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Inside the House of Money: Top Hedge Fund Traders on Profiting in the Global Markets
Inside the House of Money lifts the veil on the typically opaque world of hedge funds, offering a rare glimpse at how today's highest paid money managers approach their craft. Author Steven Drobny demystifies how these star traders make billions for well-heeled investors, revealing their theories, strategies and approaches to markets. Drobny, cofounder of Drobny Global Advisors, an international macroeconomic research and advisory firm, has tapped into his network and beyond in order assemble this collection of thirteen interviews with the industry's best minds. Along the way, you'll get an inside look at firsthand trading experiences through some of the major world financial crises of the last few decades. Whether Russian bonds, Pakistani stocks, Southeast Asian currencies or stakes in African brewing companies, no market or instrument is out of bounds for these elite global macro hedge fund managers. Highly accessible and filled with in-depth expert opinion, Inside the House of Money is a must-read for financial professionals and anyone else interested in understanding the complexities at stake in world financial markets. "The ruminations of supposedly hush-hush hedge fund operators are richly illuminating." -- New York Times
384 pages, Hardcover
First published April 1, 2006
161 people are currently reading
2551 people want to read
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Displaying 1 - 30 of 55 reviews
May 11, 2009
First, I wouldn't recommend this to anyone who isn't very comfortable with finance terminology. There's a lot of *very* technical language and a lot of unintuitive discussions about pricing volatility etc. etc. If you skim over that stuff, it's pretty much impossible to follow the thrust of the book.
That being said, it's a kind of interesting book - particularly in how you get an unfiltered view of what happens at various prop desks and hedge funds. The book is a compilation of interviews with various finance professionals, most of whom run their own "global macro" funds. "Global macro" - as this book defines it - is the business of taking sides on 0-sum bets about the direction of prices. There are prices on just about everything from the obvious (currency exchange rates) to the very unobvious (volatility on random futures). And so they trade on just about everything.
It's difficult to say what I really took away from this book, but following on my New Year's resolution to try to figure that out and write it down:
1. These jobs sound totally sweet. Many finance people just read The Economist and talk to random people and come up with "tradable ideas."
2. Trades are being made on *everything*. When a new government comes into power, people make trades. A hurricane can trigger a hedge fund to make a series of trades around hurricane-related financial instruments.
3. There may be a competitive advantage for hedge funds as they can respond very quickly to macro-events that institutional investors can not.
4. Markets may not be as efficient as I've liked to believe. While there's a lot of Monday-morning quarterbacking about asset prices and policy decisions, there emerged from the interviews a consistent narrative that I can buy into: central banks, particularly in financially unsophisticated countries, can make bad decisions for political reasons. These bad decisions effectively transfer wealth from the country's shareholders to global financial institutions. This is relevant for today, too, I guess...
5. Ultimately, though, this stuff doesn't work. The predictions that the people in this book make (in 2006) were ... pretty average. One even called for buying a lot of Icelandic bonds (oops!). But all in all, there is further support for the thesis that trading in a 0-sum game (like global macro) can be random yet produce people who look like consistent winners. Take a look a few years later and they don't look too consistent.
That being said, it's a kind of interesting book - particularly in how you get an unfiltered view of what happens at various prop desks and hedge funds. The book is a compilation of interviews with various finance professionals, most of whom run their own "global macro" funds. "Global macro" - as this book defines it - is the business of taking sides on 0-sum bets about the direction of prices. There are prices on just about everything from the obvious (currency exchange rates) to the very unobvious (volatility on random futures). And so they trade on just about everything.
It's difficult to say what I really took away from this book, but following on my New Year's resolution to try to figure that out and write it down:
1. These jobs sound totally sweet. Many finance people just read The Economist and talk to random people and come up with "tradable ideas."
2. Trades are being made on *everything*. When a new government comes into power, people make trades. A hurricane can trigger a hedge fund to make a series of trades around hurricane-related financial instruments.
3. There may be a competitive advantage for hedge funds as they can respond very quickly to macro-events that institutional investors can not.
4. Markets may not be as efficient as I've liked to believe. While there's a lot of Monday-morning quarterbacking about asset prices and policy decisions, there emerged from the interviews a consistent narrative that I can buy into: central banks, particularly in financially unsophisticated countries, can make bad decisions for political reasons. These bad decisions effectively transfer wealth from the country's shareholders to global financial institutions. This is relevant for today, too, I guess...
