Million Builder

Blair Hull is Founder, Chairman and Chief Executive Officer of Matlock Capital, a private financial investment firm based in Chicago that works in the areas of financial engineering, systems, and investments.

Starting with the goal of establishing one of the world’s premier market-making firms, Blair Hull founded Hull Trading Company in Chicago in 1985; an organization built of outstanding thinkers in the fields of investing, science, and mathematics.  By embracing both efficiency and innovation, Mr. Hull’s firm grew to be one of the country’s largest and most profitable independent trading firms.  His multi-disciplinary approach was responsible for the design and implementation of a steady stream of systematic innovations that combined trading expertise with state-of-the-art technology and quantitative modeling.  Hull’s process used computerized trading to capture thousands of short-term stock and options mispricings, each day, while continually calculating portfolio-wide risk on a real-time basis. The success of Hull Trading Company’s strategy led to its acquisition in 1999 by Goldman, Sachs & Company.

Throughout his career, Blair Hull has also been deeply active in progressive Democratic politics.  His leadership in the political arena has been marked by successful efforts to improve gender equity, his support of the pro-choice movement, his advocacy on behalf of accessible healthcare, efficiency in government, and his commitment to social justice — passions which led Mr. Hull to seek the Democratic nomination as candidate for the United States Senate in 2004.

In addition to his public activities, Blair Hull joined with his children in 1999 to establish the Hull Family Foundation; a grant-making institution that supports educational, environmental, cultural, and social justice causes throughout the country.

Mr. Hull has served on the Board of Directors of the Chicago Board Options Exchange from 1988 to 1990 and on the Board of the Options Clearing Corporation from 1992 to 1998.  He served on the National Board of Directors for NARAL, is a Partner in the Democracy Alliance, and currently serves on the Board of Directors of the Chicago Council on Global Affairs.  Mr. Hull is also a member of the Board of Trustees of the University of California Santa Barbara Foundation and in 1998 endowed the first chair in Women’s Studies at UCSB.

Blair Hull holds a Bachelor of Arts degree in Mathematics from the University of California, Santa Barbara; Master of Business Administration degree from Santa Clara University; and graduated from the Harvard OPM Program.

How did you first get involved in the markets?
My interest probably dates back to when my grandfather charted stocks. I didn’t really understand what he was doing, but the idea of having capital working for you was appealing. The desire to learn about the financial markets led me to business school at Santa Clara University. After graduating, I got a job as a security analyst at Blair and Company. Exactly 3 months after I started, the West Coast research department was eliminated during the bear market of 1969. While at my third job with Kaiser Cement, I got interested in playing blackjack by reading a book called Beat the Dealer by Ed Thorp. From 1971 to 1975, I went to the Nevada casinos regularly. During the period when I was winding down my involvement in blackjack, I started to work on some option valuation models. The paper on this model was published in 1973. I was unfamiliar with the literature, so in 1975 I was busy constructing this model, which in fact had already been developed. In late 1976, I applied to be a market maker on the Pacific Stock Exchange.

Millionaires have more in common with each other than just their bank accounts - for some millionaires, striking it rich took courage, salesmanship, vision and passion. Find out which traits are most common to the seven-figure bank account set, and what you can do to hone some of these skills in your own life.

1. Independent Thinking
Millionaires think differently. Not just about money, about everything. The time and energy everybody else spends attempting to conform, millionaires spend creating their own path. Since thoughts impact actions, people who want to be wealthy should think in a way that will get them to that goal.

Just look at David Geffen. A self-made millionaire with $4.5 billion to his name in 2009, this American record executive and film producer was college dropout, but made millions founding record agencies and signed some of the most prominent musicians of the 1970s and ’80s. Although he didn’t take what many assume to be the usual path to success, his tireless work ethic and sense of personal conviction about artists’ potential allowed him to rack up a sizable fortune.

2. Vision
Millionaires are creative visionaries with a positive attitude. In other words, wealthy people not only have big dreams, they also believe they will come true. As such, wealth seekers should set lofty goals and not be afraid of uncharted territories.

Bill Gates, the world’s richest person in 2009, did just that. The American chairman of Microsoft (NYSE:MSFT) is one of the founding entrepreneurs who brought personal computers to the masses. Gates jumped into the personal computers business in 1975 and held on tight, creating Microsoft Windows in 1985. When consumers began to bring computers into their homes, Gates was ready to profit from this new age.

3. Skills
Writer Dennis Kimbro interviewed successful people to determine the traits they had in common for his book, “Think and Grow Rich” (1992). He found that they concentrated on their area of excellence. Millionaires also tend to partner with others to supplement their weaker skills. If you don’t know what you are good at, poll friends and family. Use training and mentors to refine your strong skills. (Want advice from some of the most successful investors of all time?

