38 of 45 people found the following review helpful
on July 24, 2006
While working on the book Steven, the author, learned and shares with the reader through a series of interviews, "how the best minds in the business think about risk, portfolio construction, history, politics, central bankers, globalization, trading, competition, investors, hiring, the evolution of the hedge fund business and a variety of other details."
The book provides an inside look at the thoughts and actions of many great financial minds. For example did you know that Maynard Keynes (the father of modern macroeconomic theory) was completely wiped out by a margin call during the commodity slump of 1929 or that George Soros's Quantum Fund averaged over 30% for it's 31 ½ years existence and that $100,000 invested in the fund at inception was worth $420 million 31 ½ years later.
Jim Leitner of Falcon Management who claims to have taken $2 billion out of the market so far in his career says he "reads a tremendous amount of books and papers" and feels, "developing a network by going out and meeting groups of intelligent people is very important". He also recommends reading the Economist. Jim says, "The Economist had something on Nigeria, stating the average beer consumption had dropped from 34 liters to 3 and then rebounded to 4. That signaled to me that there must be a trade there. There is something going on when beer consumption drops 90% in a hot country and then starts to rebound. We started buying Guinness of Nigeria and its gone straight up over the last 3 years".
Peter Thiel, the former CEO and co-founder of PayPal who runs Clarium Capital Management was given this advice from a major venture capital partner when asking about the industry, "The best way to get into venture capital is to make at least $20 million by starting a company and selling it. Take that money and invest in other companies as a VC." He would give the same advice today.
Then there is Jim Rogers, the co-founder of the Quantum fund in 1969, and author of, Investment Biker, Adventures in Capitalism and Hot Commodities, who lives in a Victorian mansion overlooking the Hudson River on the Upper West Side of NY that he bought for $105,000 and is worth $15 million today. He's so hot on commodities he says, "one day lumberjacks and farmers may be on the cover of Fortune magazine" and thinks in the next decade, "oil will be at $150 a barrel and they will be drilling for it on the white house lawn and cotton will be $4 and they will be planting it in central park".
He is so bearish on the dollar he believes it can fall to half the value of the Euro. He says, "the pound sterling was once the worlds reserve currency and it went down 80% from top to bottom. The dollar went up 400% against it."
For market enthusiasts this book is tons of fun and you sure as hell pick up real insight as to the thoughts of some brilliant traders. I may pull more of my favorite parts that I'd like to remember and post them on my blog.
By Kevin Kingston, author of: A 20,000% Gain in Real Estate: A True Story About the Ups and Downs From Wall Street to Real Estate Leading to Phenomenal Returns
My Blog: The Real Estate Investors Blog
14 of 15 people found the following review helpful
on April 6, 2007
One of the things money can't always buy is access to the great minds. Lets say you want have an 1 on 1 with Jim Rogers(the co-pioneer of the Hedge Funds concept). Will you be able to do it? Maybe ... maybe not. And if we expand the problem to 10+ top Hedge Fund minds ... the problem becomes even more challenging. However, instead if we find someone who has access to all these folks and can proxy for you? Won't that be neat? That is exactly what Steven Drobny has done in this book. He has been able to rein in some of the greatest & successful minds in the Hedge Funds arena and ask them interesting & revealing questions relating to their trading strategy, best trades, worst trades and the other lessons they learnt from their failures/successes.
As expected, this book is written in Q&A format. The author has done an excellent job of organizing and laying out the book which moves in gradual progression. The responses from the folks are equally simple and straight forward without the use of complicated financial language(except the overuse of long/short gamma/alpha) or financial models. In my opinion, the most interesting and revealing question/responses were the one relating to the biggest mistakes and the lessons learned from them. I would highly recommend reading the responses from the various folks on this particular question. It will be worth a lot.
Some of the key insights/views I found interesting ...
* Just being right does not matter. Being right at the right time does.
* Be fluid in your decisions. As fact changes, change your views too.
* If you make agressive bets, then make sure that you defend your investment with good hedging strategy.
* Cut your losses. Ride your winners.
It definitely is a must read ...
9 of 10 people found the following review helpful
on November 28, 2006
The more things change, the more they stay the same. Inside the House of
Money is an amalgam of perspectives from about twenty of the world's most
successful "global macro" hedge fund players in the vein of similar books
like Barton Biggs' Hedgehogging, Schwager's Market Wizards, or Elder's
Entries and Exits. The players range from home office hedge fund managers
to chief treasurers of Barclay's to reknown bow-tie wearing commodity
market demagogues. New Jersey's governor (a Goldman Sachs alumnus) even
makes an brief appearance in this book.
