Thursday, October 23, 2008

This Hedge Fund Manager Tries to Short Himself: Michael Lewis

This Hedge Fund Manager Tries to Short Himself: Michael Lewis

Commentary by Michael Lewis
Oct. 24 (Bloomberg) -- The first time I sensed the alarming change in my soul was when I caught myself, five minutes after the market open, reaching for a reefer.
Trust me, I didn't amass legacy wealth (underestimated by Forbes magazine in the high eight figures) by smoking weed during trading hours. Exhaling that first hit I thought and might even have moaned aloud: ``Whoa, dude! Why are you even running a hedge fund?'' The markets were collapsing, and so was my passion.
Bloomberg subscribers have come to know me as a seriously successful hedge-fund manager who tries to serve society in more ways than one. Not only have I made as much money as possible, and proven the natural inferiority of the little rich-kid idiots from Harvard and Yale who went to work for Lehman Brothers Holdings Inc. I have also freely shared my thoughts and opinions with you.
As the trading room filled with smoke, and acquired that only sweet smell I know that is not success, I realized it was time for me to share more. To go deeper. I needed to re-examine honestly who I was, and why.
What could possibly have caused me to doubt my own value? I cannot say. But with my lungs stretching to the bursting point I felt a sudden urge to make the argument for shorting myself. I looked for weaknesses. I found three:

Misplaced Trust

1) I trusted America to do the right thing.
My fund may be an offshore entity, but I trade in U.S.
markets. When they move from ``God Bless America'' to ``Take Me
Out to the Ballgame'' at Yankee Stadium, I keep my hand over my
heart. And I trusted my government to preserve one of man's most
basic rights: the right to short Morgan Stanley.
Six weeks ago I was right where I wanted to be: short not
only Stanley but also Goldman Sachs Group Inc., in real size.
Both were going to zero, and I was going to have another Merry
Christmas. Then the Goldman alums at Treasury jump in and force
the Securities and Exchange Commission to ban short selling.
The short squeeze forces me to buy back everything at prices
that would make a Japanese investor blink. How did I feel?
Imagine how it would feel to be Michael Jordan in mid-air, three
feet above the rim with no one around you, when the ref blows the
whistle. Dunking is now illegal, he says. The league fines you
for trying to dunk; the media lambastes you for trying to dunk.
Barney Frank subpoenas the dunkers.
I'm not saying I'm the Michael Jordan of hedge-fund
managers. Others say that. I'm saying that for the first time in
his career the Michael Jordan of hedge-fund managers feels like
picking up his ball and going home. Which brings me to...

Love What You Do

2) I hate my job.
When people ask me what it's been like making hundreds of
millions of dollars for myself I always try to smile as if to
say: ``It's no big deal. Some people are just built to win in the
financial markets.''
The truth is nothing comes naturally in the financial
markets. Winning is so much harder than you know. It comes with
this huge opportunity cost: not winning at something else. For
example, I think I could be one of the best ever at finding
meaning in life. But I have to put that to one side, to help keep
markets efficient. Don't get me wrong. I'm not a whiner and I'm
not a quitter. I'm not writing a letter to my investors to tell
them why I'm too good for their money and my own Blackberry. No,
I'm no Andrew Lahde. (Though he has a point about pot.) I'm just
underutilized. Which leads me to...

Wrong Man

3) I was rocked to my core that I -- or one of the few
people like me -- wasn't put in charge of the bailout.
If you haven't figured it out by now, America has hired the
wrong Paulson. There are two of them, Hank and John. Hank turned
Goldman Sachs from an investment bank into a busload of tourists
going to a casino, with borrowed money.
Goldman might have been the smartest investment bank but you
only needed to see Dick Fuld testify before a congressional
committee to know how much that means. No pun intended, but Dick
didn't know dick.
Astute observers will note that every time they run across a
party of midgets, one is tallest, and his name is usually
Goldman. Suffice it to say that while Hank's shop was creating
subprime mortgage-backed bonds, John's was shorting them. Hank
wound up working for the government, John wound up making $3.7
billion. For himself.
Wake up America! The teacher has just asked the class to
send one member to the chalk board to figure out a problem. You
just reached past the A student in the front row and plucked the
guy in the middle who's working hard for a B-minus. And he's
To be honest, I'm not sure what I'm going to do next with my
life. But the more I think about it, the weakness I'm feeling
isn't mine. It's yours.

(Michael Lewis, author of ``Liar's Poker,'' ``Moneyball,''
and ``The Blind Side,'' is a columnist for Bloomberg News and an
imaginary hedge-fund manager. The opinions he expresses are his

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For Related News: NI LEWIS
For Financial Crisis News: EXTRA

--Editors: Marty Schenker, James Greiff

To contact the writer of this column:
Michael Lewis at

1 comment:

Anonymous said...

from amazon. . .

Tom Adshead (London United Kingdom) - See all my reviews

I worked for CSFB for three years, and am still in investment banking for a smaller firm. So I have seen a part of the world that is described here. I'm not saying that this is an exact description of what I saw, because Lewis picks the most exotic creatures that he met, but the atmosphere is perfectly conveyed. This book will tell you all the stuff that they don't teach you in an interview or recruitment visit - the pecking order, the politics, and how to get paid.
The other reason to read this is that Lewis is a brilliant writer, with a real talent for describing people and their situations. Lots of other people have written boring books with the same raw material. For a non-specialist like my mother, the technicalities were hard work, but you don't need a lot of special knowledge to like this book. My mother certainly did.

Probably the best way to look at this book is like a travel book - you're not visiting a country, you're visiting a world. Great travel books are not word-perfect descriptions of a place, they are representations of what the author felt like when he was there, and they give the reader a feeling of what it was like to be there. If you read this book, you will understand what it feels like to work inside a big bank, and you'll enjoy the ride, even if you have no interest in actually working there.