BOOK REVIEW: “Diary of a Very Bad Year: Confessions of an Anonymous Hedge Fund Manager”

There have been a lot of books written about the Great Recession, with surely more to come.  “Diary of a Very Bad Year” is different in that it was actually written during the crisis.  Keith Gesson, a writer for n+1 magazine, was introduced to the Anonymous Hedge Fund Manager (HFM) by a friend and interviewed him in September 2007, when it became clear that the housing market was tanking, highlighted by the failure of two hedge funds at Bear Stearns that were very exposed to subprime financing.  The interview was posted on the n+1 website and turned out to be very popular.  Over the course of the next two years, Gesson conducted eight more interviews with HFM.  The result is a very practical, easy to understand, finance-centric view of the economic crisis from someone on the inside.

From the very first interview, HFM shows himself (the book does indicate that HFM is a male) to be a very practical explainer of his view of the world.  In the first interview, he states that there was a lot of investment money that wanted to invest in mortgages, and it was that demand that caused many of the subprime mortgages to be created.  In further interviews, he talks about why Bear Stearns “blew up”, why Lehman Brothers was allowed to fail but not AIG and how the government was dealing with the banks.  This is not a political book, HFM spends very little time in the interview making judgments (although he does thing that more big banks should have been allowed to fail), but focuses on what happened and what next.

Where this book differs from other books about the crisis is that there is no attempt to come up with a prescription for how to fix what went wrong.  These interviews are about how the HFM is trying to survive during the crisis, along with a personal crisis where HFM is weighing whether he wants to continue in this business at all.  HFM comes across as a really good guy, not the least of which because he is willing to sit for a great deal of time to educate Gesson and his readers about the hedge fund business.

This is a quick read, but packed inside it are a lot of observations that other business journalists are unable to provide.  A recommended read for anyone who would like a view from the inside of finance.

Diary of a Very Bad Year: Confessions of an Anonymous Hedge Fund Manager

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