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'More Money Than God,' But Morally Bankrupt

More Money Than God

Alfred Winslow Jones, inventor of the hedge fund, never got an MBA. Amazingly, he studied Marxism in Berlin. And he was almost 50 when he become an investor.

At the time, in 1948, economists believed the stock market was cyclical. Not Jones. Wall Street, in his esteem, was irrational -- fluctuating with investors' mood swings.

To reduce his risk, Jones didn't just buy stocks hoping they'd go up. He also bought stocks "short" -- meaning he borrowed stocks he thought would lose value -- sold them immediately, then bought them back when the price dropped.

He could thus hedge his bets and even make money regardless of the market. And a new type of fund was born.

Jones' legacy is illuminated in an excellent, infuriating new book by Sebastian Mallaby, More Money Than God: Hedge Funds and the Making of a New Elite.

More Money Than God is an expert primer on America's most obscenely lucrative investment tool. Hedge funds, as Mallaby explains, are like the Ferraris of finance. They're elite, turbocharged, smaller and less regulated than other investment vehicles. Unlike banks and brokerages, hedge managers invest some of their own money -- which, Mallaby says, makes them less reckless. When they crash, they don't take the whole economy with them.

But when they're winning? More Money Than God describes how a few moguls devalued the currency of Thailand -- plunging millions into poverty -- to walk away with over $1 billion in profits; how top earners took home at least $240 million apiece in 2006; and who even managed to benefit wildly from the subprime-mortgage crisis.

To his credit, his book isn't "wealth porn." He doesn't drool over their jet planes or wine cellars. Rather, he admires their nerve and innovation.

We see George Soros, torn between saving the world and sinking the British pound. Julian Robertson, who challenges his employees to tightrope walk across icy ravines. James Simons hiring mathematicians to find "golden algorithms" for beating Wall Street.

In their fanatical drive to outsmart the markets, these capitalists seek to unlock the secrets of human psychology itself. They're obsessed with trying to predict behavior, subjugate it, manipulate it. Their quest is almost mythical.

Almost. There's much to admire about the hedge fund elite, but little to love. So, the same can be said about More Money Than God.

Let me be blunt: Currently, many of my loved ones are out of work -- and like the majority of Americans, I can never afford a hedge fund and I didn't make money off the credit crisis. Perhaps you'll forgive me, then, for not warming to a terrific book about the moguls who did.

Mallaby notes that hedge funds themselves didn't create the subprime crisis. True. But their short-selling aggravated the fallout. And they've contributed to an outsized atmosphere of greed -- and the growing imbalance of wealth -- for years.

Is this business as usual? Perhaps. "Greed and risk are always with us," Mallaby concludes. He's incisive, informative, and as good a financial writer as he is a storyteller. Yet I found his subjects morally bankrupt -- and his book therefore hard to adore. Like a stock market fluctuation, my reaction is probably irrational. But Alfred Winslow Jones surely would understand.

Susan Jane Gilman is a journalist, fiction writer and best-selling author of three nonfiction books: Hypocrite in a Pouffy White Dress, Kiss My Tiara: How to Rule the World as a SmartMouth Goddessand, most recently,Undress Me in the Temple of Heaven, a memoir about a naive and disastrous trek Gilman made through Communist China in 1986.

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