Non-Farm Payroll Trading Errors

Joe Lonsdale shares a story about how his hedge fund made millions by identifying systematic errors in government employment data.

"We were working at the hedge fund, the market opened at 6:30 in San Francisco. The traders had to be in at 6:30, except the first Friday of every month you had to come in at 5:30 because the nonfarm payrolls come out at 8:30 AM on the east coast.

Kevin Harrington, our head of research, was a genius physics/biology guy. We mapped out this thing where we realized they were adjusting the numbers wrong based on seasonal adjustments. We were able to predict whether the number would hit or miss. This thing would move bond markets like crazy - hundreds of millions of dollars would move around based on this number.

We figured out they were systematically misdoing it. This was totally legal. We could make money trading this 75% of the time. We could adjust and make it even better based on where the market was positioned. We'd take a big position the night before and make a ton of money that morning when it worked.

Peter probably had $100 million riding on it every time. I personally had a few million riding on it in my early twenties. When it worked, we'd all high five and go to our favorite breakfast place afterwards. It was the most fun, high-stakes game you could play."