Eagle’s View Asset Management
Recently, I came across a posting regarding my former employer and old friend, Neal Berger, who now runs a niche ultra high net worth investment advisory service specializing in hedge funds. Neal also runs a niche Fund of Funds that, from what I gather, only invests in “off-the-radar” strategies as he’s a firm believer in finding money in dark crevasses everyone else overlooks; yet he somehow finds with a talent unlike anyone else I’ve seen. I had the privilege and honor of working directly for him while at his previous fund, Apogee, and although my tenure was brief as my “female companion” was not prepared for the culture shock of leaving quaint little Irvine, Ca. for a metropolis like the Big Apple; to avert her experiencing an emotional and mental breakdown, I returned to California and set up shop only to return to New York two years later when I realized it’s best to go as a single, highly eligible bachelor and throw myself into the dating pool without letting it distract me from the intense dedication required to succeed as a hedge fund manager. That last part, not possible by the way.
To my pleasant surprise, and this is a huge endorsement for NY, the women there are over the top gorgeous, from all over the world, intelligent, many in the hedge fund industry but on the other side of the line (sales), and almost all of them treat Hedge Fund Traders under 30 like rock stars! It’s heaven for a single guy. Honestly, it’s the most powerful variable I miss the most about NY and also the reason I’ll be heading back after finishing my PhD at UC San Diego. There’s an abundance of amazingly beautiful, models or model quality girls with very high IQ’s that could easily be supermodels if they wanted but instead chose a more intellectually demanding line of work (as opposed to physically demanding). But I digress. Although my time with Neal was limited , the knowledge I gained was priceless, indescribable, and is one of the main pillars of my present career as a well recognized successful fund manager. To be honest, I actually owe a lot of my success to him because he was the first Hedge Fund to take me in and trust my skill sets without paying credence to where I was schooled; something uselessly abundant in this business and in fact pointless because those Ivy Leaguer’s keep getting us into trouble and costing American taxpayers trillions to clean up their mess while those responsible collect fat bonuses.
I’m starting to think the nations top universities intentionally mislead their students into believing the horse manure called “efficient markets” and other ridiculous concepts supposedly validated through esoteric quantitative studies. I don’t if they still enforce this, although I’ve been told they do, but early in my career, I was offered a job at Merrill Lynch. When I went for my interview, I noticed something bizarre. Not a single screen had a chart of a stock on it. Not one. So I asked one of the traders, and this was a sales trader who’s supposed to work an order to gain the best possible net avg. price for the client, why no one looked at charts, especially sales traders and his response still resonates in my head, “because we’re forbidden from using charts”. Wow. I understand and even believe subjective technical analysis is a piss poor way of trading. Looking for patterns called flags, triangles, double bottoms, wedges, etc.…. The subjectivity in it alone is terrifying and that may be why Merrill banned charts from their trading floor. Or they banned it because Merrill’s a wire house, a wholesaler. They accumulate mountains of stock at market lows and sell it to clients out of inventory during the mark-up stage. So if a broker could see the chart of a stock his manager told him to push that day, he might realize he’s advising his clients to buy into a wall of resistance. Shocking isn’t it? No brokerage would ever push a worthless stock through their army of stockbroker’s trained to sell and close. Never. Not on Wall Street! Please.
In the early days of Level 2 trading, where we could see the inside market for the first time, there were such blatantly obvious market manipulations taking place; for example, you’d see an analyst from Smith Barney or Merrill on CNBC ranting and raving about the upside potential in a stock like Intel for example, and then you’d look at the offer and since this was pre ECN days, you’d see MLCO or SMBS on the offer, or whoever it was on CNBC hyping the stock, just sitting their unloading Intel all day long while their analysts keep coming on CNBC or other news outlets over and over ranting about the intrinsic upside value in Intel and listing a litany of fancy sounding data sets to justify their position, while the firms Prime Brokerage or Proprietary Desk was selling as much of the stock out of their inventory as possible. The poor analyst had no clue, 2 years out of college, “instructed by management and told this was a special honor and display of trust by the brass” to go on TV and present a compelling case for INTC; who took it seriously and worked hard building that case for his or her 10 minutes of fame. Oblivious to the fact he or she was a pawn in the firms decision to unload 10,000,000 shares of the stock from one or more of their mutual funds. And with their Prime Brokerage handling the selling on behalf of the Mutual Fund, there was no conflict of interest. This crap still goes on but it’s under the cover of dark pools, anonymous ECN’s and automated execution algorithms, but the only defense against them today are the proprietary black boxes at hedge funds that can sniff out a big seller or buyer even if their firm is on TV pitching the other side of the trade. Just one of the many lessons I learned through Neal when he was my mentor.
Today, it’s a battle of the private black boxes who send thousands of orders per second to the market followed by matching cancel orders to prevent them from getting stuck on the inside all alone. Order discovery involves prices being shown and cancelled up and down the price scale until one ECN is left standing at a particular price, which indicates a natural sitting order, so these boxes find floors and ceilings which they then trade inside of knowing where a natural order sits in case they get stuck with the position as it moves against them. However, none of those individuals are able to trade when the machines go dark and always depend on their own programmers, who then take their algorithms and go start shop somewhere. This is why there’s an arms race for less and less latency, to the point where black boxes are “sharing memory” at the ECN level. Why? Because almost all High Frequency black box trading systems are similar, if not identical except for a few lines of code. So the only edge left is speed, hence the race for ultra low latency execution. Now that’s just unfair. Neal was never gullible enough to allow that to happen. He understood compartmentalization, supporting his traders with whatever it took to make them successful, showing a sense of patience and camaraderie with new hires (like me) that made me feel at home even though I moved 5000 miles just to work for him. After a while, you get a sense of obligation, or a desire to perform at your peak because you didn’t want to let Neal down. That’s what I call a truly inspiring leader. So to see, for the first time, this new fund of his brought back some old school memories that inspired me to write a public “thank you” to him, while also covering areas of the market which have changed since my time at Apogee. He’ll probably never read this but at least there’s a chance he might. I never did get an opportunity to say Thank You for everything he did for me while I was there.