4. Passion
Billionaire investing guru Warren Buffett says “Money is a by-product of something I like to do very much.” Enjoying your work allows you to have the discipline to work hard at it every day. People who interact with money for a living, bankers for example, often love creating new deals and persuading others to complete a transaction. But finding your dream job may take time. The average millionaire doesn’t find it until age 45, and tends to be 54 (on average) before becoming a millionaire.

5. Investment
Millionaires are willing to sacrifice time and money to achieve their goals. They are willing to take a risk now for the opportunity of achieving something greater in the future. Investing may include securities or starting a business - either way, it is a step toward achieving great financial rewards. Start investing now.

6. Salesmanship
Millionaires are constantly presenting their ideas and persuading others to buy into them. Good salesmen are oblivious to critics and naysayers. In other words, they don’t take “no” for an answer. Millionaires also have good social skills. In fact, when writer T. Harv Eker analyzed the results of a survey of 753 millionaires for his book, “Secrets of the Millionaire Mind” (2005), he found social skills were more important than IQ. Just look at Donald Trump. His fortune has fluctuated over the years, but his ability to sell himself - whether as a TV personality or as the force behind a line of neckties - has always brought him back among the ranks of celebrity millionaires.

When your grandparents lamented that a dollar just isn’t a dollar anymore, they weren’t just bellyaching. Inflation attacks the value of a dollar, reducing it as time goes by so you need more dollars as time goes on. That is one of the reasons that $1 million is often thrown around as a retirement goal. Back in 1900, a $1 million retirement would include a mansion and a bevy of servants, but now, it has become a benchmark for the average retirement portfolio. The upside is that it is easier to become a millionaire now than at any time before. While you won’t be buying islands, it is still a goal worth shooting for. Read on for 10 ways to make your first million.

Stop Senseless Spending
It’s easy to spend your way out of a fortune. Fortunately, the opposite is also true - you can save your way into your first million. Most people working in North America right now will earn well over $1 million during their working lives. The secret to saving $1 million lies in keeping more of what you earn. Just as extending your earnings offers a unique perspective, doing the same with your spending sheds a ghastly light on the waste. If you spend $5 every day of your working life on coffee, snacks, etc., you lose $73,000 of your lifetime earnings, making it that much harder to hit the $1 million mark in savings.

Prune Your Purchases
When you do have to spend, try to get the most utility, not simply the most you can. The difference between great value and utility is a fine line. Buying too much house or too costly a car comes from confusing the two. If you shop for what you need and buy it cheaper than you’d planned, that’s a great deal. By keeping the end use of large purchases in mind, you can avoid this drain on your cash. Before paying more than you can afford, remember that Warren Buffet, a man who constantly jockeys for richest person on earth, still lives in his humble Omaha abode.

Target Your Taxes
Another leaky hole you need to plug is the parasitic drain of big government. While you are expected to pay your taxes, it’s the right of every taxpayer to try and reduce their tax bills to the absolute minimum allowed by law. Increasing your tax awareness means making taxes a quarterly chore rather than an annual scourge. Keeping abreast of allowable deductions, changes to your withholding and changes in tax limits will allow you to keep more of what you earn, so that you can put that money to work for you.

Crafty Compounding
Time is on your side when you’ve got compounding working on your savings. The earlier you start saving and the earlier you get your savings into a financial instrument that compounds, the easier your path to $1 million will be. You may be thinking of tenbaggers or hot issues that return 10 times their value in a few weeks, but it is the boring, year-on-year compounding that builds fortune for most people.

Build Through Your Boss
If you’re looking to save $1 million dollars for retirement, look no further than your boss. With matching contributions, your employer can be your best ally when it comes to building up retirement funds. If you think you need to squirrel away 20% of your income for retirement and your boss puts up 6% in matched contributions, then you’re left with a much more manageable 14%. Even if you are your own boss, there are still options under SEPs.

Ramp-Up Your Retirement Savings
Rather than letting your boss’s contribution lessen your load, try to put a little extra into your retirement plan whenever you can. Automating your account contributions will make setting your money aside that much easier. That said, making extra contributions a priority will speed up your journey to $1 million and make your golden years that much more golden. You don’t have to eat cat food to do this, just keep your retirement in mind when you’ve got extra cash on hand.

Incremental Investing
If you’ve got your retirement portfolios where you want them and are ready to start a pure income portfolio, then incremental investing is an excellent way to begin. You don’t have to jump into the market with your life savings to make money. Even relatively small amounts can result in decent returns. The important thing to remember with your income portfolio is that capital gains taxes will be applied yearly to any income you pull out. Again, improving your tax awareness will help reduce the bite, but it takes time and knowledge to make one million solely from a taxable portfolio. Still, it has been done and will be done again.

Dare To Diversify
If your portfolio is made up entirely of American companies or is even all held in stocks, then you may need to diversify. In the first case, more and more financial activity is out there in the wider world. This doesn’t just mean investing in emerging economies like China and India that are producing huge gains, but recognizing that there are companies in Europe and Asia that are just as good (maybe better) as investments in the U.S.. Diversifying also means not putting all your money into one type of asset. Being a financial omnivore opens up that much more opportunity in times of growth and makes certain you won’t go hungry when one source dries up.

