Hedge Fund Market Wizards

Before I get into my thoughts on Hedge Fund Market Wizards, I think sharing the author's own words will go a long way toward establishing expectations for the book as I've found that those few folks who have panned the series have only really done so because they went into reading the books with a mistaken view of what they would get. "Readers who are looking for some secret formula that will provide them with an easy way to beat the markets are looking in the wrong place. Readers who are seeking to improve their trading abilities, however, should find much that is useful in the following interviews." (from the Preface) And of course interviews is what the book is all about. There are 15 in this latest variation on the Market Wizards series, each with its own introduction and concluding summary of key takeaways. Again, we have a diverse collection of money managers represented. They are grouped in to "macro", "multistrategy", and "equity" categories. I wouldn't call this as broad a set of discreet categorizations as we saw in the earlier books, but this probably reflects the way trading and money management has evolved in the 20+ years since the first book came out. I think those who have read one or more of the prior books will find some subtle differences in this new edition. It is clear Schwager is more confident in both his interviewing and his own views on trading and markets. There is more editorializing in this book than I remember from the others. At the same time, the author isn't shy at all about drilling down on subjects and pressing interviewees to get the most out of them. This adds to the quality of the end product. I was actually somewhat surprised how into the book I got personally. As an experienced traders, I found a kind of affirmation from some of the interviews. There were also a few "I never really thought about it like that" moments to give me new things to ponder, which is a plus. I think having a significant recent (financial crisis) event central to the interviews helps. It also creates the same kind of contextual linkage the Crash of 1987 had for the interviews in the first book. This common reference point for readers makes it easier to be engaged by the text. It also helps developing readers from an application perspective in terms of allowing readers to have "Oh, yeah. I see what he was doing there" type of realizations. There are a couple of interviewees in this book who present a challenge to individual investors in that they operate in markets where no individual really can take part (there is plenty of good footnoting to support explanations and definitions of subjects discussed). Most of them, though, operate in ways largely applicable by individuals, and even those who don't still offer insights into how they are thinking about the strategies they are employing and the way they are positioning themselves in the market. And really that's really the crux of what's on offer in Hedge Fund Market Wizards. It's about hearing how successful traders think about risk, strategy, research, and everything else that goes into their efforts - getting inside their heads. There are a couple of more systematic traders in the group who don't share much in the way of specifics, but the rest (who I would largely describe as being discretionary types) seem to have no problem at all in talking pretty specifically about the kind of technical and/or fundamental cues they look for to find good trades. If you're after "I buy when the 15-day average crosses the 30-day" type of rules, you're not going to find any. Most of the gentlemen interviewed (it's all men in this one), though, are very open about the way they look for trades, manage positions, etc. For this reason, I believe there is a lot of value to be had here for new and developing traders. Schwager ends the book with his own takeaways from all the interviews he's done through these books. Those 40 observations alone are worth getting a copy of Hedge Fund Market Wizards, especially knowing from whence they came. There's also a very good epilogue written by his son talking about his own introduction to the Market Wizards concepts and their presentation which is well worth reading. The bottom line is I think this is a good read no matter where you are on the spectrum of market experience.

It has to be some pressure for Jack Schwager to try to write books that will meet the expectations of his readers after his classic master works in the Market Wizards series that continue to stay on the best seller lists. Most traders I know read the original Market Wizard book over and over until it literally fell apart and they had to get a new copy. Schwager's past books were an amazing success getting the world's greatest traders with the best trading returns and performances to allow an interview and then Schwager was able to really ask the right questions and get them to open up and explain why they are so successful. This book is no different, this time around Jack Schwager was able to get the top hedge fund managers to grant him interviews and explain why they were at the very top of their games. I could hardly put this book down hanging on the words of these amazing traders. Reading this book for me as a trader was a delicious experience much like eating a Fillet Mignon is that is perfectly cooked and seasoned. After the 200 plus trading books I have read I still consider Jack Schwagers Market Wizards Series the best of the best. Why? His trading books are not based on theories, opinions, predictions, or beliefs, he goes down a completely different path. His books are based on interviewing the very best traders in the world, the ones with the very best returns year after year, the millionaires, the traders that trade for a living. The new embodiment of the Hedge Fund Wizards book belongs right along side his others and gives the reader an up close look at how the world's best hedge fund managers were able to find and master a trading style that fit their personality and allowed them to beat the market and the vast majority of other hedge funds year after year. If you read this book carefully and pay attention you should find some trading principles that are gems that could revolutionize your trading. I know his books have done that for me. If other trading books are like letting you see a trader's trading plan then Schwagers books are like allowing the reader to see directly into the mind of the rich trader. One Hedge fund manager even made a call during his interview saying that Apple stock was an amazing buy and that it would sky rocket based on earnings projections over the next few years with the new iPad added to its arsenal of products and that Research in Motion stock would collapse with all the companies terrible missteps it was doomed. Since the interview in 2011 Apple went on to almost double and Research in Motion lost over 80% of its book value. That was pretty amazing to make a call like that in a Wizard book and it was one of the best calls that could have been made. But more importantly the book shows the reader how to to think like a great hedge fund manager. I would put this book on my top ten must read trading books.

