There are a handful of legendary traders who achieved such remarkable feats in the
markets that even their trades become famous, Tudor Jones on Black Monday,
John Paulson and the subprime crisis Soros breaking the Bank of England and
Andy Krieger shorting the Kiwi. A quick search reveals heaps of articles covering
Krieger's legendary trade labeled one of the greatest currency trades ever made.
But just like an old campfire story, each time someone retells it,
some of the facts are replaced by fiction. To add to the mystery,
unlike other prominent figures who fight for the spotlight, Krieger at the height
of his success stepped away from the public eye. Meanwhile, his Kiwi story grew a life of its own.
So what's fact and what's fiction? Fortunately, we can speak to the man himself.
I have to preface it that, um, the Kiwi trade made a lot of noise. It didn't make a lot of
money. We had a fantastic year, but it, it wasn't in the Kiwi. I, I made a, a lot of money in the
yen and the pound and the deutsche mark and the kiwi was, it was kind of a nightmare actually.
Uh, people think we made a fortune in the kiwi. Didn't make a fortune in the kiwi
That year it was like, what, 300 million profit or
something? Oh, that's it. That's, it's often cited that, that was from that trade. But,
so that was from the year. And that trade's just famous, but it's not.
Yeah, exactly. So it was, I never bothered, who am I gonna correct it to? Who cares? Right. But,
um, you're, well, you're correcting us now. We'll have to correct our video. Yeah. Unfortunately.
That's right. You may remember we told his remarkable story in a video a few years ago
that was incredibly popular. Why did that one become so famous? Was it just because
of the size of the move and because you sort of caused the drop or what happened?
What happened was the next morning we're sitting, we're sitting in, in the, in the meeting and I was
sitting there quietly and, and everyone said, well, I heard there was a lot of action in
New Zealand last night. This is at the, you know, their currency desk. They said, yeah.
I said, yeah, I was, I was pretty busy. They said, well, how big's your, how big is your
position? I said, how big's the money supply? So at one point, yeah, we were bigger. It was
bigger than the money supplied in New Zealand. It was many, many B of New Zealand dollars.
As the economist reported. Remember the big swinging dicks made Famous
by Michael Lewis in his novel Liar's Poker one B S D Merits.
Such a mention in the 1980s. Andy Krieger was a star at Banker's Trust in his heyday there,
mr. Krieger made hundreds of millions of trading profits,
and here is a measure of just how big a BSD Mr. Krieger was during 1987, he sold short,
hoping to buy back more cheapy and future more Kiwis than the entire money supply of New Zealand.
So it is time to set the record straight. What really happened back in 1987?
The year before I joined the foreign exchange department was up 56 million dollars and that
year with all the adjustments and they had some writedowns, they were up 512 million
dollars. I was the only personnel change, the only one. Um, I had a very, very good year.
In fact, he had such a great year at Bankers Trust
that he ended up setting the record for highest earning trader on Wall
Street. Almost all the profits came from dollar-yen and from
some of the crosses from Sterling. It was the Kiwi trade was a trade that
I'd almost never trade kiwi much. Uh, I'd almost, I traded just a couple of times.
I mostly traded the Aussie dollar,
which I found absolutely hysterical. It was, it was so chaotic. Uh, and I,
I like chaos because I could long, I would get long gammas. I'd buy a lot of shorter dated
options and just trade like a lunatic back and forth against the market with, with these options.
And by the way, if you want to learn directly from Andy Krieger, we've collaborated with him
on a unique opportunity, you can sign up for free using the link in the description box and
you'll receive his insights, market overviews, and experiences in the markets and much more.
It's not often you get the chance to learn from someone as legendary as this. So definitely go
and sign up now. Back to the story. So Krieger went from having no relationship
with the Kiwi to becoming synonymous with it. It all happened in October, 1987,
Krieger writes on October 19th, 1987. The stock market crashed.
Currencies remained relatively stable for a while. Even the junk bond currencies,
which offered high interest rates and lousy fundamentals. I was convinced that these high
yielding currencies were terribly overvalued. So I began paying close attention to two of them,
the Aussie, the Australian dollar, and the Kiwi, the New Zealand dollar.