Of course none of these folks are like us, as inside the House of Money
they deal in highly leveraged $100 billion positions in esoteric financial
exotica like swaptions and steepeners. Readers whose experience may be
limited to discount brokerage stockpicking will quickly find theselves
submerged by the quasifantastic instruments hedge fund players flip
almost effortlessly. Drobny sometimes eases the impact with explanatory
side bars, and price graphs illustrate many good (and bad) market bets.
Nonetheless, feeling a certain amount of disorientation when first
entering the House is only to be expected.
When these trades go wrong, they are Oh So wrong, as revealed in many
personal reflections throughout the book. Yet given their failings they
have managed to survive global macro, and that much makes them remarkable.
We hear in the news with alarmingly increasing frequency of one fund after
another "blowing up," and reading Drobny's interviews with Wall Street's
elites you can see how nothing more than plain human pride, hubris, and
an unwillingness to recognize one's mistakes is to blame. For every
successful trader, there are countless mere mortals who must fall by
the wayside into ruin.
A subplot throughout the book, if not the author's stated goal, is to
answer the question "What is global macro?" When every story has been
told, you can rule out domestic investment and microeconomic analysis,
and in those leftovers that make the banquet look like only an appetizer
is a wide world of different kinds of investments which let hedgies do
nearly whatever they please.
The book is best regarded for retelling the financial history from
the collapse of Bretton Woods in the seventies to the Asian currency
crisis of the late nineties. The introductory chapter concisely hits
on a number of financial events that shaped the success of some, and the
losses of many. These events (and others like them) recur continuously
in Drobny's successive interviews with participants who traded them and
lived to tell about it. We see periods of low volatility regularly
awaken with a tectonic upheaval, and therein we glimpse tomorrow's dangers
and opportunities. Drobny calls on Dr. R. Lee Thomas III to conclude the
book with a short qualitative discussion into the probability of making
multiple independent bets, the classic "hedging" theory that reduces
Readable and contemporary, Inside the House of Money should grace your
nightstand (or bustling train commute into the city) before you think of
entering into a yen carry trade, going short volatility by selling
options, or just planning for your retirement. It's wisdom and
experience shall prove invaluable when the next economic dislocation
unwinds before us -- is it your opportunity, or your ruin?
11 of 13 people found the following review helpful
on January 26, 2008
MY RATING SYSTEM:
* - if you have to chose between torture and reading this book, then you might want to consider reading the book - although it depends on just how severe the torture would be.
** - if you've lost your job and have quite a bit of free time on your hands, and don't have anything else better to do, then you might want to consider reading this book; don't expect to learn much or really be entertained. It will however, help you pass the time until your death.
*** - meh...I'm indifferent. Reading this book will not alter your life in any significant way, yet it is not so horrendously dreadful that your taking the time to read it will be a complete waste of time.
**** - Good book to great book zone here. You should probably read this book if you have some spare time. This book could be interesting, entertaining, or informative.
***** - Outstanding book! Make time to read this book - you'll learn or be entertained or intrigued. The book might even be good enough to provide original or helpful insights into the world that we live in.
Overall, while I found Inside the House of Money to be, at times, an interesting and engaging read, I did find that my perception of the value or interest of each of the interviews varied greatly throughout the book. I have not read the Market Wizards series or any of the other trader interview books that some other reviewers have mentioned as being superior to this book, so I can't really compare.
For me, the highlight of the book was quite likely the interview with Jim Leitner, with the interviews with Jim Rogers, Dwight Anderson and Scott Bessent also catching my interest. These interviews seemed to be more transparent in their discussions, more accessible, and more thought provoking than some of the others.
Generally, each of the interviews tends to hit on a few main areas: (a) how their careers developed and how they got into the industry; (b) that their main strategy is and some examples of good and bad trades they made; (c) some discussion of how they obtain/analyze information; (d) risk management/portfolio construction; (e) general views on the markets and areas they like/don't like; and (f) their thoughts on global macro as a strategy. There are a variety of different perspectives presented throughout the book, and while a couple of the interviews contained some basic technical finance lingo, most of the interviews should be easily understandable by readers with an understanding of economics and financial markets. Where is jargon, the author does a good job on including explanation boxes that clarify key terms and events to provide the reader with some background that helps clarify or put the interviewee's comments in context.
One of the interesting things that I picked up throughout the book is that there are a variety of different styles and techniques that are employed by these traders, and all are able to employ them in a way that achieves success. For example, some of the traders get research from investment banking research and sales groups while others avoid it. Some traders like to take vacations to clear their heads, others don't. Some traders find it valuable to visit the markets they are considering investing in, others find that doing so might make you more subject to making decisions based on anecdotal evidence.