5. Ultimately, though, this stuff doesn't work. The predictions that the people in this book make (in 2006) were ... pretty average. One even called for buying a lot of Icelandic bonds (oops!). But all in all, there is further support for the thesis that trading in a 0-sum game (like global macro) can be random yet produce people who look like consistent winners. Take a look a few years later and they don't look too consistent.
February 6, 2011
This book is another set of interviews, in the same vein as the Market Wizards book. The traders here all run hedge funds that specialize in Global Macro. What's Global Macro? It means trading anything, anywhere. Typically, these traders look to long term fundamental aspects of international economies. They are trading enormous amounts of money, even the guys who are mostly trading their own money. The interviews were quite interesting.
The best thing about this book is how clearly, and nearly unanimously, the traders saw that a huge shift was coming -- and the book was written just before 2008. They didn't know when it was going to come, though several thought it was something that Greenspan was delaying until after the end of his term. But they all knew that the relative stability and lack of volatility was going to come to an end, and most thought that the crash would be pretty hard.
I think I learned something from this book, but I don't know whether any of it has any practical application.
The best thing about this book is how clearly, and nearly unanimously, the traders saw that a huge shift was coming -- and the book was written just before 2008. They didn't know when it was going to come, though several thought it was something that Greenspan was delaying until after the end of his term. But they all knew that the relative stability and lack of volatility was going to come to an end, and most thought that the crash would be pretty hard.
I think I learned something from this book, but I don't know whether any of it has any practical application.
July 21, 2010
This is not a book for people not familiar with a lot of financial jargon.
Very little of which isn't explaned.
There is some interesting material in the book,
but the author seems obsessed with the term "GLOBAL MACRO".
He keeps asking everyone what it means,
the best answer on p 217 is from Jim Rodgers,
probably the most famous of all the people he interviewed;
a sarcastic: "I'm not smart enough to know".
That gave me a chuckle and I hoped the author would forget
about GLOBAL MACRO.
He didn't though.
He also likes to ask what the person's favorite trade was,
then you get a story about yen or pesos going up or down
20 years ago.
Not very helpful.
A lot of the language is turgid,
try this sentence:
"My basic underlying strategy is to get long of gamma when I feel we're going to get movement due to an anticipated policy shift driven by new economic data."
What does that mean in simple English?
"Buy some options when new data is announced."
I think?
Take a guess.
Very little of which isn't explaned.
There is some interesting material in the book,
but the author seems obsessed with the term "GLOBAL MACRO".
He keeps asking everyone what it means,
the best answer on p 217 is from Jim Rodgers,
probably the most famous of all the people he interviewed;
a sarcastic: "I'm not smart enough to know".
That gave me a chuckle and I hoped the author would forget
about GLOBAL MACRO.
He didn't though.
He also likes to ask what the person's favorite trade was,
then you get a story about yen or pesos going up or down
20 years ago.
Not very helpful.
A lot of the language is turgid,
try this sentence:
"My basic underlying strategy is to get long of gamma when I feel we're going to get movement due to an anticipated policy shift driven by new economic data."
What does that mean in simple English?
"Buy some options when new data is announced."
I think?
Take a guess.
November 8, 2016
If you are interested in general interviews with macro managers, you may find the book of interest. That said, there is very little technical information on how the managers actually express their views through their positions.
August 12, 2020
A collection of interviews with hedge fund managers, similar to Market Wizards, except with a specific focus on global macro. Macro is fascinating primarily because of its broad mandate: you can go from making relative value trades on the Japanese yield curve to making outright bets on stocks in Kuwait. A good example was one manager who bought shares in glass manufacturers after an earthquake in 1999.
In addition to the oft-repeated trading wisdom (be emotionally disciplined, cut your losses, leverage your winners), Inside the House of Money also contains points that are a bit more subtle. If I could only take one lesson from this book, it would be to never short gamma – in other words, look for convex bets that pay you a lot if you are right but you only lose a little if you are wrong and always remember that extreme price moves can easily be followed by more extreme price moves (rather than mean-reverting).