Reconsider Real Estate
Owning real estate provides equity and diversity to your investments. If you own your own home, then paying your rent builds up equity. If you invest in real estate, then someone else’s rent builds up your equity. Real estate investing isn’t for everyone, but it has built fortunes for many savvy people. Owning your own home, however, is usually a good idea regardless of your opinion on real estate bubbles. Peter Lynch, one of the greatest stock investors of all time, believed that you should own your first home before you buy your first stock.

Increase Your Income
There is nothing terribly romantic about becoming a millionaire while working a regular job, but it is probably the avenue available to most people. You don’t need to start your own business to pull in a high income, and you don’t even need to pull in a high income if your saving, spending and investing habits are sound. Asking for a raise, upgrading your skills or taking a second job will add that much more to your savings and investments and subtract that same amount from the countdown to your first million. If you are entrepreneurial at heart, starting a business on the side can actually decrease your overall tax bill, rather than putting you in a higher income tax bracket.

The Three Ps
Persistence, patience and purpose are common traits that you’ll find in every millionaire from John Jacob Astor to Bill Gates. Even though inflation has brought the value of $1 million down from its lofty perch, you still need these traits to reach it. Why isn’t everyone a millionaire? Maybe because it is easier to spend now, buy big and put off saving and investing than it is to sacrifice to reach the goal of becoming a millionaire. Using the tips given here can help you on your way, but you have to be brave enough to take the steps - first, final and all the hard ones that lay in between.

Let’s face it; we all don’t make millions of dollars a year, and the odds are that most of us won’t receive a large windfall inheritance either. However, that doesn’t mean that we can’t build sizeable wealth - it’ll just take some time. If you’re young, time is on your side and retiring a millionaire is achievable. Read on for some tips on how to increase your savings and work toward this goal.

Step 1: Stop Senseless Spending
Unfortunately, people have a habit of spending their hard-earned cash on goods and services that they don’t need. Even relatively small expenses can really add up. Usually, in order to become wealthy one must adopt a disciplined lifestyle and budget. This doesn’t mean that you shouldn’t go out and have fun, but you should try to do things in moderation - and set a budget if you hope to save money.

Step 2: Fund Retirement Plans ASAP
Unfortunately, retirement planning is an afterthought for many young people. Here’s why it shouldn’t be: funding a tax deferred plan early on in life means you can contribute less money overall and actually end up with significantly more in the end than someone who put in much more money but started later. If you deposit $3,000 per year from the age of 23 to 65 at 8% interst you will have $985,749. But if you wait 10 years and contribute $5,000 per year, this number will be reduced to $724,749. Even higher contributions can’t make up for the lost time.

Step 3: Improve Tax Awareness
Sometimes, individuals think that doing their own taxes will save them money. In some cases, they might be right. However, in other cases it may actually end up costing them money because they fail to take advantage of the many deductions available to them. Try to become more educated as far as what types of items are deductible. You should also understand when it makes sense to move away from the standard deduction and start itemizing your return.

Step 4: Own Your Home
At some point in our lives, many of us rent a home or an apartment because we cannot afford to purchase a home, or because we aren’t sure where we want to live for the longer term. And that’s fine. However, renting is often not a good long-term investment because buying a home is a good way to build equity. Unless you intend to move in a short period of time, it generally makes sense to consider putting a down payment on a home. (At least you would likely build up some equity over time and the foundation for a nest egg.)

Step 5: Avoid New Luxury Wheels
Individuals who buy new vehicles are doing themselves a disservice - especially since this asset depreciates in value so rapidly. Obviously, this depends on the make, model, year and demand for the vehicle, but a general rule is that a new car loses 15-20% of its value per year. So, a two-year-old car will be worth around 70% of its purchase price. Consider buying something practical and dependable that has low monthly payments - or that you can pay for in cash. In the long run, this will mean you’ll have more money to put toward your savings - an asset that will appreciate, rather than depreciate like your car.

Step 6: Don’t Sell Yourself Short
Some individuals are extremely loyal to their employers and will stay with them for years without seeing their incomes take a jump. This can be a mistake, as increasing your income is an excellent way to boost your rate of saving. Always keep your eye out for other opportunities and try not to sell yourself short. Work hard and find an employer who will compensate you for your work ethic, skills and experience.

Step 7: Don’t Rely On Luck
You don’t have to win the lottery to see seven figures in your bank account. For most people, the only way to achieve this is to save it. You don’t have to live like a pauper to build an adequate nest egg and retire comfortably. If you start early, spend wisely and save diligently, your million-dollar dreams are well within reach.

Becoming a millionaire used to mean you were on top of the world. Nowadays, it means you are climbing up the ladder. While a million dollars is completely out of reach for many people, it’s just a step along the way for many others. Why? Because it doesn’t go as far as it used to.