I also enjoyed a couple tidbits that I picked up along the way. One trader mentioned the idea that being right at the wrong time is still being wrong. Also, the discussions of cost/benefit of managing money for others once you've established your skills and have accumulated enough of your own capital that you can trade for your own account.
In conclusion, I found the book interesting, but not captivating. I would have liked to have had more consistency in interview quality (some of the interviews didn't really seem to be that thought provoking or communicate that much of value to me). A decent read, but I'll take a look at some of the other trader books before I consider increasing my rating.
8 of 9 people found the following review helpful
on April 24, 2006
If you have any investments in stocks, bonds, commodities, currency, real estate, mutual funds, hedge funds or anything else you should read this book. You will be blown away, and you will learn more about what really happens in the world of international finance from some of the most successful and audacious traders in history, many of whom have never spoken this openly about how they do business. Why should you read "In the House of Money?" Because if you have any investments, no matter how small, you are competing against these guys and many like them, and they are way ahead of you and most everyone else in the investment business. They get in early, before anyone else, and they get in big. They make money off of you and me--we get in small and we get in late. These guys have known for decades that the global economy - "global macro," as they call it - is where the money is--big money. They only make a profit by being ahead of the curve. How do they do it? It's in the book. These guys are smarter than us, and they've now spilled the beans in a way that has been extremely well-constructed and explained by the author, even for a casual investor (such as myself). It's a fascinating read, even if you don't care much about investing: a riveting, revealing look behind the scenes at the people whose business is to know the world, economically, socially, culturally, and politically. More than money, they trade in knowledge. And knowledge is power. Here, they share their knowledge with the rest of us. They turn knowledge into profits, and, by learning from them, so, perhaps, can we.
8 of 9 people found the following review helpful
on May 23, 2006
To anyone who sees the description of this book and dismisses it out of hand due to the seemingly esoteric strategy that is global macro, I have this to say: Don't. Whether your investment strategy involves US stocks, grain futures, risk arbitrage, currencies, plain vanilla bonds, or anything in between, global macro events and strategies affect your returns sometimes in very subtle ways that would seem nonsensical. What happens in Asian debt or Russian commodities has a huge effect on US stocks. No single market (e.g., US stocks or UK bonds) is an island, and it's important for anyone involved in the markets (which includes everyone investing directly or via a retirement account) to know how the financial world really works.
Drobny has really done a great job getting these secretive managers to open up and discuss their strategies and views. I felt as though I was sitting in each interviewee's office having a series of conversations with friends, which made for a very pleasurable read. I've already read a couple of the interviews twice.
Bottom line: great book; highly entertaining; extremely educational; and now sitting on the top shelf of my book case (which is reserved for my favorite investing books) next to such classics as "Market Wizards" and "Reminiscences of a Stock Operator."
5 of 5 people found the following review helpful
on April 8, 2007
This book was categorically outstanding. In the course of reading I had occasion to e-mail the author and found him to be exceedingly helpful and courteous as well.
I noticed that the only negative reviews were cases where the reader apparently didn't understand (or desire) the book's format, which is a compendium of interviews with global macro hedge fund managers. Another caveat is that this book is NOT about how to get rich if you have little or no investable assets. Rather, the book offers great insights on investment opportunities and risks for those who do have funds to invest or who are just curious about the marketplace. For people like me whose full-time job is to manage their own financial assets, this book is simply invaluable.
If you ever wondered what the smart money is really thinking, or what drives their investment decisions, here's your chance to find out in the form of candid, frank interviews with the field's most reputatble players.
5 of 5 people found the following review helpful
on April 19, 2006
Market Wizards was a breakthrough in the late 80's, early 90's but is completely out of date in today's markets. The growth in hedge fund assets under management has dramatically changed the landscape. In my opinion, Inside the House of Money brings us up to date and adds so much more. It is deeper, more detailed, and immensely valuable. The book is filled with dozens of graphs and contains so many new and valuable insights, high quality ideas & strategies. The fact that super-star hedge fund managers like Dwight Anderson, Christian Siva-Jothy and Dave Gorton, who are closed to new invesment and thus have nothing to gain with publicity, opened up says it all. This is a must read for anyone deeply involved in today's markets.
5 of 5 people found the following review helpful
on April 19, 2006
After a clear, concise intro by the author, the book is a series of very enjoyable interviews with the supertraders of our era. There is nothing recycled here, just pure market insight from the current generation of market gurus. Anyone owning a single stock in a pension plan would gain a much better understanding of the markets from this easy-to-read, fireside chat with a some of the most profitable traders in the world.
