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Running Money: Hedge Fund Honchos, Monster Markets, and My Hunt for the Big Score
     

Running Money: Hedge Fund Honchos, Monster Markets, and My Hunt for the Big Score

by Andy Kessler
 

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A brilliant investor, a born raconteur and an overall smart-ass, Andy Kessler pulls back the curtain on the world of hedge funds and shows how the guys who run big money think, talk and act.

Following on the success of Wall Street Meat, his self-published book on the lives of Wall Street stock analysts, Andy Kessler recounts his years as an

Overview

A brilliant investor, a born raconteur and an overall smart-ass, Andy Kessler pulls back the curtain on the world of hedge funds and shows how the guys who run big money think, talk and act.

Following on the success of Wall Street Meat, his self-published book on the lives of Wall Street stock analysts, Andy Kessler recounts his years as an extraordinarily successful hedge fund manager. To run a successful hedge fund you must have an investing edge — that special insight that allows you to reap greater returns for your clients and yourself.

A quick study, Kessler gets an education in investing from some fascinating and quirky personalities. Eventually he works out his own insight into the world economy, a powerful lens that reveals to him hidden value in seemingly negative trends. Focussing on margin surplus, Kessler comes to see that current American economy, at the apex of the information revolution, is not so different from the British economy at the height of the industrial revolution. Drawing out the parallels he develops a powerful investing tool which he shares with readers. Contrarian and confident, Kessler made a fortune applying his ideas to his hedge fund. Which only proves that they may not be as crazy as they sound.

Editorial Reviews

Rich Karlgaard
“[One of ] the best books you’ll find on technology, opportunity and entrepreneurship [to] hit bookstores.”
Financial Times
“One can just hear Wall Street denizens asking each other if they have read Running Money yet.”
Wired
“Right place, right time, right questions. That’s the formula in this smart - and smart-ass - take on investing.”
Barron's
“One of the best books of 2004”

Product Details

ISBN-13:
9780060740641
Publisher:
HarperCollins Publishers
Publication date:
09/14/2004
Edition description:
First Edition
Pages:
320
Product dimensions:
6.00(w) x 9.00(h) x 1.05(d)

Read an Excerpt

Running Money
Hedge Fund Honchos, Monster Markets and My Hunt for the Big Score

No Homa

KOWLOON, HONG KONG -- EARLY 1996

The doors of the marble-lined elevator opened on the 32nd floor. I walked out, looking for a receptionist to direct me to William Kaye, a money manager I was set to meet at 10:00 A.M. Back in 1986, Kaye ran the deal arbitrage desk at PaineWebber. Now, 10 years later, he is running money out of Hong Kong, and I was trying to get him to invest in our fund or point me to others in Asia who might be interested.

But something wasn't right. There was no receptionist, just a giant room filled with Chinese men and women bustling about, jabbering away, passing pieces of yellow and red and orange plastic around the room. Boxes filled with wires and screws and nuts and bolts were on every table. Against the wall, a stack of shrinkwrapped boxes looked ready to ship out. This was all very odd for a classy office building in Kowloon. I made eye contact with a woman scurrying by.

"William Kaye?" I asked.

"No homa."

"He's not in?"

"No, he homa."

"So he is in?"

"No. Homa. Homa Sim-san." She pointed to the finished boxes.

She was right. The boxes were of Homer Simpson figures. A giant arrow on the box told me to push his exposed belly, which I did and heard, "D'oh!"

• • •

I checked my calendar. William Kaye was on the 33rd floor. D'oh.

I rode the elevator up one more floor, and the doors opened to a completely different world. Cherry wood–lined walls, modern furniture, a sign that said Pacific Group, under which sat a blond receptionist who greeted me by name.

"Mr. Kessler, Mr. Kaye will be with you in a moment. He is on a conference call with the management of a Thai cement company. May I invite you to wait in our conference room? Tea for you?"

I stood and stared in amazement out the conference room window overlooking Kowloon and Hong Kong Island and the port of Hong Kong. What seemed like hundreds of container ships stacked high with, well, probably with Homer Simpson figures, shuffled along, while a few junk ships and motorboats darted in and out.