I'd had a few nasty experiences with the Kiwi,
after which I'd left it alone. I'd already earned more than 100 million dollars during the year,
and I was willing to invest some of those profits in a large Kiwi option position. There were a
few things that happened. Number one,
Kiwi had had rallied from like 51 cents up to above 67 cents with almost no correction.
I said, this is stupid. I said, and this is just after the crash. Of all the currencies
in the world with, you know, with their super high on, uh, inflation, I said,
they're gonna get slammed. The, his currency's gotta go down. It would just seem to be like a
bubble to me. I sold, I sold 50 million kiwi people to try to market and see how it felt.
And as soon as I sold, all of a sudden I'm watching like the screen ticking up. I said,
wow, I thought 50 million was a good size for New Zealand. I said,
that was interesting. So I sold 50 million more. And boom, it goes up some more. I said, this is
great. So I just sold like a hundred million kiwi now, like $40 million down on the trade.
I go, how does that work? So I said, who's buying this stuff? Because that's actually,
that was a decent size Kiwi trade at the time. Right. And then I started getting phone calls
from the New Zealand banks. Cause I had, I had banks in every time zone. Cause I needed
to always have liquidity, but I didn't have a big, a big desk that I could execute through.
Right. So, and uh, so they called me up and they said, well, you know, we hear there's,
we hear there's a big short in New York, one of one of your old mates is short. A lot of,
a lot of kiwi. And then they're referring to Lipschitz, right? So I'm like,
I go, so why are you telling me this? Well, we think the market is short.
They're gonna get squeezed. So I said, okay, fine.
I said, and now I'm, I'm annoyed because they shouldn't be telling me this. It's
not their business to tell me, right? But I'm like, okay, we'll see. As I sat
watching the Prices Zealand traders were pushing the screens up. It
looked if someone was artificially bidding the currency higher again.
But on the other hand, maybe there really was some natural demand for the kiwi. This
went on a couple of days. I watched the Kiwi. We trading up and down. Finally,
I called one of my friends a currency trader at Solomon. I'm hearing in the market that
you guys are short kiwi. I said, really? Yeah. A number of traders have told me that.
Pretty professional, aren't they? Yeah, but I make a lot of money
trading Kiwi. It still bothers me. Me too. You wanna do me a favor? I
asked. Why don't you get me a price on a a hundred million Kiwi? I want to sell some,
and since I'm hearing your short, I'm sure you're going to get a good bid outta them.
Sure, why not? He called up a bank in New Zealand and asked for a price on
a hundred million Kiwi. The dealer, quoted him a price, and my friend sold him a hundred million,
on the screen. The price went down about 20 or 30 points and came right back up.
He said, my God, I guess it is bid. I said, thanks for the deal.
I said this is, this is a great market. Because what I found out is that the
guys would go to the pub and they would share positions of their clients in the pub. I go,
this is like totally un It was. It was totally unprofessional. And so now I'm
like getting like, It just, I felt like it was like immoral, what was happening.
So I said, you know what? I'm, I'm gonna slam this currency. After booking his deal with Solomon,
he was short about 200 million Kiwi. To him, it seemed like the market was artificially pumped up,
and there must be a large number of stops at lower prices. If those prices got hit,
there would be a massive dumping of long positions.
So what I did was I, I lined up,
I lined up at bank in Singapore that normally wasn't involved in the Kiwi and I knew they'd
be able to just execute wildly and professionally for me. Did a lot of business with them. And so
I went into the market and there was a, a trend line that came in around 64 cents.
And I knew if we broke that trend line,
the technical guys, all the trend follows are gonna have to bail.
So my strategy was to drive it down towards, towards that level, let them bounce, and then
drive it through 64 cents. And I decided I was willing to sell a lot of Kiwi to get this done.
Realizing there was a chance the currency could drop 10%,
krieger decided he'd invest several million dollars on the trade. His sources told him
that the New Zealand government was concerned about a strong kiwi affecting their exports.
So if the kiwi fell sharply, the government would have to intervene.
So I started at around around 6 30, 7 o'clock at night. And it was the first
time when I, I started selling. I started selling hard. I sold like the first 500,
and I started breaking, uh, and normally what I'd found was every time I'd sell,
they'd mark the screens up, but this time they actually, they had to get out
because it was too much for them to carry. I said, all right, let me give another 500.