Hearing that his present returns at Eagle’s View are very good, although I can’t verify this for a fact so caveat emptor, makes me extremely happy. I can’t endorse or denounce any hedge fund publicly, but there’s no law that says I can’t mention their name or post a link to their site. However, he is very strict about only taking on ultra high net worth investors, so the qualifications will be far beyond that of an “accredited investor”.
What I found most honorable in Neal, which is truly lacking today on Wall Street, was not only his extensive market knowledge regarding risk and tactical trading strategies; but also his passion for them as well. It’s the latter trait which I related to the most, once telling him “if I had to, I would do what I do for free”, which he thought about for a moment and then said “so would I”. Combined with intense fiduciary concern for all of his investors, he is very honest when it comes time to making the right decision when in Wall Street, making the wrong decision is often so much more profitable and so much easier. That was my “culture shock” when I first moved out to NY. Learning your best friend would kill you in a second if it meant a bigger bonus for him at the end of the year. I had to return to sunny, laid back beachside Orange County, Ca. just to reset before I could return to NY, prepared mentally and physically.
There are moments in life when you know you’ve crossed paths with someone who made a lasting impression on your life, changed your personality and the way you think, or humbled you in a way you’ll never forget. Neal is one of those guys; and I’ve never again been fortunate enough to work for a Hedge Fund owner even in the same league as him. Although it was 8 years ago, he’s still affecting my decisions to this day. Whenever faced with a choice, I take the high road because it’s honest and most of all, it’s safe in a business entirely fraught with danger. I can truly say I was lucky to have crossed paths with him at such an early stage in my career when I was most impressionable. The hedge fund industry is overflowing with narcissists, mega-maniacal lunatics, over the top ego’s and guys spewing with overconfidence because they threw a dart and it landed on the right stock, so they tell their clients and colleagues how much of a genius they are until they begin to believe it themselves, and that’s when truly talented traders rip them of any gains and then some. At the core, they’re just your typical, hot-key obsessed, trading arcade idiots who generate 3 times as much in commissions as they do in trading income for a firm who doesn’t even have the decency to recognize them employees just to skim a few more points off the top by avoiding payroll taxes.
So the guy with a $5mm trading line and an 80% payout is actually getting a fraction of that because of a couple factors: excessive churning and trading commissions, and an employer who is most likely running a black box while calling it a “risk management system”. This box is designed for two things under the cover of risk management: first it takes the other side of all new traders because they’re playing the odds, then when a trader establishes a consistent pattern of profitability, the black box is programmed to coattail that trader by jumping ahead of his order a split second before it’s filled then flipping to the other side and filling the same trader when he takes the order to market in frustration and fear of missing the trade. It blows me away how little most traders at prop firms know about the business they’re engaged in. When I found out, I sued my firm. Neal had this extremely competitive streak which rubbed off on me, and when I traded for one of the largest proprietary firms in New York, that competiveness not only kept me grounded, but also prevented the firm from taking advantage of me through an unreasonable “employee contract” while still having the audacity to blatantly lie and misclassify employees as “Independent Contractors”.
Any non-compete, exclusivity clause immediately invalidates the idea of an Independent Contractor. Also, anytime you work for the same employer, show up at a the same hour and leave at roughly the same hour because they’ve told you if you don’t, you’ll lose your trading privileges for the day, utilize the firm’s equipment, are mandated to attend meetings or employee training, and are not permitted to work for another firm during or after your termination for any reason and for any length of time, YOU ARE AN EMPLOYEE. Therefore, you’re owed a lot of money depending on how long you’ve worked there regardless of what the minimum wage is. Even if it’s low, don’t fret. At least in NY, there’s a punitive clause that automatically rewards double the amount owed in wages. Now that you know this, what are you going to do? If you don’t know, drop me a line and I’ll introduce you to the attorney that handled this for me and my colleagues in NY. He’s a stand up guy, which is rare, to say the least. Who said Wall Street wasn’t corrupt? And if you’re a hopeful discretionary trader picking your trades in the morning, no pre-defined “macro theme”, clueless as to using your platform’s advanced execution functions, especially if they can be customized, then your time is very limited in this business. Quit now before you quit because your nerves are shot. Otherwise, go learn the basic language, which is Ruby on Rails, and use a platform like www.Marketcetera.com which is open source (i.e. free) to design your own automated strategies. If you have a strategy that can be repeated, then it can be automated. If you want longevity of career, you need to learn how to automate all the models in your head and know when and how to tweak them, when to shelve them, when to take them off the shelve, what stocks to feed into them, etc.…
If you aren’t even making an effort, you’re a dinosaur going extinct, even if you’re 21 years old. Don’t blow it. Go back to graduate school, specialize then come back to trading. The market’s not going anywhere. In Neal’s case, like most brilliant managers, he not only educated me about the inner workings of the market, today referred to as the “market’s micro-structure”, a term you’ve seen me use hundreds of times, but he also invests his own capital in his fund. Neal always insisted on finding a quantifiable edge that can be repeated. His dogma was and I bet still is, “without a quantifiable edge that can be defined and repeated, you’re trading from the hip,” and at his firm, there was only one trader allowed to shoot from the hip: Neal.
Proprietary Traders Worldwide

