In Hedge Hogging, former Morgan Stanley global strategist Barton Biggs has written a book that is interesting and yet at times a humorous read. That's a rarity in the field of investing. Although the book’s main theme the account of Biggs hedge fund from inception through its beginning years, the book is interwoven with stories that include other hedge managers’ trials, successes and failures both in financial and human terms.
The book is written in a fashion that is an easy read, not in the mode of the sardonic Abelson, of Barron’s, but rather that of a storyteller. The reader is able to put the book down and yet pick it up later and continue. Each chapter is like a story by itself, and yet it weaves into the overall book.
While the stories are funny and pithy at times, they relate to the real world of investing. There is one where a hedge fund manager who has a mansion in Greenwich and a wife that wants to keep up the show just loses it. His funds' performance collapses and he just goes home, goes to bed and refuses to leave. His wife has to close the fund and sell the house. They move to California and take up the beach life.
While the stories are interesting, it’s Biggs’s observations in his stories, that are relevant to all who manage their own or other people’s money. One of the best is how alone one is in the art of investing. In one chapter, he describes the feeling of when things go against you. He tells of Churchill and his dark moods, comparing them to a huge foul-smelling black dog with breath like the sewer which appeared uninvited and sat heavily on his chest pinning him down. As Biggs says there is an investment black dog that appears from time to time. The person that can get the black dog off is one who becomes a successful investor.
It's that alone feeling, present in every true investor, that one must overcome. Biggs does not state this explicitly, but implies from his anecdotes that often the toughest thing to do in investing is nothing. The second toughest thing to do is something.
Another section of the book, relevant to all investors, discusses investors' excessive expectations of investment returns. Again, Biggs uses one of Churchill’s lectures to make the point in a very humorously way. In a serious fashion, he describes the differences and the history of Yale’s and Harvard’ endowments and their investment results. Harvard’s return was great but the small-minded academics did not like the pay for performance that its managers were getting. The managers left and the performance has suffered. Yale’s approach is to think outside the box and use other investments products, than the usual ones. Unfortunately, most private investors would not be able to take advantage of these products but it is still worthwhile to think of about them.
Other chapters are devoted to what makes a good investor. One concept Biggs reviews is groupthink and that thought process. One piece of important advice to investors: read. As Biggs describes, people are either visile or audile. All investors can absorb information. The key, as discussed in Hedge Hogging, is what you do with the information.
There are many vignettes throughout the book which are interesting and enjoyable to read. But the book also has many truisms that are useful to investors. Although the book deals with a unique group of people that live in and are centered in a narrow universe, it is a good read, with many ideas and insights that one can take and use for one’s own purposes. The book is a very personal viewpoint, well written and worth the read.
Hedge Hogging by Barton Biggs, from Amazon. (This is an affiliate link that generates revenue for Seeking Alpha without raising the cost to the buyer.)