Andy Krieger: The Currency Trading Genius
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Andy Krieger's name will forever be associated with Black Monday. On that fateful day in 1987, stock markets around the world crashed, hitting all of the world's major economies, following sudden slowing in general recovery after the 1980's recessions based in Europe and the United States. Krieger's actions on that day have gone down in trading history and made him one of the most influential financial figures of the last century. But how did he make his name?
Krieger, a Wharton School of Business graduate who had majored in Sanskrit and philosophy, joined Bankers Trust in 1986. He gained a reputation quickly amongst those familiar with big market trading as one of the most aggressive traders currently working, whilst also managing to get big results on his risky investments. With the full support of the Bankers Trust board behind him, his trading limit was vastly increased from $50m (the normal limit for most traders) to $700m, more than the GDP of some small nations.
Then, Black Monday fell. Stock markets were dropping an average of 40% across the world and created the largest one-day percentage decline of the DIJA (Dow Jones Industrial Average) in history. Economists believed that the aftermath of this economic explosion would be almost identical to the years following the market crash of 1929, which resulted in The Great Depression.
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As traders and investors saw the US dollar plummeting, they rushed to invest their money in currencies that were very minimally surviving the sudden drop in value. Krieger realised that other, smaller currencies would suddenly become overvalued. Foreign exchange markets would suddenly become the hot commodity if they could survive against the US currency. He believed that the New Zealand dollar was also vulnerable to collapsing, and so he used his vast purchasing power within the company to bring a huge amount of money to bear on the currency. Some have said that he was dealing with more New Zealand dollars than the country had in current circulation at the time.
With a leverage of 400:1, this was a venture never before seen in the trading world. Sure enough, the currency went down 5% after a few hours against the US dollar. Krieger completed his trade with an estimated $300 million made for Bankers Trust. This incident caused major controversy in the New Zealand Central Bank, who later contacted Bankers Trust and demanded that Krieger be removed from their currency. Krieger argued that New Zealand was too small a country to cope with the wealth of trade Bankers Trust was performing with their currency, prompting another wave of dissatisfaction from the nation he'd invested in.
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Very little of the profit was given to Krieger after this gargantuan sale - around 1% of the money was bestowed onto the man who had made the deal a reality. Krieger resigned from his position at Bankers Trust shortly after this feat and went on to work for George Soros, an investor and trader who was known as 'The Man Who Broke The Bank of England' after performing a similar feat to Krieger during the Black Wednesday Crisis of 1992.
At Trading Education, we believe Krieger had techniques that most investors can only dream of: knowing exactly when to enter and exit the market, accessing the right information about multiple international currencies that influenced his decisions, and the skills needed to realise that a currency could be overvalued. Successful traders are always looking for new items in the market that can make for risky ventures, but with big pay-offs, and he continues to be hugely influential to traders old and new today.
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