Naturally impatient, Sykes was drawn to the riskiest category of equities: penny stocks. “In my mind it was simple,” he says. “Penny stocks were not only affordable, they were more volatile and more predictable than the larger, higher-profile stocks.”
That predictability was partly the result of something else Sykes didn’t yet understand: the Internet bubble. “I was about to discover I was in the perfect place with the perfect naiveté at the perfect time in stock market history,” he would later write in a self-published book, An American Hedge Fund.
One of Sykes’s most profitable strategies was to buy shares in any company that announced it was adding “.com” to the end of its name, whether it had a working website or not. By the time he realized that his profits were more a result of luck than skill, the market had turned, and Sykes adjusted. He taught himself how to short and bet against the crashing stocks of hot companies he’d bought on the way up.
After transferring to Tulane University, in part because the girls at Tufts, he says, were “too unattractive,” he endowed the Timothy Sykes Daytrading Award for the Talented. The absurdist title was inspired by his love for the comedy Zoolander, which also features an improbably named charity. He charged the $15,000 scholarship to his American Express card. By graduation day—which he missed because he was executing a trade that made him the equivalent of his last semester’s tuition—he’d turned his bar mitzvah haul into $1.65 million, before taxes, he says.
Sykes next started a hedge fund called Cilantro Fund Management. Early profits got him included on a 30 Under 30 list published by the short-lived magazine Trader Monthly, a wannabe GQ for the finance world, and that, in turn, led to an invitation to appear on CNBC. The prospect of being on live TV scared Sykes so much, he had to down shots of vodka to loosen up. “I was drunk as s---,” he says. Sykes spoke openly on-air about his biggest loss, a $200,000 hit, with as much glee as his gains. “Most traders don’t like talking about their losses,” he says. “I didn’t care, and that set me apart.” The response was immediate. CNBC wanted him back, and the segment led to his first appearance on a reality-TV show, Wall Street Warriors.
Sean Skelton, the show’s co-creator, says Sykes was originally supposed to be in only one episode. But he was a natural in the heavily scripted, drama-rich environment of reality TV. In contrast to the staid financiers Skelton’s camera crews were following, Sykes was eager to perform. He threw furniture, dated models, and partied late into the night. He even let the show film his mom “accidentally” discovering a pair of handcuffs in his bedroom while she was cleaning his penthouse. “There was no one else like him,” Skelton says. “He was young and cocky, and he loved the camera.”Sykes would tend to agree. “Wall Street Warriors was when I realized that even though my performance was shot because of one bad investment, I could still make a name for myself by being unruly,” he says. “ ’Cause everyone in finance is so f---ing boring.”
The TV gig helped his social life—“I didn’t pay for a drink for six months after it aired,” he says—but it did nothing for his business. Likewise, appearances on CNN, where he debated a porn star and a rabbi on the value of greed, were fun but didn’t improve his bottom line. Then, in 2007, he was the subject of an embarrassing Page Six item in the New York Post. The tabloid reported that Sykes had been denied entry into Trader Monthly’s latest party because his returns had taken a nosedive. In the 24 hours after the story ran, Sykes says, he sold 1,000 copies of his book, which was published that week. It was a lesson in the value of infamy.
Cilantro kept struggling. Sykes lost a third of his fund’s assets, after a failed investment in an e-commerce company, and he shut down operations in October 2007.
It didn’t affect his marketability. As the reality show got picked up in Europe and South America,Sykes began receiving fan mail from all over the world. The letter writers wanted what Sykes had—money—but had no clue how to make it. “The show made me realize there was a much greater need for education and transparency than there was for another kid to manage rich people’s money,” he says.
Sykes started offering free advice online a year after closing his hedge fund. He wrote about the importance of trading conservatively—“I trade scared; I’m a f---ing coward,” he says—and told his readers to look for fraudulent-seeming stocks and short them. It’s impossible to know how many people lost money on Sykes’s ideas, but he’s made sure to promote the winners. One day trader, Michael Goode, 34, who lives in western Michigan, says he’s made $1.4 million investing with Sykes’s techniques.