Hedgehogging (Hardcover)

~ Barton Biggs (Author) "I went to the Triangle Investment Club dinner at the Century last night..." (more)
Key Phrases: secular bear market, private wealth management, own hedge fund, Morgan Stanley, United States, New York (more...)

Editorial Reviews

Review

"...a real glimpse of the investing world...by telling individuals' stories, Biggs...reveals far more about the ups and downs of hedge fund investing than the usual numbers-heavy dissertations...reveals just what a whacky world many hedgers occupy" (Daily Telegraph, 29 December 2005) It seems Barton Biggs, the former chief investment strategist for Morgan Stanley who has been off running a hedge fund for the past two years, is about to become the Samuel Pepys of the investing world. Biggs has been quietly writing a tell-all diary of his investing adventures that is likely to put a few noses out of joint and also - since he uses only first names and has occasionally changed even those names - will keep a lot of people guessing. Who is Richard, a man who Biggs describes "as slick and slimy as they come, although he has a smooth, cultured Harvard veneer, wears fancy suits and talks with a hint of a Boston accent"? Richard used to show up at Triangle Club dinners-New York gatherings of hedge fund managers - where he was suspected of being a sandbagger (someone who talks a stock up to fellow fund managers while quietly selling it). In case that and various anecdotes, including details of his propensity to cheat at tennis, isn't enough to identify Richard, Biggs also reports that the man insisted on being called Richard and not Dick. Clearly a novelist manque, Biggs tells several instructive stories about how people he knows made and lost money and gives a no-holds-barred description of setting up his own fund, Traxis. There is a memorable account of Morgan Stanley's huge annual hedge fund conference at The Breakers in Palm Beach ("Germans with bulging eurobellies from family offices mingle with bloated Arabs in pale suits ... their handshakes as cool and clammy as snakeskin. Former investment bankers exchange lies with portly ex-diplomats, permanently deformed by self-importance". All this left poor Barton feeling "estranged and disoriented"). He drops a few investing tips along the way - among other things, that he believes the next hot and potentially crazy market will be emerging markets equities, especially Africa and the Middle East. The book, HedgeHogging, appears far more useful than the thousands of how-to-invest-and-get-rich books that pour out every year. But will Biggs ever eat lunch in this town again? (The Financial Times, November 30, 2005) "...an intelligent book on a serious subject that is also a joy to read." (Professional Investor, April 2006) "...evokes the 'agony and ecstasy' of the frenetic and highly competitive world of hedge funds...funny and sobering" ( The Mail on Sunday, May 2006) "...a reassuring tale for ordinary mortals..." (Financial World, May 2006) "...legendary..." (Futures Magazine Group, July 2006) "...is punchy, entertaining and insightful." (Money Week, December 2006) "...a real page turner... an extremely well written, funny and fascinating book..." ( The Technical Analyst, January 2007)

“…a real glimpse of the investing world…by telling individuals' stories, Biggs...reveals far more about the ups and downs of hedge fund investing than the usual numbers-heavy dissertations…reveals just what a whacky world many hedgers occupy” (Daily Telegraph, 29 December 2005)

