It’s been a while since Jack Schwager has treated us to a collection of the insights and experiences of a collection of successful market participants, but he’s back with Hedge Fund Market Wizards. This is the fourth installment in the series which started with Market Wizards in 1989, added The New Market Wizards a couple years later, and got market-specific with Stock Market Wizards as the third of the sequence. I will admit that I wasn’t blown away by the latter book, but have long rated the first two very highly. I actually interviewed Schwager back in 1992 in his office at Prudential Securities (if I’m remembering correctly). His advice to me at the time when I asked was to learn computer programming to facilitate system development and testing, perhaps reflecting his own thinking toward taking a more systematic approach to the markets at that time.
Before I get into my thoughts, 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 (Colm O’Shea especially reflected a great deal of my own thinking as it has developed over the years). 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.
Make sure to check out all my trading book reviews.