The term millionaire has been synonymous with being rich ever since we became a country. The person most often credited to be the first American millionaire, Elias Hasket Derby, made his fortune as a privateer during the American revolution. Back then a millionaire did really mean rich.

Also, we all love round numbers. We love to see 1999 become 2000, and our odometer roll over to 100,000 miles. So it’s only natural we would fixate on $1,000,000. It’s a milestone with a lot of zeros. It’s even got an additional comma. Now that’s rich — having two commas in your net worth!  But what does that get you? Not as much as you would think.

Housing

Housing is where most people hold their largest chunk of wealth and with real estate falling considerably in many areas, some might think that the lifestyle a million dollars would provide would be luxurious. But that depends on where you live.

There are plenty of nice places to live that don’t cost very much, but according to the California Association of Realtors, the median house price in Palo Alto, Los Altos, Manhattan Beach and Cupertino is over $1 million. The median price for the entire San Francisco Bay Area tops $500,000 and Orange County is right behind at just under that. And those are just averages, not even something special. While other areas of the country aren’t nearly this expensive, being a millionaire in some areas just means you paid off the mortgage.

Retirement

Another aspect of becoming a millionaire is not working. If you had a $1 million right now, could you retire and would your money last? This is a simple calculation. If you want to try to live off the interest and you invest the money in tax exempt municipal bonds that pay 4 percent, then you would have $40,000 a year to live on.

But that doesn’t account for inflation going forward. If $1 million today doesn’t feel like much, imagine what it will feel like in 30 years. At 3 percent inflation compounding for the next 30 years, $1 million dollars will have the purchasing power of $412,000 today and your $40,000 income will feel like $16,500. So retiring when you have $1 million may sound nice, but it’s likely that it won’t be what many people have in mind when they think of retiring a millionaire.

Instead of living on the interest, you could tap into the principal as well. Those are slightly more difficult calculations. For example, if you were 50 years old right now and wanted to plan for your money to last until you were 95, then you need money for 45 years in retirement. If you stick with the 4 percent return, then you could withdraw about $48,000 a year. Again this doesn’t account for inflation going forward. Each year if prices rise, your standard of living would fall. In this example, you have 45 years of prices going up at 3 percent. So that last year will feel like $12,600 does today.

Combining Retirement and Real Estate

If we factor in a house, this gets even worse. If we take the price for a house out of the $1 million, even in a reasonable area and not San Francisco, it’s going to be a big piece of your net worth and cut into your funds for retirement. For example, if you bought a nice $250,000 home, you would only have $750,000 left to live on. At 4 percent that would be $30,000 a year or $2,500 a month. That’s before inflation takes a bit every year.

These retirement calculations show that even if your house is paid off, that living off a million dollars isn’t what it’s cracked up to be. And if your house isn’t paid off, it’s probably not even close to what you want to do.

Bottom Line

So the bad news is that even if you fall into a million dollars, you probably aren’t set for life, especially if you are young. But the good news is, you’ll still be a millionaire, and that’s better than the alternative.

One of my former competitors once cornered me at a party a couple of months after she’d been relieved of her duties. “How did you always know who to put on the cover?” She was referring to the fact that while I was editor of Seventeen and CosmoGIRL!, we’d often take chances putting rising stars on the covers –and hit home runs. Truth be told, I’ve always enjoyed surfing trends–I love the poetry of the process. So Forbes asked for a little surfing lesson. Here’s what works for me.

Surround yourself in culture.

There can’t be any differentiation between your personal life and your work in this regard. You can’t only tune into ball games the second you leave the office. You must submerge in The Ocean (pop culture) full-time, because it changes every second and to understand it, you need to live with it. Eat what your audience eats. Sleep when they sleep. That way, when they are about to crave something, so are you. But you (smartie!) will always crave it first–because you’re aware of it and always checking for those cravings.

Loosen up.

I’ve met people who are so uptight about hitting trends for their job that they’re a total wreck. You can’t approach the study of culture that way, because your entry point is all wrong. People who create trends are doing so because they’re enjoying themselves. If you’re so tense about getting it right, you’ll probably over-think little details and get behind the wrong wave. Wipe out!

Go outside your comfort zone.

You can’t be a creature of habit. Even if you think you’re surrounding yourself in culture, be careful not to fall into a rut. In other words, don’t only tune into VH1 because it happens to be hot right now and think you’re doing your homework. You need to always be scanning. And the best way is to …

Make friends with people that are cooler than you.

Or, OK, you may have to hire them. Oh, and if you’re hiring them? Listen to them, please. Almost a year ago, I was having lunch with Bec Stupak, an edgy video artist I was collaborating with on a project. Side note: She has dreadlocks and wears super-wild clothing. She mentioned I should definitely download this movie called The Secret from the Internet. I was like “OK, sweetie.” And let’s just say, I didn’t make it to that Web site until Oprah told me to go. Too late, dumb Atoosa.

