Diary of a Very Bad Year: Confessions of an Anonymous Hedge Fund Manager

by Keith Gessen, Anonymous Hedge Fund Manager

The First Book from "n+1"--an Essential Chronicle of Our Financial Crisis

HFM: Where are you going to buy protection on the U.S. government's credit? I mean, if the U.S. defaults, "what bank" is going to be able to make good on that contract? Who are you going to buy that contract from, the Martians?

n+1: When does this begin to feel like less of a cyclical thing, like the weather, and more of a permanent, end-of-the-world kind of thing?

HFM: When you see me selling apples out on the street, that's when you should go stock up on guns and ammunition.

Genres: Finance, Nonfiction, Business, Economics, History, Money, Memoir

272 pages, ebook

First published April 20, 2010

About the author

Keith Gessen was born in Moscow in 1975 and came to the United States with his family when he was six years old. He is a co-founder of the literary magazine n+1 and the author of the novels All the Sad Young Literary Men and A Terrible Country. He has written about Russia for the London Review of Books, n+1, the Nation, the New Yorker, and the New York Times Magazine, and has translated or co-translated several books from Russian, including Voices from Chernobyl by Svetlana Alexievich, There Once Lived a Woman Who Tried to Kill Her Neighbor's Baby by Ludmilla Petrushevskaya, and It's No Good by Kirill Medvedev. He is also the editor of the n+1 books What We Should Have Known, Diary of a Very Bad Year: Confessions of an Anonymous Hedge Fund Manager, and City by City. He lives in New York with his wife, the author and publisher Emily Gould, and their son, Raphy, who likes squishy candy.

Reviews

[David · Rating 3 out of 5]

DIARY OF A REALLY BAD YEAR:

Jan 3: forgot to go to the gym today, was really busy, will definitely go tomorrow though.

Mar 18: got promoted at work! too bad that other guy got fired, YOLO.

Apr 13: UGH NEED TO DO MY TAXES. Isn't there a robot or something to do this for me? I just want to watch SVU on Netflix.

Apr 14: Damn, I should have done my taxes in February.

May 6: So hungover... I should do a juice cleanse.

May 7: SO HUNGRY, I HATE KALE JUICE.

May 8: caved and ate a whole carton of ice cream, will start cleanse again tomorrow.

June 17: Wish I had a six pack or bicep veins, maybe next year?

Jul 29: Damn, rent is going to be raised in September. Megan got fired from her job, but she didn't really do good work anyway and was always reading Buzzfeed and writing GoodReads reviews. Remember to be consolatory to her. Try.

Aug 22: Invested all my clients in some of these great CDOs, it's like cruise control to Richville! Totes getting a raise on this bitch.

Sept 14: FUCCCKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKK

Sept 30: Sure this new job isn't as prestigious but at least I'm learning new service skills. I wonder how all my clients are doing since they lost all their money? Oh well, just keep swimming.

Nov 28: Maybe I will write a novel? I have lots of time. I could be the voice of my disenfranchised generation. Maybe like a modern day 'Great Gatsby' story? I kind of liked that book in High School, I could cast January Jones as the unattainable love interest, and Taylor Swift could sing the theme maybe? I should get a moleskine.

Dec 24: I heard suicides spike during the holidays. Whatever, plenty of scotch left.

Dec 27: No more scotch.

[Al Swanson · Rating 4 out of 5]

An excellent story excellently written. Basically a series of conversations between a financial reporter and (as evidenced by the title) an anonymous hedge fund manager. From late 2008 through early 2010, the two talked about the markets, the products and the financial system as a whole. They also discussed the talk surrounding those same subjects - which was almost as interesting.
I started reading about the financial markets for two reasons: 1) I was, in a past incarnation, a stock broker and so have a previous interest, particularly in how things have changed and 2) I had believed that much of the market meltdown was due to our media telling us there was a market meltdown. On the latter point, I was dead wrong.
The book will give you insight into the products that nearly killed our financial system, the way fund managers (at least this one) think and how things are inter-related (meaning how one thing dominoes into taking out everything else). Those two reasons are enough for just about anyone to read the book. The entertainment value is just an extra.
By itself, this book would not have answered all the questions I have about the meltdown, the people responsible and how it all happened. But it's a great addition to the other books I've read/am reading about the situation. That said, should you just have a passing interest in the debacle or even an interest into hedge funds - I recommend this book.
For a better overview of the products and people involved in killing our financial system - read FIASCO.

[Mary · Rating 5 out of 5]

the best chapter of this diary was the "proletariat rage" chapter-or something like that-that outlines what money dudes actually saw when they were confronted by one of madoff's salesman. HFM is a clever reader of human nature, while the interviewer is amazingly blinded by his naivete. it's sad to think about the damage this type of person can do, especially around election time.

