CMR Interviews: David Abramson On What Prop Trading Firms Are Looking For

Summary

In this insightful interview, Jason Shapiro speaks with David Abramson from First New York, one of America's largest and most successful proprietary trading firms. They delve into the firm's approach to hiring and managing traders, emphasizing the importance of risk management and a long-term perspective. Abramson shares his experience with thousands of traders, discussing what it takes to succeed in the trading world, the value of being contrarian with discipline, and the firm's unique culture that fosters collaboration and a focus on making smart trades. The conversation highlights the challenges of the trading business and the principles that have contributed to First New York's enduring success.

Takeaways

• 📈 David Abramson from First New York discusses the hiring and monitoring process for traders within a successful prop trading firm.
• 💼 First New York is one of the largest and oldest proprietary trading firms in the U.S., with a focus on risk management and long-term success.
• 🎓 The firm has a rigorous training program for new traders, aiming to develop them into partners over time.
• 🚫 David emphasizes the importance of not being contrarians for the sake of it, but understanding risk and having a disciplined approach.
• 🔍 When evaluating potential traders, the firm looks for a track record of success in various market conditions and a realistic understanding of one's strengths and weaknesses.
• 📊 The firm's approach to risk mitigation includes smaller allocations for riskier strategies and a focus on capital preservation.
• 💰 First New York prefers traders with a directional tilt rather than market-neutral, beta-neutral, or sector-neutral strategies.
• 🤝 The firm values a collaborative environment where traders can share ideas and support each other's success.
• 🏆 Success in trading is not about the money but the process, discipline, and understanding of one's capabilities.
• 🚫 David advises against the pressure to constantly make money and instead focuses on making smart trades and managing risk.
• 🌟 The firm's culture is not about luxury or status symbols but about the business of trading and making money in a disciplined manner.

Q & A

What is the name of the firm that David Abramson works for?

David Abramson works for First New York.

What is David Abramson's role at First New York?

David Abramson's role at First New York is Head of Trading and Head of Talent Acquisition.

How does David Abramson describe the firm's approach to risk management?

David Abramson describes the firm's approach to risk management as focusing on risk-reward over time, understanding market conditions, and having discipline in both good and bad times.

The firm does not run any outside capital as they do not want to feel the pressure to put money in the market when it shouldn't be.

null

How does First New York's compensation structure differ from other firms?

First New York prefers higher performance bonuses over management fees and does not pay for infrastructure or poor real estate decisions. They want to pay for alpha and share profits with those who generate it.

What is the firm's view on traders who are looking to make money all the time?

The firm believes in taking a long-term view and does not expect traders to pull a rabbit out of their hat in the first week, month, or quarter. They emphasize the importance of proving one's ability to make money over time.

What is the firm's policy on traders who want to manage a large amount of capital from the start?

The firm is cautious about allocating large amounts of capital to new traders. They prefer to see a track record of success and risk management before increasing the allocation.

How does David Abramson feel about the importance of being honest with oneself in trading?

David Abramson believes that being honest with oneself about strengths and weaknesses is crucial in trading. He emphasizes the importance of self-awareness and not lying to oneself about one's abilities.

What is the firm's perspective on the lifestyle of a trader?

The firm encourages a business-like approach to trading and managing money. They advise against excessive spending and emphasize the importance of keeping life and work in check.

How does First New York support its traders and assistants?

null

Outlines

00:00

🎤 Introduction to CMR Interviews

Jason Shapiro introduces the CMR interviews, mentioning the episode's guest, David Abramson from First New York, a prominent prop trading firm. Jason discusses the firm's success and David's role in hiring and monitoring traders. The video's audio is emphasized due to technical issues with the video quality.

05:00

📈 The Importance of Risk Management

The conversation delves into the importance of risk management in trading. David Abramson shares his insights on how to identify and manage risk, emphasizing the need for discipline and understanding of market conditions. The discussion also touches on the pitfalls of being contrarian without proper risk parameters.

10:02

🚀 Building a Successful Trading Firm

David Abramson explains the training program at First New York, which has helped develop successful traders and partners within the firm. The program focuses on event-driven, catalyst-based trading strategies and has produced a number of successful traders over the years.

15:03

💼 The Role of Capital Allocation

The discussion highlights the firm's approach to capital allocation, favoring strategies that are not market-neutral or beta-neutral. David explains the firm's preference for directional tilts and how they allocate capital based on a trader's performance and risk management skills.

20:04

📊 Analyzing Track Records and Trader Psychology

David shares the firm's methodology for evaluating potential traders, focusing on their track records and how they perform in different market conditions. The importance of a trader's mindset and their ability to be honest with themselves about their strengths and weaknesses is emphasized.

25:04

🌟 Success Stories and the Right Mindset

The conversation includes stories of traders who have succeeded and those who have struggled. David and Jason discuss the importance of having the right mindset, being disciplined, and understanding the business aspect of trading. They also touch on the collaborative environment at First New York and the value of being part of a supportive community.

30:04

🎙️ Wrapping Up the Interview

Jason and David conclude the interview, reflecting on the challenges of the trading business and the importance of finding the right partners and maintaining a disciplined approach. They acknowledge the difficulty of the industry and the need for a strong support system.

