the next one you

Channel: Jake Tran

Views: 739,745

Rating: 4.9366317 out of 5

Keywords: hedge funds, long term capital management, hedge funds explained, what is a hedge fund, jim cramer market manipulation, private equity, short selling, hedge fund, investment banking, stock market analysis, stock, how do hedge funds work, robinhood, bitcoin, stocks, tesla stock, gamestop, bitcoin news, stocks to buy now, crypto, stocks to buy, chamath palihapitiya, cathie wood, cryptocurrency, stock market, passive income, make money online 2021, how to make money online 2021

Id: PiLZSTBIjO8

Length: 21min 10sec (1270 seconds)

Published: Fri Feb 19 2021

Reddit Comments

[u/abandonX4]

I was just about to post this lol

Great video!!

[u/TheRealJDang]

Pretty nice video, and very informative. I’ll be ok with him doing the Netflix documentary on GME!

[u/Popcornbiatch]

Great job on this Jake!

[u/socradeeznuts514]

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