[Josh Paul · Rating 4 out of 5]

These interviews with an anonymous hedge fund manager give a nice summary of the '08 financial crisis, along with its causes and consequences. The writing is approachable for folks without much background in finance.

[Max Ohnesorge · Rating 4 out of 5]

I liked this. It read like a series of podcast interviews over the course of about a 2 year period during the gfc. HFM (as the anonymous PM is referred to as) is entertaining to “listen” to and has a knack for explaining complicated things in an easy to understand manner. Things like the breakdown of the money market fund collapse that I had known of but hadn’t had a good grasp of were explained nicely.

I think it’s also good to hear about something like the GFC through the eyes of someone experiencing it. I’ve read backwards looking retrospectives on the GFC (Bernanke’s firefighting) but nothing that directly quotes someone as it happened. It’s easy to look at a chart of say the sp500 and say “why didn’t everyone just buy the dip?” but it’s hard to grasp the real fear that existed that the economy could deteriorate even further at the time. Or the decision to let Lehman fail. Very hard to make that call during the time.

Definitely got less interesting towards the end. First two thirds were good, last third, less so.

[Chris · Rating 5 out of 5]

Poor name and cover in my opinion, but great Q&A about the modern financial system. Recommended by Matt Levine, which makes sense as the interviewee has a similar style of integrating financial concepts into discussions (e.g. relating private investing to writing calls on your time with its lengthy default recovery process).

[Ethan Dan · Rating 5 out of 5]

Highly recommend for anyone wanting to learn more about the flows of money in the economy. The book is specifically about 2008-09 and the aftermath of the housing market crash, and it’s extremely approachable with little knowledge of finance. The Hedge Fund Manager speaks eloquently about the inter-connectedness of the modern financial system, importance/fragility of the corporate lending market, and the application of the Fed’s financial toolkit. Great read.

[Athan Tolis · Rating 5 out of 5]

I don't think you can read this book and make sense of it if you don't work in Finance.

But if I'm wrong and you can, that would make it my favorite book on the crisis. For the sake of keeping score, I rank this anonymous hedge fund manager above Joseph Stiglitz, Andrew Ross Sorkin, Robert Schiller, Alan Blinder, Neil Barofsky, Anatole Kaletsky, Simon Johnson, the lot of them. To say nothing of Matt Taibi, Michael Lewis, Jeff Sachs, Hank Paulson, Paul Krugman and the various other guys who have an axe to grind (much as I have thoroughly enjoyed some of their work).

The arguments are analytical, dispassionate and very clearly thought through. I found it impossible to disagree with anything the guy says and even on the bits he ultimately gets wrong I swear I can remember that with the information available at the time I was arriving at similar conclusions.

The book is proof, if anything, that markets at some level work: exposure to the market makes you think and analyze, it forces you to get to the bottom of what's going on. Ah, and it keeps you away from the extremes.

I particularly enjoyed reading what the author had to say about Simon Johnson's brave and inventive but ultimately flawed article in the Atlantic.

There are two things the book does not do: first, it does not have any particular order, it is not a narrative in any way shape or form like Sorkin, Blinder or Paulson are; second, it does not attempt to explain why it all happened in 2008, what was different in the last 20 years that did not hold true before.

For that, you'll need Stockman, which is however a very difficult book to read and an impossible one to enjoy.

The "Diary" has strengthened the faith I have in markets.

[Josh Friedlander · Rating 3 out of 5]

Surprisingly readable explanation of the economic forces that brought about the 2008 crisis: the wave of foreclosures, taxpayer-sponsored bailouts, and the return of almost all of the bankers involved to business as usual. The (obviously partisan) opinion of the eponymous HFM is that no-one was really to blame, and not much could have been done differently. And the way he explains it - so calmly, patiently and phlegmatically - you just might end up agreeing with him. It was weird to me, though, how sympathetic this book was. Who knew that hipster-Marxist n + 1 - enemy of all things reactionary and neoliberal - would find so much common ground with a hedge fund manager? (As a sample, the closing quote: "That's the hedge fund manager I know and love.") Not this reader...

[Ryan · Rating 4 out of 5]

Possibly the best book on finance I’ve ever read.

[Kevin Whitaker · Rating 5 out of 5]

Diary of a Very Bad Year
Well, I wasn't expecting this to be a topical book when I picked it up in February, but here we are. This is a series of interviews with a hedge fund manager about the financial crisis -- so it's partly a readable and contemporaneous-ish history of the financial crisis, partly an introduction to the actual differences between parties in the sometimes monolithic world of "finance", and partly a rather entertaining lesson in how a hedge fund manager looks at the world. I enjoyed it a lot although the first half was better than the second.

