Market Overview

Will David Einhorn's Financial Experience Help His Poker?

David Einhorn, the co-founder of Greenlight Capital, is stepping into the pro-poker circuit once again after entering the World Series with a $1 million buy-in.

Einhorn, who has said that he will donate all profits to charity, is a noted poker player, finishing 18th in the 2006 World Series. In last year's tournament, he made it through to Day 2. On PokerPages.com, Einhorn is listed as having total winnings of $755,352.

He is a respected hedge fund trader and poker player, but the question is, are the profession and the pastime related? Is Einhorn a great poker player because he is a great investor (or vice versa), or does one have absolutely nothing to do with the other?

The connection between trading and gambling has been made before. While some serious traders will desperately try to play down the idea that their strategies are little more than casino-plays, whole books have been written on the subject.

Edward Thorp's Beat the Dealer is one such book. Thorp, known as the "father of card counting", developed a strategy for turning the tables on the casinos and giving the player the upper hand. He also worked out a way to have a better chance of winning at roulette.

In '64, Thorp says that he also came up with a strategy for beating Wheel of Fortune, before realizing that, "The biggest game in the world is Wall Street. Why don't I look at and learn about that?"

Now, Ed Thorp, like Einhorn, is a successful hedge fund manager. According to Jack Schwager in Hedge Fund Market Wizards, "Thorp along with Sheen Kassouf developed the first known systematic approach to trading warrants and other convertible securities (e.g., options, convertible bonds, convertible preferred stocks) by hedging them with offsetting stock positions, an approach they detailed in their book, Beat the Market."

Whether trading is a gamble in the same way as blackjack and poker, and certainly roulette, is debatable. However, it seems clear that, if somebody has an analytical mind as is required by an investor, that person will be well-suited to games involving numbers and odds.

All eyes will be Einhorn in the World Series.

Posted-In: News Hedge Funds Economics Success Stories Trading Ideas General Best of Benzinga

 

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