Keywords

💡Prop Trading Firms

Prop trading firms are companies that trade financial instruments using their own capital. They employ traders who manage these trades. In the context of the video, First New York is highlighted as a successful example of such a firm. The conversation with David Abramson, who works at First New York, provides insights into the firm's operations and hiring practices.

💡Risk Management

Risk management is the process of identifying, assessing, and prioritizing risks followed by coordinating and implementing the appropriate responses to mitigate or control these risks. In trading, this involves strategies to limit potential losses while maximizing gains. The video emphasizes the importance of risk management in the success of traders and the firm.

💡Contrarian Trading

Contrarian trading is a strategy where a trader goes against the prevailing market sentiment or trend. It involves buying when others are selling and vice versa. The video discusses the challenges and potential pitfalls of contrarian thinking, especially when it comes to understanding and managing risk.

💡Asset Allocation

Asset allocation is the process of dividing an investment portfolio among different asset categories, such as stocks, bonds, and cash equivalents. The goal is to optimize returns based on an investor's risk tolerance and investment objectives. In the video, David Abramson mentions that smaller allocations to riskier strategies are a key risk mitigator.

💡Performance Bonuses

Performance bonuses are financial incentives given to employees based on the achievement of certain performance goals. In the trading industry, these bonuses are often tied to the profitability of the traders' investments. The video highlights a preference for performance-based compensation over fixed fees.

💡Market Neutral

A market-neutral strategy aims to profit from securities regardless of the direction of the overall market. This is often achieved by taking offsetting long and short positions. The video suggests that market-neutral strategies may not be suitable for all trading firms, especially those looking for more directional trades.

💡Training Program

A training program is a structured series of activities designed to teach new skills or knowledge. In the context of the video, First New York has a proven assistant training program that acclimates young traders to the firm's thought process and trading strategies.

💡Camaraderie

Camaraderie refers to the spirit of trust, friendship, and mutual respect among a group of people. In the trading environment, camaraderie can foster a collaborative atmosphere where traders support and learn from each other.

💡Ego

Ego, in the context of trading, can refer to a trader's self-confidence or self-assurance, which can sometimes lead to overconfidence and poor decision-making. The video suggests that managing one's ego is crucial for successful trading.

💡Long-Short Equity

Long-short equity is an investment strategy that involves taking both long (buying) and short (selling) positions in stocks. This strategy aims to profit from both rising and falling markets. The video discusses the firm's preference for traders who can navigate this type of market dynamic.

Highlights

David Abramson from First New York discusses the hiring process and risk management strategies for traders.

First New York is one of the largest and most successful prop firms in America.

David has been managing money for First New York for around seven years.

The firm focuses on hiring traders who understand risk management and have a contrarian approach.

David emphasizes the importance of not being contran price but being contrarian to the market's expectations.

The firm's risk mitigator involves allocating smaller amounts to riskier strategies.

First New York does not run outside capital and avoids pressure to put money at risk when it shouldn't be.

The firm prefers performance bonuses over management fees and focuses on paying for alpha generation.

David shares his personal experience of starting with a small capital allocation and growing it over time.

The firm's approach is to use capital when it aligns with the trader's risk and strategy strengths.

First New York has an internal assistant training program that has produced additional partners over the years.

The firm looks for traders who are honest with themselves about their strengths and weaknesses.

David advises new traders to go slow, prove their ability to make money, and then gradually increase their capital allocation.

The firm's culture is collaborative and non-materialistic, focusing on making money and supporting each other's success.

David shares his philosophy on living modestly and not spending money on luxuries, emphasizing the business aspect of trading.

The firm's office environment is described as collegial and focused on trading, rather than on appearances or luxury.

David discusses the difficulty of the trading business and the importance of having the right mindset and partners.

The interview concludes with a reflection on the challenges of managing money and the need for a disciplined approach to trading.

Transcripts

[Music]

