Update: NY Mag author Jessica Pressler has told Yahoo Finance that she saw Islam's bank statements which confirmed the eight figure number, but cannot confirm that the high schooler has made $72 million trading.
Based on his press clippings 17-year-old high school senior Mohammed "Mo" Islam has already achieved a level of market mastery beyond most investor’s wildest dreams. The question is whether or not there's even a grain of truth behind the growing legend.
In a story hitting newsstands today New York Magazine claims the 12th best of its ‘Reasons to Love New York’ is "Because a Stuyvesant Senior Made $72 Million Trading Stocks on His Lunch Break". The senior is Islam. Though light on specifics writer Jessica Pressler says Islam embraced the markets after first blowing up trading penny stocks when he was just 9 years old.
"It was a while before (Islam) was ready to try again" Pressler writes. "In the meantime, he became a scholar of modern finance, studying up on hedge fund managers."
Apparently he studied the right managers. Though Mo won't confirm the $72 million he says he has a net worth "in the high 8-figures" and plans to make a billion in the next year. He and his friends have plans to start a hedge fund after Mo turns 18 in June and is old enough to earn a broker dealer license. Mo says he already has a BMW, an apartment in Manhattan and a hedge fund manager who "basically wants to give us $150 million."
The natural initial response to Mo's story is skepticism and maybe even a little jealousy. Once you run the numbers those feelings morph into incredulity and distaste not just for this kid and his friends but any publication that would print these kind of claims as anything other than what could charitably be assumed to be a bunch of kids letting braggadocio get the better of them.
By his own story Mo took a while to recover from losing tutoring money back when he was nine. The legend of Mo is that he doesn't come from money but rather scrimped and traded his way into the pantheon of investors.
Ok.
Assume Mo started investing with $1,000 when he was 10. To accumulate $72 million strictly through his trading acumen he would need to average over 500% annualized returns over the last 7 years. That means he would have had to double his money every one to two months for 7 years straight without ever being forced out of business by a drawdown. It's also a calculation that assumes no capital gains taxes or commissions.
In other words, Mo wouldn't have to be one of the few blessed souls with market skills like Warren Buffett or Paul Tudor Jones. To net 500% per year for 7 straight years Mo would have to be the greatest trader in history. Ever. By far. No such creature has ever existed in financial markets and it's not for lack of trying.
Mohammed Islam and his buddies are essentially claiming Mo has superhuman skills. This isn't SI's famous April Fool's joke about a Mets prospect with a 168 MPH fastball.
What Islam is claiming lies somewhere alone the lines of Charles Ponzi's scheme and stories of Paul Bunyon forming Minnesota's 10,000 Lakes with his massive footsteps. Islam is claiming alchemical abilities and publications that should know better are running the story with barely a disclaimer in sight.
What is it about money that makes people so rock stupid and gullible? In the attached clip Mike Santoli says this is the type of story that tends to crop up during aging bull markets.
"This is a late bull market kind of story because we think it’s that easy, or at least potentially can be that easy for some people,” he says. “Even as we talk about how hedge funds as a group can’t beat the market, somehow this kid in his bedroom has some kind of scheme and has turned this kind of money. It just doesn’t work."
We've reached out to Islam for comment but have yet to hear back as of this writing.
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