See, I didn’t know that Bec was one of those types of colleagues. I underestimated her. Now, she’s one part of my secret sauce. At the magazines, I had my entertainment editor, Carissa Rosenberg. Have at least three very cool people in your life. They will know about trends before the mainstream is craving them. And listen to them–no matter what their hair looks like. If anything, their non-conformism is what gives them the bravery to surf waters you don’t even know exist.

Don’t be chicken.

The best, most exciting new trends are the ones that the research department (sorry, researchers of America) doesn’t pick up. They’re happy accidents. And sometimes, they may seem highly unlikely. That’s when you have to trust your gut. If you’ve been doing all of the above and something–just something–tells you that those “Gear” clutch handbags with the bubbles from the ’80s are going to be hot, then listen to that something.

While I was editor in chief of Seventeen, I saw most of my competitors get canned or go out of business. In my opinion, their biggest mistake was trusting research departments more than their gut. Going back to the cover analogy: I always found that the celebrities who rated highest in research never sold best. Readers would check off the celebrities that they were currently being saturated with while they were filling out the surveys. Consumers have no way of knowing they want the thing they don’t know about yet. We were Gwen Stefani’s first major magazine cover (our head of circulation thought I was insane for putting a weird pink-haired girl on the cover). The same for the Olsen Twins (again–lots of raised eyebrows). The same for Paris Hilton (um, yeah … sorry about that!). But most important–they sold very well for us.

But forget about me, let’s go back to you. Your homework for tonight: Go watch the documentary The Endless Summer and study those surfers. Do what they do. The good news is, you won’t have to wear a swimsuit in front of your colleagues to be a surf champ.

Brandon Adams, who teaches behavioral finance at Harvard University’s Department of Economics, says some of the best candidates for Wall Street trading jobs are the professional card players at FullTiltPoker.com and similar Web sites.

“They’ve essentially been the survivors in the system, a very difficult system where 95 percent of people lose money,” the 30-year-old Adams, who plays at the site, said in a telephone interview. “Anyone smart enough and disciplined enough to survive that system is probably going to do very well in the trading world.”

An increasing number of hedge funds and brokerages are scrutinizing professional poker to find talent and analytical tools, according to financial recruiters including Options Group, a New York-based executive-search company. Susquehanna International Group LLP, the Bala Cynwyd, Pennsylvania-based options and equity trading company, uses poker to teach strategic thinking.

“Someone who has made a successful living as a poker player for a few years would more likely be a good trader than someone who hasn’t,” said Aaron Brown, a 53-year-old former poker pro who is now a risk manager at AQR Capital Management LLC in Greenwich, Connecticut, which oversees $23 billion. “They know to push when they have the edge and they know how not to bust, and that’s a tough combination to find.”

Skill Sets

Skills that define successful traders — rational approach toward risk, speedy decision-making under pressure, discipline and a well-trained memory — are the same ones that separate elite poker players from ones known as “dead money,” financial recruiters say.

After the World Series of Poker started in Las Vegas four months ago, Options Group recruiter Simon Satanovsky said he received a hedge-fund request for online poker players with no financial experience. He wouldn’t identify the client.

“Before, we were asking about GPA or the Math/Physics Olympiad,” Satanovsky, a former Russian national bridge champion, said in a telephone interview. “Now, we’re asking questions about poker successes.”

Satanovsky said Wall Street firms and recruiters have been paying increasing attention to poker players as job candidates since 2003, when amateur Chris Moneymaker beat hundreds of professionals to win the World Series of Poker’s No-Limit Texas Hold ‘Em main event.

The Right Game

Adams, who has taught at Harvard in Cambridge, Massachusetts, each spring since 2003, said disciplined poker players can be spotted on sites such as Full Tilt and PokerStars.com waiting for particular games, not tempted by those outside their area of expertise or financial comfort level.

Their self-control and confidence would be useful in trading where large profits are possible, the probability of going broke high and the competition formidable, he said. Adams cited as an example a trader who notices a slight imperfection in the way options are being priced, then works to come up with the proper bet per trade.

“In poker, people are used to not sitting back and waiting for the fat pitch,” Adams said. “They’re used to skirting the edge of ruin and they learn the tools of how to do that.”

Susquehanna has been using poker to teach its new traders since it was founded in 1987, said Pat McCauley, who heads the privately held firm’s trader-development program.

College Friends

The company’s founders played the game as college friends at the State University of New York-Binghamton. Susquehanna has held in-house poker tournaments to recruit traders and monitor decision-making skills.

The trainees learn to use information they see in the marketplace to infer what motivates others, helping them make better prices. It’s the same way poker pro Phil Ivey, considered among the game’s greats, makes bets based on what he sees among his opponents, McCauley said.

“What professional poker players are really good at is taking this information that’s relatively subjective, quantifying it and making it objective, and that’s what trading is about,” McCauley said.