About 10 years ago, I was sitting at lunch with Morgan Stanley's respected U.S. equity strategist Byron Wien and a number of other analysts. The bulls were running, and the media would routinely fixate on one or another rising young Wall Street strategist only to watch him burn out on a bad call or a bad year. Wall Street is notoriously a young man's game, yet year in and year out Wien and Morgan Stanley's global strategist Barton Biggs, both veterans in their 60s, werevoted the tops in their field.
An analyst asked: "Byron, why do you suppose you and Barton seem to always be running ahead of your competitors, even though they're 20 years or more your junior?"
Wien, usually not at a loss for words, paused for a few seconds. "I think it's because we love our jobs, and they hate theirs."
In 2003, Barton Biggs went on to demonstrate the point. Long past the point of needing the money, the glory or the fame, Biggs and a couple of partners left Morgan Stanley and launched a global macro hedge fund, Traxis Partners.
Being a venerated Wall Street figure did not spare Biggs the indignities of hedge-fund start-ups before him. He put on the dog and pony shows, trying to drum up capital. He suffered false promises and rejection. Hedge-fund managers' performance is typically a closely-guarded secret -- the Securities and Exchange Commission does not allow marketing or bragging -- but I can report from inside the business that Traxis has enjoyed very favorable returns in its young life. Biggs can most certainly walk the walk.
Hedgehogging, his account of his hedge fund and Wall Street years, is evidence that Biggs is still at his best when he is talking the talk.
Throughout his 40-plus-year career, Biggs (whom I never had the pleasure of meeting during my four years at Morgan Stanley as a research analyst) has been an innovator on both the "buy" and "sell" side of the Street. Back in the 1970s, he managed one of the early hedge funds; he later founded Morgan Stanley's equity-research department and then served as its global strategist, and was for a time a member of the Barron's Roundtable.
Hedgehogging offers us telling glimpses of the characters that populate the hedge-fund world, and the unremitting daily pressure of running a marked-to-market hedge fund.
We read about "Richard," a successful manager who had a bad habit of touting his stocks to other managers while selling as they bought, and "Grinning Gilbert" a red-hot hedge-fund manager in the go-go 1990s, whose wife "reinvested" his earnings in a share in Netjets, an expensive Greenwich home with a 5,000-bottle wine cellar, the requisite Scottish nanny and the usual charities. When Gilbert's fund flamed out, he became paralyzed with depression, closed the curtains and refused to leave his bed. Wife Sharon was left to tell his team of 12 that they no longer had jobs, and to liquidate the firm.
Maybe I've been thinking about James Frey too much, but I should add that after reading more than a half dozen of these anonymous manager profiles, I did want to scream: "Who are these friggin' people?" As it happens, it has become something of a hedge-fund parlor game to try to figure out who is whom. Personally, I suspect one character, the likeable Greg, is based on Omega Capital's Leon Cooperman. Other hedge-fund luminaries, such as Mark Kingdon, Stanley Druckenmiller, Art Samberg, Richard Chilton and George Soros, also appear to make cameos, although the "fudge factor" in Biggs' composite sketches may be huge. Most writers realize they can improve sales by naming names, but Biggs is a businessman first, and making enemies does nothing to help his business.
Biggs is at his best when he describes the misery of a manager who suffers through bad performance. Like the game of poker, managing a hedge fund requires a high level of skill, but during any given time period, a high degree of randomness can creep into one's performance.
I know, I know: Pity the plight of the poor hedge-fund manager with his ridiculous performance fees. Over the past 25 years, I have been a reporter, a research analyst and a hedge-fund manager. While all professions have their share of pressure and pain, there is simply nothing professionally that compares with the vise-like grip that takes hold of a manager's stomach when things are going badly. No one has done a better job of describing this visceral pain than Biggs:
"Winston Churchill, whose career had its up and downs and also was plagued with bouts of depression, spoke of the huge, foul-smelling black dog with breath like the sewer, which appeared uninvited and sat heavily on his chest pinning him down," Biggs writes. "There is an investment black dog, and when you are doing badly, it comes and sits on your chest in the middle of the night, and on Saturday mornings, and on sunny spring afternoons in the office. It's almost impossible to banish the black dog when he gets on you."
Thus Biggs describes, with good-natured candor, his bad bet shorting oil -- including his sense that his friends were looking at him strangely at the country club. He even heard criticism from his own daughter.
Biggs takes us to places far beyond the realm of the modern-day hedge fund, as he regales us with short snippets of Margaret Thatcher, the Internet bubble, coin collecting and the folly of investing in art. Some of his diversions, such as the fable of the man who could read tomorrow's Wall Street Journal, seem a little forced. Others, such as his chapter on the life of Lord John Maynard Keynes, hit the mark.
My grandmother was not a stock-market maven, but she did have a favorite expression: "Live forever, learn forever." While we all would like to follow the first part, only a lucky few will wind up like Biggs, with an open and fertile mind through our 70s. Therein must lie the secret of his passion and success -- even with the occasional foul-smelling black dog, and oil bets gone awry.
—Reviewed By Neil Barsky (Barron's, February 4-10, 2006)

"...an intelligent book on a serious subject that is also a joy to read." (Professional Investor, April 2006)

