In Hunter's defense -- word on Wall Street is that after Citadel and JPMorgan bailed out Amaranth in 2006, they made a killing on Hunter's positions. Hunter had made ultimately profitable trades; Amaranth just wasn't able to withstand the temporary loss.
Well, this is an especially poorly-written article. I stopped reading and skipped to the comments after the second sentence was:
As Jane Austen might have said, it is a truth universally acknowledged that a man who single-handedly loses a large fortune, especially one that wasn't of his own making, must be way more interesting than the average man.
Had he made money on his trade, he'll most probably just be one of the nameless millionaires (billionaires?) making a killing on the markets on a regular basis.
Trading can teach you a lot about doing business - put your money where your mouth is; high risk, high returns; trade like you don't need the money.
Maybe one thing he should have learned first though was - never trade anything you can't afford to lose.
It wasn't his fund though; he lost investors money (plus, obviously, what would have been his bonus). It's the fundamental problem plaguing investment banks and hedge funds: you're rewarded ridiculously well for exceptional performance and punished very little for poor performance. This encourages taking substantial amounts of risk in the name of superior returns.
Hunter is set for life and never has to work again. The legal crap will be tied in court for a while as bureaucratic shitkickers shuffle papers around and Hunter will eventually "admit no wrong doing but pay some nominal fine". It's the SEC special.
You say that as if he should admit some wrong doing.
People paid him to manage their money, asking him to make as much as possible, knowing that he could win or lose, and he did and lost. Where did he "do wrong"?
I don't think he did anything wrong - at least not that I'm aware of. Granted I didn't work with him or anything so there's no real way for me to "know." I was just trying to spell out what's most likely going to happen and why it (i.e. massive loses) happen so frequently. These stories, as a whole, exemplify why I'll always have the majority of my money in a low cost, no load, diversified fund.
But the agent-principal conflict shows up in every kind of business. You hire a plumber, and you have to accept that he can a) just do the job right, b) waste a lot of time, and still get it done, and charge you extra (how are you supposed to know?), or c) experiment with some awesome wrenching and piping methodology he picked up in the latest issue of Plumber Weekly.
The difference between the plumber and Amaranth is that it's much easier to quantify when Amaranth is screwing around. Even before a blowup, some strategies have a 'signature' -- high leverage + low volatility + long illiquidity + short liquidity, for example -- that can tell you ahead of time when you're dealing with a crafty gambler.
You're absolutely right, but realistically a plummer or consultant messing around and inflating his price or screwing around will cost a few hundred or thousand dollars extra. Not millions or billions except in the most ridiculous of circumstances.
The main difference in this agent-principal conflict is the amount of capital one person is responsible for. It's actually very similar to the CEO agent-principal conflict.