Three opinions from HFM I found interesting:
1. You make a lot of money in finance by seeing paradigm shifts, but that’s not really what conventional finance programs or MBAs train you in -- people don’t have capacity to rethink every assumption, so some of what gets taught gets taken for granted.
2. The SEC was staffed by lawyers so they focused on technical legal violations rather than fundamental frauds or fundamental lack of disclosure in selling financial products to less sophisticated orgs -- e.g. most actual finance people apparently knew Bernie Madoff was a Ponzi or something else illegal long before he got busted.
3. Many people in the hedge fund world felt bailout was too easy on banks once immediate financial crisis was over, but to people in the banking world (where many of the regulators came from) more extreme solutions were unimaginable

Where I heard about it: Matt Levine (Bloomberg)

[Andrej · Rating 5 out of 5]

This will be the book I recommend to friends curious about what working at a hedge fund is like. Not necessarily because it always reflects my day-to-day work but because HFM’s style of thought and level of sharpness is in the same ballpark of my colleagues. A lot of the concepts covered here like positioning and counterparty risk and concentration are not really “fundamental” investing concepts known to the lay day-trader, but understanding them is basically a prerequisite to being a good HF trader.

The specific content on the financial crisis is interesting, but for me the best parts were seeing how HFM thinks, especially when he’s forced to break down concepts into first principles. The number of time he mentions “linkages” or works from basic Econ make me think he worked for Bridgewater at some point, or for someone who’s trained there. Also interesting to see what he has to say about the hedge fund industry comp/risk profile/competitive dynamics as well.

Incidentally, what a weird fund. Doing EM private loans + fixed income relative value??? This guy is a PM yet seems to have a really wide coverage + broad knowledge base.

[Jon M · Rating 4 out of 5]

3.5 stars. Interesting perspective. For me I’d have liked it better if it were shorter… I think the first third-to-half was by far more interesting. If you get to a point where you’re bored, probably just stop there.

[Brian Flaherty · Rating 5 out of 5]

Entertaining and a refreshing break from purely retrospective crisis books

[Shreedhar Manek · Rating 3 out of 5]

(3.5/5)

There are quite a few books about the 2008 financial crisis, but there aren't a lot writing giving an insider's perspective about the crisis as it happens. Diary of a Very Bad Year does! The writer, Keith Gessen, interviews someone who is apparently a bigshot hedge fund manager over a period of a year.

Initially the anonymous HFM says that "this is as bad as things are going to get". Later we see the transition to "I cannot believe that this is how bad things are".

Honestly, I wanted to like this book. It does give an insider's perspective, avoids hyperbole, goes into some wonderful tangents, but.. overall I felt it was forgettable. Quite literally. It's been a few weeks since I read the book and I can't remember too many details from it already.

[Luke · Rating 4 out of 5]

Excellent, readable introduction to the economic crisis of 2008-Present. While it is quite educational, this book is hampered by the fact many of the 'terms of art' of trading (credit default swaps, collateralized debt obligations, etc.) are not defined at the outset. Indeed, there is a minor flood of acronyms towards the beginning of the book. This trend abates markedly as the book progresses. This book is notable for three things:

1. It is prima facie evidence that the market cannot regulate itself. One of the primary arguments against centralized planning is that a free market can do a better job of allocating resources because of its multiplicity of inputs. This book falsifies that theory. The Hedge Fund Manager explains very clearly how this crisis was a crisis of misallocated resources: houses that should never have been built, scientists who should not have been working on wall street, etc.

2. It illustrates some of the disturbing aspects of black box (computer controlled) trading, including the role that such trading played in the crisis. For example, such trading systems tend to be based on similar models and make similar assumptions, exaggerating the effects of a crisis when one occurs. Jaron Lenier has also dealt with this issue in "You are not a Gadget."

3. It predicts the downgrading of United States credit while warning of the adverse consequences of such a downgrade. These passages are, frankly, scary.

Overall, a recommended read.

[Jamie Pastore · Rating 5 out of 5]

A highly enjoyable series of interviews about the financial crisis between a hedge fund manager and a journalist who doesn't cover the industry. The majority of books about the crisis are retrospective and more narrative, but the interview format makes the book seem much more novel. The interviews happen as the crisis unfolds so you see the thoughts of the hedge fund managers and the interviewer as the manager tries to explain both what is happening and his perception as to how that will effect things going forward. The reporter doesn't have great depth in covering the industry, but that turns out to be an asset of the interview as his questions necessitate a response that strips out the regular jargon of finance. The manager is incredibly lucid and is able to break down the events as they come along without becoming snide and is able to convey his humility as well as his intelligence. The book often fails to make it onto lists explaining the credit crunch (likely because of its format), but if you have any interest in the crisis and want to read interviews in real time from it, I recommend this.

