Inside the House of Money

[HenryTo]

It is said that everyone investment professional today want to talk about hedge funds – except the guys who actually run them. For the first time in a long time, we finally have a book about the industry that was written by an insider with access to the world’s top “global macro” managers today.

I am about halfway through it but this book is a must-read for those who want to learn more about the evolution of “global macro” from Keynes to Alfred Jones to Soros and to what it means today – a large number of mid-size funds (relative to funds with huge asset sizes like Quantum or Tiger) that operate in teams with specific knowledge about individual commodities or countries. For years after the demise of Breton Woods, folks like Quantum and Tiger had an informational edge – and these guys were able to take advantage of this “edge” by successfully speculating in commodities and the new world of floating currencies. In today’s globalized and capitalist world, fads and trends die out very quickly – and hedge funds have reacted by hiring more specialized knowledge and pushing the envelope further and investing in totally out-of-consensus assets, such as index-linked housing bonds in Iceland or the Ghanian stock market.

Check out the website for the book: http://www.insidethehouseofmoney.com/home/

IMHO, this book is one of the “must-reads” investment books for 2006 – along with Barton Biggs’ “Hedge Hogging.”

Assuming we don’t have a world war anytime soon, the pace of change in the financial industry will continue to accelerate. Even China has “one-upped” the capitalists as the Chinese government has now given the clearance for the state’s “social and welfare fund” to invest in overseas assets. Moreover, socialist countries like France and Mexico (PAC and ASR) have also recently privatized some of their major airports. At the same time, the derivative markets continue to grow exponentially. The latest is that CME (in conjunction with Goldman) is set to roll out a derivative product based on various economic indicators such as the CPI, nonfarm payrolls, and the PMI, etc.