It was very interesting to see different hedge fund managers having different views of the markets and how their stratégies differ vastly, but still able to generate huge profits. Concepts can be a little difficult for new traders or non-finance trained folks though. Might need to reread the book again to appreciate the different techniques as we trade.

I owe Jack Schwager. It was the original "Market Wizards," stumbled across in the mid-1990s, that really opened my eyes to trading. I had previously discovered "the Investment Biker," by Jim Rogers, and knew I wanted to forego a life in academia and pursue markets. William J. O Neil's "How to Make Money in Stocks" then convinced me to intern at a stock brokerage (Raymond James) my last two college summers. But it was "Market Wizards," and after that "Methods of a Wall St Master" and "Soros On Soros," that really crystallized the vision. Unquestionably, "Reminiscences of a Stock Operator" stands alone as the far and away greatest trading book of all time. But the Market Wizards series sits, like a leather-bound canon, just a notch or two below. Until Steven Drobny's relatively recent "Inside the House of Money" and "Invisible Hands" - sort of the grad school version of Market Wizards, both mind-blowing in their own right - no one had challenged Schwager's run of brilliance and consistency when it came to trader interviews. Like many others I am sure, I can quote passages from the first three - Market Wizards, New Market Wizards, and Stock Market Wizards - chapter and verse, like a constitutional lawyer referencing supreme court briefings. The books have been absorbed by the trading community so fully that, if you put "MW, NMW or SMW" next to a quote, most serious traders will know exactly what it means. The series has made its mark not because the traders in Schwager's books are infallible, superhuman, or otherwise worthy of hero worship - no one deserves a pedestal - but because the books are so densely packed with wisdom, ideas and insights that the total net value is mind-boggling. Time and again a market situation, an element of theoretical debate, or an aspect of methodology comes up where one of the Wizards had something clear and sharp to say on the matter. There were a number of such "a-ha!" insights in HFMW (as I shall abbreviate), though the book felt a little bit lighter than its predecessors. (I will write up my impressions and key takeaways for each HFMW interview separately, as such would take up too much room here.) The surprising thing, for yours truly at least, was that the most intriguing ideas in HFMW centered around value investing. One wonders how many trading funds the Market Wizards series is intellectually responsible for seeding - Hundreds? Thousands if one counts the failures? - and now I can say HFMW has given rise to another. Here is the gist: It struck me, in reading about the value investors in HFMW, that the active and versatile trader could actually have a powerful and hard-to-replicate edge... as a value investor on the side. This would come about through the traders' ability to leave the value investing portion of his funds in cash (or cash equivalents) for significant periods of time. Let me expound a little... Kevin Daly, one of the value investors interviewed in HFMW, made an 872 percent return over a 12 year period of time, when the S&P returned negative 9 percent. So Daly must have been good at shorting, right? Nope... Daly did it with very little trading (in terms of managing around positions) and virtually no shorting. How? By going to cash for extended periods, of long duration, when conditions were unattractive. This concept - delivering far superior returns by going to cash in adverse periods - dovetails with an interesting theory proposed by Marc Faber in his June 2012 Gloom Boom Doom Report: the notion that long-term investors would do better staying out of markets most of the time, and only investing after a crisis. From an anecdotal perspective it makes sense too. Imagine if a long-only fund manager had had the good sense to sit in cash all through the 2004-2008 madness... then really loaded the boat at the firesale liquidation values of early 2009, when forced portfolio disgorgement put excellent businesses on sale, lock, stock and barrel, for less than cash in the bank! The concept also aligns with the methodology of Tom Claugus, another HFMW interviewee, who is only maximum long invested in times of extreme market dislocation (as defined by outlier standard deviations in the S&P), and with the observation of Joel Greenblatt, the final interview in the book, who wryly observes that "value investing works because it doesn't work" for extended periods of time, thus causing the impatient to abandon it. Sitting in cash - for long-term investors, not active traders! - also seems a natural given the environment we are in, where uncertainty is high and valuations are mediocre-attractive at best. No wonder highly respected value practitioners like Jim Tisch of Loews have been sitting on their hands for years (which they can do as stewards of their own capital). But of course, it would not be logistically feasible for a standard issue value fund to go dormant, sitting in cash, for months or years at a time. Investors would demand their money back, saying they aren't paying the manager to be idle. And the manager himself would have long stretches of nothing to do. A sufficiently versatile trading shop COULD implement such a process, however, assuming the shop was 1) skilled and knowledgeable enough to demonstrate deep value capabilities (with a research team devoted to such), and 2) patient enough to leave the long-term investment cash untouched in mediocre to poor allocation conditions. The ability to actively trade in a SEPARATE fund - where the main activities existed anyway - is what creates this opportunity. In other words: In conjunction with a trading fund, a deep value fund could be treated as a sort of side pocket (with its own standalone track record). During low-to-no activity periods, the cash balance in the fund could be kept at a minimum. During periods of excellent opportunity from a long-term perspective, cash could be swept into the value fund, and investors in the more active trading fund could be alerted to the situationally conditional value investing opportunities at hand. For the first stretch of years, such a fund would likely have to be internal capital only, as telling prospective investors "we might only do something once a year, or sit in cash for 20 months" would not be a great sell. Once an excellent track record developed over time, however - with the power of excellent returns during invested periods overcoming the all-cash periods - investors would see the light and show more willingness to support such a wise and logical approach. I expand on the concept to give example of the thought processes Schwager has so generously brought forth with this most excellent series. We are almost certainly going to do this when the time is right... so I guess I owe Schwager once again. Thanks Jack!

