Timothy Sykes: Personal Journey in Penny Stock Trading & Short Selling - Prof. Madetoja, Exams of Mathematics

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HOW I MADE $2 MILLION

AS A STOCK OPERATOR AND

CREATED A HEDGE FUND

TIMOTHY SYKES

WHY AM I DOING THIS NOW?

You've seen the news. High unemployment, recessions, downsizing, and foreclosures are a daily topic. Right now is the best time to invest in a trading education and I will prove it by helping you make big money in this market. Because I get so many requests daily (over 2,500 emails per day...no joke), not every- one will qualify. I'm going to select a handful of lucky people who are serious, motivat- ed, and ready to work. If you'd like a chance at being one of those people, apply at www.timothysykes.com/millionaire-challenge

DISCLAIMER: The trading profit figures stated are my personal profit figures. Please understand my results are not typical, I’m not implying you’ll duplicate them (or do anything for that matter). I have the benefit of trading stocks for 20 years, and have an established following as a result. The average person who trades stocks get little to no results - 90% of traders lose money. I’m using these references for example purposes only. Your results will vary and depend on many factors …including but not limited to your background, experience, and work ethic. The stock market entails risk as well as massive and consistent effort and action. If you're not willing to accept that, please DO NOT READ THIS BOOK.

HAVE WHAT IT TAKES TO BE MY NEXT SUCCESS STORY?

Up-to-date I have helped more than a dozen students make solid six-figure profits. I have also helped thousands of students learn how to become self-sufficient traders. The Greatest Risk Is Doing Nothing! Now is the time to immerse yourself into my world of trading penny stocks using my niche strategy; both on the long and short side. I've been consistently profitable during this market volatility; and now it’s your turn! You don't have to be a trading professional to work with me. Truth is, I don't really care what your experience level is or how much you have in your trading account. I just need someone who is willing to be teachable and follow my instructions line upon line.

This book was not designed to provide more than anecdotal information on stock trading and hedge funds. It is sold with the understanding that the publisher and author are not engaged in rendering legal, accounting, professional or investment advice of any kind. If legal or other expert assistance is required, the reader should see the services of a competent professional. It is not the purpose of this material to reprint the investment information that is otherwise available to traders, fund managers and the public but instead to relay one individual’s experi- ences in the finance industry. You are urged to read all available material, learn as much as possible about stock trading and fund managing, and tailor the information to your individual needs with the assistance of trained professionals as may be necessary.

Trading and, more specifically, hedge funds are not “get-rich-quick” schemes. Serious pursuit of the activities described in this book requires a great deal of time and energy in order to learn the intricacies of the marketplace. Even then, there are no guarantees of success, as many hardworking people involved in these activities still lose money.

Every effort has been made to make this book as complete and accurate as possible. Howev- er, there may be typographical and/or factual errors and omissions. Therefore, this text should be used only for entertainment purposes and not as a reference for trading and hedge fund information. Furthermore, this book contains trading and hedge fund information that is current only up to the first printing date.

The purpose of this book is to entertain. The author and BullShip Press, LLC shall not be held liable for any loss or damage caused or alleged to have been caused, directly or indirectly to any person and/or entity, by the information contained in this book. Any mischaracteriza- tions or misrepresentations of people, places or organizations are done unintentionally and without malice.

If you do not wish to be bound by the above, the author and BullShip Press, LLC kindly request that you please stop reading this book now.

DISCLAIMER

TABLE OF CONTENTS

• ACKNOWLEDGEMENTS
• INTRODUCTION
• PROLOGUE: A VIEW FROM THE TOP
• 1. START ME UP
• 2. BITTEN BY THE BUG
• 3. SHOWTIME
• 4. THE FRESHMAN 107,000
• 5. HAPPY NEW YEAR!
• 6. ONCE IN A LIFETIME
• 7. WHEN THE LEVEES BROKE
• 8. MARGIN OF SAFETY
• 10. 2004: A HEDGE FUND ODYSSEY
• 11. THE YEAR THAT CYGNUS BUILT
• 12. I LOVE NEW YORK!
• 13. PINK TO RED INK
• 14. I AM A WARRIOR
• 15. LESSONS LEARNED
• THE NUMBERS
• 9. THERE’S NO BUSINESS LIKE HEDGE BUSINESS
  • AN AMERICAN HEDGE FUND

HEDGE FUND

AN AMERICAN HEDGE FUND^07

v.