In addition to the oft-repeated trading wisdom (be emotionally disciplined, cut your losses, leverage your winners), Inside the House of Money also contains points that are a bit more subtle. If I could only take one lesson from this book, it would be to never short gamma – in other words, look for convex bets that pay you a lot if you are right but you only lose a little if you are wrong and always remember that extreme price moves can easily be followed by more extreme price moves (rather than mean-reverting).
September 3, 2024
This book gives a great glimpse into the world of traders and fund professionals. It truly explains why the market often behaves in a rather fascinating way (but one theme stood out: the traders in the book often fear the market, since the market is so powerful, when leverage is used, the market could easily wipe them out in a single day).
But here are a couple things I find interesting as the book was conducted the eve before the 2008 crisis and the subjects in the book do not know what’s to come yet:
One of the trader commenting on why he was long Eurodollar during the Greenspan put:
Comment on the market reaction to unscripted event (such as 9/11):
(One of the other traders in the book later commented that he did not trade for 3 weeks post 9/11, since he had no stomach for trading.)
On the relationship between banks and hedge funds:
But here are a couple things I find interesting as the book was conducted the eve before the 2008 crisis and the subjects in the book do not know what’s to come yet:
One of the trader commenting on why he was long Eurodollar during the Greenspan put:
When the Fed is in an aggressive rate-cutting mode I want to be long Eurodollars because it’s the most obvious trade in the most liquid market in the world. I don’t want to be long South American fixed income or anything else when there is a clear trend in a liquid market.
Comment on the market reaction to unscripted event (such as 9/11):
... markets were very slow to react. It’s one of my fascination with markets - that they are unbelievably slow to react to big events that there is no script for.
(One of the other traders in the book later commented that he did not trade for 3 weeks post 9/11, since he had no stomach for trading.)
On the relationship between banks and hedge funds:
The real question is what banks actually do in the world today - finance hedge funds? If that is indeed the answer, it means that you and I, the taxpayers, will bear the brunt of any fallout. Every one of these institutions is too big to fail, as we saw with Long Term Capital. And LTCM was a drop in the bucket compared to some of the positions that exist out there today.
August 21, 2018
This is very much a book in the Market Wizard- tradition - a knowledgeable person interviews prominent macro hedge fund managers on how they work and what investments they have done. As the author knows many of the interviewees personally the conversation becomes open and relaxed. Steven Drobny is the co-founder of DGA, a macro research firm selling to many of the macro hedge funds he first got to know as a member of Deutsche Bank’s Hedge Fund Group.
Macro hedge funds take long and short leveraged positions in almost any asset class around the world through any liquid vehicle. The investment style is sometimes relative value but more commonly directional, i.e. trend following. Some funds are rules based and quantative, so called systematic, but the really cool guys work for discretionary funds. Giants and geniuses like George Soros, Louis Bacon and Paul Tudor Jones with the flexibility to do whatever they want!
After three chapters where the author sets the stage by defining macro hedge funds and discussing their history and future, the interview section starts off with a superstar - Jim Leitner of Falcon Group. Among several good interviews this first one stands out as exceptionally interesting. Leitner is an astute analyst of markets but also of psychology and investment processes and his sometimes philosophical thoughts covers areas you wouldn’t normally expect, such as the optimal size of an investment team (8 to 9 persons) and the way to write monthly reports making sure it’s a learning experience also for the portfolio manager. Under the label “Aikido Spirit” the sympatric Leitner fosters a responsive approach to the markets and a humble probability driven view of losses and gains. Building a case for a position, numbers trumps stories. Leitner searches for imbalances and values but does not act before a trigger has created momentum around the idea.
Even if most investors interviewed are trading oriented, a presentation of thirteen PM’s will inevitably display a lot of differences. If something unites the many PM’s then I would say that it’s their innovation, flexibility and imagination – an ability to think of the next step. As such they are tactically good strategists. With an alert outsider mentality they gain a valuable broad view of the states of the world and they understand not to optimize the given environment but to look for signs that the environment will change.