"...evokes the 'agony and ecstasy' of the frenetic and highly competitive world of hedge funds...funny and sobering" ( The Mail on Sunday, May 2006)

"...a reassuring tale for ordinary mortals..." (Financial World, May 2006)

"...legendary..." (Futures Magazine Group, July 2006)

"…is punchy, entertaining and insightful." (Money Week, December 2006)

"…a real page turner… an extremely well written, funny and fascinating book…" ( The Technical Analyst, January 2007)

"highly amusing."--Financial Times

Product Description

Rare is the opportunity to chat with a legendary financial figure and hear the unvarnished truth about what really goes on behind the scenes. Hedgehogging represents just such an opportunity, allowing you to step inside the world of Wall Street with Barton Biggs as he discusses investing in general, hedge funds in particular, and how he has learned to find and profit from the best moneymaking opportunities in an eat-what-you-kill, cutthroat investment world.

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Product Details

• Hardcover: 320 pages
• Publisher: Wiley; 1 edition (January 3, 2006)
• Language: English
• ISBN-10: 0471771910
• ISBN-13: 978-0471771913
• Product Dimensions: 9.1 x 6.2 x 1.2 inches
• Shipping Weight: 1.1 pounds (View shipping rates and policies)
• Average Customer Review: 3.8 out of 5 stars  See all reviews (86 customer reviews)
• Amazon.com Sales Rank: #268,455 in Books (See Bestsellers in Books)

Customer Reviews

Most Helpful Customer Reviews

128 of 142 people found the following review helpful:

5.0 out of 5 stars It's not about how to invest but how to be an investor., January 4, 2006

By	Michael A. Kelly "highgamma" (Basking Ridge, NJ USA) - See all my reviews (REAL NAME)

I previously worked in the hedge-fund industry and now teach college students about finance. Therefore, I found Barton Biggs' anecdotes both instructive and amusing, having seen some of the poor lifestyle choices that some hedge fund managers ("hedgehogs", according to Byron) make.

However, the book's strength is not an "inside look" into the world of hedgehogs, but a series of instructive vignettes about how to be an "investor". According to Biggs, a true investor sees one step ahead, while the rest of us are responding to the "now".

The true investor pays a high price for this insight. A true investor makes mistakes, is inevitably early, has doubts, lives in a lonely world, and is abandoned at precisely the wrong time by his most loyal investors. Sleepless nights, grinding teeth, and poor digestion are just part of the price paid. (I certainly can attest to this, though I would never claim to be a true investor. I guess that I am just a "journeyman".)

The goal of people with money to invest is to find these true investors, give them their money, watch them closely, and stick with them through thick and thin. One must constantly watch, though, for the weaknesses that often come with success.

In the first half of the book, Byron provides many instructive stories, centered on his town of Greenwich, of successful hedgehogs who let their money determine their lifestyles. Inevitably, pride comes before the fall, destroying both lifestyles and businesses.

I strongly recommend this book, not as an investment guide, but as an "investor guide" -- a guide on how to be a successful investor or how to find successful investors to work for you. This book fills an critical hole in my library.

Addendum January 8, 2006: I've spoken to a few friends in the business who are quite angry about the passages in the book concerning the Breakers meeting that is sponsored by Morgan Stanley. I, too, felt that Biggs' comments were unwarranted, but they did not detract from the book for me. There are many in the hedge fund community who feel that Biggs owes them an apology. I agree.

29 of 30 people found the following review helpful:

5.0 out of 5 stars Walking in the Footsteps of the MASTER, February 19, 2007

By	Richard Stoyeck "StocksAtBottom.com" (Westport, CT) - See all my reviews (REAL NAME)

If you own stocks, love stocks, must have stocks, than this is the book for you. Barton Biggs has spent his entire life in the markets and has influenced some of the biggest names in the business. He's forgotten more than most of the premiere hedge fund managers operating today will ever know. I know because I know this business.

Having spent 35 years in the industry, and I still love it every day, I have nothing but respect and admiration for this man who spent most of his career at Morgan Stanley. He was actually the lead man in putting together the Morgan Stanley research department. This is a major feat by itself. By whatever matrix you want to compare this man, you will find him on every winner's list.

