But in the 1970s and 1980s, a big pension fund that wanted to dump a large block of shares could not actually find a buyer unless it offered a discount. After, most money in hedge funds came from endowments, which had been told by their learned consultants that the market could be beaten—and which wanted in on the action. Give as a gift or purchase for a team or group. “All I want to do is kill myself,” one said. This was an overall very well-written and researched narrative of hedge funds through history. Meanwhile, other researchers acknowledged that markets were not perfectly liquid, as Steinhardt had discovered long before, and that investors were not perfectly rational, a truism to hedge-fund traders. Meanwhile, the financial crisis of 2007-2009 vindicated my hypothesis that hedge funds are the good guys in finance. Then came the crisis of 2007–2009, and every judgment about finance was thrown into question. Dazzling, smart, and original, More Money than God mixes up the angels and devils of history and hope into realms of greater being. A great read for anyone who wants to work in the industry and needs a perspective on the history, or equally to someone who just has a casual interest in these firms which for the most part are quite secretive. The author begins to tell the history of the industry from the perspective of Alfred W. Jones, who coined the term "hedged fund" and started his own in the late 1940s. The nature of hedge funds’ true edge is often obscured by their bosses’ pronouncements. Top subscription boxes – right to your door, © 1996-2021, Amazon.com, Inc. or its affiliates. He was irreverent, impatient, and scarcely even bothered to pretend to be grown up. More Money Than God takes a critical look at hedge funds, the powerful and often mysterious organizations that have a huge impact on global finance and our day-to-day lives. He is the author of the poetry collections More Money than God (University of Pittsburgh Press, 2015), Battles & Lullabies (University of Illinois Press, 2006), Tap Dancing for Relatives (University Press of Florida, 1985), and two fine press collaborations with the artist Leonard Baskin. He had been a rising star at Goldman Sachs, but he opted for the freedom and rewards of running his own shop; a man who collects plastic superheroes is not going to remain a salaried antihero for long, at least not if he can help it. And so, by the start of the twenty-first century, there were two competing views of hedge funds. The crash of 1987 underlined these doubts: When the market’s valuation of corporate America changed by a fifth in a single trading day, it was hard to believe that the valuation deserved much deference. It made it all a little bit easier to understand for me, and definitely a better read than JM Keynes! In the credit markets, likewise, a hedge fund such as Farallon might trade against pension funds whose rules require them to sell bonds of companies in bankruptcy. Please try again. At his death in 1913, J. Pierpont Morgan had accumulated a fortune of $1.4 billion in today’s dollars, earning the nickname “Jupiter” because of his godlike power over Wall Street. For another, he predicted that the crash would hit in the spring of 1988; if Jones had really followed Borish’s counsel, he would have been wiped out when the crash arrived the previous October. Ken Griffi n, the creator of Citadel Investment Group, bought himself a $50 million Bombardier Express private jet and had it fitted with a crib for his two-year-old. The theorists stipulated, for example, that prices would be efficient only if liquidity was perfect—a seller who offers a stock at the efficient price should always be able to find a buyer, since otherwise he will be forced to offer a discount, rendering the price lower than the efficient level. When banks can pocket the upside while spreading the cost of their failures, failure is almost certain. But in the bubbly first years of this century, the top hedge-fund managers amassed more money than God in a couple of years of trading. Cliff Asness was fairly typical of the new wave. They came through the turmoil relatively unscathed, and never took a cent of taxpayers’ money. Bring your club to Amazon Book Clubs, start a new book club and invite your friends to join, or find a club that’s right for you for free. The new wave was led by David Swensen, the boss of the Yale endowment, who focused on two things. The other skewed incentive in finance involves traders’ pay packages. Definition of has more money than God in the Idioms Dictionary. Reviewed in the United Kingdom on March 18, 2013. Please try again. The second is more ominous: So-and-so has more money than the amount of God he has. But frequently the edge consists of exploiting kinks in the efficient-market theory that its proponents conceded at the start, even though they failed to emphasize them. Find all the books, read about the author, and more. .orange-text-color {color: #FE971E;} Discover additional details about the events, people, and places in your book, with Wikipedia integration. The depth of the author's research combined with interesting story telling crafted this book into a magic carpet ride into the world of hedge funds. The research of Fama and French, for example, showed that unglamorous “value” stocks were underpriced relative to overhyped “growth” stocks. Hedge funds, as Mallaby explains, are like … Little did he know that, almost twenty years earlier, a pioneering hedge fund called Commodities Corporation had analyzed the same data, reached the same conclusion, and programmed a computer to trade on it. Hedge funds were reliant upon the patience of their investors, who could yank their money out on short notice. The question is who will manage this risk without demanding a taxpayer backstop. Instead, our system considers things like how recent a review is and if the reviewer bought the item on Amazon. John Paulson poured $2 million in the research that gave him the conviction to bet against the bubble. In July 2007, a credit hedge fund called Sowood blew up, and the following month a dozen or so quantitative hedge funds tried to cut their positions all at once, triggering wild swings in the equity market and billions of dollars of losses. It also gives you some background on the habits and personalities of the hedge fund magnates who made billions throughout the years. This conclusion, though tempting, is almost certainly mistaken. . Very fun (addictive) reading. In “More Money Than God,” his smart history of the hedge fund business, Mallaby does … Inevitably, hedge funds were caught up in the panic. Ste-ven Cohen, the boss of SAC Capital, equipped his estate with a basketball court, an indoor pool, a skating rink, a … But leverage also made hedge funds vulnerable to shocks: If their trades moved against them, they could burn through thin cushions of capital at lightning speed, obliging them to dump positions fast—destabilizing prices.11 After the bond-market meltdown of 1994 and the Long-Term Capital failure in 1998, the two competing views of hedge funds wrestled to a stalemate. “The bright light shed by More Money Than God is particularly welcome. It gives a solid overview of the general strategies employed by hedge funds but by no means would serve as a guidebook in how to enact these strategies (in that regard, this book is more inspirational than cookbook). I was somewhat taken aback by his Conclusion in which he suggests our government should encourage the growth of hedge funds in spite of the blatant fraud he outlines throughout his book. Ship This Item — Qualifies for Free Shipping Buy Online, Pick up in Store Check Availability at Nearby Stores. But even when hedge funds are not using leverage and not actually hedging, the platform created by A. W. Jones has proved exceptionally congenial. Something went wrong. Sebastian Mallaby's rollicking tour of industry legends--famous and otherwise-- tells the improbable story of A.W. American households would not have increased their borrowing from 66 percent of GDP in 1997 to 100 percent a decade later. They need to shrink institutions that are too big to fail and favor ones that are small enough to go under. If there were systematic patterns in markets of the sort that Fama, French, and Asness had identified, then hedge funds could milk these in a systematic way: There were strategies that could be expected to do well, and they could be identified prospectively. But if alpha existed because markets were inefficient, it followed that savings were being allocated in an irrational manner. Far from bringing about the Great Moderation, they had helped to trigger the Great Cataclysm. The Devil uses money to seduce us and that is when it can become powerful in a negative direction. The lesson is that genius does not always understand itself—a lesson, incidentally, that is not confined to finance. The carnage of 2007–2009 demonstrated how wrong that was. By contrast, bank traders generally face fewer such restraints; they are simply risking other people’s money. 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