The first edition was published in 2006 so the interviews were done during the goldilocks economy. The updated second edition from 2009 came out when macro hedge funds were scolding hot. Not only did they do superbly in the boom, they also did much better than most other hedge funds and long onlies in the subsequent downturn. Top-down investing was the name of the game. Bottom-up was knocked out. In a broader portfolio the utility an allocation to macro hedge funds brings is that they often have their best relative performance during periods when the stock market is weak. The reason is that they are trend following and bear markets bring powerful trends to follow for those who have a flexible choice. In the last few years the glory of macro hedge funs has become a bit tarnished by uncompetitive returns. I’m not entirely sure of the reasons but explanations could include that they – like all trend followers – have been whipsawed by the risk-on-risk-of character of the market, that they have focused too much on more catastrophic scenarios than those that turned out to be the case (so far) and perhaps more importantly that the space has become more crowded. Trend following strategies are today sold as mainstream beta products to institutional investors.
Imitation of the successful is an excellent way to boost performance. However, to succeed there has to be an in depth understanding of the person’s accomplishments, as pure imitation without adjustments to the person or the times is a recipe for disaster. This book will bring the reader plenty of deep understanding.
Macro hedge funds take long and short leveraged positions in almost any asset class around the world through any liquid vehicle. The investment style is sometimes relative value but more commonly directional, i.e. trend following. Some funds are rules based and quantative, so called systematic, but the really cool guys work for discretionary funds. Giants and geniuses like George Soros, Louis Bacon and Paul Tudor Jones with the flexibility to do whatever they want!
After three chapters where the author sets the stage by defining macro hedge funds and discussing their history and future, the interview section starts off with a superstar - Jim Leitner of Falcon Group. Among several good interviews this first one stands out as exceptionally interesting. Leitner is an astute analyst of markets but also of psychology and investment processes and his sometimes philosophical thoughts covers areas you wouldn’t normally expect, such as the optimal size of an investment team (8 to 9 persons) and the way to write monthly reports making sure it’s a learning experience also for the portfolio manager. Under the label “Aikido Spirit” the sympatric Leitner fosters a responsive approach to the markets and a humble probability driven view of losses and gains. Building a case for a position, numbers trumps stories. Leitner searches for imbalances and values but does not act before a trigger has created momentum around the idea.
Even if most investors interviewed are trading oriented, a presentation of thirteen PM’s will inevitably display a lot of differences. If something unites the many PM’s then I would say that it’s their innovation, flexibility and imagination – an ability to think of the next step. As such they are tactically good strategists. With an alert outsider mentality they gain a valuable broad view of the states of the world and they understand not to optimize the given environment but to look for signs that the environment will change.
The first edition was published in 2006 so the interviews were done during the goldilocks economy. The updated second edition from 2009 came out when macro hedge funds were scolding hot. Not only did they do superbly in the boom, they also did much better than most other hedge funds and long onlies in the subsequent downturn. Top-down investing was the name of the game. Bottom-up was knocked out. In a broader portfolio the utility an allocation to macro hedge funds brings is that they often have their best relative performance during periods when the stock market is weak. The reason is that they are trend following and bear markets bring powerful trends to follow for those who have a flexible choice. In the last few years the glory of macro hedge funs has become a bit tarnished by uncompetitive returns. I’m not entirely sure of the reasons but explanations could include that they – like all trend followers – have been whipsawed by the risk-on-risk-of character of the market, that they have focused too much on more catastrophic scenarios than those that turned out to be the case (so far) and perhaps more importantly that the space has become more crowded. Trend following strategies are today sold as mainstream beta products to institutional investors.
Imitation of the successful is an excellent way to boost performance. However, to succeed there has to be an in depth understanding of the person’s accomplishments, as pure imitation without adjustments to the person or the times is a recipe for disaster. This book will bring the reader plenty of deep understanding.