welcome to CMR interviews by Jason

Shapiro in today's episode Jason

interviews David Abramson from first New

York on what prop trading firms are

looking for to learn more about Jason

and David check the episode notes in the

description hi so this week we did a

interview with David Abramson um from

first New York which is one of if not

the largest prop firm and most

successful prop firms um in America

they've been around for a long time and

and they are very successful and and

David um is the guy who really

interviews and hires and and does a lot

of the monitoring for the people who

trade money there so the video as it

turned out came out very grainy for

whatever reason so we're just going to

put the audio up but I would really

suggest listening to this I think

there's a lot of value added here okay

thanks and I hope everyone has a has a

good week okay hello today is feary 20th

Tuesday February 20th 2024 I'm Jason

shapir with Crow Market report.com and

today we're really lucky because we have

DAV Abramson speaking with us and David

works at uh first New York asset

management is that

right investment advisers first New York

investment advisers which is to my

knowledge at least one of the largest

and oldest and most successful uh

proprietary in the country I manage

money for these guys I have been

managing money for them I don't know if

we're going on seven years or something

like that already six or seven years the

pandemic yeah that was before the P yeah

yeah and I gota that uh these guys are

great and I think people that noo I

don't say that about a lot of people and

I've had many discussions David runs and

I hope I say this right but he does the

hiring of of who is going to manage

money for them and has done that for a

long time and therefore has seen God

knows how many multiple hundreds if not

not thousand of Traders come through

there that he has interviewed that he

has hired that he has not hired that he

has fired and he now but he also

monitors what they're doing uh p&l wise

riskwise and is very involved with that

so he has a lot of experience in

watching Traders succeed and fail and we

have sat and had many about that very

topic and I always said so interesting

because I thought that his Viewpoint is

so good that I wanted to do an interview

so David what welcome thank you Jason

tell me where I was wrong tell me what

exactly what you do there and how long

been doing it and how many Traders and

all that stuff I would say I have been

doing it now

for seven eight years in this capacity I

my title is head of trading head of

talent acquisition but I do do the

things that you mentioned plus a few

other things I'd like to not bit on

camera um at the end of the day you

pretty accurate in regards to the

thousands and thousands

of portfolio managers Traders PMS

analysts onetick ponies all types of

approaches strategies risk regimes and

markets we see thousands of people a

year can't say easily what we do like

easier for me to tell you the things

that we don't look for but we'll get

into that as we talk a little bit more

about what we look for and how we do it

I essentially work with uh two other

members of our investment committee the

chief risk officer of the firm and the

CEO and the two of us with the help of

two analysts on the risk team are able

to dive through most strategies and

really peel back the proverbial onion to

figure out most people's approach the

way they think the markets

need the risk regimes they like the

places they struggle and then we go from

there cool and I'll just add as much uh

analysis as they do into this if I

recall my interview which I had taken

about a year and a half off of trading

and wented to sort of semi- retirement

and then when I decided to come back I

was in David and they gave me money and

I think lasted about three minutes

because he asked me how I trade I said I

try to figure out what everybody else is

doing and I go the opposite and he just

laughed and said okay you're

H that's why we've gotten along ever

since because he got right away what I

was saying and the reason he got right

away what I was saying I believe I like

the believe it's because he's seen so

many traders in trading and he knows

that the vast majority are going to not

succeed many reasons and therefore to

make a market so to speak to those

Traders maybe will succeed I think that

was the thought process but so I'll tell

you it last a little bit more than three

minutes yeah but a good understanding

the way you run risk was really the the

sealer for me in regards to it's okay to

think contrarian but I've watched plenty

of people with a contrarian opinion get

carried out behind the proverbial

Woodshed they don't understand risk

parameters and how to control that

contrarian tendency to want to pound

your chest and say I'm right everybody

else is

wrong correct correct which is why well

first of all I always say don't be

contran price be contrarian

participation being contrarian price

everybody wants to be contrarian but

what is contrarian right and being

contrarian price I think you agree we'll

get you carried

out you know you could have been contrar

in price on the video for the last 12

months and you just uh and I'm had guys

that were trying to do that even that I

think is fine right if that's what you

want to be but must the's making a new

high then stop shorting it you know just

must have the risk discipline must have

a reason to be there must have the

discipline $100 to make four right

exactly risk for to make a

100 good sounds a sounds a little better

to me yeah that's good and I think

that's

exactly as I always said I think that's

exactly the point with all of this right

it's all about risk management and it's

all about risk return over time and

understanding what that

means right absolutely so what else can

you tell me I would also tell you single

greatest risk mitigator for us is also

so the size of the allocations and the

gmv very important to little riskier

strategy little smaller allocation and

that's the single greatest risk

mitigator on the planet is to get

smaller in size and deal with whatever

conditions are presented and wait for

your Catalyst wait for your event wait

for your strategy your plan to play out