[Matt Munns · Rating 3 out of 5]

Improved my understanding of the financial crisis a bit, specifically around the scale of the bets during the financial crisis and how they were strongly correlated & concentrated in a few ideas. Still, a lot of what HFM said went over my head. I had also read / heard before about the incentive structure that rewards the kind of behavior that led to the crisis, but it was put most clearly in this book.

I think there was a dimension lacking in HFMs outlook around the deserved & realized consequences for bankers, but that's not really a knock on the book. Overall it was pretty entertaining and cleared up some areas in my understanding.

One knock was that the interviewer kept complimenting HFM on how smart he is, how good he is at communicating, and how he could be doing anything in the world at a high level. He seems smart but not so Earth-shattering.

[Wendy Liu · Rating 4 out of 5]

So good! The anonymous HFM is obviously very intelligent (and funny), and I found his analysis is convincing even as I disagree with some of his normative positions (and found his implied political views to be very limited in imagination).

I bought this because I'm on a kick to collect the entirety of n+1's back catalog (don't ask why). Worth reading if you're interested in economics (especially finance) from a left perspective, or if you've ever worked on Wall Street (even if you're not politically left-leaning).

[Mugren Ohaly · Rating 1 out of 5]

Extremely tedious and disappointing.


If you want a great book about the financial crisis, read Among The Bankers by Joris Luyendijk.

[Eli · Rating 5 out of 5]

I found this book an extremely fun read and really illuminating. I’ve been recommended this book a few times by people I respect deeply and I was not disappointed. There are very few books that deal with the thoughts of a risk-taker during a severe market event and this was brilliant. The book is a series of 9 interviews between the literary magazine n+1 and an anonymous hedge-fund manager (HFM). HFM is extremely smart, funny, and explains technical aspects of the market and the economy intuitively.

He often makes mistakes, but is willing to acknowledge them rather well. The book focuses on both the financial and personal consequences for HFM (by the end he grows extremely tired and resolves to retire at a rather young age).

The most interesting parts to me were when HFM talks about how fundamental relationships the market took as near-axioms began to break down. He described how no one has the time to review every assumption underpinning the financial system (or even their life!) and how the assumptions breaking down (correlation of mortgages, money-market funds defaulting) led to huge crises of confidence. He talked a lot about the role of risk-aversion in the crisis and how powerful a force it could be. Lastly, I really enjoyed his discussion about wasted production, allocating losses, and employment.

Here are some of my favorite quotes.

“This is not a crisis that was caused because there was a drought, or because a meteor hit London and obliterated it, or because there was a war that destroyed productive capacity. This is because there was a misallocation of resources, because people had too much of that neurotransmitter in their brain, that then caused them to have too little of it, and now all they want are risk-free assets, and that causes the machinery of finance to really shudder to a halt,” (85).

“Who paid that Mexican guy to hammer together those houses? Well, the developer. Where did the developer get the money from? The developer got the money from a bank. Where did the bank get the money from? The bank got the money from a depositor. The depositor doesn’t think he spent the money. The depositor still thinks he has a claim on the money, right? The problem is that what underlies that claim is an empty, uninhabited, uninhabitable house in Arizona. That’s what I mean by allocating the losses. There’s a loss there; the depositor doesn’t know that he’s lost yet… Anybody who worked in sectors where there was a tremendous amount of activity where there shouldn’t have been. So we’re talking about housing. It means the Mexican guy who hammered together the house. It means the logger who cut down the wood that was used in the structural lumber. The guy who worked at the sawmill. It means the steel company that created the steel for the nails. It means the mortgage broker who sold the mortgage. It means the physicists who decided instead of doing physics they should work on Wall Street to create the asset-backed security that helped to fund the mortgages that the mortgage broker was originating. All of these people were doing things that turned out not to be productive,” (143-144).

“So if you really know a lot about mortgage brokering, that may be worth nothing. Maybe the only thing you have to offer is the strength of your back when you’re moving boxes. And that is a very painful adjustment for somebody to make. I mean, let’s just say that we have a class of people who were very highly paid to be witch doctors, and then tomorrow Western medicine comes to the economy, and everybody realizes that witch doctors… it’s much better to take pills than go to the witch doctors. Well, these witch doctors had some very specific knowledge that was worth a lot but now is worth nothing. But there’s some use for them, right? They can become manual laborers. That’s a very difficult transition. They’re not just going to accept that right off the bat, that witch doctor skills are worthless and the price of their labor has gone from very high to practically nothing,” (145).