I have run into him at several conferences, and I have never failed to be impressed by his massive intellect, which can focus like a laser on individual stocks, sectors, commodities or equities, and a whole array of economic issues.

He is a first rate thinker, and a first rate analyst. He's just basically smarter than his peers, and he has decades of experience to couple that brainpower with. In this book you have the opportunity to take in about 300 pages of pure wisdom. How else are you going to be able to do this, and from who?

Every couple of years I try to retool. It helps me remain humble. This can be done in a number of ways. You can take a stack of books like this one, tuck them under your arm and get away to a retreat or a beach somewhere, and just start taking in the knowledge, and try to integrate it.

Back at the height of the Internet Boom when I couldn't understand the valuations being given to hundreds of companies with no earnings, I decided to retool. It wasn't that I just couldn't understand the lack of earnings. I couldn't even find companies that had a hint of an earnings stream. It was suppose to be the new economy. The old methods of valuation were thrown out the window. If you didn't conform, you were mocked, antiquated, a dinosaur.

One of the so-called dotcoms we looked at had a valuation greater than the combined valuations of 10 massive, old-line industrial companies that we followed and respected. I ran up to Harvard, which I have done a number of times to see what the academics were thinking. I sat in a classroom with a brilliant professor, who then began to pontificate on why this specific dotcom was worth the price the stock was selling at. I looked at him, and instantly knew he OWNED THE STOCK. Ownership is always a surefire basis for BIAS.

Now when you read Barton Biggs' Hedgehogging, you will understand precisely the emotional mechanisms that the professor in question suffered from. Biggs covers it on page 29 of his book. It's called Confirmatory Bias. This is the tendency to collect all the information that agrees with your position, and to ignore the information that doesn't.

He even tells you how to fight off Confirmatory Bias, which is something the Professor in question never thought of, or about for that matter. It's interesting to note that the Professor in question lost his shirt along with about 98% of all other investors at the time.

I went back to taking my basket of books and hit the beach in Hawaii. Reading by the shore as the surfers made the morning waves is a great way to try to re-connect with what's going on. If you do decide to go to the beach, Barton Bigg's book would be right up there near the top of the list for your enlightenment. Every page is choked full of wisdom by a man who has paid the price with his own cash for that wisdom.

Are there other books that you should take to the beach with you along with this one? You bet there are. Take Graham and Dodd's Security Analysis. There are several editions. Warren Buffet has read this book probably 15 times from cover to cover in his lifetime. As you know, Benjamin Graham was Buffet's professor at Columbia University.

Edwin Lefevre's Reminiscences of a Stock Operator may be the greatest book ever written about trading. I first read it as a teenager, and I still re-read it every couple of years. It never gets dull, and every time I go through it, I find things I have never seen before. It's that extraordinary. You need to own it, and own the knowledge that's in it as well.

Read Bernard Baruch's "My Own Story". Baruch is to the first fifty years of the 20th century what Warren Buffett is the second half of the century. Both were unequalled investors. Each was the premiere investor of his time.

If you have an institutional bent to you, try David Swensen's book on "Pioneering Portfolio Management: An Unconventional Approach to Institutional Investment Management". Swensen is the man who ran the Yale endowment for the last twenty years, bringing it back from the ash heap of history to being the number one college endowment in performance for the last generation. No mean achievement when you consider he was up against every professional money manager in America.

Let's talk about some of the concepts you are going to learn from Barton Biggs in this wonderful book called Hedgehogging:

· You learn about Robert Wilson, the man who shorted Resorts International and lost $100 million for his efforts. Biggs is polite, he doesn't mention the real names of most of the players. He doesn't want to embarrass anyone, but if you have been in the market long enough, you know who is talking about.

· Morgan Stanley's Breakers Hedge Fund Conference- Biggs is not a professional writer, but his writing is brilliant. In this section he discusses attending a conference of hedge fund participants, and aspiring players. His descriptions of these people by itself is worth reading the whole book. Listen to this sentence, "Former investment bankers exchange distinguished lies with portly ex diplomats, permanently deformed by self-importance." (P 50) He uses language like this throughout the book, and it's a joy to read.