because you got to live to fight another

day we could talk about analogies all

day long but

you gota you you gotta plan to open your

doors tomorrow can't do that without

risk discipline be around long enough to

we say yeah and better to be lucky than

good and know when whatever is that you

do that it doesn't oh you know that

particular thing doesn't always work

works sometimes and and when it's not

working you know mitigate your risk my

contrarian stuff this has not been the

year for that are right we're until what

mid-February this has not been the year

for that you can see it in in all the

numbers Trend following is crying this

year all these all these strategies

pretty much are crushing it this year

trying to fade TRS this year has just

been a horrible horrible way to try to

live I've been fortunate that I really

haven't had signal to fade that many

Trends so therefore I haven't really

lost you know any money and I think that

that's fine if I cannot lose money while

Trends and everything are ripping then

will have be around for when friends end

and hopefully catch them and get that

and I think D it as an allocator to

me understands that which is so

important for me for my CLI to

understand you know it's so easy

everybody just wants to make money all

the time just go make money and that's

kind of the first New York thing in a

way is like if you make money they're

good with you okay he doesn't call me up

and like hey why'd you have this trade

on that doesn't fit into what you told

you know he doesn't you know just make

money but we understand you will lose

sometimes just keep that small and and

that's good it's almost like they look

at it that easily to me it's a lot of

common sense and over thought but the

truth of the matter is is that there are

times in the market you're going to make

money your strategy is going to pan out

and those are the times that you should

play and be involved and and there are

times when it doesn't work and those are

the times they have to step away one of

the reasons why as a firm we don't run

any outside capitals we don't want to

feel the pressure to put money in the

market or at risk when it shouldn't be

there and we feel the same way with our

managers and our Traders our thought

process is use the capital when you

should not because you can and when you

should is what aligns with your risk

thought process what align strategy and

what aligns with where your strength is

and if your strength isn't trading

options because you have no idea about

the K and what it means and that the

mark options market makers rule the

world you shouldn't be trading options

and and that's the way we think about it

you have a skill set use it and one of

my favorites is we all remember I'm a

humongous Sports guy with huge Sports

analogies and we all remember when

Michael Jordan went to play baseball it

really didn't work out that well stick

with your skill set and your strategy

and use your risk discipline and over

time you'll make money or you maybe you

shouldn't be in the business Amen to

that Amen to that there's such a

pressure all the time to just make money

right in particular I think well with

including the people who you because for

the most part they don't make money

unless they make money right they're

getting paid a nice percentage of what

they make we we don't pay when we uh

allocate internally externally we're not

payers of management fees we don't want

to pay people to put money in the market

we want to pay people money to take

money out of the market and share it

with them so we're fond admirers of

higher performance bonuses than most

firms and we're fond admirers of zero on

a performance basis I I don't want to

pay for someone's infrastructure I don't

want to pay for someone's poor real

estate thought process or need to hire a

team of analysts I want to pay for Alpha

and I'll share more of the profits with

those that know how to generate it and

it yeah and uh it's funny because when I

came

back I took that thought process to

build my company all the people that I

ended up

I ran money for first new y probably for

like three years before I then went and

took outside

money and all my fee structure became

zero and because of that very idea right

they don't get pissed at me if uh I'm

not doing any because they're not paying

me any kind of monthly management fee

right I'll get a higher back end if I

make money and I'm happy to do that and

my expenses are very low so I can do

that but yeah it doesn't pressure me

it's just one of those you have like

surround yourself in your life to me to

make sure that you can follow these

rules and that helps me a lot I don't

feel the pressure to have to trade

because no one's calling me up being

like what the hell we're % you know a

year and you haven't made a trade in six

weeks or something you know what I mean

it's like okay well you're not paying me

anything to so you know you're paying me

to wait essentially for for the lwh

hanging fruit and you know recently

certainly the last four or five months

I've had the least amount of that I've

ever had and career right I mean you see

it David I'm barely trading and what can

I do you know what I mean if it's not

there it's not there you know the worst

thing you could do is to force it right

so I don't feel the need to force it

because I'm not getting paid of

management Fe so I think that that makes

sense and I get it and I I kind of

really that was ingrained in my brain

when I started managing money for for

you guys um because it's just it's just

so true it it it helps me so

psychologically as a Trader to not take

management fi I also think and not for

all so I don't want this isn't a brush

for a broad stroke comment but I also

think it's a little indicative of what

someone's thought process is in the

beginning of a running or building a

hedge fund or an asset management

businesses are you in asset Gathering

business or are you in the p&l business

and you tend to see those that think

about construct things one way and those

that think about asset gather build the

orc chart and hire all the phds and it's

a very different thought process and it

it steers us in a couple directions as

well yeah I should have been in the

asset gather

[Laughter]