[Henry · Rating 5 out of 5]

Few interesting notes:

- The collapse the market can be foreseen: it happens gradually, then suddenly. In mid-2005, glutted housing market can already be seen. Yet, the market does not adjust immediately until July 2007. Even then, the full effect of the recession won't be felt till more than a year later - around end of 2008. Things can happen very slowly (thus be patient). From mid-2005 to end of 2008, that's about 3.5 years

- People hating the dollar is a trade that has been going on since forever. Yet, if hating of the dollar is so priced in in the market, then who is the counterpart against it? Oftentimes even if the conclusion is correct (and often it isn't), if the trade is so crowded during a short period of time, should margin squeeze happen, the opposite effect could happen. Consider this, the Hedge Fund manager said:

... a trade that a lot of hedge funds had on, maybe not at the end of the year but during the year, was they were short the most junior tranches of subprime mortgage secularizations, because they thought that was going to go really terribly. So they were long the senior tranches many times the amount that they were short the more junior tranches. Because, you know, what's going to happen is the junior tranches will be utterly destroyed, and the senior tranches will decline maybe a little bit, but I can kind of make the trade so that it's carry-neutral. And the assumption is that the senior tranches will be much less sensitive, will move a lot less. But what happened is that because every hedge fund had that trade on, or so many hedge funds had that trade on, and had to liquidate, that meant that the junior tranches actually preformed less poorly than they would have, because people had to buy them back, and the senior tranches got utterly destroyed.

- "Experts" of the field are often too occupied with the daily fluctuation of things. In addition, if things hasn't blown up in the past, experts will often put their heads in the sand and dismiss it as nothing burger (for instance, prior to the sub-prime blow up, experts often dismiss the concern of sub-prime as a non concern, since they can see from their own collection book that sub-prime are performing well. However, they did not factor in the contagion effect that unlike their naive thinking that the market will give them plenty of time to see sub-prime gradually turn delinquent, when sub-prime turns delinquent, they could all blow up at once)

- Bank runs can not be predicted. The best way to play offence is get out when the likelihood is high enough

- During the short term, people could be either irrational or rationally irrational (such as the case when a firm is having margin call, thus they're likely selling their prime asset at a hefty discount even though they're fully aware that their prime asset has no flaws)

[Robert · Rating 4 out of 5]

Diary of a Very Bad Year is an engaging retrospective on the Global Financial Crisis, told through a series of interviews with an anonymous hedge fund manager (HFM).

Humans are excellent at rationalising events after the fact, which makes me naturally sceptical of books like The Big Short. Entertaining and informative as they may be, it’s hard to know the extent to which the conviction of the characters is flavoured by hindsight. We want to believe that there were renegades like Steve Eisman and Michael Burry who had clear prophetic insights into the future, but the reality is probably more sober – they made decisions under uncertainty based on careful analysis, and while the expected value of the bets may have been positive, they weren’t sure winners by any means.

By contrast, the play-by-play commentary in Diary structurally reduces hindsight bias. We get to see the spectrum of things that HFM is thinking about at any given time, with little room for the construction of post-hoc narratives. In the footnotes, HFM annotates how his predictions played out in real life, and he’s wrong quite a lot (as Steve Cohen says, his best traders get it right 56% of the time). I enjoyed this aspect of the book because it provides a better picture of reality, highlighting the difficulties of making decisions in a very uncertain world. I’m reminded of early 2020 – many people now say it was absolutely obvious that the Fed would step in, yet if truly were obvious, we wouldn’t have seen such a steep selloff/rebound in the first place. We use platitudes like “don’t fight the Fed” to delude ourselves into thinking that there wasn’t any doubt about these things.

One downside of this format is that because the interviews happened “live”, there is less insight into actual trades that the manager has on (for privacy and disclosure reasons) – but in my mind, this is a fair tradeoff for having the “frontline” perspective in real-time.

The interviews themselves are enjoyable to read; the vibe of HFM concords with my personal observations of the talent in the industry: rational and thoughtful people with a sharp sense of humour, especially of the self-deprecating kind.

a portrait of a mind at home in the world, moving with agility and certainty, though not without doubt, not without regret, and not without making its share of mistakes.

The book is relatively technical – HFM uses classic trading jargon – but the layperson interviewer does a good job of keeping things accessible to the keen amateur. Worth reading for a different perspective on the GFC – I’d love to read books of this format for other big market events.

[Mr. Banks · Rating 3 out of 5]

A series of interviews with an anonymous hedge fund manager during the 2008 crisis. Came into this book expecting a treatment on the psychology of a manager during turbulent times, but was greeted instead with an overview of the crisis from the lens of an intelligent investor.