March 18, 2022
- Amazing, required reading for everyone working in the financial sector
- Explains how in cases of ‘certainty’ betting on the opposite can be exceptionally cheap relative to the true probability of the event
- Second order thinking regarding market stress e.g. no one is sure how much the Turkish earthquake will alter the growth trajectory but you know windows will need to be replaced, ergo Turkish glass manufacturers are cheap
- Investors can have diametrically opposed views on an asset class and both be correct depending on time frame and what strata of the asset class their thesis is based on
- The razor thin line between confidence and humility, trusting what you know and accepting others view points e.g. Paul Tudor Jones rapidly changing sentiment a la Keynes
- Explains how in cases of ‘certainty’ betting on the opposite can be exceptionally cheap relative to the true probability of the event
- Second order thinking regarding market stress e.g. no one is sure how much the Turkish earthquake will alter the growth trajectory but you know windows will need to be replaced, ergo Turkish glass manufacturers are cheap
- Investors can have diametrically opposed views on an asset class and both be correct depending on time frame and what strata of the asset class their thesis is based on
- The razor thin line between confidence and humility, trusting what you know and accepting others view points e.g. Paul Tudor Jones rapidly changing sentiment a la Keynes
December 20, 2017
Well conducted interviews with successful macro traders, very much in the style of the Market Wizards books. The subjects tend to do quite arcane trades, which means there are lots of technical terms. The lack of explanations/simplifications in these cases is the only drawback I saw as I read this book.
For someone highly interested in finance/trading, I would recommend this book. It served as my introduction into macro and, although I realize I maybe should have studied a bit more first, I still enjoyed it.
For someone highly interested in finance/trading, I would recommend this book. It served as my introduction into macro and, although I realize I maybe should have studied a bit more first, I still enjoyed it.
December 7, 2020
This book is structured the same as the Jack Schwager's Market Wizards books. There's a chapter for each money manager. Each chapter consists of background plus an interview. Unlike any of Schwager's books, however, this entire volume is centered around the "global macro" approach to investing and speculation. I found it fascinating, but it was the first book on global macro I had ever read.
January 18, 2018
what a great interesting easy-to-read book, filled with so many honest interviews of millionaire and billionaire hedge fund managers, sharing so many ideas and strategies in global macro investing. one of the most practical and helpful books I've read this year.
August 27, 2017
Interesting vignette interviews, though the focus on trading rather than investing and discretionary rather than systematic managers is a bit dated
February 6, 2018
Educational and enjoyable. Nothing beats men of character that set a an example I can practice.
August 29, 2018
Fairly interesting but not his best work.
July 17, 2019
An insider look into investment world. Underrated and without peer for it's genre
June 24, 2020
The interviews are well made, this is basically Hedge Fund Market Wizards with a macro tilt. I find the final chapter as the most interesting interview.
February 25, 2021
A book of interviews with top global macro hedge fund managers.
December 11, 2021
Bit dated but has some good content on the history of global macro investing
February 10, 2022
Maybe the top book of all time for macro
September 10, 2022
Similar to market wizards but it gets more in-depth and covers a more specialised range of traders.
January 8, 2024
This was a pretty light read. It was basically a podcast in book form. I thought the author asked very insightful questions and the guests were all great.
Want to read
January 4, 2025Tenreiro (1/3/25)
January 4, 2025
Great to hear from actual practitioners from wide array of backgrounds. Replete with good anecdotes
February 19, 2025
I enjoyed it for the most part, if you've got a finance background and / or a passion for markets / trading it has some nice talks specially pre dotcom.
October 16, 2016
There were some interesting trades mentioned in the book which I liked. Since my strength is equities, the discussions on currency, fixed income, derivatives were useful to refresh my memory. Quite often I found myself researching terms like 'short volatility', 'long gamma and vega'.
On the negative side the book dragged on at times. Some of the interview questions were irrelevant and I had to outright skip those segments.
I would rank Sebastian Mallaby's book on hedge funds above this book. However the style of the funds are a bit different which adds some diversity. The format is also different as this one is interview based like the Market Wizards series.
On the negative side the book dragged on at times. Some of the interview questions were irrelevant and I had to outright skip those segments.
I would rank Sebastian Mallaby's book on hedge funds above this book. However the style of the funds are a bit different which adds some diversity. The format is also different as this one is interview based like the Market Wizards series.
March 12, 2018
scary reading of a pre 2008 era
superb work by Steven Drobny
superb work by Steven Drobny
March 6, 2017
From Top 12 Investment Books to Start Off 2017
Inside the House of Money, by Steven Drobny, focuses on global macroeconomic investing and the strategies used by fund managers. Similar to The Market Wizard series, this book is a collection of 13 interviews with some of the top performing mangers in the world. Personally, I’ve always been more interested in the macroeconomic side of finance and I found this book very informative.
