The name of Bruce Kovner is known only to a narrow circle of traders. He is modest, withdrawn, and lives in a mansion that can protect against a gas attack. Starting more than half a century ago with soybean futures, Kovner amassed $ 5.4 billion. And Bruce does not disclose professional secrets and does not teach beginner traders, but he says:
“The market depends on a stupid government, and a smart investor knows what to do.”
Biography of Bruce Kovner
A descendant of Jewish immigrants, Bruce Kovner, was born in 1945 in New York. At the age of eight, he and his parents move to the San Fernando Valley – to the other end of the States. In general education at school, Kovner shows himself as a competent student, for which he receives many letters and thanks on behalf of the director. By the age of 16, he becomes the student president of the school.
Having changed many jobs, Kovner thought that it would be nice to open his own business. By a happy coincidence, he was seriously into a stock trading at the time, and in 1977 (that is, after 30) made his first deal. It dealt with the spread in copper futures and, to the hero’s surprise, made a profit. A few days later, Kovner repeated the operation, but it turned out to be unprofitable.
Having received an economic and political science education at Harvard, Bruce Kovner decided to devote his life to science. He even lectured here and at the University of Pennsylvania while this was not tired. The mind was captured by stock trading, and within a year, Kovner read everything in the public domain. Only after that did he pluck up the courage and went to the stock exchange.
Bruce Kovner’s trading
Realizing that the spread is his main asset, Kovner got involved in the soybean supply game. There was no money for the operation, and he had to borrow three thousand dollars, investing at his peril and risk. A year later, he had $ 45,000 in his hands, and Bruce tried to play on short contracts. Once, succumbing to a broker’s persuasion, the future billionaire took a risk, made a long bet, and lost $ 23,000.
Bruce Kovner made an important conclusion
Never succumb to market panic and do not engage in transactions, the essence of which is unclear. Later, 20 years later, he will tell reporters: all stock exchange moves depend on a stupid government and even more stupid banks that set the market wrong. And a trader, especially if he is smart, sharp and literate, must catch market signals and turn them into real money.
Futures contracts, in addition to maturity, are characterized by price and yield. The closer the deadline is, the more diverge these parameters, although, after the contract, they can be comparable.
When buying several futures, you need to wait for at least one of them to rise in price, immediately sell and buy lots with an even more distant execution date – cheaper than the price we sold today. After all, the more significant the difference between price and yield, the greater the spread!
- The whole scheme fits into three links: buy-wait for the rise in price-sell. By the way, the government bond yield curve, so beloved by Kovner, works the same way.
Soon, the newcomer to stock trading went to work as an assistant trader at Commodities Corporation. After studying his resume, Michael Marcus (the legendary American investor) said: we do not have an associate position for you, but we have a real trader position. Are you taking it? Kovner got involved in trading from the first days, working, among other things, with his own money.
In 1983, Kovner, willing to risk other people’s money, opened the investment company, Caxton. Its financial condition at the beginning of the journey is unknown, but already in 1987, investors’ income amounted to, for a minute, $ 300 million!
Since then, access to Kakston by third parties has been closed – only those who entrusted their savings to Kovner 30 years ago participate.
We talked a little higher about how soybeans brought Kovner $ 20,000, although if he had not believed the broker, the income would have been $ 40,000.Recalling that day, the investor cannot explain what prompted him to take a long bet – possibly clouding consciousness. After that, composure became a faithful companion of the trader, and it helped before Black Monday – Bruce withdrew money two days before him!
Over time, Kovner “grew” out of commodity trading and moved to valuable bonds – they allowed trading with the billion dollars at his disposal. Simultaneously, the investor participates in the development of exchange computer programs, however, considering them imperfect. Say, any strong trader can easily see what moved the market – a false signal from a robot or a human.
Hence his belief in the inequality of traders. In the market, Bruce Corner believes, some people know more about the movement of quotations than others. And the ideal could be Soviet investors who worked for the state and were engaged in the sale and purchase of currency, oil, grain, and metallurgical raw materials. They were the most informed bidders in the world (with such and such intelligence!).
Today, the state of Bruce Kovner is equal to 5.4 billion US. Dollars., Cost of critical assets Caxton (it’s Berkshire Hathaway at Warren Buffett ) is classified. However, it is known that Kovner brought $ 12 billion to Caxton investors with his works since 1987 and continues to increase the volume.
Caxton’s annual return is 87%. Think about it; 87% over 30 years!