Inside the House of Money: Top Hedge Fund Traders on Profiting in the Global Markets

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Editorial Reviews:

Product Description
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

Customer Reviews: Read 51 more reviews...

5 out of 5 stars

A Global Macro Version of The Market Wizards July 25, 2006
31 out of 36 found this review helpful

While working on the book Steven, the author, learned and shares with the reader through a series of interviews, "how the best minds in the business think about risk, portfolio construction, history, politics, central bankers, globalization, trading, competition, investors, hiring, the evolution of the hedge fund business and a variety of other details."

The book provides an inside look at the thoughts and actions of many great financial minds. For example did you know that Maynard Keynes (the father of modern macroeconomic theory) was completely wiped out by a margin call during the commodity slump of 1929 or that George Soros's Quantum Fund averaged over 30% for it's 31 years existence and that $100,000 invested in the fund at inception was worth $420 million 31 years later.

Jim Leitner of Falcon Management who claims to have taken $2 billion out of the market so far in his career says he "reads a tremendous amount of books and papers" and feels, "developing a network by going out and meeting groups of intelligent people is very important". He also recommends reading the Economist. Jim says, "The Economist had something on Nigeria, stating the average beer consumption had dropped from 34 liters to 3 and then rebounded to 4. That signaled to me that there must be a trade there. There is something going on when beer consumption drops 90% in a hot country and then starts to rebound. We started buying Guinness of Nigeria and its gone straight up over the last 3 years".

Peter Thiel, the former CEO and co-founder of PayPal who runs Clarium Capital Management was given this advice from a major venture capital partner when asking about the industry, "The best way to get into venture capital is to make at least $20 million by starting a company and selling it. Take that money and invest in other companies as a VC." He would give the same advice today.

Then there is Jim Rogers, the co-founder of the Quantum fund in 1969, and author of, Investment Biker, Adventures in Capitalism and Hot Commodities, who lives in a Victorian mansion overlooking the Hudson River on the Upper West Side of NY that he bought for $105,000 and is worth $15 million today. He's so hot on commodities he says, "one day lumberjacks and farmers may be on the cover of Fortune magazine" and thinks in the next decade, "oil will be at $150 a barrel and they will be drilling for it on the white house lawn and cotton will be $4 and they will be planting it in central park".

He is so bearish on the dollar he believes it can fall to half the value of the Euro. He says, "the pound sterling was once the worlds reserve currency and it went down 80% from top to bottom. The dollar went up 400% against it."

For market enthusiasts this book is tons of fun and you sure as hell pick up real insight as to the thoughts of some brilliant traders. I may pull more of my favorite parts that I'd like to remember and post them on my blog.

By Kevin Kingston, author of: A 20,000% Gain in Real Estate: A True Story About the Ups and Downs From Wall Street to Real Estate Leading to Phenomenal Returns

My Blog: The Real Estate Investors Blog

1 out of 5 stars

Mediocre survey of investors and hedge fund managers May 30, 2007
22 out of 27 found this review helpful

The preponderance of enthusiastic reviews for this book is very surprising to me. Frankly, I thought there were two chapters in the entire book that provided any type of meaningful insight - the pieces on Jim Leitner and Scott Bessent are really quite excellent - the jim rogers piece is also entertaining as always. The piece on Leitner may make the entire book worth buying. Otherwise, I think Drobny has assembled a collection of pretty dull and not particularly inspired commentary on the markets and trading from a group of investors of inconsistent quality.

Frankly, the number of positive reviews on the book and the fairly cookie cutter nature of many of them makes me awfully suspicious - I'm giving it 1 star to try to even this out a little (probably deserves a 3). This book isn't bad, but it's far from excellent, and clearly inferior to other books in the genre.

If you've read any of the Market Wizards or Money Masters books and have thought about investing in any level of depth, I think you will find this book pretty dissapointing. Mkt Wizards and Money Masters are drastically superior to this collection both in terms of the quality of the insight and commentary and the quality of investors surveyed.

3 out of 5 stars

Worth a Read, but Not in the Same League as 'Market Wizards' June 12, 2006
14 out of 17 found this review helpful

I looked forward to reading this book, having recently reread both Market Wizard books. The first interview with Jim Leitner was of the same calibre of anything that was in Market Wizards. Leitner is a big player, and he gave a surprising amount of detail of his investment approach. There is undoubtedly much more to glean from the interview if one was to re-read it.

