The Cowboy Traders Behind Wall Street's Largest Hedge Fund Disaster
March 11, 2013
Megalomaniacal traders trash the market while battling for supremacy in this lively financial melodrama. Journalist and former financial analyst Dreyfuss smartly deploys her inside knowledge of Wall Street in following Brian Hunter, an energy trader for Amaranth LLC whose colossal bets on natural gas futures all but bankrupted the firm in 2006 and took down many a retiree’s pension in the process. She makes his duel with rival supertrader John Arnold a choreography of canny (and possibly illegal) market manipulations in which he eventually outsmarted himself: the gas contracts he bought were so huge that they moved the market upward—and they were also too big to sell without causing a self-defeating market plunge that might wreck his firm. Dreyfuss’s lucid, perceptive tour of the high-wire culture of hedge funds highlights just how vapid Wall Street’s pretense of market expertise and risk analysis really is; Hunter’s natural gas trades are really just bets on future weather, wagers that a hurricane or cold snap will crimp production or boost consumption enough to raise prices. Less cowboys than arrogant yet insipid hollow men—Hunter’s inane “hahaha” e-mail tag line is his most flamboyant trait—Dreyfuss’s subjects lose sight of reality in a financial hall of mirrors. Agent: Deborah Grosvenor, Deborah Grosvenor Agency.
May 1, 2013
A Wall Street insider-turned-investigative journalist explains the collapse of the high-risk hedge fund Amaranth LLC and how it affected small businesses, pension funds and the price of natural gas across North America. After working two decades on Wall Street, Dreyfuss quit in 2004, alarmed at the emphasis on obscene profits for hedge fund traders, whose greed had begun infecting managers at supposedly more conservative, safe mutual funds. As the author searched for the best way to expose the hedge fund industry, she became increasingly aware of Amaranth, which, in 2006, went from billions of dollars of assets to corporate death nearly overnight. Dreyfuss' research into the collapse suggested to her that she could tell the complicated saga for a lay readership by focusing on two men: Brian Hunter, the Amaranth trader whose risky deals in natural gas trading caused the collapse, and rival John Arnold, at a different firm and viewing the natural gas market in an entirely different way from Hunter. The result is a story about not only greed, but also hubris, the lack of government regulation over many aspects of Wall Street, the high-consequence ignorance of investors seduced by astronomic-seeming hedge fund profits, and the apparent failure of the sad lessons to stick. Hunter refused to cooperate with the author; Arnold cooperated in a limited manner. Nonetheless, Dreyfuss managed to locate telling details for the narrative by relying on post-collapse hearings in the Senate, as well as two federal regulatory agencies entering the fray too late to prevent the painful losses. The author also persuaded numerous friends and foes of Hunter and Arnold to talk in detail about what they saw and heard in the months and years leading up to the collapse. A well-crafted investigation for nonspecialists about an obscure, needlessly arcane corner of Wall Street.
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April 15, 2013
Hedge funds, once an obscure investment vehicle confined to the ultrarich with a penchant for risk, have ballooned to a $2 trillion industry in recent years, as ordinary pension and retirement money have been poured into these unregulated funds. One of these funds, Amaranth Advisors, managed $9 billion in assets until its collapse in September 2006 owing to oversize holdings in natural-gas futures executed by a brash young Canadian trader named Brian Hunter. Wall Street analyst Dreyfuss details how Hunter's manipulation of the natural-gas market not only lost billions of dollars for Amaranth investors but also caused speculative price spikes that took a heavy toll on consumers and business owners. Her work shines light on the little-known sector of unregulated energy trading in the wake of Enron, where reckless traders continue to take enormous risks with investors' money and wreak havoc in energy-commodities markets, which are essential to the lives and livelihoods of ordinary Americans.(Reprinted with permission of Booklist, copyright 2013, American Library Association.)