The ability to write complex poker algorithms, which either run poker Web sites or try to beat them, will get hedge funds interested, said Todd Fahey, a recruiter who specializes in quantitative finance at New York-based Exemplar Partners.

“There have been a few guys that I’ve placed in the industry that come from the poker software side of the house,” Fahey said in a telephone interview. “Two Sigma, D.E. Shaw and any of your larger computationally-based hedge funds are going to want to see people like this.”

Two Sigma Investments LLC and D.E. Shaw Group, both based in New York, declined to comment.

Begleiter’s Try

The worlds of poker and finance often intersect. Steven Begleiter, who headed corporate strategy at Bear Stearns Cos. before its 2008 collapse, earned $1.6 million earlier this month with a sixth-place finish in the main event. Greenlight Capital LLC founder David Einhorn was 18th in 2006. The annual “Wall Street Poker Night,” benefiting Math for America, was started by billionaire James Simons, the founder of hedge-fund firm Renaissance Technologies Corp. This April, the $5,000 buy-in tournament drew 100 entrants — 90 percent from hedge funds or other Wall Street jobs — raising $1.3 million.

Even though poker players make good traders, they aren’t necessarily good with their own investments, said Adams, adding that he is almost “famously unsuccessful” as an investor.

“Poker players are lazy and they’re gossipers,” he said. “If you look at the way they trade, they tend to latch onto other people’s ideas.”

Texas Hold ‘Em

One person who has chosen poker over finance is Joe Cada, who this month outlasted Begleiter and Ivey at the main event final table. Cada, who plays the game professionally, was first among 6,494 entrants and took home the $8.55 million top prize, giving half to financial backers Cliff Josephy and Eric Haber, poker pros with Wall Street backgrounds. The Texas Hold ‘Em contest had a $10,000 entry fee.

“As a little kid, I used to watch the stock markets day in and day out,” Cada, 22, said in an interview. “My parents always thought I was going to get into banking or become a stockbroker because I was really good with math and logic, and I was obsessed with money.”

Cada said he plans to remain a poker pro. AQR’s Brown, the author of “The Poker Face of Wall Street” and a life-long player, long ago gave up the game professionally after a couple years of trying.

“I eventually decided finance was easier,” he said.

Men who bottle up their anger over unfair treatment at work could be hurting their hearts, a new Swedish study indicates.

Men who consistently failed to express their resentment over conflicts with a fellow worker or supervisor were more than twice as likely to have a heart attack or die of heart disease as those who vented their anger, claims a report in the Nov. 24 online edition of the Journal of Epidemiology and Community Health.

In fact, ignoring an ongoing work-related conflict was associated with a tripled risk of heart attack or coronary death, the study of almost 2,800 Swedish working men found.

“It is not good just to walk away after having such a conflict or to swallow one’s feelings,” said study co-author Constanze Leineweber, a psychologist at Stockholm University’s Stress Research Institute.

The study did not specify good ways of coping with work-related stress — “We just looked at the bad side of coping,” Leineweber explained.

The study doesn’t advocate being belligerent at work, Leineweber cautioned. “Shouting out, and so on, is not proper coping,” she said.

But venting one’s anger outside of the workplace didn’t seem to take a cardiovascular toll, at least. “Getting into a bad temper at home” was not associated with an increased risk of heart attack or cardiac death, the study authors found.

The findings echo those from a study published last year in the journal Occupational and Environmental Medicine. That study, also from Sweden and involving more than 3,100 men, found that having an overbearing or incompetent boss boosted workers’ odds for angina, heart attack and death.

Leineweber stressed that what is true for men might not be true for female workers. While the study included more than 2,000 women, too few of them had heart attacks or died of heart disease to allow conclusions to be drawn.

“Earlier studies have indicated that women use different coping strategies than men,” Leinewaber said. “So for women, strategies such as going away and not saying anything might not be good.”

Women in general appear to handle stressful situations better than men, noted Dr. Bruce S. Rabin, director of the Healthy Lifestyle Program at the University of Pittsburgh Medical Center.

“Social interaction, having people to talk to, is extremely important,” Rabin said. “If you keep things to yourself, you have high levels of stress hormones. Women are more comfortable in social interactions than men. They talk more, while men tend to keep within themselves.”

A study, conducted by the Swedish researchers in 2005, found that women did not have the same levels of cardiovascular risk factors as men, Rabin noted.

There is no one key to handling on-the-job stress, because the level of stress depends on an individual’s environment, at work and in the home, he said.

“Work environment is important,” Rabin said. “You need interaction between people so that everybody feels they can express their opinions about their work. You shouldn’t come to work with a feeling that no one cares.”

“And when you go home, it is very important to share your feelings with whomever you are sharing with,” Rabin added. “Also, you should understand that children learn from the behavior of parents. You can have a meaningful effect on the long-term health of children by being good role models. The message is that the environment you culture can affect not only your health but also the health of those who are important to you.”

