<story><title>Novogratz&apos;s Crypto Trading Desk Lost $136M in Nine Months</title><url>https://www.bloomberg.com/news/articles/2018-11-28/novogratz-s-crypto-trading-desk-lost-136-million-in-nine-months</url></story><parent_chain><item><author>dragontamer</author><text>To be fair, when you have $100 Million, the goal of the game is not &amp;quot;growth&amp;quot;, but holding onto that money.&lt;p&gt;$100 million isn&amp;#x27;t much different from $108 Million (8% gains over the year)... or even $500 Million. In both cases, its still more than enough money to live on for the rest of your life. The S&amp;amp;P 500 has dropped 50% in the past (ie: 2008), and it doesn&amp;#x27;t make sense to risk that much money on that.&lt;p&gt;You can&amp;#x27;t use bank accounts: FDIC insurance only covers $200k per bank. You&amp;#x27;d literally need 5000 different bank accounts to hold $100 Million safely. So what do you put it into?&lt;p&gt;Answer: things that don&amp;#x27;t grow as quickly as an S&amp;amp;P500 fund. Things that are safer: municipal bonds, international (German, Japan) bonds to hedge the dollar, and US Bonds. Maybe some high-quality corporate debt, like Apple&amp;#x27;s debt, and maybe a real-estate project or two.&lt;p&gt;All of which probably returns less than the stock market. But your $100 Million will still be there in the next crisis. That&amp;#x27;s not necessarily true for an S&amp;amp;P500 fund.&lt;p&gt;------------&lt;p&gt;Finally, the average volume of Vanguard Total Market ETF is only ~3-million (at a price of ~130 or so). Which means that Vanguard Total Market ETF only has ~$300 Million changed each day.&lt;p&gt;If you pump $100 Million into an ETF with only $300 Million worth of daily average volume, what do you think will happen? You&amp;#x27;ll over-centralize the price and get a bad deal. Its not easy to move $100 Million, even into a major fund like Vanguard&amp;#x27;s Total Market ETF, without a manager.&lt;p&gt;At $100 Million+ size portfolios, you need to start thinking of Dark Pools of Liquidity (ie: somewhat hiding the order book). So that when you execute the buy order, the wolves of Wall Street won&amp;#x27;t own you.&lt;p&gt;$100 Million+ accounts don&amp;#x27;t work the same as a normal account. Pump that into the market in one day, and the price will rise dramatically.  Sell that in one day, and the price will drop dramatically (losing a % of your value on both legs of the transaction).  Having an expert guide you, so that you can minimize Bid&amp;#x2F;Ask issues, is essential.</text></item><item><author>misiti3780</author><text>to back this up, read the expose in the economist this week about family offices and how they all divesting from hedgefunds because the fees are ridiculous and they are doing no better than the S&amp;amp;P, usually worse when you take into account the onerous fees those mgrs are charging.</text></item><item><author>AznHisoka</author><text>One of the best kept secrets in the hedge fund&amp;#x2F;financial industry is that most people really dont have a clue what they are doing. Sure they make bold predictions, appear on CNBC and use industry jargon. But at the end of the day, they arent much better than you or me at managing large amounts of money.</text></item><item><author>simias</author><text>I mean, given how hard cryptocurrencies crashed this year is it really a surprise? The only way for him to make money would probably have been to short everything continuously but seeing how irrational and easily manipulated the cryptocurrency market has been in the past that seems rather foolish.&lt;p&gt;Given his pedigree you&amp;#x27;d think he&amp;#x27;d know better than to bet on something that&amp;#x27;s 99% pure unbridled speculation and 1% actual technology. It&amp;#x27;s like knowingly investing in a Ponzi scheme, what did you expect?</text></item></parent_chain><comment><author>dgacmu</author><text>Vanguard&amp;#x27;s AUM grew by about 1 trillion last year. This hypothetical 100M is 1&amp;#x2F;3rd of a day of that - and one almost certainly doesn&amp;#x27;t move all of it in a single day. Nor is one likely to keep all of it in a single fund. Once you have a bog-standard stocks&amp;#x2F;bonds&amp;#x2F;cash&amp;#x2F;maybe RE split, 100M isn&amp;#x27;t moving the market.  I think you&amp;#x27;re off by an order of magnitude.&lt;p&gt;Where you&amp;#x27;re right, of course, is that 100M justifies considerably greater attention to the money management. But the biggest focus is tax efficiency, not the micro details of the market.</text></comment>
