- Hardcover: 384 pages
- Publisher: Wiley; 1 edition (April 21, 2006)
- Language: English
- ISBN-10: 0471794473
- ISBN-13: 978-0471794479
- Product Dimensions: 6.4 x 1.3 x 9.3 inches
- Shipping Weight: 1.3 pounds
- Average Customer Review: 4.3 out of 5 stars See all reviews (65 customer reviews)
- Amazon Best Sellers Rank: #486,072 in Books (See Top 100 in Books)
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Inside the House of Money: Top Hedge Fund Traders on Profiting in the Global Markets Hardcover – April 21, 2006
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"The managers featured in Drobny's book use various strategies, as evidenced by the panoply of securities mentioned, from African stocks to Icelandic housing bonds. Drobny stresses the importance of diversification in picking global-macro managers, adding, "You can't rely on one man."….Other managers featured in Drobny's book include Peter Thiel, who runs Clarium Capital Management….Christian Siva-Jothy, former head of proprietary trading at Goldman Sachs, and Jim Leitner of Falcon Management. In the book, Leitner offers this advice to managers: "If you read about an oil discovery, start thinking about how to develop it into a trade. The idea is to do as much research as you can just reading and thinking about anything in the world before reaching out to your network."….The key to thriving in global macro? Plenty of smarts for starters. And "humility and flexibility," Drobny says. "You have to be flexible enough to cut your positions when what you firmly believe in is not working for you." This year, global macro managers did great in the January-April period, and didn't do great in May and June, when equities and emerging markets took a big hit…..even for sophisticated players in the global-macro game, it sometimes pays to just sit on the sidelines." (Barron's)
"It's a fantastic book, both in content and execution." (Bloomberg News)
"Steven Drobny has been able to do something that few others have, especially in the media: He got hedge fund managers to share their trade secrets." (InstitutionalInvestor.com)
"...useful for anyone who has entrusted their money to funds operating in the sector...an insight into the way in which some of the best performing global macro managers think about the world they invest in and how they have amassed their fortunes." —Financial Times, (Los Angeles Times, June 4, 2006)
"[Steven Drobny] uses this access to present a series of fascinating interviews with more than a dozen managers representing a broad spectrum of investment thinking." (Financial Times)
"a good start in understanding what the new global micro manager is all about." (Lipper HedgeWorld)
"Couldn't come at a more appropriate time…sheds more light than ever on the minds behind the largest global macro funds…reveals the intricacies of thinking like a hedge fund manager." (Forbes)
"Drobny has a Rolodex that's the Wall Street equivalent of Wilt Chamberlain's little black book…he has used its power to help craft the absorbing Inside the House of Money. Think Market Wizards – only full of guys who aren't either dead or irrelevant." (Trader Monthly)
"For the investor, the trading strategies described in the interviews are chock-a-block with detail, and can serve as a starting point toward navigating hedge funds… more interesting are the stories of how these traders got where they are today… goes a long way toward enlightening those who aspire to enter." (Financial World Magazine)
"...eye opener..." (NYSSA)
"...must read..." (Futures Magazine)
"...engaging..." (Active Trader)
"written an intelligent analysis of the current hedge fund climate" (Pensions World, September 2006)
"Corporate finance managers are taking the message of the book on board." (CFO Europe, September 2006)
From the Inside Flap
In today's difficult investment environment, where geopolitical and social instability compound an already challenging search for higher returns, hedge funds have outperformed. As a result, assets under management have exploded and top investment talent has migrated over to hedge funds. Amidst the growth and evolution of the business, one strategyglobal macrohas remained true to its original mandate of absolute return investing, which seeks outsized returns from investments anywhere in the world, in any asset class, and in any instrument.
Although successful money managers often have a reputation for being reluctant to discuss their market views and trading strategies, Inside the House of Money opens the door to the typically opaque world of hedge fundsparticularly global macro investingand offers a rare glimpse into a high-intensity environment where enormous stakes are a part of everyday life. As cofounder and partner of Drobny Global Advisorsan international macroeconomic research and advisory firmauthor Steven Drobny has access to a broad selection of today's top global macro hedge fund managers. Through detailed interviews with more than a dozen of these individuals, Drobny provides you with an inside look at how these money managers view world markets and offers subtle insights into how they make money.
First, you will receive an introduction to global macro from a professional investor's perspective. Then, you will discover how some key historical events have shaped this field. You will also learn how future events, such as increased competition and specialization, are pushing today's global macro manager into the realm of global micro investing. With this information in hand, you'll go Inside the House of Money through a collection of in-depth interviews with a variety of money managers, each with a unique perspective and approach to global markets, including:
- The Family Office Manager: Jim Leitner (Falcon Management)
- The Prop Trader: Christian Siva-Jothy (SemperMacro)
- The Treasurer: Dr. John Porter (Barclays Capital)
- The Central Banker: Dr. Sushil Wadhwani (Wadhwani Asset Management)
- The Dot-Commer: Peter Thiel (Clarium Capital Management)
- The Pioneer: Jim Rogers
- The Commodity Specialist: Dwight Anderson (Ospraie Management)
- The Emerging Market Specialist: Marko Dimitrijevic (Everest Capital)
- And others
Filled with in-depth insight and real-world experiences of top hedge fund traders, Inside the House of Money reveals how the best minds in the business identify and profit from opportunities in every corner of the globe.
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Top Customer Reviews
The books looks into the thoughts and investment process of the great investors.
It is a good read and I highly suggest reading it.
I liked how Keynes, the great economist, made good money. Also, Jim Rogers making a fortune (he is an economist too).
Now there are more resources about hedge funds online including blogs and podcasts.
Still it is a nice read. I suggest reading the book with googling the investor.
You will learn far more doing so.
I like the first person voice where we actually can learn how these people think. Conclusions are not presented as facts. In fact, there are no conclusions in the book. Just views from a large number of professionals. If you are willing to spend some time thinking about what the people say, I think you can learn quite a bit. The good thing is that you can read one interview and then think. You don't need to read the whole book in one go. However, don't expect any conclusions about how the market works from this book.
The book is five years old so the examples are a bit old. However, I would not worry about that at all. Naturally, some interviews are more interesting than others, but that's just life.
Finally, I think the title is kind of stupid. I thought it was some second rate author who was going to go on and on about the hedge fund industry based on some narrow knowledge and that the publisher hotted up the title. The latter is probably true. Anyway, my only point is: don't let the title scare you away.
There is apparently a second edition out with some 40 extra pages. I have not seen that version, but off course that is the one you should buy.
I liked the interviews of so many different styles because it just proves my personal theory that anyone can make money. Every trader in the book trades differently and they still all make money.
I also like the comments from many of these traders that said that we were heading for a sub-prime meltdown and that the banks would be having problems. This was written more than a year ago, and thats exactly whats happening today. Dow is now down 8.6% off the high it made last month. The volatility is crazy. And these guys predicted it long ago. Lots of good insight from their interviews.
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.