Niederhoffer on Being Wrong

The discussion about what were the real causes of the financial crises of the last two years will not end with a firm resolution and I have resigned myself to that. And while dwelling on blame is not useful in my view, what I know is that hedge fund managers have got a bad name and yet they have been the most gracious losers among the whole lot of people who took risks. In my view, most bankers who were culpable got way far too easily and those that survived are now back to profitability without proper public acknowledgement of their culpability. 

On the other hand, hedge fund managers seem to be the real adults in the financial services industry because many of them took it on the chin and went on with their lives without crying for public support or blaming others. Among them is Victor Niederhoffer who had good investment record but also had two of his hedge funds collapse out of bad investment calls. 

His interview in Slate Magazine here with Kathryn Schulz provides his views about the errors that he committed on two occasions and the losses that he took when the funds collapsed. That he is a smart man is not in doubt and in the interview, his admission of errors and hubris is reason to respect his candour and sense of self-criticism. But more importantly is that hedge fund managers get a bad rap when most of them went down with their ships while banks got bailed out through public money. Banks should not be too big to fail and like hedge funds, their failure would be good for markets.