The book delves into the different ways the mangers profiled in this book navigated through major world financial crises, including the 1997 Asian financial crisis and the 1998 Russian Ruble crisis. It’s particularly interesting to see how a single event from across the world can become an investment opportunity for global macro investors.
Oftentimes, investors only focus on the domestic market, without giving any thought to the way global economic trends affect them. With the recent withdrawal of the United Kingdom from the European Union, the subject of macroeconomic investing has never been more relevant and Inside the House of Money is a great place to start.
Inside the House of Money, by Steven Drobny, focuses on global macroeconomic investing and the strategies used by fund managers. Similar to The Market Wizard series, this book is a collection of 13 interviews with some of the top performing mangers in the world. Personally, I’ve always been more interested in the macroeconomic side of finance and I found this book very informative.
The book delves into the different ways the mangers profiled in this book navigated through major world financial crises, including the 1997 Asian financial crisis and the 1998 Russian Ruble crisis. It’s particularly interesting to see how a single event from across the world can become an investment opportunity for global macro investors.
Oftentimes, investors only focus on the domestic market, without giving any thought to the way global economic trends affect them. With the recent withdrawal of the United Kingdom from the European Union, the subject of macroeconomic investing has never been more relevant and Inside the House of Money is a great place to start.
January 25, 2009
An excellent and educational read. Timely follow up to Schwager's Market Wizards series, as it is more up to date and profiles managers who have succeeded in the 90s and 00s. Drobny makes an effort to speak to a wide range of managers, with differing personalities and styles, though all in global macro (though each individual defines it slightly differently). Many tips here on the broad outlines of specific strategies, but what's more valuable is being able to trace their thought processes, and also what the managers point out as the important underlying principles of trading and behavioural characteristics of successful fund managers.
Separately, I liked especially the appendices, where a guest writer puts derivatives and financial engineering in their broader historical context. The overall argument is that securitization and derivatives (two linked but separate phenomena) enabled the creation of money/credit via non-bank institutions, which are far less regulated than the banks. Also, the Fed was not empowered to act as a lender of last resort to these non-bank institutions. This meant that the markets were operating under an institutional structure that harked back to the late 19th C, when financial crises were far more regular and deep. However, the Fed and regulators didn't quite realise this, and operated under the assumptions that they were still in control. The 2008 financial crisis, following this line of thinking, is a failure of central banker's economic paradigm to catch up with what was really happening.
A thought on this: I think economics education at Ivy League colleges will have to change. We're taught neoclassical economics all the way, and few students will delve into the history of economic thought. Yet it is the narrowness of economic understanding so prevalent among Street bankers (where were they all educated? Ivy League colleges probably). I was introduced to Austrian economics via a 5-day summer seminar in experimental economics at George Mason, where the level of discussion/curiosity far surpassed anything I experienced at Columbia (excepting one-on-one discussions with thesis advisor). Yet according to this guest writer, the Austrian paradigm recognised the inflation of asset prices as signalling the price of money was too cheap -- ie too much liquidity, stemming from unregulated credit creation. And major economics blogs now are concerned about going back to Keynes and understanding the implications of his thought. We never even read Keynes in college, just an oversimplified summary of his ideas, and the monetarist counter arguments. And yet we were made to read (rightly) many of the landmark works in political thought and literature. There is an imbalance here. Undergrad economics I think should include a course on the history of economic thought and methodology as part of the curriculum.
Separately, I liked especially the appendices, where a guest writer puts derivatives and financial engineering in their broader historical context. The overall argument is that securitization and derivatives (two linked but separate phenomena) enabled the creation of money/credit via non-bank institutions, which are far less regulated than the banks. Also, the Fed was not empowered to act as a lender of last resort to these non-bank institutions. This meant that the markets were operating under an institutional structure that harked back to the late 19th C, when financial crises were far more regular and deep. However, the Fed and regulators didn't quite realise this, and operated under the assumptions that they were still in control. The 2008 financial crisis, following this line of thinking, is a failure of central banker's economic paradigm to catch up with what was really happening.