Things I learned:

Hiring and firing in a company during a crisis. Three reasons to fire:
1) Employees aren't effective in the role and should be routinely let go. (This shouldn't be affected by the crisis)
2) Letting go employees in an overstaffed a research project with the attempt to make it to market quickly.
3) Choosing divisions with low profit and shutting them down effectively firing their labour.

The lens of looking at a dynamic system and the series of connections that have a direct relation to one and another. Interesting to think about the finance sector and its implication on an illegal construction worker's revenue.

Concept of misallocation of resources. Before the crisis, there was a misallocation of resources in the finance sector that caused a massive bubble which needed to be self corrected. With the collapse of the sector, human capital can move to other fields where their skills can be used for innovation which eventually yields higher productivity for the whole economic system. Ex. Physicists working on trading floors going back to physics research.

Trust and the banking sector. The whole banking sector works on the concept of trust and the financial crisis + bad actors eroded the trust consumers and institutions had in the sector. Thus, credit lending and deposits decreased causing a negative feedback loop that required government intervention to revert. Therefore, it is the shrinking of available credit that causes a devastating slow recovery.

Government's role in the market. The state can influence the demand of the economy (keynesian), but HFM argued that there are two ways:
1) Capital investment with higher growth at the end (ie. education, highway projects, etc.)
2) Spending on support systems that constantly need cash injected year over year with no returns.
Number 2 is a bad idea during a crisis.

[Ryan Thorpe · Rating 4 out of 5]

This book provides play by play commentary on the 2008 financial crisis as observed by a probably late thirties hedge fund manager.

The main new thing here is you get a perspective from a mid sized principal dealing with counter parties during the middle of a chaotic period. His experience is unlike the banks and govt officials who dealt primarily in negotiating and administering an unprecedented monetary and fiscal recovery program. No, this fellow is just trying to survive the crisis, figuring out which of his counter parties are bankrupt, which of his credits have stopped paying, what he can own, what he can sell, and which of his clients will ask for redemptions this week. It sounds unpleasant.

You also get to peer into the psychology of an finance type: competitive and wealthy at a time when those went from being socially desirable things to socially undesirable things.

The hedge fund manager (hfm) provides a unique opportunity to hear the unmodulated views of a point one percenter who did not yet realize he should hide his views.

He explains he mortgages much of his 20s and 30s to build wealth, not taking a vacation in ten years. He complains of burn out, getting into the office at five am, and leaving at seven, negotiating with tough counter parties and psychological stress.

The best part of the book: in two sentences he explains he’s retiring, has made enough money, doesn’t need to be Scrooge McDuck swimming in gold coins, and is moving to Austin Texas to avoid New York city’s high taxes!

Ten years later, there’s something impossibly distant about how hfm describes his life, his troubles, and what he is or isn’t entitled to as a contributing member of society. It’s not that people still don’t think like he does, most really wealthy people do in my experience. It’s that the casual, detached manner in which folks once felt comfortable expressing these views no longer exists.

[Ṛta · Rating 4 out of 5]

Diary of a Very Bad Year expone de forma diáfana las vicisitudes y coyunturas que llevaron a la crisis del 2008; crisis funesta que causó infinitos males a los millennials gereátricos y precipitó al Hades las ganancias de incontables fondos de cobertura, a quienes hizo presa de perros y pasto de aves.

Hablando en serio: a pesar de lo importantes que fueron los hechos acaecidos durante la crisis de la vivienda, poco se habla de los detalles. Nuestra cultura fue esculpida por occupy wall street; que a su vez fue germen del libertarianismo moderno, así como del socialismo de champaña en que ha devenido breadtube, pero las especificidades del funcionamiento del sector financiero -probablemente más impopular aun que las camarillas más elitistas de SV- son un misterio para la mayoría; todavía más para quienes se imaginan traders o inversores de medio tiempo. Este libro da un vistazo a la estructura del sistema financiero moderno, pero no en forma de elegía como podría sugerir el nombre. Por el contrario: Diary of a Vey Bad Year es una oda al capitalismo moderno, a su complejidad, su arquitectura y su belleza: una belleza elegante, estatuesca y frágil.

Este libro es recomendable tanto para quienes son críticos del capitalismo como para quienes quieran iniciarse en el mundo de las finanzas. No está escrito en retrospectiva, sino como una serie de entrevistas que abarcan desde los primeros signos de alarma hasta la cénit de la crisis, por lo que los juicios coyunturales sobre cada episodio de la saga de la crisis del 2008 son tan sinceros como podrían llegar a ser. Durante el camino muchos rudimentos de la lógica en que se estriba el comportamiento de los mercados son explicados de forma clara y sucinta, mostrando la crisis como lo que fue: una tormenta perfecta de incentivos alineados en contra del público y consecuencias involuntarias producto de iniciativas bien intencionadas.