I guess you can run a hedge fund anywhere -- they come in lots of different flavors. Some come up with complicated strategies to speculate on the rise of Malaysian currencies versus pork belly futures. Or to take down the Bank of England.

In 1949, a guy named Alfred Winslow Jones figured out he could improve his investment returns by simultaneously borrowing money to buy stocks with one hand and selling stocks he didn't actually own with the other hand. If he constructed the right transaction, he could make money in a rising or falling market. That's how Jones discovered a "hedge." Ever since, smart guys who wanted to be rich began creating complicated hedges and getting rich people who weren't as smart to invest in them. How do I know this? I tripped across the name "A. W. Jones" on a door at One Rockefeller Plaza in New York years back and asked.

A few years into the evolution of hedge funds, in the late 1960s, you started to recognize the names. Guys like George Soros and Michael Steinhardt and even Warren Buffet ran some of the 200 hedge funds that popped up. You must be a millionaire to invest in a hedge fund -- an "accredited investor," in regulatorspeak. The Feds, focused on the downside, figure it's OK to let rich people be stupid -- after all, they can afford to lose it all. But all that really does is keep ordinary folks from getting great returns. By the 1990s, a couple hundred funds had become thousands, most of them fast-money operations eking out tiny returns on each trade but buying and selling so much stuff day in and day out that it eventually added up to real money. That's what Julian Robertson at Tiger and the Nobel laureates at Long Term Capital Management did. They ran huge pots of capital through monster trading floors filled with computer monitors covered in dancing green and red prices. These folks hedged anything that moved. I was trying to raise money to get in the game.

"You Andy? Yeah, I remember you. Chips or something like that. You sat back there with Jack Grubman."

Seeing Kaye brought the '80s flying back. I had spent five years at PaineWebber and another five years at Morgan Stanley as a semiconductor analyst. I was the poor slob that had to say Buy or Sell on stocks like Intel and Motorola and Texas Instruments. These stocks loved to bob when everyone else weaved.

Technology was volatile, but stocks of companies that made chips were like hyperactive kids munching on cotton candy: they'd fly high until they crashed hard, and my job was to figure out when the sugar high would begin and end. I always figured I would end up with gray hair and ulcers. My clients were big money firms -- Fidelity, JP Morgan and increasingly lots of fast-money hedge funds that liked to play where things were moving.

I had hopped off that roller coaster still sporting a head of dark brown hair, but now I was getting into running money or at least I hoped I could if someone like William Kaye would give us enough money.

Kaye was a reasonably slight, very New York-looking guy, with black hair and eyes set a little close together, which gave him both a serious and mysterious, almost sinister look at the same time. He was also smart as shit. At PaineWebber, he had made the firm and its clients tons of money (I assume he did well himself too). Courtesy of Michael Milken and Drexel Burnham and hot money in junk bonds, the late '80s saw mergers announced almost daily. If a stock was trading at $45 and a deal was announced at $60, the stock might jump to $57 ...

Running Money
Hedge Fund Honchos, Monster Markets and My Hunt for the Big Score
. Copyright © by Andy Kessler. Reprinted by permission of HarperCollins Publishers, Inc. All rights reserved. Available now wherever books are sold.

What People are Saying About This

Rich Karlgaard
“[One of ] the best books you’ll find on technology, opportunity and entrepreneurship [to] hit bookstores.”

Meet the Author

After turning $100 million into $1 billion riding the technology wave of the late 1990s, Andy Kessler recounted his experiences on Wall Street and in the trenches of the hedge fund industry in the books Wall Street Meat and Running Money (and its companion volume, How We Got Here). Though he has retired from actively managing other people's money, he remains a passionate and curious investor. Unable to keep his many opinions to himself, he contributes to the Wall Street Journal, Wired, and lots of Web sites on a variety of Wall Street and technology-related topics, and is often seen on CNBC, FOX, and CNN. He lives in Silicon Valley like all the other tech guys.

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