business guys out there doing it that's

for sure I took I certainly took the

wrong road man I actually have to

freaking make money to make money these

guys just you know they do nothing right

not they don't they don't do nothing but

there's a lot of them out there that

we've seen that uh that don't do very

much no they're very good marketers yeah

which I'm not so there you go a little

bit of a talking head lately a little

different I'm a talking head but I'm not

a very good marketer but fortunately I

don't need to be because uh I'm not

looking at raise assets I have enough

assets so yeah neither are we please no

marketing no this isn't that's not what

we do we don't want any customers I

don't want somebody calling me up ask

not long this or short that or nope

thank you we have a very very good

partnership internally with some really

risk tolerant individuals and it's

they're all Partners within the firm and

it's it's all and it's great

conversations and and a good

understanding of making money good smart

trades and losing money on good smart

trades helpful and that's you know like

you said when you surround yourself with

like-minded individuals it's very

helpful and trying to accomplish what

you want to accomplish there's a couple

things that I've always what you talked

about um and maybe you could expand that

but this idea of like you like people

that come to come in and I know this is

hard for somebody like right out of

college or something like that but you

like people to come in and like they

don't need to make money for a year or

two years you know can you expand on

that one a little bit yeah for so one of

the things that you said for we've been

around for a long time this is coming up

on four decades and and one of the ways

that we've grown organically over the

years is we have a very

proven and tested assistant training

program where we have Partners in The

Firm that are essentially desk heads or

se you know not we don't have any sector

specific individuals but there might be

a couple of pillars within the domestic

Equity Group and a couple within the

International Group and they're very

good at what they do and they're

invested in the firm and they therefore

bring on assistance young people read

research and and do work and and

understand charts and understand what

makes markets move and how we operat so

that after a Trader hits the screen what

happens and what goes on and why certain

trades are held at certain Prime Brokers

and cers asset classes are better

serviced elsewhere and just a general

understanding for what goes on in the

market and and she's training this

person and we pay them a salary and we

offer them benefits and we're not risk

with this person but we're trying to

acclimate them to our thought process

which is event driven Catalyst type

shorter term ter swing trading and this

partner trains this person and takes

them under their wing because they want

to turn him into a producer and a

partner in the firm and and and also

have them be another set of eyes and

ears generating thoughts and markets and

and coming up with good risk-reward

trades which is what we look for and

that program has produced

3540 additional Partners over the years

and it's just fantastic because it

creates a certain amount of camaraderie

and Endearment and it also creates a

little ownership to a central nervous

system that you want to contribute to

and you want to be a part of and it's

worked over the years where we've

created and have partners that have been

there since the late 80s early 90s that

have been made multi-millionaires

through the partnership through their

own trading and the partnership

involvement which you know we're fond

admirers of shareing profits that's for

sure hold on I was thinking of the other

one and I know we can I'll I'll say this

out loud Jason not to age myself but I

went through the training program I

worked for one of the partners in The

Firm right about the time when the

internet was coming on I actually had to

leave the firm for the afternoon and go

meet the Cable Guy to install the AOL

dialup so that he could from home back

in the day and you've watched this

business change over the years and that

you know our assistants don't go home to

meet the bment anymore but our

assistants do dig in and and listen to

research reports and listen to

conference calls and read 10ks and to

really understand what makes markets

move and stocks

move how many people would you say

approximately at least are managing

money for the firm right now both and I

know you have internal guys who only

manage

first and then you have some external

people like me who manage first New York

money and possibly some other money so

we have

about

8590 internal proprietary allocation

spanning asset classes from domestic

equities to International equities to

macro to

Commodities and we have about 25

separately managed accounts allocations

to external managers like yourself that

may run other pools of capital they have

their own compliance and infrastructure

and operations and either transact

directly onto our balance sheet or send

us an end- day file and we share some

profits in them we're we're admirers of

the emerging manager those that are

spinning out doing their thing we

like um good proven stories and we like

young entrepreneurs and that's what we

look for in the external world and the

internal world how would you say it

breaks up if you could say approximately

in terms of doing long short Equity how

many people are doing whatever you know

one thing I love that he always

talk one of my faite

David he tells me how like all these

people come in here with these um algo

systems that are completely Market

neutral long short and he just

automatically tells them thanks but no

thanks we don't

allocate enough capital for a market

neutral beta neutral sector neutral

Factor neutral I'm trying to make a

quarter of a basis point each month and

make 4% a year and hope somebody levers

me up in the background and I get the

share in that too that that doesn't work

for us we tend to like a best type of

construct and a little bit more of a

directional t tilt it doesn't you know

we don't like long only we don't like

short only and we don't like Market

neutral beta neutral sector neutral

Factory there's a lot of Market real

estate in between those extremes and

that's what we tend to look for and

because we tend to share

per the humongous hedge funds that get

the pass through all their

expenses we all at a little bit smaller

lines and managers can do the math those

no that are they're a little bit

capacity constrained they may be a

little nichy in what they do and that

might be a better construct for them and

you know it depends It's Different

Strokes for different Folks at our firm

you know if a manager like yourself

wants to go on vacation for a week and

shut it

down say God bless good luck have fun

and for us it's very different you know

it's not the like you mentioned before

the need to manage the capital and

therefore it's a little bit of a

different environment a little bit of a

different manager with a little bit of a

different thought process now yeah I am

that's not to say that if that guy

showed up with the market neutral beta

