The $5bn man

This man worked for the Deutsche Bank and managed to lose at least 51 million dollars in one week back in 2004. Bingo! As you can imagine, the Deutsche Bank wasn't too pleased and wanted to be rid of this maverick. Not as easy as it sounds; the Big Hunter blamed the software and the court case is still on-going.

In the meantime, Mr Hunter procured a job, under the supervision of old-Enron (hmm, now where do we know that name from?) trader Arora, in which he was allowed to play with the 9 billion dollar assets of the Amaranth Advisors Hedge Fund. Shortly after his appointment, Arora's conservative trader left and the far riskier Mr Hunter took charge of the trading desk.

He began trading in the most volatile of sectors, namely Natural Gas. He soon created a furore and his reputation quickly began to precede him. Perhaps success or fame went to his head; whatever it was, things recently went drastically wrong.

10% bonus

He made 0.8 billion dollars profit for his fund last year during the time of the hurricanes. Almost 1 billion dollars! With an eventual profit of 800 million in one year, he was hailed as a hero within the Fund. And in view of the fact that he benefited from a 10% bonus, he was sitting very pretty indeed.

Then, in May 2006, and to the horror of its members, Mr Hunter lost the Hedge Fund 1 billion dollars. But because people had faith that he could recoup his loses, he stayed put. And he proved them right; until a week ago, the profits for 2006 were an unprecedented 2 billion dollars.

But last week simply wasn't Mr H's week. In just one week, he managed to lose 5 billion of the Fund's 9 billion dollar assets. When the Natural Gas market fell outside exchange hours, Mr H's position was far from where he would have liked it to have been.

All-or-nothing

Now, you'd think that that would be the end of the line for the Hedge Fund and for our Mr H, wouldn't you? But you'd be wrong - they don't give up that easily, although Fund members have promised to take things a little slower from now on. Rigorous change of policy … now? Er … are you as dumb-founded as I am?

This man plays 'all-or-nothing' and seems to have hardly any idea of the risks he's taking. And the worst thing is, he plays with other people's money.

In view of the implications for the market as a whole, we must ask ourselves if it is sensible to allow companies and traders almost free-reign in the taking of such enormous risks.

We can trust in the genial inspiration of an individual, or bet on a person being a mastermind but, more often than not, such extreme individuals are unstable. And this instability can lead to regular bouts of extravagance, and megalomania.

Keep your money well away from such people. Find a safe home for your assets. Actions speak louder than words. Beware ticking time bombs!