Boom. Slammed it again and now it's down around 64 50. So they came in and it bounced,
and I said, now I'm really gonna hit it. And, but I, I did it through,
through a bank in Singapore that went into the brokers and basically just offered huge amounts
below the market. And so they had no choice. They were, he was offering it below the stop levels,
um, which means I was offering it both the stop levels, I'm offering it,
whatever, 60, 63, 80, when the market was like 64, 30 that I.
At that point, I just wanted to trigger the stops,
and when the stops got triggered, it was just ugly. They traded
down another five, five and a half cents that night.
His actions sent shockwaves throughout the market, triggering a 14% drop in the
value of the Kiwi. However, he knew it was time to start getting out of the position.
I said, this is faster and a little more aggressive than I wanted and expected. So
I'm like, how am I gonna buy this stuff back? And so the first thing I did, I did, I did two things.
Number one, I bought a massive call option to cover the entire position.
A call option is a contract that gives the holder the right to buy
the assets at a specified price within a specified period of time. By having this,
it meant that his short position was covered in case the market starts moving against him.
So I can never get squeezed. No one would know, but I, I, now, now I'm covered so I
can at least relax. I'm not gonna blow up the bank. Number one. Number two,
I knew that they were gonna try to squeeze me in the overnight, uh, financing because the currency
to drop 14%, and they were gonna try to move rates up to about 25% on me instead of the four.
So I said, okay. So I'm, I started doing rollovers immediately where I,
I rolled my, my short position out a month. And so what happened was these poor guys in
New Zealand who were trying to squeeze me called me up and said, oh mate, it's really
a terrible thing here. There's a big squeeze. Interest rates are up to 25% in the overnight.
I said, that's just awful. That's terrible. Uh, I said, well, how's the one month? I said,
oh, it's around 14%. I said, fine. I said, well, how's your liquidity there? I said,
well, we can do up to about a billion kiwi that those rates.
I said, is there 25% versus 15? Now the real market should've been like 14% flat.
Right? I said fine. I said, I'll, I'll sell and buy, do a billion kiwi with you. I said,
what? So he, he got totally buried on the swap when I rolled up cuz he basically locked
in like a 10% interest rate differential against himself thinking I was squeezed,
right? Mm-hmm. And uh, so it was, it was a lot of cat and mouse and nasty stuff.
And then I started getting death threats. Um, yeah, it got serious. I had to get,
I got security. You better watch out. Your kids aren't gonna be safe. It was as I, I had to get
security actually from my house. It really wasn't well liked and um, they took it very personally.
But when you're making such a huge trade, it is one thing to build up the position
in the first place, but then comes the struggle of getting out of it as well.
So at the end of the day, um, it was hard to buy 'em back. I had to, we had to finally
send a spot trader down to New Zealand and, and it's stabilized in between 59 and 62 like that,
and every time. Every time we got, we got given New Zealand dollars,
he would just take them and give them to, for my book. And every time we was paid, he covers.
So basically we systematically, over a few weeks,
were able to buy the position back. But it was, it was a bit of a nightmare and it was a good
excuse for the bank to not pay me properly. So it worked out perfectly for the bank.
So the truth about Krieger and the Kiwi is that it wasn't such a smooth situation after all.
In fact, it was a horror show. Um, it was an interesting trade. I, I had it
covered properly. Um, would I do it again? Not in that currency.
At the end of the year, Andy shocked the financial world by resigning from his position at Bankers
Trust. As reported in Philadelphia Magazine in 1988. Within five years, he had become
the world's hottest currency trader, earning a stunning 300 million in 1987 for Bankers Trust Co.
There are only a few people in the world whose resignation can grab a whole column on the front
page of the Wall Street Journal. Nixon did it. Iacocca did it, and Paul Volker did it. Andy
Krieger did it too. That's because he's one of a handful of people who could throw the markets into
disarray by moving 1 billion worth of currency with the push of a few buttons on his car phone.
Remember, if you want to learn directly from Andy Krieger, you can sign up for free using the link,
the description box. For years, he's been out of the public eye,
but we've managed to encourage him to collaborate on this. So more people
can have the opportunity to learn his unique ways of approaching the markets.
Hit the thumbs up button if you like this video and you want more
stories like this from Andy. And of course, thanks a lot for watching.