neutral sector neutral Factor neutral

strategy and it made a lot of money that

I wouldn't take a deeper dive but most

make a lot of money and need a lot of

Leverage and we're not that's not the

way we do things I don't know how

everything neutral all the time quite

frankly can make a lot of

money I mean other words I know you

agree with this because you say at the

middle time you got to take a bed at

some

point you know I mean and it might be

wrong and that's fine you always say

we're in the risk management business

right we're in the risk business you've

said that to me you know you take a bet

and if it's wrong then cut it lose a

little bit it's fine right and live to

fight another deck right the other thing

I have uh come to learn about your firm

which I also love you know people come

in and this happen and the payout is

pretty high over there right one of the

highest out there um if not the highest

out there and they come in and they

start doing the numbers in their head

and they just trade big and they just

want to make that quick Buck um and what

I have told people as you know that

either introduced to the firm or that I

knew that were joining The

Firm go slow okay because these dudes

take a long term view of this okay when

I started for example I hope I can talk

about this David but when I started with

first New York listen I had worked at a

pretty large hedge fund for a number of

years I managed up to like $600 million

at one point okay and when I left there

I had started my own firm and I was

managing like $250 million at my own

firm right and then I took time off and

um found that I wanted to get back into

it and I spoke with David they gave

me a stop loss of about

$200,000 and if um if we just back into

the math if my big draw down is 5% right

that's $4 million under management in my

eyes right so I had to go from 600

million 250 Milli to Imaging $4 million

and a lot of guys can't handle that

right because their egos are so big

right oh I don't manage four million but

I didn't care right because I just

wanted to manage money and what I

learned

was W with David as I believe is the

exact right way to do it if you show

that you can make money then there's

money that they can then reallocate to

you right you make money they up it

because now you're playing with house

money so to speak right and that's what

I tell all the people you know that when

they join this this firm and they manage

money for this firm like dude whatever

you're about to do you know cut it in

half or or or cut it in a third or cut

it in a quarter okay and just go a year

and show these guys that you can make it

doesn't matter how much just show them

that you can make money because they got

plenty of assets toate and once you

become their friend and show them that

you know what you're doing then you can

go and make money and I think that such

an important concept for everybody right

if you're trading your own account right

go slow I know you want to get rich this

year I I I know we all do okay but go

slow take time prove

yourself that you can make money and

then start to up the size yeah we we

tell everybody we don't expect anyone to

pull a rabbit out of their hat in the

first week the first month the first

quarter of the first year you're right

the longer you have access to Capital

the more good situations you can put

yourself in and the more money you can

make and it's not about the elevator

conversation about what your a

it's about at the end of the year what

kind of money you make and how you make

the money and do you keep the money and

for us we tell everybody in the

beginning exactly that one of

the largest e and principles at the firm

is the risk that we take in the

beginning with someone we're very very

disciplined when someone walks in the

door that listen we're going to risk x

with you and until we make X you know

we're not stepping on the gas and we're

knocking up the allocation but our

conation is going to become common sense

at that point if it's working and you're

making money you're going to come and

you're going to knock on somebody's door

myself or the chief risk off hey things

are working uh I'm seeing the ball can I

can I have access to a little more

capital and you're gonna ask the

question and the answer is going to be

yes sir because it's working and if it's

not working guess who's not knocking and

that's the way we think about it so

common sense spin it around am I'm gonna

come to you J and say hey hey hey give

me all of your capital on day one we've

never rubbed two nickels together I've

never made you a quarter you have no

idea how I think how I act under

pressure give me access to your balance

sheet and I need X and I say okay here's

X and you say no no no I need 100 times

x I say sorry that doesn't work around

here yeah I need 100 times x too don't

we all need 100 times x yeah so do I

show me what you got first and then we

can talk yeah I crack my jokes all the

time and you know me I am a little bit

of a wise ass I say when we come and we

sit down and it makes sense I'm then

moving to St Louis because it's Missouri

and Missouri is the show me state and

show me why I should give you more

capital and show me that you know how to

handle risk and show me that you

understand different risk regimes and

show me you understand your strengths

and your weaknesses and communicate with

us and let us understand how did

micromanaging get involved in every

trade no way know how but I want to make

sure you're thinking clearly I want to

make sure you're seeing the ball and I

want to make sure that our interests

remain aligned it's just such way about

all of this stuff whether you're

allocating Capital like David is or

whether you're just trading your own

Capital such the right way to think

about this stuff and that's why they're

so successful you know what I mean when

not don't joke that it's common sense

but it's not that common well they say

common sense is not that

right but like again I want to reiterate

we're talking to somebody here that it

works what they're doing Works we're

we're successful at what we do from

Trading you know it's expensive to

operate a firm with multiple PBS in this

St and multiple venues and staff and all

the infrastructure to support it

but perspective we do pretty

well and I I really believe it's because

of these princip these exact principles

that that that you're speaking of right

so learn from people have been

successful okay the these guys have been

extremely successful and this is in my

view why it's not because necessarily

David has this magic ability to pick the

greatest traders that have ever lived

okay he did find one of course

but he he doesn't have this magical

ability to to pick the greatest traders

that ever lived it doesn't really even

exist right but he does have the ability

to use this common sense to understand

right risk reward right and I'll tell

you the rest of my team good Chief risk

officer is unbelievable when it comes to

derivatives and understanding volatility

and understanding people's understanding

of those assets and the way they move

and the they think about them and the

way they think about risk which to us is

you know first second and third

important things and we also have a