I have been wanting to write a review of the new Market Wizards book for some time, but it took me a few weeks to slog through it in my spare time. I'll come right to the point: I think I got more out of this book than any of the prior Wizard books. All of them are good, starting with the first back in 1989 (side note: years ago, I worked for one of the Wizards in the original compilation...........err, don't ask). I think the quality and sophistication of the information in the book is a cut above the others, probably because the individuals featured in this volume tend to be seasoned managers of very large funds. If you're a serious trader, I urge you to buy the book; I heavily highlighted my copy, and I've retyped some of the favorite segments below. The quotations are from different parts of the interview, so please read its paragraph as an independent snippet. The only organization I've provided is to precede each block of quotes with the name of the person who was being interviewed: Colm O'Shea: We recognized that we would underperform the bulls by quite a bit because in a bubble the true believers will always win. That's fine. you just need to make decent returns and wait until the market turns. Then you can make great returns. What I believe in is compounding and not losing money. We were quite happy to be part of the bubble, but to do it in positions that were highly liquid, so that we could exit the market quickly if we wanted to. The great trades don't require predictions. The Soros trade of going short the pound in 1992 was based on something that had already happened - an ongoing deep recession that made it inevitable that the U.K. would not maintain the high interest rates required by remaining in the ERM. Afterward, everyone said, "That was incredibly obvious." Most of the great trades are incredibly obvious. It was the same in late 2007. In my mind, it was clear that the financial system was imploding and that most market participants hadn't noticed. Never underestimate the ability of people to be optimistic and believe that everything is going to be okay. Historically, what is important to the market is not whether growth is good or bad, but whether it is getting better or worse. Gold is the only commodity where the amount of supply is literally about 100 times as much as the amount physically used in any year....there is never any shortage of gold. So gold's value is entirely dependent on psychology or those fundamentals that drive psychology....I always found it ridiculous when other analysts would write lengthy reports on gold analyzing such things as annual production prospects and jewelry usage. Annual production and consumption of gold are always a tiny fraction of supply, maybe around 1 percent, so who cares how much they change. It has nothing to do with price. Ray Dalio: People think that a thing called correlation exists. That's wrong. What is really happening is that each market is behaving logically based on its own determinants, and as the nature of those determinants changes, what we call correlation changes. One of the greatest problems that plagues mankind is that people are always saying, "I think this, and I think that," when there is a high probability they are wrong. After all, to the extend that there is strong disagreement about an issue, a lot of the people must be wrong. Yet most of them are totally confident they are right. How is that possible? Imagine how much better almost all decision making would be if people who disagree were less confident and more open to trying to get at the truth through thoughtful discourse." Scott Ramsey: The reality is that I'm not being paid to be right; I am being paid to make money. You have to have a degree of flexibility. Whenever I talk to investors, I make it clear to them that whatever I say today about the markets may or may not reflect the positions I have tomorrow or the next day. I recently reviewed a presentation I gave about six months ago, and I realized that everything I predicted didn't happen - and yet, I made money in almost every month since then. The market doesnt' care if you lost money on a trade. It doesn't matter. Think about your next trade. You have to get past the idea that just because you lost money on a trade, it means you failed. Every trading decision you make it subject to some randomness. It doesn't matter whether you win or lose on any individual trade, as long as you get the process correct. Michael Platt: I always regarded financial markets as the ultimate puzzle because everyone is trying to solve it, and infinite wealth lies at the end of solving it. When you are solving any puzzle, you have to start off from the perspective, "What do I know for sure? Do I have any bedrock to start off my analysis?" It's shocking how little you know for certain in financial markets. There are three things you need to make money in a market. You need a decent fundamental story, a good trend that looks like it will carry on, and the market handling news the way you think it should. Bull markets ignore any bad news, and any good news is the reason for a further rally. Steve Clark: Let me tell you the trouble with trading. There is no career in trading. You are only as good as your last trade, and that is it. You build nothing; you just trade. The day you stop trading, it's gone. So what you have spent doing for X hours every working day of your life has ended, and there is nothing left to show for it, except for money. You have to keep trading because you don't want to stop and look back. Because what have you done? You have built nothing. You have achieved nothing. Nearly all successful traders I have known are one-trick ponies. They do one thing, and they do it very well. When they stray from that single focus, it often ends in disaster. In the hedge fund world, you will see traders who do one thing very well, make a lot of money at it, and then think, "This one thing is rather boring. I can do other things because I am a genius." So they start doing other things. Really good traders are also capable of changing their mind in an instant. They can be dogmatic in their opinion and then immediately change it. If you can't do that, you will get caught in a position and be wiped out.