A mutual fund organized as a limited partnership and using high-risk, speculative methods to obtain large profits.

An investment company that uses high-risk techniques —such as borrowing money and selling short—in an effort to make extraordinary capital gains.

A flexible investment company for a small number of large investors (usually requir- ing a minimum investment of $1 million); can use high-risk techniques (not allowed for mutual funds) such as short selling and heavy leveraging.

An investing group usually in the form of a limited partnership that employs specu- lative techniques in the hope of obtaining large capital gains.

— American Heritage Dictionary

— WordNet, Princeton University

— Merriam-Webster’ s Collegiate Dictionary

— Dictionary.com

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prohibited advertising, talking to the press and any detailing of business activity to non-wealthy people. These regulations were designed to protect investors who had no business investing in hedge funds, but instead, they have hurt only the smallest of funds like mine. Industry growth has continued unabated, but due to the lack of publicly available information, the media has gotten it wrong and the general public has become scared and confused. This has made it nearly impossible for startup funds with few connections to raise capital. There are reasons why 80% of the money invested in hedge funds is controlled by 20% of the funds, and much of it is due to industry regulations.

This great country was built by people who risked everything for a chance at a new future, success and freedom. Hedge fund managers share similar dreams. Some are successful, but many more are not. Win or lose, industry regulations prohibit us from telling our stories, so the press reports on industry corruption and failure, creating skepticism among investors. The media has detailed only this industry’s greatest failures, while everything else is pure guesswork, unable to be confirmed or denied by its subjects. Every industry has derelicts, and yet ours are paraded in front of the masses, skewing public perception.

My hedge fund is little more than a speck in this colossal industry, and yet it serves as a shining example of why hedge funds should be free of oppressive restrictions. The word speculator should not have a negative connotation. We represent the very definition of entrepreneurship and the American dream. If we win, we’re richer, and if we lose, we’re wiser. If you can afford to play, it really is a great profession. Financial speculation is in every American’s blood; it’s our true

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national sport and we should be free to discuss it in detail. Nothing less than the very right of free speech is at stake here. Some might argue the American system of free trade is at risk, too. The general public, including many people in the investment community itself, has never heard the truth about this industry. This needs to change.

Throughout my financial journey, I made plenty of mistakes, but I will not commit the ultimate blunder by not giving others the opportunity to learn from my experiences. Rich or poor, all people have a right to hear about financial speculation and hedge funds. I can no longer sit back and allow the public’s misconception of financial speculators to continue. It is time for somebody on the inside to talk about their experiences without holding anything back. My disillusionment with the hedge fund industry is actually a blessing in disguise, because I am now free to tell my story.

I write to inspire, entertain, caution, and, most importantly, educate society about this incredible profession. Think about it: if such inaccuracies can be spread about the entrepreneurial spirit of the up-and-coming hedge fund industry, what’s next? I hope this book will serve as a rallying cry for all of us so we can protect our basic right to discuss our businesses with whoever shows interest.

Stock trading is my life, and yet, due to industry regulations, I have been forced to turn away thousands of people who have been inspired by my story. Sure, most could not afford to invest in my fund, but they probably knew somebody who would be interested. Now I will never know. A startup company needs to talk to as many people as possible, because it needs to quickly raise

A VIEW FROM THE TOP

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I was about to enter one of the most revered offices in the entire financial industry. This company’s $4-billion hedge fund was headed by a trader who’d recently been profiled in a major business publication as the best trader on Wall Street. His personal net worth was now over $1 billion, and on any given day he accounted for nearly 3% of the entire market’s trading volume. As a fledging hedge fund manager, this trader and his firm represented everything I aspired to one day become.

But I wasn’t going there for a job. I intended to pitch them for an investment to help grow my fund. And $10 million was all I needed—an insignificant investment for them, a huge jump-start for me. Of course, the legitimacy of being connected to their hugely successful organization was part of the package as well. Success by association is the name of the game in the secretive hedge fund world.

One of my industry contacts, a fellow Tulane alumnus, worked for this fund. I’d been courting him for months, but only after I donated $1,000 to Tulane’s Hillel organization, did he agree to meet with me to discuss my fund in detail at his firm’s offices in Stamford, Connecticut. As I made the reverse commute from New York City to Connecticut, crossing the terrain that encompassed the majority of the hedge fund universe, I was actually amazed that my heart was able to beat as fast as it did throughout the hour-long journey. The anticipation was exhilarating.

