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Inside
the House of Money
Finance: Hedge funds are playing a larger part in the world’s financial markets, so Joseph Nicholas’ new book on how some of these active managers address risks, regulators, economic trends, globalization, central bankers, and trading is quite interesting. Entitled ‘Inside the House of Money’ (John Wiley & Sons Inc. (2006) 360 pages) Nicholas interviews a dozen or so successful hedge fund managers about their successful trades and mistakes, and attempts to identify key factors which may be present in each situation.
The book was quite interesting, but many of the managers have different styles and strategies - all of which apparently worked for them at one time. Due to the diversity of styles and the different markets they invested in it is difficult to distill any ‘rules’ regarding successful trading from the book. Each manager seemed to have a market, or niche, in which they were very effective.
Besides having some interesting facts (Maynard Keynes (the father of modern macroeconomic theory) was completely wiped out by a margin call during the commodity slump of 1929, and George Soros's Quantum Fund averaged over 30% for it's 31 ½ years existence such that $100,000 invested in the fund at inception was worth $420 million 31 ½ years later) possibly the message the book is that an investor should identify a niche in the market that is not efficient, and develop an expertise to exploit the inefficiencies. The
Age of Oil: The Mythology, History, and Future of the World's Most
Controversial Resource
Unlike the peak oil and doomsday analysis of some other authors who have addressed the energy issues Maugeri is relatively positive on the future for crude oil. He argues much of the crude oil production and supply problem is a function of lack of investment over the last decade and the structure of the market, rather than a lack of recoverable hydrocarbons. The book is worth reading for energy investors, and those interested in the current argument over ‘peak oil’ issues and energy supplies. The
Age of Fallibility: Consequences of the War on Terror
Soros discusses the theory of ‘reflexivity’ again at length in this book as he has in the past (individuals thinking and biases become part of reality even if it is flawed). He claims the ‘reflexivity’ causes the markets swing wildly around an equilibrium point. Such instability creates investment opportunities.
The only saving grace for this book is he identifies one global problem that he had not mentioned in the past – energy. Soros devotes a whole chapter to what he sees as a global energy crisis. While other books have analyzed the energy sector in more detail and have organized their analysis better we give Soros credit. Soros has identified one area, the energy sector, which will be at the center of major problems over the next decade – and a sector that will present major opportunities for investors.
Web Note: Also hear Jim Puplava's interview with the author, James O. O'Shaughnessy. CONTACT
INFORMATION |
Last
month we read the following books that might be of interest:
Energy
& Crude Oil: The history, politics, and future of oil are
discussed by industry executive Leonardo Maugeri in his book ‘The
Age of Oil: The Mythology, History, and Future of the World’s Most
Controversial Resource’ (Praeger Publishers (2006), 360 pages).
While we thought the subject and analysis would repeat many of the themes
of other recent books on the energy sector – we were quite surprised how
well written, entertaining, well presented, and informative the book was.
Policy
& Government. Investor George Soros discusses current U.S.
policies and how they are effective or ineffective in addressing the war
on terror and other important global issues. His book, entitled “The Age of Fallibility” (Public Affairs (2006), 260 pages)
is extremely difficult to read in our opinion. While the topics are of
interest, and ideas unique, the structure of the book and organization
leave much to be desired. 
