Edward O. Thorp's new book - Man for All Mar

I got lucky and didn’t have to wait too long to get a copy of Prof. Edward Thorp’s recent book from the library, A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market. (With a forward by Nassim Nicholas Taleb, of Black Swan fame.)

For those who don’t know him, Thorp is noted for both his integrity and mathematical acumen. He invented card counting in blackjack, and then went on to develop market-neutral trading methods that did well in both up and down markets, with very low risk. He is perhaps the greatest hedge fund operator. He detected fraud in Bernie Madoff’s operation decades before he was caught. He invested in Berkshire Hathaway at about $1000 per share, way before there were B shares.

The book is a combination of autobiography and layperson-oriented discussion of his trading and investment methods.

Thorp is the kind of person you’d want advising the SEC and other agencies to help maintain a level and sensible playing field, or to be an adviser on financial fraud investigations.


Does he recommend any stocks or better still run any open investible funds?

His methods don’t include much of the usual kind of stock picking. He looks for disparities in pricing between a stock and its related derivatives, so, he might end up shorting a stock and buying call options on the same stock, or vice versa. He used computers a lot, and did a lot of short-term trades. Berkshire Hathaway was one of the very few stocks he mentioned. He also ran a fund that invested in other hedge funds. He’s in his 80’s, and I don’t think he’s running any funds now.

His approach was pretty much the opposite of Warren Buffett’s, but they had a lot of respect for each other. When Buffett was winding down his partnership in the 60’s due to lack of opportunities in a long bull market, he recommended Thorp to one of his investors. Thorp didn’t realize for years that the failing textile company Berkshire Hathaway had become something quite different, but bought in once he noticed it in the early 80’s.

I should add that he talked a lot about all sorts of misconduct by hedge fund managers and others, and didn’t really make specific recommendations for investment. I would encourage people to read the book and learn what they can from it. There’s a lot there.