As I walked into the firm’s high-tech, fortress-like brick building, my heart beat faster. I’d worked hard to get to this point, but for all my effort, my tiny fund could barely be considered a hedge fund. I was now one door and one

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I was surprised to see that this gargantuan firm’s security rested on a rent- a-cop and a sticky name tag that could be purchased in any local convenience store. No high- tech photo ID. No closed-circuit TV system. It was just the latest in a long string of surprises I’d already encountered in this strange industry.

My contact’s assistant appeared, greeted me, and ushered me to the firm’s trading floor. The sight was incredible; the trading floor was as large as an airplane hangar and there were more computer monitors than I’d ever seen in one place before. Hundreds of traders scurried back and forth among them. I could feel the tension and the pressure to perform. What a difference this was from my “operation,” which consisted of me dressed in a bathrobe with one computer and three monitors in my SoHo loft.

I was ushered into one of the dozen side offices that surrounded the massive open space in the middle and was told to wait there. Apparently, this was my contact’s office. When he strolled in, he was a casually dressed, middle-aged man who seemed surprisingly laid-back considering how much money he probably earned. He introduced himself, made small talk, and eventually brought one of his friends into the compact office to join him in listening to my pitch. I’d already had a dozen or so pitches under my belt, but I was still an amateur, particularly because I enjoyed winging it and seeing the looks of disbelief on the faces of my potential investors when I told them my story. Just a few months out of college, I was earning nearly $40,000 a month from trading and was cockier than ever. Those were some big bucks for me, but peanuts for these guys. Still, they listened intently while making a few notes.

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After I finished, they said they liked my trading style and my niche strategy but wouldn’t consider investing until I had had a full year of fund performance to show them. That was another eight months away! In that time, I would have dozens maybe hundreds of worthy plays under my belt and everyone would’ve made tons of money. I tried not to show my frustration. Unfortunately, meetings with large investors like this were rare, so my shot at the big time was over for the time being. I graciously thanked them for their time but thought their judgment overly cautious.

I was surprised when they invited me to stay for lunch. Somehow I thought they’d be too busy researching and trading to spend time eating, let alone spend more time with a small-time trader like me. The three of us headed down to the building’s lower level that doubled as the firm’s cafeteria. As we walked, my contact explained that each side office represented the research team for every industry that their fund covered. The center of the building was reserved for traders who executed orders based on the various teams’ research. My contact’s job was to cover the dozen or so major companies in the sector he followed and to know as much as humanly possible about each company.

Talk about specialization. I followed thousands of stocks across dozens of industry sectors; I’d have a lot of free time if I narrowed my trading universe down to a dozen companies. I mentioned how I’d read the recent article about their firm. He laughed and told me that it was extremely inaccurate because the information had come from several disgruntled former employees. As I looked at him to see if he was lying, he quickly asked, “Hey, would you like to meet him?”

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to several other traders and staff members, with whom I made polite conversation. I was most impressed with one particular person, the firm’s on-site trading coach. He was a very polite and inquisitive older gentleman whose knowledge about trading seemed to know no bounds. He was apparently well paid to be on-site in case any trader wanted to talk to him. I knew that many of my largest trading losses had been due to a lack of discipline, and having an experienced coach to talk to probably would’ve helped a great deal.

While our conversation lasted only a few minutes, he impressed me enough that I made a mental note to purchase all the books my contact told me he’d written. I figured that if a multi-billion-dollar hedge fund believed in his teachings, I could also benefit from them. It would be another step in my quest to grow my operation into a similar kind of empire.

After lunch, I thanked my contact for meeting me and taking the time to listen to my pitch, but I left somewhat disappointed. On the way home, I had a lot to think about. I’d finally seen what a real hedge fund looked like. I knew I’d get there if I worked hard enough and made the right contacts. It was just a matter of time.

The next morning, I noticed the word “VOID” was showing through on the sticky visitor’s tag I’d judged as so low-tech the day before. I laughed. It was some kind of advanced name tag that really was ingenious as a security precaution after all. Never underestimate a billionaire.

START

ME UP