John Paulson began his career at Boston Consulting Group before leaving to join Odyssey Partners, working under Leon Levy. He later worked in the mergers and acquisitions group at Bear Stearns. Prior to founding his own firm, he was a partner at mergers and acquisitions firm Gruss Partners LP. In 1994, he founded his own hedge fund with $2 million and two employees (himself and an assistant).

Paulson & Co., Inc. had assets under management (as of June 1, 2007) of $12.5 billion (95% from institutions), which leapt to $36 billion as of November 2008. [2] Under his direction, Paulson & Co has capitalized on the problems in the foreclosure and mortgage backed securities (MBS) markets. In 2008 he decided to start a new fund that would capitalize on Wall Street’s capital problems by lending money to investment banks and other hedge funds currently feeling the pressure of the more than $345 billion of write downs resulting from under-performing assets linked to the housing market..

John Paulson’s investment philosophy and methodologies can be found in interviews he gave in the past.

According to “Excellent timing: Face to Face with John Paulson,” by Pensions & Investments). John Paulson discussed his investment Philosophy and style:

Describe your investment philosophy. I really picked up my investment philosophy from Marty and his father, Joseph Gruss. He had two sayings that guided me going forward.

The first was: Watch the downside, the upside will take care of itself. That’s been a very important guiding philosophy for me. Our goal is to preserve principal, not to lose money. Our investors will forgive us if our returns don’t beat the S&P in a given year, but we are not forgiven if we have significant drawdowns.

The other saying really drives the same point from a different angle: Risk arbitrage is not about making money, it’s about not losing money. If you can minimize the downside, you get to keep all your earnings and that helps performance.

Would you say that your investment style is concentrated? Yes and no. No, when you look at most activist funds, they tend to have five or 10 positions and that’s 100% of their portfolio. Some have only five positions. We’re much more diversified; our average position size is just 2.5%. However, when we do feel strongly about a position, we will take that up to 12% in our merger fund and 10% in our event fund. That is (higher) than some funds. We feel it’s important to have the flexibility to go to 10% because in order to outperform, you have to be able to allocate a sizable position to what you think could be a high-return investment. It’s only when you have a substantial allocation to a high-return (security) that you can influence the overall portfolio.

And in the 2003 Interview with Hedge Fund News, he revealed some details on how he approaches risk arbitrage, his research process, and how he manages risks

Q. Could you describe your approach to risk arbitrage?

A. We operate on a global basis which includes the U.S., Canada and Europe and have a diversified portfolio of merger arbitrage positions. Our goal is to produce above average returns with low volatility and low correlation with the equity markets. We seek to outperform the merger arb index by minimizing drawdowns from deals that break, by weighting the portfolio to deals that could receive higher bids, by focusing on unique deal structures which offer the potential for higher returns and by occasionally shorting the weaker transactions. A major focus of our proprietary research is to anticipate which deals may receive another bid and then to weight the portfolio toward those deals. We have a good track record in that area and that has been a key driver of our performance. We avoid event-type arbitrage deals, such as spin-offs, recapitalizations, announced sales or restructurings, as those types of deals tend to have more market correlation. Our correlation with the S&P 500 since 1994 has been 0.07.

    Q. Could you describe your research process?

A. First, one of our analysts screens the tape for any new deals that are announced. Once a deal is announced, we do a detailed financial analysis. We examine the performance of the company, its growth in sales, EBITDA, net income and earnings per share; we compute the merger multiples to EBITDA, EBIT and net income; we look at the size of the acquirer vis a vis the target, and the premium being paid. We then make an overall assessment of the financial merits of the deal. Generally, we look for healthy companies being purchased at reasonable multiples without excessive premiums. The second stage of our research is to participate in the management conference calls; review the Wall Street research, SEC filings and the merger agreement. In our review of the merger agreement, we look for any unusual conditions to the merger such as due diligence, financing, business or regulatory conditions. We are basically looking for solid merger agreements with minimal conditions. We also examine regulatory issues that could affect the timing or the ultimate approval of the transactions. We have very good outside antitrust counsel and we have a in-house lawyer to look at any legal issue that may affect the outcome of a transaction. Generally, the focus of our research is to eliminate deals that are riskier and have a lower probability of being completed. We look at the remaining lower risk deals on a return basis and we try to focus on deals with lower risk and higher potential returns.

    Q. What are your risk management tools?

A. We look at deal risk and portfolio risk. We divide deal risk into macro risk and micro risk. Macro risk would be how major market moves could impact the portfolio. For instance, if markets were to fall sharply or interest rates were to rise, we stress-test the portfolio to see what impact that could have on performance. Generally, we try to minimize the impact of market risk by being fully hedged on the merger arb positions and by eliminating deals that have financing contingencies, market-outs, walk-away clauses or other type of market related outs. The micro risks are those risks pertaining to any particular transaction that could affect the chance of a deal breaking. These could include the earnings stability of the target, financing, legal or regulatory hurdles, taxes, timing and potential accounting issues. We also look at the premium being paid and the potential downside in case the deal is not completed. Portfolio risk includes such things as average position size, top five or ten positions, number of positions, allocation between cash and stock deals, allocation between the US, Canada and Europe, allocation across different market capitalizations, currency exposure, liquidity issues, and sector concentration. We have specific guidelines on all our risk parameters that we maintain on a real time basis to manage the portfolio.