[Alex Wilkins · Rating 4 out of 5]

Reading interviews can often feel like a waste of time - there's little editing for content, or readability, or structure. It can feel like you're stuck in someone's rambling, incoherent train of thought, at the mercy of the interviewer's lack of control and unfocused questions. There's an element of that here - the eponymous anonymous hedge fund manager (or HFM for short) loves to ramble. But he's also aware when he does it, and is adept at reining it in. The interviewer, literary editor and journalist Keith Gessen, is neither out of control or unfocused, and plays his part in keeping things on track as well. The product is a very readable, very incisive look at not just what when wrong in the financial markets and global economy at the beginning of the 21st century, but also a deeper explanation of the financial plumbing of the world you're unlikely to get elsewhere.

HFM has spent his working career swapping out U-bends and playing with monetary pressure valves, so his view of the world is separate from the academics and economists that tend to get quoted in the financial press. But that's not to say his view is simplistic or dumbed down - there's clearly a great deal he understands very well - but it's his ability to traverse from complex trading to simple analogies that is one of the book's great strength. The book is like a being a fly on the wall in a top financial institution while the stock market collapsed, but with an earnest and incisive guide asking all the right questions. If you can filter out the stronger opinions of HFM (and in follow up interviews, he acknowledges some of his pronouncements are flat-out wrong), Diary of a Very Bad year can be tremendously instructive, and funny too! HFM's New York sense of humour gives the dire financial situation a bit of levity, and makes the whole things very readable.

[Zachary · Rating 4 out of 5]

“It is not acceptable that the six largest financial institutions in this country have assets of almost ten trillion dollars, and issue half of the mortgages and two-thirds of the credit cards. That is too much wealth and power in the hands of a few. If Teddy Roosevelt were alive today he'd tell us to ‘break them up.’ And he'd be right. These huge banks must be broken up.”
-Sen. Bernie Sanders

“Our bank system has become unfortunately very concentrated. Deconcentrating the banking system is going to be an important project going forward, but right now it’s highly concentrated . . . The approach of the Bush administration and the Obama administration has been insufficiently tough with the financial sector . . . There are certain institutions that need to be shot or nationalized or rapidly downsized, or institutions where losses need to be distributed to the point where shareholders are wiped out.”
-Anonymous Hedge Fund Manager

Familiar, no? And yet, despite the obvious similarities between these statements, the latter was uttered by an enormously wealthy hedge fudge manager—and no liberal—at a fairly prominent New York City fund in April of 2009, mere months after the one of the most catastrophic financial heart attacks Wall Street had ever suffered. Which prompts one to ask when this issue—namely, how to address the disastrous mistakes made by Wall Street financiers—became deeply politicized, and what that politicization is all about. Which prompts one to also ask whether those mistakes were at all criminal in nature and if they could have been avoided. Which prompts one to reflect on one’s familiarity with the financial sector that, in my case, was more or less nonexistent. And so, I decided to pick up a book on the financial crisis and was drawn to Diary of a Very Bad Year, a fairly unconventional account of the near-collapse of the American financial system recorded in real time.

Diary of a Very Bad Year is a somewhat odd book and, in many ways, not really a book at all. It’s a series of interviews conducted by Keith Gessen, founder and editor of n+1, a literary magazine, with the aforementioned hedge fund manager beginning in September of 2007 and ending in August of 2009. Unlike most books on the crisis, Diary of a Very Bad Year is unique insofar as it offers a valuable perspective into the world of Wall Street before, during, and after the financial meltdown of 2008. The anonymous hedge fund manager documents the collapse of Bear Stearns, Lehman Brothers, and AIG, and the subsequent economic fallout across the United States as a contemporary witness. Sometimes, his predictions about the severity of the crisis and its impact on the real economy are spot on; other times, he really misses the mark. All in all, his comments—all of which are thoughtful, highly intelligent, and enlightening—help elucidate the root causes of the crisis, financiers’ and the government’s reaction to the crisis, and what life is like for a Wall Street big shot potentially faced with financial ruin. While the anonymous hedge fund manager escapes the ignominious fate of many of his peers, he’s so burnt out from the whole debacle that, at the end of the book, he retires from the industry altogether. He’s so likeable, that a small part of you really does feel bad for him.

