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

I've enjoyed everything Andy has written (in newspapers, magazines and books) and this book is a wonderful description of the joys and tribulations of a hedge fund. Although its obvious that running a tech oriented hedge fund in the "bubble years" of the late 90's was a different kettle of fish than running a hedge fund in normal times, Kessler's philosophic endeavors near the end of the book, discussing the advantages of American capitalism is,in and of itself, worth the price of admission. Thanks Andy.

For sure there's much to learn from a tech growth hedge fund with 377% gain in 1999 (the fourth best hedge fund for the year) and down only 5% in 2000 (then it closed itself as planned five years beforehand), especially when the manager of it, the author himself, seemingly had no reservation to share his experience and insights to whoever believed, in particular the section of the author's unique opinion on the growing US trade deficit, which he deemed that as no problem at all with intellectual property and margin surplus the US is running. No matter what, if you like Wall Street Meat (the author's first book of his life as an analyst), Liar's Poker, Fiasco, Pit's Bull, Confessions of a Street Addict, Trading with the Enemy..., you must not miss this one. If you had not read anyone of the above, I assure you that you had missed a lot in fun and in knowledge, and you should recover part of the opportunity cost by starting with this one, though I think reading Wall Street Meat first will put you in a better perspective similar to the author's.

"Running Money" is not only a great read, it also provides a unique contemporaneous view of the `90s investment market by a talented hedge fund manager who makes no claims to omniscience. He brings us into his struggles, doubts, and mistakes as well as his successes. He shows us how hard it really is to find great investments even in a wild bull market. This is a very different book than "Wall Street Meat". It isn't as wry but I think it offers us more substance along with a lot of fun. However, the fun comes from more sources than just humor. The book weaves three threads into the final fabric. First, there is the hedge fund narrative. The author provides us with many fun stories about his difficulties in raising money for their fund, the troubles in finding the right investments, and the natural history of his and his partner's successes and failures with the market and private investments. Among other many things, we learn that the real action at conferences is out in the hall, that it is time to leave when CFOs close the doors to their offices or conference rooms or when the sales executive is the power guy, and the travails of getting an Instinet terminal in your office so you don't have to pay a broker to do the same thing for you. We get to ride with them in their four-door office as the go to meeting after conference after meeting looking for the right investment. Usually they find things to laugh at, run from, or that are jaw droppingly dumb. However, every now and again they find things to buy. Even then, many of them are dogs. But the ones that take off end up paying for everything including their cheap office above an arts supply store. Second, we get the author's analysis of what is going on in the market and what he and Fred Kittler are trying to do with Velocity Capital. Mr. Kessler shares with us his metaphors for what he is after - in particular the waterfall and its moment of great power just before it hits the rocks. There are some serious history lessons on the development of the steam engine, railroads, and integrated circuits as vehicles for investment. When would it have been right to get in and to get out? We come to understand that the investments he is after have not just large markets, but mega markets so there are powerful factors of scale. He wants profitability to go up as prices fall towards the rocks below. He wants to see a business plan to leverage that scale. And he wants some kind of unfair competitive advantage. If a competitor can simply build what you have and be your equal, he feels you have a recipe for large losses. Third, and this seems to be the part of the book that matters most to the author, everything is pulled together to culminate in a philosophical treatise on the future of the American economy as part of the world economy and what we as a country should be focusing on. His view is that the industrial age is ending and that the future economy is based on intellectual cap

An easy way to get a lesson in world economics. The trouble is that I'm not so sure the lesson is correct. For instance, we import a laptop computer that's made in the far east. The production of that computer is fiercely competitive, there's almost no margin in its manufacture. But Microsoft gets about $100 for the Windows software that comes with it. And the profit to Intel for making the CPU is significantly higher than the profit on manufacturing the computer. Given a choice we should be far more concerned with getting these high profit components of the computer rather than manufacturing the computer itself. OK, I agree with that. This is fine if you're a software engineer at Microsoft or a chip designer at Intel. But what if just an ordinary guy, trying to make a living, perhaps at a blue collar job? With the shipment of the manufacturing overseas, a lot of those kinds of jobs have been eliminated. Then again, look at the overall unemployment rate, it's quite low. Obviously the U.S. economy is finding some kinds of jobs for all kinds of people. In this book, Andy Kessler says that we've moved beyond industrialization into an intellectual property economy. It's a point that needs to be considered, and besides that his book is a delight to read. His comedy like reporting makes the economics lesson go down easily.

The highest compliment that I can give this book: It was too short, I didn't want Kessler's ideas to "stop." His IP economy, trade deficit analysis is worth the book's price many times over. Plus, it's a very, very funny book. To paraphrase Jim Cramer, this is both a brain and a beach book. One of the best I've read this year about money, investing and the economy.