OLD Media Moves

Ritholtz: What I would have asked high school “investor”

December 18, 2014

Posted by Chris Roush

New York magazineBarry Ritholtz writes for Bloomberg View about the New York high school student who duped New York magazine reporter Jessica Pressler into believing he had amassed a $72 million portfolio by investing during lunch breaks.

Ritholtz writes, “But in thinking about this episode, I started jotting down questions I might’ve asked the whiz-kid trader if I’d been confronted with the story:

— Could you provide some context? If you made $72 million, what did you start with and who provided you with capital?

— Did you begin with $10,000 or $100 million? Without context we have no idea what the performance was — and that would be the case even if the $72 million figure was true.

— How did you put together such a spectacular trading record while going to high school? When did you find time to do analysis and trade? Did you put in trade orders between classes?

— How does a random kid beat the best-equipped, fastest and smartest algorithms, run by firms with effectively unlimited resources to pursue trading profits?

“We could go on about financials for a while. But here’s a broader point: there will always be ways to verify a financial transaction — trade documentation, assets held at custodians, audits from accountants, monthly statements from brokers. Yes, the kid may have provided the reporter with a facsimile of a bank statement. But the absence of proof of winning trades should have been a gigantic red flag.”

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