Diary of a Very Bad Year is aimed at financial novices like me, and it mostly succeeds in this respect. Because it’s a series of interviews, the language is never unnecessarily complex and the hedge fund manager typically clarifies the more abstruse jargon he often uses. Nevertheless, he doesn’t always explain the intricacies of complicated financial products—like collateralized debt obligations—simply enough for the average layperson to adequately grasp. Personally, I sometimes needed to supplement his explanations with outside sources in order to understand his more sophisticated points. The hedge fund manager’s discussion of AIG’s financial woes, for instance, is more or less unintelligible without knowing how credit default swaps work. After a couple of brief online tutorials, I could finally comprehend how “a promise from AIG [was] basically as good as cash,” and why, “when AIG’s credit rating fell [and] its counterparties were entitled to ask for collateral . . . it was just too much cash for AIG to come up with in a short period of time.” By the way, credit default swaps are terrifying. Like, really scary. It’s no wonder that AIG blew up like it did.

When it comes to the financial crisis, everyone is pointing fingers. People really suffered, and other people were, in some capacity, responsible for that suffering, so that there’s real incentive to level blame at those who seem to have acted rashly, irresponsibly, and callously. Nevertheless, if there’s one major take away from Diary of a Very Bad Year, it’s that this kind of unmitigated blame is often quite inappropriate and unwarranted. The anonymous hedge fund manager is by no means easy on the big banks—see the quote above—but he is keen to continuously stress that the crisis stemmed from a gross misallocation of resources more than anything else. “Some very smart, intelligent people . . . spent their time creating mortgage-backed securities to fool [Standard and Poor’s] into giving them a rating that they shouldn’t have given them. That’s one example [of misallocated resources]. Another example is a Mexican . . . swam across the Rio Grande to hammer together houses in the exurbs of Arizona that no one is ever going to occupy.” If both the employee at the investment bank and the poor immigrant were compensated for work that they shouldn’t have done, is it fair to blame the former, but not the latter? Probably not. Nonetheless, Diary of a Very Bad Year seems to give the impression that if we can’t blame specific people—and, by the way, even the hedge fund manager thinks that some people can certainly be blamed—then perhaps we should blame the ethos of the system that permitted the absurd degree of risk-taking that precipitated the crisis in the first place. In other words, if Wall Street is unconcerned with hedge funds leveraged at 50:1, then maybe we should take another look at why they think that’s okay. In the end, Wall Street’s mistakes became every American’s problem, and there’s no reason to think that can’t happen again. Maybe it’s time we finally took away the knives they keep playing with.

[Manuel Del Río Rodríguez · Rating 4 out of 5]

This is a rather unusual topic for me to read about, but the book was recommended by a person I highly appreciate, and it hasn't let me down. It consists of a series of 9 interviews between a journalist and an anonymous hedge fund manager (hence the title). These conversations take place during the great economic crisis of 2008-9, and basically explain in relatively layman's terms how it came about, as well as giving you an idea of what a hedge fund manager's job is all about.

In doing this, the book is a non-demagogical explanation of how markets, banks and hedge funds work. It is also quite funny (really love his explanation of how all money is credit, peppered with the Scrooge McDuck references)- the interviewee is a person who you clearly benefit from speaking to, and learning from. You come from this with a rather dispassionate view of how markets work - or fail to do so-, with some interesting takes, like how bailouts are unpopular among hedge funders (they go too easy on banks and don't do the appropriate purges when necessary), how regulators are at times inefficient because they are legal people, instead of sufficiently economically savvy, and how incredibly stressful the job is -dependent on psychologically tough thinking, long hours, being subject to random, unpredictable and unfair forces, no real vacations in decades, very unpleasant dealings when things go wrong... I mean, they get well paid for a reason, but I can understand the burnout.

Overall, this is as good of a not-super-technical intro into finance and the 2008 crisis as it gets.

[Nuno Freitas · Rating 4 out of 5]

Diary of a Very Bad Year is a fascinating read from someone who is a sharp operator in his field. This piece stands out from other books about the Great Depression in two ways.

For one, the events are playing out in real time, as it is a compilation of interviews in 08/09 when we were in the thick of it. That drives home the sense of uncertainty, the speculation about what was happening and what might happen, how the sentiment was at the time, and one can even have a good sense of how humans react in these times of high stress in which they think the world is falling apart.

Secondly, while most of the media focused on the subprime mortgage part of the equation, the hedge fund manager gives an exceptional view of what it was like to deal with it from the standpoint of a financial institution, no matter how well-capitalized they were at that point. Besides the obvious asset quality concerns, the hedge fund manager drives through the idea that the liquidity crunch in the REPO market was an even more immediate threat to the system while also providing a viewpoint on the best example of counterparty risk at an enormous scale unfolding in real time I've seen.

Highly recommended for folks wanting to build a view of what was going on from the perspective of high finance in a time in which the possibility that the financial system may be completely collapsing for good was not null.