really young on the team that is a

phenomenal thinker and a quer and a

Quant and to watch eviscerate wannabe

quants who Quant I just play one on TV

it's fun at times

and entertaining what do you do about

the fact that always say this but the

vast majority of the people that walk in

there looking for Capital must be shown

a track

record right nobody out there I always

say like nobody's out

there with a negative track record going

give me Capital right so everybody's out

there that can show a positive you know

return how do you decipher well when we

look at track records we look for and

not a secret SAU we look for those that

make money in different markets and what

happens in different months and what

type of regimes this was an ugly month

this was a positive month did they do

this month how did they do that month we

look at dailies we look at Daily

volatility within portfolios to see how

people act we watch people sometimes

take poor performance out strategies

it's omitted from a from a strategy Oh

by error and it's pretty easy to find

some of these things if you're diligent

in looking you know it's we do little

background checks on people and some of

the things that come up are pretty

telling about where where they are in in

in life and at the end of the day there

everybody makes mistakes everybody has

hups but it's for us it's really about

the person about where they are in life

about how they're operating about it's a

a total picture and we have a really

good crew that that's really good at the

different components of deciphering that

what else can you tell everybody that

will make them a better Trader over time

what because you've seen so many people

succeed and fail I tella it's funny that

you say I wrote it down a couple notes

and and for me it's really about listen

I joke around with a lot of people and I

ask the question you have a mirror in

your house do you in front of it and are

you real with what you see there you

know some people lie to themselves it's

like The Gambler who goes to Vegas and

always wins we know that doesn't exist

we've all been

there the casinos aren't getting bigger

and bigger because we always win right

and at the end of the day it's it's

those that are really real with what

their strengths and weaknesses are there

are some people that are just really

terrible at trading Futures and

get emotional about it like no and you

have to take out the bad things and have

to expand on the good things and those

that are honest and look at themselves

and know who they are and know what

they're good at and what they're poor at

it it's it helps to make a very

difficult business a little bit easier

if you're candid with yourself and not

that guy who says every time I go to

Vegas

I from from another perspective it's you

know for us are successful at what you

do and how you do it and do you like to

talk about

it it's it's indicative of those that

have success don't really talk about it

one they don't really want to share

their strategies they don't really want

to tell people what they're doing that's

successful and they're not records

they're not talking about how much money

they manage and talking about how much

they make and it it's they keep life in

check they keep what they do in check

and they understand that this is a

business it's not I'm not a gambler not

Mama doesn't need a new pair of shoes

I'm running a business and and that's

other things that are really important

you know you

don't you don't make 10,000 and buy the

million doll house you make a million

and buy the1 th house those are the

things that make you make smart

decisions running the business of life

well helps running the business of

trading well and those are the things

that we look

for I'm getting chills on that one

because know that's things that I uh not

only that I I do but I pound into I try

to pound into people you know I always

say the only uh the only Ferrari I've

ever had is uh my partner bought me

which is right here that's better than

Ferrari I've never had yeah I'll tell

you this Jay not to tell tricks not to

tell anything but emerging manager spins

out of one of the big firms has had a

lot of economic success building his own

firm that's dying for me to get on a

train to go to Greenwich to see the

really really nice off East and meet his

team of five analysts and meet his coo

and meet his chief marketer and he

doesn't have $1 under management yet I'm

apprehensive to allocate to but the guy

who FES Jeff Blue from Dallas and has a

geographical advantage down in the oil

and gas industry and slept on his

cousin's couch in Queens and rode the

train in the morning to meet me is my

guy because he's thinking about the fact

that I want to get to the Mountaintop

I'm not there yet and I can't I'm not

portraying that I'm there he walked in

he was sweating he got lost he may a

culprit and said I stay in Queen's on my

on my cousin's couch he thought it was a

terrible thing I fell in love he still

manages money for us today yeah that's

uh that sounds like the Story of My Life

um I got I have people tell me all I

have people comment to all the time you

know about stuff like that you know why

don't you drive a NIC car why don't you

B your house why you know why don't you

do this why don't you do that you don't

get it man you know you don't get it and

and because of the way I came up too

right um which is that I started with

zero Blew out a few times learned what

that felt like um I learned those

lessons as we've talked about many times

I I

don't I don't spend money man I I don't

care how much I make like

vacation I have a good year okay I'll

take my family and you know whatever

we'll fly business class or whatever and

and have a nice vacation but other than

that I got no interest

in buying a new house buying a new car I

mean once to buy a new car because I run

my cars into the ground but you're

talking about every 10 years I'll buy a

you know a new car but I I think it's so

true and it's all I want did a video

about that guys were making fun of the

chair that I sit in because it had like

a huge rip in it it was all messed up

and I never thought twice about right

and truthfully part of my chair was like

metal piece was coming out and digging

into my ass and I never thought guys

were laughing at me and making fun of me

and I did a whole video about it I was

like look it's a mindset okay it never

even occurred to me to buy can I afford

a new chair I mean what's a new chair

cost a couple hundred dollars

fortunately not would I can afford that

but it never even occurred to me right

and then I went and I did one after that

but the truth is that's got to be the

thought process and people say it all

the time it's not about the money it's

about the process I have to tell you

that U one of the most successful

traders in The Firm runs our aventuro

office and he's International Trader

he's phenomenal risk taker he runs a

very very risk discipline approach and

strategy trains assistants all the

times pandemic hits the whole world

moves to South Florida I start meeting

interview in people that have migrated

down there and they looking for a home

and I sent a few of them into the office

and one of the guys comes back he's whoa

whoa I can't work at that office I'm