4 of 4 people found the following review helpful
on October 25, 2008
It's a pleasure to say it: "House" is a worthy successor to Jack Schwager's "Market Wizards" series. Having first read it a few years ago, it's a shame I'm only just getting off my duff to review it now - in October 2008 - after so much has happened.
As of this writing, Wall Street as we know it has "ceased to exist" (according to the WSJ). The investment banking model has gone up in smoke. More than one featured player in "House" - like Dwight Anderson's Ospraie fund for example - has violently gone the way of the dodo. No doubt at least one or two more will be carried out in the ongoing carnage that has brought about the worst year for stocks (and perhaps commodities too) ever. Ever!
Needless to say, I greatly anticipate Drobny's updated and appended version (due out Jan 2009)...
Awe inspiring turmoil aside, it's a great book. And with the financial crisis sucking Wall Street into the vortex, it is perhaps instructive to note how the big hedge fund players have seemingly split into two camps.
On the one hand you have those like Ospraie, who were too exposed to commodities, or illiquid capital commitments, or maybe just leverage in general, to survive. On the other hand you have the big players like Farallon and Perry Capital (neither mentioned in "House") where little leverage is used at all. While the now defunct houses of Lehman and Bear thought nothing of taking on risks that would make a gun-slinging futures trader blanch, the best of the hedge fund survivors played it very close to the vest.
When the 2008 smoke clears - and the fires are still billowing at this point - the nearly $2 trillion hedge fund industry will look a lot different (and a lot smaller). But I imagine the bloodletting will work to the advantage of the survivors... the players who truly internalize the lessons in "House," as opposed to merely paying lip service to them.
There is another subtle yet marked division that stands out to me among "House" participants: those who cut their teeth on the equity side, and those who cut their teeth on the futures side.
The equity players, not to put too fine a point on it, are (or at least were) generally more fast and loose with risk. They seemed altogether more likely to double down on bets going against them, and to congratulate themselves on doing so. This was freshly highlighted for me in the Dwight Anderson interview (which I reread closely for "clues" after the widely reported Ospraie meltdown).
Anderson did not radiate feverish waves of self-destructive tendency (as, say, Victor Niederhoffer did in "Education of a Speculator"). And yet, in talking about his training, Anderson favorably references an ingrained habit of his mentor, Julian Robertson: the willingness to "ignore" price action, obtusely so if need be, and to get aggressively "bigger" when one feels one is right.
Anderson then references Paul Tudor Jones' mentality as a path not taken for Ospraie -- managing risk tightly via "technicals," something Robertson and cubs (Anderson included) chose not to do. Is it a truly big surprise, then, that Robertson's Tiger fund ultimately went under -- Anderson's too -- while PTJ is still around?
The lessons in "House of Money" are rich and varied. If you are a trader or an aspiring fund manager, you will surely get some excellent ideas from this book... or at least be reminded of some key principles worth reconsidering.
For me, the sad fate of Anderson (and others) serves as a clarion call warning against hubris. I have deep respect for fundamental traders, and a personal affinity for the virtues of value investing. And yet, perhaps befitting my early trading background, I ultimately prefer to "manage risk by technicals" as Jones does.
At the end of the day, it's an odds game in which information is never perfect. As with poker, you can be 80 - 90% sure, but you are very rarely 100% sure. So why not hedge? Why take on risk you don't have to? I cannot help but think that some traders (a small handful) have some mysterious and ineffable connection with risk deep down in their souls. This theory argues that the true "lovers of risk" also have the deepest respect for what risk can do.
Every one of the participants interviewed by Drobny is brilliant, no doubt excellent in their own way. In that they are like soldiers sent out to battle, or grizzled poker pros making their way through a giant tournament. Some will rise and fall on the sweep of serendipity alone... the panic of 2008, in particular, will slay virtuous and wicked alike. It doesn't make sense to lament this, though; the sweep of fate is just part of the deal. Fortuna will not be denied; excellence and dedication gets you a ticket to the dance, but it in no way guarantees a share of the prize.
Those who wish to compete on talent and drive alone are no doubt put off by the fickleness of fate... as are those who got lucky early in life (right parents, right schools etc.) and want to freeze the status quo in place.
But I take comfort in Fortuna's whims for a reason that might seem odd to some: She makes sure that the top spots are never permanently filled, and that hungry fighters always have a chance. There are always new stars rising as old ones fall from the firmament. (And sometimes, instead of falling, the "old" stars happily retire to their memoirs and their gardens.)
And finally, the enthusiasm and diverse ideas in "House" reminded me of one more key truth in regard to markets, trading and investing: It's a truly beautiful game -- one worth playing for its own sake, even in light of horror shows like late 2008. Those who love to play for the sake of the game itself will find day-to-day reward in that, above and beyond the millions won or lost.