Sandwiched between a thought-provoking Foreword by veteran market wizard Ed Seykota and an Epilogue by the author's son Zachary, who is apprenticed to one of the hedge fund wizards profiled in this book, are 15 interviews with some of the best in the business. They are divided into three major groups: Macro Men, Multistrategy Players and Equity Traders. Each individual generously contributes their valuable thoughts and experience on trading. The sum total is a priceless contribution to aspiring traders and investors worldwide. Each chapter begins with a description of the interview setting and circumstances and ends with a nice summary of that trader's style and methodology. The interviews are verbatim transcriptions from tape. Schwager adeptly weaves his questions to extract maximum information and keep the conversation on course. As a result all touch on the same set of topics: how the trader got started, what challenges or setbacks he experienced, the nature of his trading style and rules, how managing other people's money affects him, what makes him successful, his opinion of why many traders fail and more. The conclusion chapter is a concise summary of 40 market wizards lessons. Schwager extracts fascinating stories about each trader's evolution from novice to master trader. Their backgrounds are often punctuated with setbacks, eye-opening "aha's" and lessons learned. The author probes for and gets examples of specific trades that galvanized each lesson into a trading rule or working methodology for the trader. He uses footnotes and italicized commentary to explain industry jargon or unusual trading methods described by the wizards as they respond to his questions. In addition to common metrics like compound annual growth rate and maximum drawdown, Schwager uses a unique standard metric, the Gain-to-Pain ratio, to measure the performance of each hedge fund market wizard based on his track record. The term is explained in detail in an appendix. The theme of this book is risk control. Each of these wizards has a unique trading style that differs substantially from all of the other traders in this book and in Schwager's previous market wizards books. However, every one of them mentions risk management at some point in the interview as a key contributor to their successful long-run performance. Fortunately for the traders among us the author extracts good and useful information about how they accomplish that goal. Hedge Fund Market Wizards contains timeless information that is useful for any investor and trader, professional or amateur regardless of markets traded or timeframe. It easily deserves a 5-Star rating.

