/student pays tuition with investment earnings

The Wharton senior turned $2,400 into $300,000 Most students might be able to buy some CDs or clothes with their summer earnings. Wharton senior Andy Nissenbaum bought a BMW and paid off the rest of his tuition. No, he did not rob a bank. He took a $2,400 cash advance on his credit card and traded it on the Chicago Mercantile Exchange. And although he is very modest about his success, the Financial Times reported that Nissenbaum has turned his initial investment into about $300,000. Nissenbaum, who is studying finance at Wharton, grew up in Milwaukee and began studying the stock market in high school. "I've always been interested in the best way to invest money," he said. "The stock market has been a great way to invest money for centuries. I was fascinated by that." But when Nissenbaum took Wharton Professor Jeremy Siegel's Finance 101 class last fall, he became engrossed in the fast-paced world of investing and trading. He began buying futures and futures options -- which means that he was essentially predicting how the stock, currency or bond market would perform at a given time. Nissenbaum said he loved Siegel's class and soon became quite close to the professor. Last spring, Nissenbaum was the only undergraduate Siegel allowed into his graduate course, Finance 890. "He used to come into my office and we would talk about the market," Siegel said. "I don't usually let students sit in [on graduate courses], but because of his special interest and knowledge, I let him." In December, Nissenbaum put one of the theories he learned in Siegel's class to the test. The "January Effect" -- the tendency of small stocks to outperform larger ones in the beginning of the year -- was of particular interest to Nissenbaum. He decided to try to profit from his knowledge of this effect. In fact, he took it one step further by investing his money early, in the beginning of December, thereby beating the other traders counting on the same trend. He immediately began making money and during the month of March he made 33 consecutive successful trades -- his biggest accomplishment so far, he said. By June, Nissenbaum had turned $2,400 into $240,000, a return of 10,000 percent. For the summer, Nissenbaum rented a spot on the Chicago Mercantile Exchange -- after paying a $1,000 non-refundable fee, taking a week-long class, a 240-question test (on which he scored 98 percent) and undergoing a grueling interview by 36 officials of the exchange. While on the floor, Nissenbaum said he learned a lot about what actually happens when trades are made -- not to mention the hand signals used to them carry out. Nissenbaum added, however, that he will never work the floor of a futures exchange again. "It's a very dismal environment," he said, citing the profanity and lack of professionalism demonstrated there. Nissenbaum also said it is a very stressful place and that one time during his stay in Chicago, he had to leave for a few days and visit his parents in Florida because he felt overwhelmed. Nissenbaum attributed some of his success to his decision to be a "position trader" -- one who studies conditions over a long period of time -- rather than a "day trader" who makes money from many small day-to-day trades. By the end of the summer, Nissenbaum had increased his sum to $300,000 -- allowing him to become completely independent financially. With this money, he was also able to fly to Europe spontaneously for three weeks at the end of the summer. And unlike Nissenbaum's finance-led summer, money was not an issue on this trip -- he bought one-way plane tickets to travel through the eight countries he visited. He did not, however, fly first-class. "I wanted to cut corners," he said. "I'm not into wasting money." Nissenbaum is still trading now, but the instruments of his trade have changed somewhat. He now has a small quote machine resembling a beeper that he wears constantly, so as not to distract him from his academic work. "Last year I had to run out of my classes to get quotes," he said. "Sometimes I just ran out in the middle. My first month's cellular phone bill was over $400. I had to use my cellular because I couldn't wait long enough to get the quarters in the phone." And last semester he woke up intermittently throughout the night to call and check currency rates, which are more active at night because they run on London time. Now he only wakes up in the middle of the night when there is a major change in the market and his quote machine beeps. Although some might call Nissenbaum obsessive, Siegel said he thinks Nissenbaum is a very good student who has applied what he has learned in class to the real world. "He has all the makings of a very good trader," he said. Nissenbaum said he received help from trader Bill Greenspan, who gave Nissenbaum the use of his office in Chicago, along with $25,000 to invest. That investment is now worth $70,000. "A lot of people have gone out of their way to help me out through this whole thing," he said. "Maybe it's my age, maybe it's where I go to school." Although he has numerous offers from Wall Street investment firms, after graduation Nissenbaum hopes to start a "hedge fund," or "fund of funds," which is basically a large sum of other traders' money. The company he plans to found, "The Amethyst Fund," would manage this money. Nissenbaum would be paid 2 percent of the total sum up front and would then receive 30 percent of the profits. By the end of his first year, Nissenbaum hopes to have $5 million and by the end of his second year, $200 million. He added that he will continue to seek advising and perhaps partnerships with members of the Wharton finance department -- although he declined to comment on which members of the department he has contacted. Although he has been extremely successful in trading futures and futures options, he said that he advises the average University student with money to invest to stick to the stock market because of the large risk involved with the type of trade he performs and the security found in stocks. "Over the long run, stocks are a very secure investment, even safer than bank accounts," said Nissenbaum, who has also given several seminars to J.P. Morgan employees on futures and futures options trading.

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