· There's dinner with Fayez Sarofim where Biggs describes a man who is Buffett's equal in brainpower, and the techniques he uses to amass multiple fortunes. "My favorite holding period is forever," says the master.(P70)

· He discusses with his father, a great investor in his own right, entering the brokerage business. The father hands him a copy of Benjamin Graham's Security Analysis, and says, READ IT. Biggs reads it, underlines it, annotates it, and goes back to his father. The father pulls out a new copy and says DO IT AGAIN. This is how you learn, and the information you learn is priceless. P81

· Biggs tells you what to read, "It is better to read The Economist from cover to cover once a week than the Wall street Journal every morning." P108

· The public never learns. Jesse Livermore the greatest trader of the early 20th century said, "Buy Low-Sell High," but Biggs expands upon the theme. "The public instead does just the opposite. It buys high and sells low, partly because the mutual fund industry has an overwhelming incentive to sell what is easy to sell, and what is easy to sell is what has just been hot." P121

· Biggs' description of the secular bear market of 1969 - 1974 (P127) is the best description I have ever read of a history that I lived through. He's got it down pat. He captures the emotionality, the flavor of the times. You feel the heat, the pain, and the agony of not being able to sell, of stocks going down day after day with no volume. Every MBA kid making a million a year in the market right now, and I have hired plenty of them, should be forced to memorize sections of this book, because they are going to pay for their lack of knowledge of history with the market value of their client's accounts.

· He teaches you an understanding of private equity (very big right now, probably getting bigger). He goes into the law of large numbers and why these funds cannot continue to bring in the returns that they have been showing for the last 10 plus years. If you are in the market you need to understand what Biggs is talking about. This is priceless information, and he's giving it to you for the price of a book. P142

· He gives a scholarly presentation of the concept of the Fibonacci's number series, and its impact on the market. It's a brilliant, easy to understand presentation (P163), but even better is his analysis of GROUPTHINK, and its impact on the market.(P169) Professor Irving Janis of the University of Michigan is the father of Groupthink; but his book is out of print. Bigg's analysis of the process is the best thing out there. It will not only help you in the market, but it will help you understand how we got to where we are in Iraq as well.

In the whole book, I only caught one error, and that's because Bigg's knowledge, and his breath of knowledge is so astounding that he relies on memory in most instances to do his writing. When you do this, sometimes you can be faulty in your memory. He simply recalled a book whose author he did not name, as being written by a famous professor at MIT. The book was about the innovator's dilemma. The author was from Harvard, not MIT, and Christensen authored it.

Here's the bottom line. If you could find ten books like this, you would be better off owning the knowledge in them, instead of getting yourself an MBA in finance from any of the top business schools in this country. A book like this is that important, that influential, and that informative. You would have to own the knowledge in this book, not just read it casually. You would need a pen to underline, to take notes, to write in the margins, to make this knowledge yours, and then with some experience, you would become AN INVESTOR. Good luck, and I say that respectfully.


Richard Stoyeck

67 of 80 people found the following review helpful:

5.0 out of 5 stars AS REAL AS IT GETS, January 6, 2006

By	j livermore "grizzled hedgehogger" (new york, ny United States) - See all my reviews

I have run a hedge fund for over 20 years. There is no book like Hedgehogging, ever, that has captured the pain, pleasure, hubris, foibles and ego of folks who run money. Running a hedge fund is a life and death battle everyday. There might be a thin veneer of "we are all in this together." But when the bell rings, ultimately, you are on your own. It is your decisions that determine whether you survive. In one way or another, it is the same for everyone in markets and life.

Barton has put over 40 years of investment experience into a very amusing and readable book. He brings to life the characters in a brutally honest way. Hedgehogging reminds us that markets are comprised of PEOPLE for all the good and bad.

Whether a novice or professional, there is a lot here that will help folks learn about what really happens in markets and how to deal with them. Hedgehogging gives one insights into the psychological and behavioral aspects of all investors. Barton captures the all of this. After all, Hedgehoggers are just like everyone, only moreso.

Everyone will recognize some part of themselves or folks they know in this terrific book.

This is not a formula. There is no such thing. Barton makes clear that even for the best, everyone makes many errors. Hegdehogging will save people a lot of "tuition" as they learn about markets, investing and themselves from Barton and his cast of characters.

This is must reading for anyone who is in markets or is contemplating it.