like how come he's

like Boston microwave there's a the

chairs are a little

tattered and and if I could tell you how

successful this guy is that runs that

office which I would never it's

remarkable to me that that was what was

important to this guy you know that that

I didn't have a leather couch in the

foyer it's just not a Trader it's it's

just not a Trader a Trader could give a

flying crap about any of that

right correct I believe and I came from

the world I didn't come from the world I

once got into the world of the the large

hedge fund and

the what do they call the things that

they all wear the vests you know with

the name of the firm on there and all

that stuff um I was scared to put on a

fleece today because I figured you were

gonna

comment about it you got the fny flee is

are going I never but I figured you were

gonna give me a hard time no matter what

I was weird yeah um I I was part of that

world for for a number of years and

um that again why I love first new first

of all the office of first New York in

New York which I go to what once a year

twice a year if I'm in New York I come

in I say hi to you I hang out a little

bit right um it's awesome

but it's it looks nothing like a hedge

fund office it's just one huge open

floor with desks for people to sit at

computers for people to look at and

trade off of right I me I think they

have like a little maybe a little snack

bar or something like that but you know

there's none of this like everybody gets

you know this is what we had at the

hedge funds everybody gets to order free

lunch every day and there's this huge

like spreads coming in all the time and

you know

it's just about that right it's about

sit down here here's your desk here's a

desk for you here's a whatever you need

manufa and manufacture a living and make

money man that's it that's it that's no

one wear a suit you know what I mean no

one has to wear any I've seen guys in

there in a t-shirt you know no one cares

about any of that crap so shorts and

t-shirt we tell them we should wear that

to the office we try to be a little B a

little business casual you tend to come

in test test the parameters but you're a

visitor we're good with that but that

that for us the office is a is a pretty

collegial environment with all kinds and

all strategies and all approaches and

it's collaborative because we're all

there's a lot of partners that trade in

the office that come in every day that

have come in through the pandemic that

still enjoy that listen everybody misses

a piece of research everybody doesn't

read a chart or or everybody reads A

report and either maybe just pulls and

the things that work for their thought

process or their strategy and everybody

needs a little smack in the face every

now and then about some thought process

and it's good to be in an environment

where people give a about you and

how you work and what comes out and your

product and your production because your

success is their success so it's a real

collaborative environment that doesn't

have happen at a lot of

places no it's true I um I don't go in

there I've managing money know six or

seven years I've been in there maybe

five times um but I was in whenever that

was six months ago or something like

that had a few hours to waste I was in

New York I had something to do later and

I had a few hours and you know I they

hooked me up with a computer and I was

able to sit do my thing and I did start

talking to some of the people that were

sitting around me who I've never met

before I don't know any of the people in

there trading I know zero of them and

it's true I sat there and spoke with a

few of them and super guys super cool

people super open-minded to different

ideas you know some who were in the

middle of struggling some who were in

the middle of doing well but honest

about that how many guys do you meet

that say that you meet him the first

time how you doing oh man it's been a

year I mean I'm not checking his p&

say what he wants to me I'm not going

over to you and saying hey how's this

guy doing you know what I mean he can

say whatever he wants to me and that's

what the one guy said I'm having a

here right off the bat I respect him yep

because no one says that no one says

that nope nope nope nope nope nope nope

nope nope nope

nope some guys always go to Vegas and

win yeah I ain't one of

them I don't go to I'm too cheap me

either me either I have too many kids

and too many bills that's right well

that's awesome David any any last

thoughts well that's it for me today I

um enjoy having a conversation with you

always we'll always talk more metrics

and the way we think and the way we feel

my absolute pleasure awesome well I

appreciate your time David and I

appreciate everything you guys are you

and you guys are great I love it I've

never uh I don't want I don't want to

say I've never had a better client

because I have some other clients that

will listen to this but you are one of

the good ones let me put it you that way

and there are people that I have not

taken money from because I don't I'm

fortunate that I'm in a position where I

can do that but Ah that's a good one

that's the note we end on difficult

business difficult people in a difficult

business it just gets in your head

they'll get in your head this game is

hard enough correct I mean and you think

that it's not going to matter and blah

blah blah it freaking matters when I had

my CTA after I left my hedge fund I had

to take in whatever clients I could get

because I went in there and I had five

people working for me and the office and

the computers and the whole thing and

all that stuff and everybody works for

me wants to make a million dollars a

year I had to take in whatever clients I

could get and that's why I closed it

down and quit after three or four years

because I couldn't take it man these

guys would call me up you know what I

mean I have a bad week or whatever and

not even a bad week just something with

in my expectations maybe call me up tell

me I suck what the hell are you doing

blah it doesn't work it doesn't work you

know what I mean it just doesn't work um

and I learned that lesson important the

right Partners the right risk Partners

important to understand what goes into

it how hard it is and what the input and

output has to be it is very very

difficult very difficult have a lot of

respect for those that manage money and

do it well let's say that again this

game is

extremely

difficult I'll I'll now I'm GNA

officially end on this notice we all

know one of the most difficult

businesses on the is the restaurant

business with a success rate in the low

single digits our business success rate

is not that far behind low single digit

sounds about right to me which is why

as always I suggest don't trade fade

find the other 98% and just take the

opposite side it's the easiest freaking

way to make money to me because they're

all going to lose money so anyway end on

that note David as always thank you so

much you're you're you're a gentleman

and a scholar my pleasure sir thanks for

having me always enjoy it have a great

night all right we'll talk to you soon

byebye subscribe to the crowded market

report YouTube channel for more CMR

interviews and other content from

Jason

[Music]