Ode to Victor Niederhoffer

I became part of Vic’s orbit in 2009 when I reached out to inquire if he might be both my graduate thesis advisor and my mentor in the ways of great trading. Admittedly, I did not know all that much about Vic or his approach when I reached out (information then wasn’t quite what it is today and Vic was perpetually cautious about exposing his methods in public) but I knew that he had been a top Soros lieutenant for many years and had made (and lost) a few fortunes so that was good enough for me.

People often balk at the idea of learning from someone who has lost everything (not once but twice) but I figured he might know more than the rest as a man of his intelligence and thoughtfulness almost certainly had some idea of why he had wiped out and thus he likely knew both what to do and what not to do.

After a few back and forth emails, Vic invited me to attend one of his famous Junto meetings which, at that time, he held at a library in Midtown Manhattan. I showed up in a suit and tie which was 100% not the right attire for the function. The meeting carried on for a few hours and I, myopically focused on markets at the time, paid little attention to the happenings biding my time until Vic and I could talk. After the meeting I approached Vic and introduced myself and that was the first time I heard his highly distinctive and surprisingly unexpected voice. Thanks to modern media all can hear his voice but, back then, podcasts weren’t really a thing so I was a bit shocked to discover that Vic’s voice was somehow both soft and craggy with a heavy Brooklyn accent.

I told Vic who I was (I figure he already knew given my attire) and we talked a bit about ideas for my graduate thesis (a paper on cobweb theorem manifested in short term ratio trades in agriculture futures). Once that part of the conversation was finished, I asked if he might be willing to also take me on as an unpaid intern so that I could learn at his feet. He told me to walk with him on his way home so we could discuss. When we got outside, Vic climbed on his bike and started peddling. As I had no bike and he was starting to move at a good clip, I wasn’t quite sure what to do so I started jogging alongside him, dressed in a suit and tie. My jog at times turned into a run but, thankfully, a few red lights forced him to stop at intersections and, by the second or third light, he had agreed to the internship. He proceeded to peddle off toward the Hudson River, and I took a deep breath happy to both have a chance to learn at Vic’s feet and to no longer be running in suit shoes. Thus began my time with perhaps the most unique and interesting man I’ve ever met.

While I don’t want to go too far into the weeds, I will share a few highly memorable details of my time with Vic:

Vic loved musicals and they played all day long in his offices. For a time, I ran the CD player (Vic had not shifted to the digital world regarding his music) and was tasked with ensuring the music almost never ended. Memorable musicals include South Pacific, Company, Candide, and Fiddler on the Roof. Vic seemed to like the song “If I Were a Rich Man” from Fiddler on the Roof and I always thought it was somehow funny or ironic that here was this famous speculator sitting in his massive Connecticut estate singing about being a rich man like (literally) poor Reb Tevye did in his barn in the musical.

While I believe that musicals were Vic’s favorite, I have two other music-related memories. First, while I don’t know why, he liked to listen to multiple versions of Old Man River. Second, when certain songs from operas would play (usually part of a mixed CD) he would have me skip ahead as he felt the songs were too socialist/communist. In hindsight, I think this song skipping was a demonstration of just how fiercely he supported individualism and capitalism, mainstays of his personal philosophy.

In addition to appreciating music, Vic had incredible collections of books and, like many highly accomplished individuals, he was a lifelong reader who covered a broad array of subjects. Food for thought for those who might strive for a life as full as Vic’s.

Another highly memorable facet of my time with Vic related to his dietary habits. Vic usually ate bread for breakfast (he loved good bread) with a cup of tea that was often more fresh lemon juice than tea. I once asked his assistant to make me a tea like his just to give it a try and it was almost like drinking straight lemon juice!

Continuing on with the subject of food, he often ordered fish sandwiches from the various diners near his place in NYC which I found a bit strange – fish from a diner struck me as not the ideal choice, but he really liked them.

