Can you think of worst credit trash than Greek Bonds? Most professional bond traders can not, so how is it that Dan Loeb of Third Point LLC managed to make 35% return on capital in six months BUYING Greek bonds?
Education is obviously the foundation, Dan Loeb is a master of the ins and outs of credit markets, but obviously, so are many other educated, very smart credit analysts, so what makes him special?
Probably his ability to handicap odds: This is a vital skill for those wishing to become successful speculators and goes way beyond an intellectual knowledge base. Handicapping is thinking of outcomes in terms of expected values, it means that your emotional system will be put to the test as sometimes high expected value trades will be contrarian in nature (Greek Bonds as example.)
His ability to pull the trigger when others are stuck in the emotional roller coaster of European Crisis is a vital key as well, losing money being long Greek bonds for a high profile manager carries professional, and emotional baggage, the ability to execute controversial high expected value trade despite that fact, is not as easy skill to master, but it is a vital one, requires emotional balance and “egoless” personality.
Dan Loeb attributes a lot of his emotional balance to surfing third point in Malibu, sitting on the ocean, having the time to think and clear his head in peaceful surroundings.