<story><title>Novogratz&apos;s Crypto Trading Desk Lost $136M in Nine Months</title><url>https://www.bloomberg.com/news/articles/2018-11-28/novogratz-s-crypto-trading-desk-lost-136-million-in-nine-months</url></story><parent_chain><item><author>dragontamer</author><text>To be fair, when you have $100 Million, the goal of the game is not &amp;quot;growth&amp;quot;, but holding onto that money.&lt;p&gt;$100 million isn&amp;#x27;t much different from $108 Million (8% gains over the year)... or even $500 Million. In both cases, its still more than enough money to live on for the rest of your life. The S&amp;amp;P 500 has dropped 50% in the past (ie: 2008), and it doesn&amp;#x27;t make sense to risk that much money on that.&lt;p&gt;You can&amp;#x27;t use bank accounts: FDIC insurance only covers $200k per bank. You&amp;#x27;d literally need 5000 different bank accounts to hold $100 Million safely. So what do you put it into?&lt;p&gt;Answer: things that don&amp;#x27;t grow as quickly as an S&amp;amp;P500 fund. Things that are safer: municipal bonds, international (German, Japan) bonds to hedge the dollar, and US Bonds. Maybe some high-quality corporate debt, like Apple&amp;#x27;s debt, and maybe a real-estate project or two.&lt;p&gt;All of which probably returns less than the stock market. But your $100 Million will still be there in the next crisis. That&amp;#x27;s not necessarily true for an S&amp;amp;P500 fund.&lt;p&gt;------------&lt;p&gt;Finally, the average volume of Vanguard Total Market ETF is only ~3-million (at a price of ~130 or so). Which means that Vanguard Total Market ETF only has ~$300 Million changed each day.&lt;p&gt;If you pump $100 Million into an ETF with only $300 Million worth of daily average volume, what do you think will happen? You&amp;#x27;ll over-centralize the price and get a bad deal. Its not easy to move $100 Million, even into a major fund like Vanguard&amp;#x27;s Total Market ETF, without a manager.&lt;p&gt;At $100 Million+ size portfolios, you need to start thinking of Dark Pools of Liquidity (ie: somewhat hiding the order book). So that when you execute the buy order, the wolves of Wall Street won&amp;#x27;t own you.&lt;p&gt;$100 Million+ accounts don&amp;#x27;t work the same as a normal account. Pump that into the market in one day, and the price will rise dramatically.  Sell that in one day, and the price will drop dramatically (losing a % of your value on both legs of the transaction).  Having an expert guide you, so that you can minimize Bid&amp;#x2F;Ask issues, is essential.</text></item><item><author>misiti3780</author><text>to back this up, read the expose in the economist this week about family offices and how they all divesting from hedgefunds because the fees are ridiculous and they are doing no better than the S&amp;amp;P, usually worse when you take into account the onerous fees those mgrs are charging.</text></item><item><author>AznHisoka</author><text>One of the best kept secrets in the hedge fund&amp;#x2F;financial industry is that most people really dont have a clue what they are doing. Sure they make bold predictions, appear on CNBC and use industry jargon. But at the end of the day, they arent much better than you or me at managing large amounts of money.</text></item><item><author>simias</author><text>I mean, given how hard cryptocurrencies crashed this year is it really a surprise? The only way for him to make money would probably have been to short everything continuously but seeing how irrational and easily manipulated the cryptocurrency market has been in the past that seems rather foolish.&lt;p&gt;Given his pedigree you&amp;#x27;d think he&amp;#x27;d know better than to bet on something that&amp;#x27;s 99% pure unbridled speculation and 1% actual technology. It&amp;#x27;s like knowingly investing in a Ponzi scheme, what did you expect?</text></item></parent_chain><comment><author>module0000</author><text>Other side of the coin here..you can take that 1 million USD and dump it in a single order into the ES - you won&amp;#x27;t move it more than 1, 2, or &lt;i&gt;maybe&lt;/i&gt; 3 ticks. This assumes you are using full day margin rates - if you are using overnight rates, you won&amp;#x27;t move it a single tick. Securities and ETF&amp;#x27;s are amateur hour for real sums of money. You&amp;#x27;ll need hundreds of millions, or billions, to move markets with the depth of the ES, ZB, TN, and other commodity futures.</text></comment>