
Interview with a hedge fund manager - eru
http://nplusonemag.com/?q=node/418
======
rgrieselhuber
Still halfway through it, but it's a good read so far. I like this quote:

"Today we have a recruiting group, and what do they do?—they throw resumes at
you, and it's, like, one business school guy, one finance major after another,
kids who, from the time they were twelve years old, were watching Jim Cramer
and dreaming of working in a hedge fund. And I think in reality that,
probably, if anything, they're less likely to make good investors than people
with sort of more interesting backgrounds."

I talked to a lot people in a lot of fields before landing where I am today
and the people in each one who really knew what they were talking about all
shared the same belief as this hedge fund manager. Much of the technical
knowledge necessary for these jobs can (only?) be learned on the job. But the
ability to look at problems in innovative ways comes from having more lateral
experience.

~~~
daveambrose
HFM also makes a point of looking for those with mental agility and
intellectual interest outside of a desired application field.

This and the "paradigm shift" are two great insights.

~~~
rgrieselhuber
I also liked the paradigm shift discussion.

Also, great section on assumptions and how sometimes disbelieving the most
commonly held assumptions - the value of the triple A paper in this case - can
lead to extraordinary profits.

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jmtame
This was such an awesome dialogue. Awesome interviewer, and an awesome hedge
fund manager.

It's hard to read as an entrepreneur because I think there's a difference
between financial people, such as hedge fund managers or venture capitalists,
and entrepreneurs.

Most entrepreneurs that I know are highly optimistic, and almost willing to
look beyond risk and uncertainty. Of course, that's not to say entrepreneurs
are stupid with risk, or don't take calculated risks. But I would say
investors are much more risk-averse.

What I took away from this article: the housing market was too good to be
true. You took Triple-A credit, and stuck it in the same pool as Triple-C
credit. And you bet on the whole thing. I think that was pretty risky, and
maybe it would have worked out if you rolled the dice a few more times, but
most people just can't afford these houses. And now we're seeing the burst.

I suppose it's a bit sobering to read. It reminds you not to be stupid about
risk, but definitely take risks. I better just stop there ;)

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eru
This link is just to give a reference point for the second interview:
<http://news.ycombinator.com/item?id=310285>

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dandelany
This is great. In particular:

"What tends to happen in financial markets, is bad things happen when you
really divorce the people who take the risk from the people who understand the
risk."

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gaika
_I think what we need to do is go to everybody's house and make sure that only
licensed statistical arbitrage traders have black boxes._

What a great idea. I thought I lost the ability to be surprised by recent
remedies proposed, this one still got me.

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adrianwaj
Nice read for some fresh thinking. Makes me smarter.

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nazgulnarsil
_In the situation we have today, where people have made bad investment
decisions, where people built houses they never should have built, there’s a
misallocation of resources. The loss has already happened. The loss isn’t what
happens on a balance sheet: the loss is what happens when someone cuts down a
tree, makes cement, builds a 6,000-square-foot house in a place it should
never be built. So the loss has already happened. The question is: How do you
allocate that loss? And if you don’t allocate the loss, if you pretend it
isn’t there, then this has really baleful consequences for the economy._

I would invest my money with this guy. most people in the financial sector
don't seem to realize the real life consequences and causes of the markets
they manage.

~~~
trevelyan
This is more about over-leveraged institutions crashing out as growth in the
derivatives market reverses than problems with the construction of actual
houses.

You can buy and flip a home without building one. You just need easy credit
and a rising market.

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unalone
Wow, n+1 turned out an article that was no-nonsense, interesting to read, and
not utterly full of itself. Props to it.

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eatmyswan
From the second interview.

"they needed to take Bear out and shoot it in front of everybody. So they took
it out, at a 2-dollar offer, all the senior management is gone, and that’s the
financial equivalent of taking the shareholders out and shooting them."

<http://news.ycombinator.com/item?id=310285>

------
quasimojo
seems like a smart enough guy...typical "trader"...doesn't care about the
direction things are moving, as long as they are moving. traders hate a
sideways, sluggish market...they need volatility. he must be happy these days.

i disagree with his implied comments on the dollar. this is a dead currency as
of friday. i expect the debt to hit twenty trillion by 2018.

look at the wikipedia page for the french revolution. accumulation of vast
excess debt destroyed the monarchy. no one thought things would/could end...
they thought they could just abuse the currency forever and somehow things
would magically turn around, even though everything they actually did just
made things worse. sounds like america today

i say the dollar will not last until 2025. no dollar...no USA. USA _IS_ the
dollar.

~~~
hugh
_i disagree with his implied comments on the dollar. this is a dead currency
as of friday_

The interview is from January, which in Hedge Fund Manager years is, like,
three aeons ago.

You'll notice that the dollar has been going up recently, and is in fact
pretty much back to historical norm levels, so it seems the market does not
share your pessimism.

~~~
jrockway
_the market does not share your pessimism_

The market is pretty good at ignoring things that it doesn't want to see.
Regardless, I'm not too worried. Every time there is a recession, the media
tries to make it look like the sky is falling. Remember the Savings & Loan
"crisis" that was going to ruin the economy for decades? Yeah, turns out that
it didn't happen.

Even if the dollar is weak, there is still a lot going on in the US. The world
can't really write the US off, and the US isn't going to be a "loss leader"
like China... so eventually the economy will recover.

