Rakesh Jhunjhunwala, the Badshah of Dalal Street, always emphasizes three cardinal principles for his disciples to follow. The first is that investors & traders must “see tomorrow” i.e. forecast the future. The second is that they must “be with the trend”. The third is that they must take advantage of other peoples’ irrational fear and greed.
“CIS”, a young trader from Japan, is a textbook example of what Rakesh Jhunjhunwala meant. In fact, the Badshah would be proud of CIS’ achievements. He is a chip of the old block.
While CIS maintains a secretive persona, the sleuths at Bloomberg not only tracked him down but also verified his income-tax and trading details to ensure the veracity of his achievement. His entire life story is laid bare in two of Bloomberg’s articles (1) & (2).
CIS’ life story is an inspiring one of rags to riches. He came out of nowhere and made a fortune by mastering the knack of buying and selling stocks at the right time.
The amazing thing is that CIS has achieved all this by operating from his bedroom in a rented house.
According to Bloomberg, CIS’ has now amassed a fortune which exceeds 16 Billion Yen. According to CIS’ twitter profile, he is now worth 20 Billion Yen (Rs. 1080 crore).
CIS’ exploits on Black Monday makes for fascinating reading. In mid-August, CIS sensed that something would give in. There was bad news gushing in from China but the markets pretended everything was normal. Even when China devalued the Yuan, the markets pretended not to be bothered.
CIS knew that it was only a matter of time that the markets would realize that China had done something drastic which warranted a huge adverse reaction.
He heavily short-sold Nikkei 225 Stock futures and lay waiting for the inevitable crash to come.
At this stage, we must compliment CIS because when the markets plunged on Black Monday and CIS was staring at a mammoth profit of $13 Million on his shorts, he held his nerve. He realized that the markets were oversold and that there would be a vicious rebound. So, he immediately reversed the trade and bought futures aggressively.
By the EOD, after the deep plunge and the sharp rebound, CIS was richer by a mind-boggling $34 Million (Rs. 224 crore)!
Interestingly, CIS credited his incredible cool-headedness to playing computer games. “Games taught me to think fast and stay calm” he said.
The other interesting part is that CIS does not pay any attention to the fundamentals of the stocks. He does not subscribe to any newspapers nor does he read any annual reports. Surprisingly, CIS also does not pay attention to the technical stuff that traders look at. Instead, his modus operandi is to keep a red alert on message boards and monitor what other people are buying and selling.
CIS’s secret formula of success is: “Buy stocks that are being bought, and sell stocks that are being sold”. His other formula is “I do my best work when other people are panicking” i.e. take advantage of other peoples’ irrational fear.
The other important aspect is that CIE is not afraid to make losses. He candidly admitted that four of his 10 bets turn out to be wrong. However, once CIE realizes that the trade is going wrong, he squares it off immediately while letting the winner stocks ride. “You lose nothing by running” he says.
One noteworthy aspect is that despite his millions, CIE leads a frugal life. His friend Uemura, also a successful trader explained “The kind of person who wastes money on that stuff would never have made it this far”. Uemura also said in a philosophical tone “Self-control is so important. You have to conserve your assets. That’s what insulates you from the downturns and gives you the ammunition to make money.”
So, the next time the markets go into a tailspin, we must remember not to be paralyzed with fear. Instead, we must remember CIS’s magnificent achievement and see if there is some way we can make a buck or two from the situation!