The reason that I wanted to read More Money Than God is because I heard about it from Tim Ferriss. As you’ve probably realized by now, I’m also obsessed with finance and financial independence. I’m also interested in economics and how society works around economics.

I feel like many people don’t know about this book. I would recommend it to anyone in business school or going to school for finance. As you’ll read in this book, many of these hedge funds are shaping the way society works. They are also independent from the government, so they can act against or upon the government in certain situations. Institutions like banks can’t do this as easily. It’s also good to know how our banks are run and can be impacted by hedge funds.

It took me a while to get the gist of how this book was being written. It is a long book. The author writes about different hedge fund managers starting with A.W. Jones and then moves onto Michael Steinhardt and George Soros. Everyone after that is shown to be influenced by these hedge fund managers. Paul Tudor Jones and Julian Robertson are also a central figures throughout this book.

Some of the people and their funds in this book:

  • Julian Robertson – Tiger
  • George Soros – Quantum Fund
  • Stanley Druckenmiller – Quantum Fund and Duquesne Capital
  • Paul Tudor Jones – Tudor Investment Corporation
  • Jim Chanos – Kynikos Associates.
  • D.E. Shaw
  • Ken Griffin – Citadel
  • Mike Mendelson – AQR
  • Michael Litt – Frontpoint Partners
  • John Paulson – Paulson & Company
  • Kyle Bass – Hayman Capital
  • Nicholas M. Maounis – Amaranth Advisors

Should You Read This Book?

This books is great for anyone thinking about going into finance as a career. Maybe you just want to understand how are financial markets work. Either way this book is great to see how financial markets work and how interconnected our systems are.

It also opens up your eyes into how much power hedge funds have and are going to have on our lives in the future.

Should Hedge Funds Be Regulated

A central theme in this book is whether or not hedge funds should be regulated. Many hedge funds have failed over the years. However it is the author’s content that many have failed and didn’t shock the market. However, this can change in the future depending on how big hedge funds get and how much they leverage.

Hedge funds also change what they trade. The more exotic trades they get into the more impact they can have on the economy if their counterparties don’t understand the trade.

Psychology In Trading

By most measures, people that start hedge funds are seen as some of the most successful people. However, many of the people get to the top of the world and implode. Why is this? They don’t see their blindspots and think that markets are predictable. They don’t understand human nature and that humans can change very quickly and overreact. Humans also think similar so thinking that you are smarter than everyone doesn’t typically work in the markets. Eventually people get wind of what you are doing and copy your trades.

It is important to have some humility in the hedge fund world and reassess your philosophies frequently. You should also have confidence. You should assess your risk and leverage on a frequent basis. Leverage is what creates asset bubbles.

Big Trades

Druckenmiller and Soros shorting the Pound Sterling in 1992 making them over $1 billion.

Druckenmiller and Soros shorting the Thai Bhat.

Deleveraging of 1994 hurt a lot of hedge funds. Resulted from Greenspan raising interest rates.

John Paulson betting against subprime mortgages.

Dotcom bubble made Julian Robertson and Stanley Druckenmiller retire.

What I’m Reading Because Of This Book

I’m going to read a couple of books after this book.

I’m going to learn more about the Federal Reserve. It is apparent after reading this book that central banks around the world shape our economy. They are also easily influenced by outside forces. I want to understand more about this system. I also think it is the government institutions that we don’t elect that do the most harm to our system. There is no one to hold them accountable. They are the most liable to be impacted by industry.

I’m going to read the Greatest Trade Ever by Gregory Zuckerman. I’ve already read his book about Jim Simons, but I want to read his book about John Paulson as well.

Chapter Notes

The Top Cat

The top cat chapter is about Julian Robertson. He founded the Tiger fund. His strategy was to find companies that were about to be taken over and trade them. He ran his hedge fund like a special forces unit. The book doesn’t speak so much about Jones as it does his followers. By 2008 there were 6 disciples from the Tiger fund with their own funds.

Rock and Roll

This Chapter is about Paul Tudor Jones. He started Tudor Investment Corporation in 1983.

Tudor Jones was well known for mentally picturing what the market might do on any given day. This way he was prepared for whatever might happen. He predicted the 1987 crash and sold futures and bought bonds ahead of time.

He also predicted the fall in Japanese markets in 1990 because they required their fund managers to return 8% a year. When the market went down, they fled to bonds. Jones predicted this and traded it by shorting Japanese stocks.

Paul Tudor Jones is featured many other times in the rest of this book.

White Wednesday

This chapter is about Stanley Druckenmiller. Druckenmiller was George Soros’ protege. He grew the assets in Quantum fund. This chapter is about how him and George Soro shorted the Sterling and made over a billion dollars. This is where both of them got a ton of notoriety.

Hurricane Greenspan

This book is about Fed Chairman Greenspan and his imapct on hedge funds. Greenspans made short term interest rates cheap.