A thought on this: I think economics education at Ivy League colleges will have to change. We're taught neoclassical economics all the way, and few students will delve into the history of economic thought. Yet it is the narrowness of economic understanding so prevalent among Street bankers (where were they all educated? Ivy League colleges probably). I was introduced to Austrian economics via a 5-day summer seminar in experimental economics at George Mason, where the level of discussion/curiosity far surpassed anything I experienced at Columbia (excepting one-on-one discussions with thesis advisor). Yet according to this guest writer, the Austrian paradigm recognised the inflation of asset prices as signalling the price of money was too cheap -- ie too much liquidity, stemming from unregulated credit creation. And major economics blogs now are concerned about going back to Keynes and understanding the implications of his thought. We never even read Keynes in college, just an oversimplified summary of his ideas, and the monetarist counter arguments. And yet we were made to read (rightly) many of the landmark works in political thought and literature. There is an imbalance here. Undergrad economics I think should include a course on the history of economic thought and methodology as part of the curriculum.
August 6, 2023
A good read for anyone interested in finance or investing. It’s likely rare to get such candid interviews with industry heavyweights all condensed into one book.
August 13, 2016
Puts forward a lot of new ideas. Many specific traders talk about what they think works, what doesn't, what drives the market, etc. Not many books really give the perspective from a successful portfolio manager / trader (i.e. readers will notice most PMs are always long the tail / long gamma). Very inspiring read. Some of the best interviews in the book feature Jim Leitner, Christian Siva-Jothy, Jim Rogers, and Scott Bessent. Peter Thiel (noted venture capitalist) is also interviewed for this book although later on he shut down his fund due to poor performance.
One of the more memorable stories came by way of Siva-Jothy, who illustrated how markets sometimes react slowly to information: during 9/11 when the first plane crashed into the World Trade Center, many news sources speculated an accident. However, Siva-Jothy, having been a recreational pilot, reasoned that pilots generally try to aim for flat land or water when in trouble, therefore the crash was more likely a work by terrorist and starting going long Eurodollars. In fact, he gave a great reason for long Eurodollars as a simple bearish trade: "When the Fed is in an aggressive rate-cutting mode, I want to be long Eurodollars because it's the most obvious trade in the most liquid market." The interview is also lined with some funny anecdotes, another time he was in a meeting with a fellow trader who reasoned shorting Spain "if you can't drink the water, sell the currency."
Throughout the book, there is also some contrasting views on options. For example, Peter Thiel described them as an "inefficient or lazy way to express a theme or hedge a trade" and frequently used options only as indicators for research. Some other fund managers on the macro side have supported the use of options because the asymmetric returns tends to be very advantageous in terms of position management. If one takes a position with options, and the position goes the wrong one, the fund manager can just keep the options position in his drawer; one simple never needs to close out a position since the options are now worth close to zero.
Some other great points from the book: relative value trades are actually negative gamma trades since they rely on reversion to the mean. Also, various managers stress the importance of understanding liquidity and the mark to market impact of trades (something not seen in liquid markets but experienced by anyone trading a fixed income product where one player unwinding will cause havoc for all).
One of the more memorable stories came by way of Siva-Jothy, who illustrated how markets sometimes react slowly to information: during 9/11 when the first plane crashed into the World Trade Center, many news sources speculated an accident. However, Siva-Jothy, having been a recreational pilot, reasoned that pilots generally try to aim for flat land or water when in trouble, therefore the crash was more likely a work by terrorist and starting going long Eurodollars. In fact, he gave a great reason for long Eurodollars as a simple bearish trade: "When the Fed is in an aggressive rate-cutting mode, I want to be long Eurodollars because it's the most obvious trade in the most liquid market." The interview is also lined with some funny anecdotes, another time he was in a meeting with a fellow trader who reasoned shorting Spain "if you can't drink the water, sell the currency."
Throughout the book, there is also some contrasting views on options. For example, Peter Thiel described them as an "inefficient or lazy way to express a theme or hedge a trade" and frequently used options only as indicators for research. Some other fund managers on the macro side have supported the use of options because the asymmetric returns tends to be very advantageous in terms of position management. If one takes a position with options, and the position goes the wrong one, the fund manager can just keep the options position in his drawer; one simple never needs to close out a position since the options are now worth close to zero.
Some other great points from the book: relative value trades are actually negative gamma trades since they rely on reversion to the mean. Also, various managers stress the importance of understanding liquidity and the mark to market impact of trades (something not seen in liquid markets but experienced by anyone trading a fixed income product where one player unwinding will cause havoc for all).
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