Beyond that, he once suggested I order a lox sandwich which he was particularly fond of. I wound up eating half and put the rest in the fridge. As I was leaving for the day, I told him that I had only eaten half of the sandwich and, since it was his favorite, it was the weekend, lox might not keep, and I didn’t want to take it with me, he was welcome to it. I can’t remember exactly what he said verbatim, but it was something like, “Very good. And it is good to see that you hoarded it. Hoarding is a good instinct to have as a speculator since one never knows when the next payday will come.” I thought the use of the word “hoarded” regarding a sandwich, while not technically incorrect, was quite peculiar as was making the ordeal a lesson about trading…but that’s the kind of stuff Vic did.

In the summer months, Vic refused to use air conditioning so it could get pretty hot in the office. He usually wore brightly colored shorts and various t-shirts, most of which had some kind of stain or another on them. If the shirts didn’t have a stain in the morning, they certainly did after lunch. One of his more memorable t-shirts was embroidered with four words, “Work Hard, Save Money”. Not exactly what you’d expect a legendary speculator to be wearing but there he was.

The idea of t-shirts brings to mind another Vic story. Once there was a lull in trading and Vic asked me if I might put together some furniture for his neighbor who lived across the hall and had asked Vic for help. I agreed and, while in the apartment putting together the shelf, I noticed the neighbor was pretty easy on the eyes. Seeing as how we were assembling her furniture, I rightly assumed that she was single and asked Vic if he might ask her if she would be willing to grab a coffee with me. I can’t recall if it was the immediate next day or the one after but shortly after I got to work Vic appeared and said that the neighbor was willing to let me walk her to work in 5 minutes. In line with office “dress code” and to contend with the oppressive summer heat, I was dressed in flip flops, shorts, and an unimpressive t-shirt. I can’t remember exactly what I said but it was something to the effect that a bit of notice would be nice and that I wasn’t quite dressed for an initial potentially romantic meeting. Of course, Vic shrugged and uttered something about “making hay while the sun was shining” so off I went to walk the neighbor to work. Despite being a clear genius, somewhat comically, in everyday affairs Vic could be a bit obtuse.

And this brings to mind yet another story, one of my favorites, that I will tell before moving on. Throughout my time with Vic the cast of characters in the office would ebb and flow. Various younglings would come and intern for a few weeks usually to find that trading wasn’t for them. But somewhere along the way there wound up being about 6 or 7 of us crammed in this little 10x12ish room/office in Vic’s place in the city. Somehow a fly got into the office and the fly became a distraction motivating Vic to do something about it. Vic proceeded to grab his nearby full-sized tennis racket and started after the fly. Luckily Alex “Doc” Castaldo saw this and, in his almost equally distinctive voice, said, “Victor, what are you doing.” which was to say that if Vic went after a fly with a tennis racket in a room this small with this many people he was going to maul everyone. Vic relented but, active imagination that I sometimes have, an image of all of us strewn about with various racket mesh impressions on our foreheads as Vic continued to thunder after the fly jumped into my head and I laughed so hard and so long that I had to leave the room for a bit. To this day I wonder if Vic would have brained the lot of us had it not been for Doc. If you read this, thanks for saving us, Doc.

When people seek adjectives to describe Vic as a person, several words come up again and again including: eccentric, quirky, unique, brilliant, idiosyncratic, unusual, peculiar. Vic was about as far from “normal” as they come and it showed in pretty much everything he said or did. Even Vic’s living spaces told a story as they were littered with art, sculptures, and other unique collections.

Vic had a profound intelligence that married well with his sense of humor. In my time with him, he would often say somewhat unusual yet clever things which were followed by a pause which was then followed by the appearance of a little twinkle in his eye and a grin spreading across his face showing his comedic intent. And Vic was exceptionally curious, especially about markets which I think made us “fellow travelers” (to use one of his routine phrases).

