Mohammed Islam Should Read During Lunch Break

Mohammed IslamJust about everywhere I went on Sunday, I saw a very click-bait-y headline about some kid who had made $72 million during his lunch break day trading. I’m highly susceptible to click-bait, but I did not click. For one thing, I’m not that interested in things that are special only because they are done by someone young. They always make me wonder what’s wrong with their parents and why the kids aren’t outside doing something edifying. I’m also not interested in the subject of stock trading. I would have been far more interested by a headline like, “High school senior has profound inside into Don Quixote during lunch break.” So I just didn’t care.

Now we learn from New York Observer that the kid was lying. Or rather, he was trading but it was all simulated. Fair enough. Fun with numbers! Of course, it wasn’t all a simple mistake. The young man — Mohammed Islam — went so far as to make a false bank statement that he used to deceive the original reporter. But I can’t imagine that she looked all that closely. After all, a multi-millionaire self-made teenager is exactly the sort of thing that America generally, and New York especially, wants to celebrate. He reaps but does not sow — the American Dream!

Before the story fell apart, Jeff Macke at Yahoo! Finance called it bunk, Story of the High School Day Trader Making $72 Million Fails the Smell Test. Basically, he showed that the numbers just didn’t add up. He calculated that Islam would have had to have made returns of at least 500% per year for the last seven years — since he was ten years old. “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… Mo would have to be the greatest trader in history. Ever. By far.” Since he’s a finance type, Macke’s annoyance seems to be with the idea that people think making money with stocks is easy. Fair enough. But I doubt that this is really what was going on in the story. I think it is rather the opposite.

The story was a big deal in the same way as “Six year old sings national anthem at Super Bowl.” Stock trading is something that few people really understand but which they think is super cool because people make scads of money doing it. And it has been a long time since the stock market seemed to have much relationship to the real economy. I know that every stock trader thinks they are doing the important work of moving capital to companies that need it. But with things like high-frequency trading, which actually hurt the process of moving capital to where it can be used, this isn’t entirely true. And certainly the public’s perception of Wall Street is that it is a kind of black magic that some people are very good at. So why not a 17 year old high school student?

I wonder about a society that thinks this is a good thing. I wasn’t kidding when I wrote that Islam reaped but did not sow. His amazing trading — if it were true — would not have resulted in a more efficient market where worthy companies get more capital at a lower price. He supposedly started trading penny stocks! What he was supposedly doing was just beating other traders. He was the human equivalent of a high-frequency trading computer. And that means that all Islam was doing was making money. We’re supposed to applaud that?!

Give me a 5,000 word essay about the depiction of the working man in Don Quixote any day!

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About Frank Moraes

Frank Moraes is a freelance writer and editor online and in print. He is educated as a scientist with a PhD in Atmospheric Physics. He has worked in climate science, remote sensing, throughout the computer industry, and as a college physics instructor. Find out more at About Frank Moraes.

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