Inside the House of Money: Top Hedge Fund Traders on Profiting in the Global Markets, Revised and Updated

Foreword

I first met Steven Drobny in Barcelona in 2004. He had invited me to give a keynote address at a global macro hedge fund conference he was organizing. At that time, I had only the haziest notion of what a global macro hedge fund was, but I accepted—not realizing that the keynote at such an event was essentially a form of entertainment. No doubt I gave some spiel about the impending demise of the American empire or the unsustainable nature of the U.S. current account deficit or the impending liquidity crisis that would be triggered by some geopolitical crisis or other. The other conference participants—nearly all managers of macro hedge funds—listened more or less politely, but made little secret of their skepticism when it came to questions afterward. Given that the next four years were going to witness one of the greatest financial upswings of all time, they had good reason to be dubious.

The real business of the conference was not my after-dinner speech, of course, but the peer-to-peer sessions conducted the next day. As I listened with growing fascination, a succession of hedge fund managers stood up and explained with great precision how inordinately large sums of money could be made out of complex transactions, the like of which I had never heard. What was a “swap”? A “steepener”? And what on earth was the “Swissie” everyone kept talking about?

Having spent almost the entirety of my professional career in universities—apart from a one-year fellowship at the Bank of ...