The rest of the interviews were average. The fundamental problem is that Drobny did not get interviews with with either the key guys behind the long-standing global macro funds, such as Tudor, Caxton, Moore Cap, or with the 'new' players such as Citadel, Brevan Howard or Renaissance. In fact, the absence of the latter fund or any other quant/systematic funds highlights how Drobny misses the cutting edge of global macro in the new millennium - that is, the rise of quant. As a result, reading the book, it already feels dated. The final interview with the currency specialist was particularly poor, and provided little other than an insight into the life of a seemingly successful prop trader.

Despite my somewhat negative tone, I do think that the interview with Leitner alone is worth getting book. The other reason is the reminder of how good Keynes was as one of the first global macro traders. Might be time to give Skidelsky's biography of Keynes another read.

5 out of 5 stars

Bulldozers vs Tricycles May 1, 2006
11 out of 12 found this review helpful

Finally a book worthy of replacing my tattered, well worn copies of Market Wizards. As a hedge fund manager and avid reader of trading books I am pleased to say that Steve Drobny's "Inside the House of Money" is now required reading alongside the legendary "Reminiscences of a Stock Operator". I suspect many aspiring traders will read the interviews over and over discovering additional glimpses of wisdom with each passing read. While many of the managers stand diametrically opposed in terms of trading methodologies and markets, it is evident that they share a great commonality in the their ability to generate innovative ideas and weigh scenarios which often go unnoticed. Rather than picking up nickels in front of bulldozers these traders are scooping up 100 dollar bills in front of slow moving tricycles. Brilliant.

5 out of 5 stars

A financial history lesson to presage the next financial crisis November 29, 2006
9 out of 10 found this review helpful

The more things change, the more they stay the same. Inside the House of
Money is an amalgam of perspectives from about twenty of the world's most
successful "global macro" hedge fund players in the vein of similar books
like Barton Biggs' Hedgehogging, Schwager's Market Wizards, or Elder's
Entries and Exits. The players range from home office hedge fund managers
to chief treasurers of Barclay's to reknown bow-tie wearing commodity
market demagogues. New Jersey's governor (a Goldman Sachs alumnus) even
makes an brief appearance in this book.

Of course none of these folks are like us, as inside the House of Money
they deal in highly leveraged $100 billion positions in esoteric financial
exotica like swaptions and steepeners. Readers whose experience may be
limited to discount brokerage stockpicking will quickly find theselves
submerged by the quasifantastic instruments hedge fund players flip
almost effortlessly. Drobny sometimes eases the impact with explanatory
side bars, and price graphs illustrate many good (and bad) market bets.
Nonetheless, feeling a certain amount of disorientation when first
entering the House is only to be expected.

When these trades go wrong, they are Oh So wrong, as revealed in many
personal reflections throughout the book. Yet given their failings they
have managed to survive global macro, and that much makes them remarkable.
We hear in the news with alarmingly increasing frequency of one fund after
another "blowing up," and reading Drobny's interviews with Wall Street's
elites you can see how nothing more than plain human pride, hubris, and
an unwillingness to recognize one's mistakes is to blame. For every
successful trader, there are countless mere mortals who must fall by
the wayside into ruin.

A subplot throughout the book, if not the author's stated goal, is to
answer the question "What is global macro?" When every story has been
told, you can rule out domestic investment and microeconomic analysis,
and in those leftovers that make the banquet look like only an appetizer
is a wide world of different kinds of investments which let hedgies do
nearly whatever they please.

The book is best regarded for retelling the financial history from
the collapse of Bretton Woods in the seventies to the Asian currency
crisis of the late nineties. The introductory chapter concisely hits
on a number of financial events that shaped the success of some, and the
losses of many. These events (and others like them) recur continuously
in Drobny's successive interviews with participants who traded them and
lived to tell about it. We see periods of low volatility regularly
awaken with a tectonic upheaval, and therein we glimpse tomorrow's dangers
and opportunities. Drobny calls on Dr. R. Lee Thomas III to conclude the
book with a short qualitative discussion into the probability of making
multiple independent bets, the classic "hedging" theory that reduces
risk.

Readable and contemporary, Inside the House of Money should grace your
nightstand (or bustling train commute into the city) before you think of
entering into a yen carry trade, going short volatility by selling
options, or just planning for your retirement. It's wisdom and
experience shall prove invaluable when the next economic dislocation
unwinds before us -- is it your opportunity, or your ruin?

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