Time Value of Money
Kinds of Interest Rates
Future Value of an Uneven Cash flow
Probability Distribution
Standard Deviation
Security Market Line
Bond Valuation
Stock Valuation
Cost of Capital
The Balance Sheet
Capital Budgeting
Hall of Fame
Credit Report
Financial Terms
Financial Charts
Fuel Mileage
Energy Efficiency

Michael Steinhardt

Michael Steinhardt was born in 1941 in Mount Kisco, New York. He spent his teenage years around brokerage firms and analyzing stocks. At 16 years of age, he completed high school and went to the Wharton School of Finance. He graduated three years later in 1960 and went on to work in research and analysis in several different Wall Street firms including Calvin Bullock (a mutual fund company) and Loab Rhoades & Co. (a brokerage firm).

In 1967, Steinhardt joined with Howard Berkowitz and Jerrold Fine to create a new hedge fund company. It was called Steinhardt, Fine, Berkowitz & Co and was based in New York. Steinhardt led the firm in identifying moves in the macro market and successfully applying trading strategies to meet the current circumstances. Berkowitz and Fine left the firm in 1979 and as a result it was renamed Steinhardt Partners.

Steinhardt’s investment style is mostly regarding as that of a short-term strategic trader, although he had the perspective of a long-term investor. This approach is summarized in the following Steinhardt quote: "I always used fundamentals. But the fact is that often, the time frame of my investments was short-term." He focused on changes in the direction of the market and used an eclectic range of different securities. He was supported by a large team of analysts and traders and emphasized the use of macro asset allocation. The additional benefits of trading were also recognized by Steinhardt and he once said, "I do an enormous amount of trading, not necessarily just for profit, but also because it opens up other opportunities. I get a chance to smell a lot of things. Trading is a catalyst."

Steinhardt made a speech in June 2004 that highlighted the importance of remaining grounded with you are involved in the investment industry. Charles Kirk (from the Kirk Report) quoted the following “rules” from Steinhardt’s speech:

  • Make all your mistakes early in life. The more tough lessons early on, the fewer errors you make later.”

  • Always make your living doing something you enjoy.”

  • Be intellectually competitive. The key to research is to assimilate as much data as possible in order to be to the first to sense a major change.”

  • Make good decisions even with incomplete information. You will never have all the information you need. What matters is what you do with the information you have.”

  • Always trust your intuition, which resembles a hidden supercomputer in the mind. It can help you do the right thing at the right time if you give it a chance.”

  • Don't make small investments. If you're going to put money at risk, make sure the reward is high enough to justify the time and effort you put into the investment decision.”

The track record of Steinhardt Partners stands out as being extremely successful on Wall Street. The compound average annual return for the fund over its 28 years of operation is 24% and is more than twice results of the S&P 500. He is quoted as saying, "One dollar invested with me in 1967 would have been worth $481 on the day I closed the firm in 1995, versus $19 if it had been invested in a Standard & Poor's index fund." Steinhardt amazingly achieved these results using his mastery over a combination of bonds, stocks, currencies, time horizons and long and short options.

In 1994 Steinhardt’s fund suffered large losses (30%) due to moves in interest rates. He closed down the firm in 1995. A 21% profit for the fund in its final year meant that Steinhardt ended his career with his successful investment reputation and huge fortune intact. Steinhardt enjoyed his work and once said "Somehow, in a business [securities trading] so ephemeral, the notion of going home each day, for as many days as possible, having made a profit – that's what was so satisfying to me."

After retiring Steinhardt is concentrating on philanthropy and serving as a member of the board for several Universities including New York University, Brandeis University, and the University of Pennsylvania. He also served as a board member for Wisdom Tree Investments. This is an asset management firm in New York that focuses their activity on exchange-traded funds.

Michael Steinhardt’s publications include:

No Bull: My Life In and Out of Markets

About the author

Mark McCracken

Author: Mark McCracken is a corporate trainer and author living in Higashi Osaka, Japan. He is the author of thousands of online articles as well as the Business English textbook, "25 Business Skills in English".

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Mark McCracken , All Rights Reserved