Have you read the new book, An American Hedge Fund?
Below is a review I wrote up earlier in the year. Read the book for insight into the hedge fund business, from the point of view of an outsider looking in. It's a captivating story about wealth-building and a young day-trader's tenacity and entrepreneurial spirit.
A Modern Odyssey: Young Day-Trader Turns Hedge Fund Entrepreneur
Timothy Sykes’ An American Hedge Fund is the candid autobiography of a young, spectacularly successful day-trader, chronicling his rapid ascent from $12 thousand in Bar Mitzvah gifts in 1998 to $2.75 million in hedge fund assets at the end of 2005—and his equally dramatic, ego-deflating slide over the next 15 months, halfway down the financial mountain he single-handedly built.
Mainly, as told from the perspective of a “little guy” newcomer struggling to gain a toehold in the exclusive New York-centric hedge fund scene, this captivating book is a personal finance story, offering a vicarious educational experience for aspiring traders and budding entrepreneurs. From our front-row seat, eyes glued to Tim’s triplet of high-tech trading screens, we follow him on the way up as he nimbly advances from trading publicity plays to overnight gap-ups to short-selling microcaps, and on the way down when he diversifies away from his trading niche through a venture capital investment that unfortunately turns sour. During the Internet craze of the late 1990s, dot-com crash in 2000, post-9/11 market volatility and subsequent bull market, we see play-by-play examples of intraday trades that work for a while but, sooner or later, stop being profitable. In spite of (or perhaps because of) his strikingly high trading volume (annual turnover rate of 200 times fund size!), Tim shows remarkable adaptability, uncannily discovering new market opportunities whenever old ones fade away.
Parallels exist between self-appointed hero, Tim Sykes, and well-known “giants” of finance. As Tim’s story unfolds, we find him engaged in: trading baseball cards and reselling lost tennis balls, reminiscent of Warren Buffett’s many childhood business ventures; playing high school tennis with a fervor akin to Victor Niederhoffer’s in pro squash, and experiencing a similar reversal of fortune (though thankfully not as shattering as Niederhoffer’s); switching from the long side to the short side of trades, with the agility of George Soros; and suffering through investor withdrawals precipitated by unexpected fund losses, though fortuitously without the crippling leverage that ultimately led to the demise of colossal hedge fund, Long-Term Capital.
Similarities with the world’s wealthy and famous aside, however, the true richness of An American Hedge Fund lies in Tim’s honest, inspirational and, at times, entertaining portrayal of his personal aspirations, struggles, triumphs, defeats, admission of mistakes and, ultimately, wholehearted tenacity—something the underdog in all of us can easily relate to. Despite misfortune—elbow pain stymies his pro tennis dreams, spotty high school grades preclude him from admission into Ivy League colleges, size requirements prevent deep-pocketed institutions from investing in his small hedge fund, and straying into venture capital brings heavy losses—Tim always finds a way to pick himself up and move on.
Having battled the microcap market with the fortitude and intensity Odysseus displayed fighting the Trojans, Tim, still a youthful 20-something, now enters the next leg of his life quest, this time in the public spotlight as financial media celebrity and up-and-coming author. Are these latest developments a temporary distraction, or the beginning of a longer-term wandering like Odysseus’s circuitous, decade-long journey home from battle across the Aegean Sea? Whatever Tim’s future may bring, following his formative years of nearly incessant buying and selling of stocks, I find it hard to fathom how he could be content for long without trading.