I am familiar with the author's previous works and I'm a fan of his books and writing style. This book is basically a compilation of interviews of successful traders most of which are open to sharing their edge with others. A few didn't share their edge specifically but have discussed the generalities of what they did and have given examples of how they trade. All of them, however, were very open to sharing the reasons behind their success.(i.e. discipline, searching for something new, exploiting temporary correlations, etc.) This is the method to becoming a good baker, if you will, but not necessarily the recipe to their famous bread. This is nevertheless very important and perhaps more important than the recipe itself. Upon reading this book you will get the impression that there are so many ways to make money. In fact, some traders do the opposite of what others have forbid themselves from doing and they still make money!! (example averaging down) A variety of trader personalities, styles and backgrounds are featured. All are elite in their profession. The book is motivational and a pleasure to read. The author's style is very strong. He has a very good binary reference of thought, which helps maintain a very coherent flow. I was never confused about what the author was trying to say in the book. The author also writes intelligently, while he summarizes every chapter, he also lets you draw your own conclusions. If you are looking for a book that explains very well the traits and habits of what makes a great trader great, then you have come to the right place. The points against the book I would probably say are minor and are as follows: 1) As the title explains, this is hedge fund traders specific. Still it is very useful and some of the trading ideas and methods featured can be utilized by the retail trader. 2) The author keeps harping on his gain to pain ratio. It seems that he really wants his term to take off and be widely adopted. He literally keeps referencing it in every chapter!! That's it! All and all a great book!

I think the best compliment I can give this book is that it deserves a place next to the original Market Wizards book, which is one of the best market books ever written in my humble opinion (along with What I Learned Losing a Million Dollars (Columbia Business School Publishing) and a couple others. To be honest, I did not like the "new market wizards" which in my opinion was done based on the success of the first book. But this one is far enough apart to contain a new generation of traders. Of course, there are some flaws. This book is populated with american and british (at least) traders. Mr Schwager does not extend his research further than that and on one occasion even says that he only searches through indications of friends (there is one exception in the book). It is sad, as I personally know of South American and European (and no doubt there are others too) traders who deserved to be here and could add to the book. Even so, this is a interesting group with plenty of insights. Although, as someone who has been solely a full time futures trader for the past 15 years, I don't think he draws necessarily the correct inferences or conclusions on some interviews, but to his great credit, the information is there for you to make your own (in a few instances I would like to have asked other questions, but in general he was okay). Even when he apparently strays off course, like when he interviews his son's boss (really???)... well, that's what I thought... but after reading the interview I thought it was indeed a good choice and very interesting interview, although Mr. Schwager get asking some wrong questions and insists on how he could "improve" his results, without taking into account what the trader had been saying between the lines all the time, which is his knowledge of his style, his emotional capacity, etc... Anyway, this book's qualities OUTSHINE these small flaws by a wide margin. And, Mr Schwager has done something few people have... he has written 2 exceptional books about the markets. For authors writing a book like the first market wizards is hard, because following it up is very difficult. But he has done it with this one. If you, like some reviewers, are looking for specific techniques and trading tips, you are already searching for the wrong things my friend, and it won't make a difference which book you buy. But if you are interested in reading about some great traders according to their own words, reading about different perspectives, approaches and a lot of information to digest and reflect on, this is DEFINITELY A BUY! Let me say it for the record, this is an exceptional book and Mr Schwager is to be commended for the work he has done the "trading community".

If you are in the derivatives trading side of finance you should read all of them

I started years ago reading the original Market Wizards and then ended up working for one of the wizards in his firm for a decade. I have read the other market wizards books but then there was a period of silence. Now Jack Schwagner has created another fantastic book. This book feels fresh and has new content with a new generation of fund managers. As with the original book I think this one will be remembered for a long time. It is easy to dismiss the interviews but every time I read one of Jack Schwagner's interviews I learn something new. I find it useful to read every word and make notes in the margin. Sometimes I find a particular issue and refer to the books to think through how others would solve the problem. Whenever I interview any would be employee one of the first questions I ask is have they read the Market Wizards series and then ask them to discuss their favourite wizard. In my humble opinion anyone looking to work in a hedge fund or in a bank serving hedge funds is not credible if they have not read the entire Market Wizards series.

Excelente

This book gives you insight how successful fund managers think and express their views in trading/investing. You will find different kinds of managers with different asset classes and different investment philosophies.

Analise de um especialista em investimentos