    Q. What is your approach to cutting losses when a position goes against you?

A. Many arbitrage deals will experience some volatility in the spread from the point of announcement to the point of closing. The arbitrageur needs to evaluate why these spreads are widening and make a judgment as to whether it is a temporary overreaction or serious risk. Ninety percent of the times, those temporary fears are overblown, the issue is favorably resolved, the spread comes back in, and the deal closes. Our reaction would depend on our evaluation of the risk, the size of our position, and the potential downside. Generally, while it is important to reduce exposure or close out the deal if the risk is serious, it is equally important not to panic.

Amid so much downsizing, it’s risky and unnecessary for managers to let feelings confuse what ought to be a clean transaction

Since January, more than a million jobs have been cut in the U.S. Although the pace of layoffs has been declining, the downsizing is by no means over.

Job cutting is never easy, but it often becomes progressively harder as we go deeper into an organization. At the beginning, employers may be able to lay off only weak employees they might have considered letting go anyway. While these weak performers are human beings worthy of dignity and respect, we can make ourselves feel okay about their terminations because they are based on merit.

The deeper we get, the less likely it is that we honestly can say that a job elimination is simply a matter of letting go those who should have been let go years ago. Now we are letting go of solid performers who would remain employed in a good economy. Every organization has solid citizens who do fine in anything but a deep recession.

But we are not done yet. We are told to go even deeper. Now we must let go of good, or even stellar performers — employees who add value and who at a different time might be considered for promotion, rather than termination.

Last Fired, Last Hired?

Letting talented employees go is further complicated and can become emotionally difficult for managers. First, those terminated earlier often receive better severance packages than those terminated later. As times get tougher, organizations often cut back on severance or eliminate it altogether.

Second, the last to be let go often are competitively disadvantaged at landing jobs, in contrast to poorer performers who were let go early on. Mediocre employees laid off at the outset of the economic crisis had less competition for scarce jobs — and open positions are even harder to find now.

Perhaps the worst feeling of all may arise when employees you protected from termination in the early waves are caught up in subsequent layoff tides with less severance and fewer opportunities. You may wonder if you hurt them by protecting them.

Finally for some, there is survivor guilt. When you don’t go down with the ship, you may be plagued by your “good fortune.” This can become too much for a “feeling” manager. Such an administrator may need to find meaning in the job eliminations — or at least explain his or her role.

So managers often say things in termination events to make themselves feel better. Unfortunately, the comments can make the employees on the wrong side of the axe feel even worse.

The Top 10 Comments to Avoid Uttering

Here are 10 things you should never say when terminating an employee:

While these comments may not be evidence of an illegal motive, they may produce anger that results in the employee’s visiting a lawyer to determine whether a viable claim exists.

1.”This was a job elimination and had nothing to do with your performance.” Do not say this when a discharge had everything to do with an employee’s performance. Your desire to protect an employee’s feelings — or your own — can later be used as evidence of pretext if the employee brings a discrimination claim.

2. “We have carried you for many years. It’s just not possible to continue to do so during these difficult times.” Don’t trash the past. It is not only insulting to the employee, but it may be inconsistent with the employee’s prior evaluations. Remember, pretext alone wins cases.

3. “We have no choice but to terminate your employment.” There are always other options. Why not tolerate mediocrity a little longer? Termination need not be the only viable option, so don’t suggest that it is.

4. “You have no one to blame but yourself. You just did not try hard enough.” Hold employees accountable, but don’t impugn their integrity. When employees feel personally attacked, they fight back.

5.”This is just as hard for me as it is for you.” There are few absolutes, but it is absolutely true that it always harder to be fired than to fire. Don’t ask an employee who is looking at unemployment to feel your pain.

6. “This is not the right job for you. When you get the right job, you will thank me.” That may make you feel good, but it will make the discharged employee bristle. The “thank you” may come in the form of a complaint.

7. “I am sorry, but you are fired.” You may mean: “I am sorry we have come to this situation.” The employee may hear that you think you are wrong. It’s not a good time to have a conversation about the meaning of “I am sorry.” Avoid apologies, even though you may genuinely feel badly.

8. “I know how you feel.” Unless you have been fired recently, you don’t know how the person feels. If you have been fired recently, now is not the time to share that experience.

9. “You will always be a part of the corporate family.” Trust me. This will make the fired employee think: “Oh, good. Will I still get the newsletter after I sue you?”

10 “Pardon the e-mail, but you are fired.” This may not be unlawful, but it’s gutless. And it invites the angry employee to go for your gut.