This allowed a lot of hedge funds to borrow short and trade long on bonds. This became a crowded trade. Then Greenspan raised interest rates and this created a ripple throughout the global economy. Druckenmiller lost almost a billion dollars shorting the yen because of Greenspan’s interest rate change. Insurance companies also lost a lot of monye on this trade. They called it Hurricane Greenspan because they lost more money than they did for a catastrophic hurricane.

Steinhardt lost a billion in this crowded trade as well. He lost the most during this time period.

Askin hedge fund failed during this time frame because they tried to find out which mortgages were going to be prepaid first. Well it turns out when interest rates go up, people don’t want to pay off their mortgage. Their fund became obsolete.

Soros V Soros

This chapter is about trades of Soros and Druckenmiller. They bet huge against the Thai currency and made a lot money. They lost a lot of money in Russia and Indonesia though.

Soros lent money to Russia because he wanted to be a global statesman. Russia defaulted on their debt and created a global crisis.

Soros also bet on Indonesia because he believe in them. They lost almost a billion dollars betting on Indonesia.

The Enemy Is Us

This chapter is about Long Term Capital Management. They were founded in 1994. LTCM was focused on bond trading.

They were one of the first hedge funds to calculate the amount of risk in their portfolio. They were highly leveraged. Their models showed that markets tended to have low volatility over the long term and that is what they bet on. Many people heard about how sophisticated they were and copied their trades. When the market turned against them in 1997 they lost 44% of their capital. It took 11 banks to raised $3.625 billion to save LTCM. Their assets were liquidated and distributed to creditors.

A lesson to learn from LTCM is that in order to avoid failure you shouldn’t be leveraged like crazy. You should also not be in all illiquid investments. This makes it hard for you to raise capital.

Hedge Fund Impact on Society

Hedge funds have a huge impact on society today. They are much large than they used to be and can influence the economy. This is evidenced by trades of George Soros and Stanley Druckenmiller. They caused multiple currencies to collapes. They can impact society with their trades and with their influence on political structure. They can also influence it because of their independence and lack of oversight. I didn’t think about how much influence hedge funds had on society before this book. They can multiply their influence with leverage.

If politicians want to change the amount of influence they have, they should not allow them to leverage up more than 2 times capital.

Hedge funds also have a lot of influence on politicians and policy makers. Soros was able to influence the international monetary fund and high level politicians. Hedge funds were also able to influence large banks and Federal Reserve Chairman. It is scary to think that so much power is held in the hands of a few. When you have more money than god, I guess anything is possible though.

The Dot Com Double

This chapter is about the dot come bubble. The tiger fund was about investing in value and not momentum. They lost a lot of investors because of this. They went from managing 21 billion to 9.5 billion in a year. Robertson closed the Tiger fund right before the bubble burst.

Druckenmiller also didn’t believe in the valuations of tech companies, but he bought in anyway. He eventually sold and bought back in again. Then the bubble burst in 2000. After the burst in 2000 Druckenmiller retired from the Quantum fund. He eventually started his own firm after the market went up again.

The Yale Men

This chapter discusses the growth of college endowments in the hedge fund industry. Hedge funds would not be as big as they are without college endowments. Yale was the first college to invest in hedge funds. By 2009, half the money in hedge funds was from institutions.

This chapter is mainly about Tom Steyer and his fund Farallon which was founded in 1985. Yale invested in his fund. Farallon was what is called an event driven fund. Other hedge funds were run on intuition. Event driven funds were run based on events like a merger or a bankruptcy. These events had powerpoints which endowments liked. Steyer was also a financially conservative guy which appealed to Yale. Between 1990 and 1997, Steyer did not have a down year.

The Code Breakers

This chapter is about quant funds. It mainly shows how Jim Simons grew Renaissance Technologies to be the best hedge fund in history.

He was better than other quant funds because he hired cryptographers and voice translation programmers. They were used to sifting through information to unearth coded information.

Other funds hired financial experts.

Premonitions of a Crisis

This chapter is mainly about Citadel and other multistrategy hedge funds. The author highlights what Citadel did by going through the story of another hedge fund, Amaranth. Amaranth put its faith into a young energy trader who got lucky. He made the firm 2 billion on a natural gas trade that went up after Hurrican Katrina and Hurricane Rita. However, the trade turned against them and they lost half their capital. Citadel offered to step in and eventually bought half the company. This highlights how Citadel operated. They would try to buy out other hedge funds once their portfolios were almost worthless.

Riding The Storm

This chapter is my favorite chapter. It highlights a few hedge funds that made money off the financial crisis. The most notable is John Paulson. He bought credit default swaps on subprime mortgages. He netted 1.25 billion in one single trade.

How Could They Do This

This chapter is about the financial crisis. This highlights a little bit about Jim Chanos and his short selling.

This chapter also discusses the collapses of Bear Stearns and Lehman Brothers. The SEC disallowed short selling of financial institutions which put hedge funds in a bind. Shows how random regulation can mess up the markets.