Beyond all of that, he was a man who appreciated everyday things in life in a way that made me reconsider my point of view. For example, he was a huge fan of ice cream and liked it so much that I often wondered if maybe I had missed something. I think Vic ultimately had a deep appreciation for things that others take for granted and, accordingly, I think he provides an excellent role model for the lot of us in terms of working toward finding personal fulfillment in life via things we might otherwise take for granted.

From conversations with many over the years, I know not everyone came to know the same Vic I came to know and I don’t know if that relates to Vic having been humbled a bit by his big losses by the time I met him, if Vic and I just got along well, or some combination of both. But the Vic I knew was an intrinsically kind and thoughtful person who was endlessly interesting. To me, Vic was a well-traveled market legend who acted as a kind of benevolent grandfather figure. He was a terrific mentor.

Mindful I do not want to expose Vic’s trading methods (as I understood them) as I do not believe he would like that; I will speak a bit about Vic the trader in a general sense.

Vic was all about using the scientific method. He routinely said things like, “It must be tested” which meant that any market-related idea needed to be subjected to quantitative analysis to prove the validity of the idea. Vic called his method, “multivariate time series analysis” which, in layman’s terms, means analyzing historical price data in search of statistically significant high probability trading patterns (which he called “regularities”). Vic was always on the hunt for regularities and every Monday he would ask if I had discovered any new regularities over the weekend (he would get excited when I had).

While Vic was a big fan of quantitative analysis of markets and he engaged in endless quantification using his proprietary software, in the end he was a discretionary trader driven by these regularities; the regularities became grist for the mill that was Vic the trader as opposed to becoming independent mechanical trading systems.

He believed that optimism was the path to wealth and he routinely spoke of the tremendous upward drift in stocks over the long-haul advising people to align with the drift. One of the books he cited routinely was Triumph of the Optimists by Dimson, Marsh, and Staunton as Vic felt the “secret” to success in markets was contained within that book. Other market-related books that he mentioned often included Secrets of Professional Turf Betting by Bacon, Horse Tradin’ by Green, and The Time it Never Rained by Kelton.

As to his results, I personally saw Vic take staggering swings in his equity; swings that would have mere mortals curled up in a ball on the floor. Yet Vic somehow took it in stride. That is not to say that the wild swings in his equity didn’t impact him, they indeed did as evidenced by him being unusually quiet while staring at the screens intently, but he was able to somehow stomach the swings with a reasonable degree of alacrity. I believe that he believed that exceptional results were only possible by taking large amounts of risk and he acted accordingly. He said as much in his New Yorker interview, “The idea that you can make a lot of wealth in a steady, unspectacular fashion, with no great gyrations, is a canard...If you are going to try and make forty or fifty per cent a year, tremendous variations are inevitable.” And WSJ reporter Gregory Zuckerman recently shared a similar direct quote from Vic, “I don’t know how to make money without a lot of risk.”

One final point on the subject of markets relates to Vic’s willingness to give people latitude to find their own way. Most people in the investment business fight tooth and nail to micromanage everyone in their path and are reticent to provide others with any rope – the trading business is typically a very controlling business where there is one, and only one, master. Comparatively, Vic did pretty much the opposite when I was with him by providing his disciples with both encouragement and capital.

Unfortunately, Vic and I largely lost touch after I left his firm some 15 years ago. But I am happy to say that, last year, I sent him an email expressing my gratitude for his being one of my mentors and he responded positively.

As to this ode, Vic’s passing took me on a trip down memory lane and made me consider things in a way I hadn’t before ultimately making me realize what an incredible person Vic was and I felt it right to pay him homage with this letter. I hope that reminiscences like this one will help to share part of Vic’s story and that his memory will inspire future generations of iconoclastic eccentric individualists who stand up for what they believe in while inspiring the masses.

So long, Vic. I hope you’re out there in the great beyond leveraged long S&P 500 E-minis surprised yet elated to be finding nothing but regularities with T stats of 5+ as the market is just beginning the run of all runs while you wolf down fish sandwiches and drink lemon heavy tea wearing stain proof pastels with musicals playing in the background.