This is a book by a Washington Post editorialist about hedge funds. I expected it would be a snoozer and about as exciting as a C-span roundtable, but it was pretty good. He got interviews with all the big names, like Soros, Kovner, Steinhardt, etc. And he asks the interesting question, how did they make their money? For the Commodities Corp. crowd, it was trend following while advertising themselves as fundamental researchers, especially in currencies. (There was something called the "white book" by the founder Hostetter, which was a list of trading rules. Would be interested if that's floating around. Kovner also mentions that unexplained price movements are the most powerful, which is an interesting tip). For Steinhardt, it was getting inside info in exchange for brokerage fees. Soros bet big when he had an edge, like when he got a tip that the Thai treasury was going to devalue. PT Jones comes across as a classic tape reader, and you can see that in his documentary, too. Recommended.
It's not interviews, not all of it is ancient history. Very interesting discussion for instance of Ken Griffin and how he got saved by selling five year bonds, so that he wasn't cleaned out by the crisis. And how PT Jones got stuck in some Indonesian banks and couldn't get out, even though he was expecting the crisis. It's surprising how many people who were expecting the crisis lost money in it . . .
Okay. Would Griffin have been "cleaned out" because of excessive leverage with illiquid instruments or an inability to borrow money to carry those same instruments?
I'm not sure I catch the distinction. Mallaby goes through an interesting history of the Amaranth blow up . . . basically Amaranth became the market and the collateral calls became too much. Griffin was able to avoid the same fate because he had long term funding and he controlled his own back office . . . so he wasn't relying on the banks marks.
I'm not sure I catch the distinction. Mallaby goes through an interesting history of the Amaranth blow up . . . basically Amaranth became the market and the collateral calls became too much. Griffin was able to avoid the same fate because he had long term funding and he controlled his own back office . . . so he wasn't relying on the banks marks.
when control/credit cost/valuation are in hands of others, shorting calls in a mark to market context, can be like selling for ZERO PREMIUM an insurance that has a significant probability of happening and a "infinite" reward because it wipes out. The only person I have read about who seems to understand some nuances of the above is buffet.
True. The interesting question is how they outperformed the market. Of course over time some may have lost more than they ever made . . . if you make a 500% return with 100 million and lose 50% with $5 billion, on the whole your investors are losers.