Barbara T. Dreyfuss

Hedge Hogs Made The Washington Post Bestseller List July 7, 2013, ranking #9 Among Hardcover Nonfiction Books

Nominated for the 2014 Ridenhour Prize, awarded to books that "defend the public interest, advance or promote social justice, or illuminate a more just vision of society."

Named One of the Top Ten Business and Economics Books of the Season by Publisher's Weekly

The Economist
June 8, 2013

"The story of [Amaranth's] collapse is clearly and entertainingly told in “Hedge Hogs” by Barbara Dreyfuss, a former Wall Street analyst who is now a journalist... It is a tale of hubris and nemesis, of traders who forgot about risk in pursuit of reward. "

May 22, 2013
Susan Antilla

"[Dreyfuss] does a great job of putting Amaranth’s out-of-control trader into historical context, explaining the blitz of deregulation that set the stage for someone like Hunter to do maximum damage. Dreyfuss also captures the juvenile culture of trading luminaries who battle like enemies in some twisted fantasy. Hunter and futures trader John Arnold, founder of the hedge fund Centaurus Advisors LLC, fight each other in trading duels more suited to the video game Halo than real life."


"A telling insider's story on how hedge funds are playing high-stakes poker for massive personal profits and stealing the American Dream from average families...This is a case study that cries out for tougher crackdowns on the derivatives game."
--HEDRICK SMITH, author of Who Stole the American Dream?

"Brian Hunter, dubbed one of the top rogue traders of all time by The Wall Street Journal, is the only one on the list not to have gone to jail for his crimes. In Hedge Hogs, Barbara Dreyfuss reveals in forensic detail how Hunter carried out a speculative assault on the highly vulnerable U.S. energy market reaping massive returns for his multibillion-dollar hedge fund, until finally meeting his match -- John Arnold -- and spectacularly flaming out. Hedge Hogs is a great read for those interested in an introduction to the games often played by energy traders, as well as Wall Street veterans who think they know everything there is to know on this subject."
--LEAH MCGRATH GOODMAN, author of The Asylum: Inside the Rise and Ruin of the Global Oil Market

"Hedge Hogs is not merely the definitive take on the largest hedge fund collapse in history-it is a window into how the financial system came unstuck. Barbara Dreyfuss gets all the details right. This is Enron ll, the sequel in which a thirty-year-old farm boy from Calgary makes $113 million one year and then destroys his firm--and yet he isn't even the highest-paid or most intriguing character his age. Once you start reading this book, you will not be able to put it down."
--FRANK PARTNOY, author of F.I.A.S.C.O., Infectious Greed and WAIT: The Art and Science of Delay


Washington Post
July 12, 2013
Steven Pearlstein

"Wall Street: How a Giant Hedge Fund Went Down

"In Washington, the Wall Street moneymen are at it again, waging behind-the-scenes battles against a host of new rules to prevent another financial crisis. Some of the fiercest fights are over limits on derivatives trading, including complex derivatives linked to commodities. Regulators, legislators and judges inclined to sympathize with the industry ought to rush out and buy a copy of Barbara Dreyfuss’s “Hedge Hogs,” a wonderfully instructive tale about Amaranth Advisors, a nearly $10-billion hedge fund brought down by the recklessness and arrogance of a single commodities trader...

"Dreyfuss, a Wall Street analyst turned investigative journalist, not only plowed through what turned out to be a treasure trove of official records and transcripts, but supplemented it with plenty of her own reporting. She manages to organize it all into a tight, riveting and understandable yarn...

"While Dreyfuss lets this tale unfold, she does an artful job of weaving in the history of the hedge fund industry and how the energy and derivatives markets came to be largely unregulated. She provides ample evidence of how these markets are routinely manipulated by a handful of trader-speculators to the detriment of energy consumers. She exposes the hypocrisy of hedge fund executives who make false and extravagant claims about their risk management. And she raises serious questions about public pension funds which have rushed to invest so much of the nation’s retirement money in high-risk, high-fee hedge funds that can no longer deliver on their marketing hype."

Financial Advisor Magazine
September 24, 2013
Eleanor O'Sullivan

"Larry Fink, founder of BlackRock, the New York-based investment management firm, asked a simple question: “When you see aberrant success, you have to ask, “Did I take too much risk? In spring 2006, Fink was 'troubled by Amaranth Advisors’ huge profits the previous fall when the hurricanes hit,’ and, because Fink was alarmed by the hedge fund’s earnings’ volatility,'(BlackRock) paid a 3 percent penalty fee to withdraw its holdings earlier than the date set in its contract,’ writes Barbara T. Dreyfuss in Hedge Hogs: The Cowboy Traders Behind Wall Street’s Largest Hedge Fund Disaster.

"Other investors who didn’t act on their suspicions soon enough lost enormous sums. One was the San Diego County Employees Retirement Association, which saw its investment with Amaranth Advisors of $175 million swell to more than $244 million, and then, when the hedge fund collapsed in 2006, shrink to $84 million.

“At its height in September 2006 (Amaranth) managed assets of almost $10 billion and then imploded virtually overnight. Between the end of August and the end of September, more than $6 billion of its funds effectively disappeared. It was the largest hedge fund collapse ever.

"What happened, Dreyfuss asks?"

Houston Chronicle
June 14, 2013
Steve Weinberg

'Hedge Hogs' is a fresh look at Wall Street trades

"The abuse of investors and American taxpayers by 'Wall Street' is an oft-told tale, especially since the financial collapse of 2008. But Barbara T. Dreyfuss has found a fresh way to tell the story and one of her protagonists is Houston's billionaire philanthropist and former hedge fund luminary John Arnold...

"Dreyfuss builds suspense by demonstrating how Hunter and Arnold 'sized each other up, gauging the bets each made … They probed for weaknesses in each other's trading strategies. For months they waged a high stakes battle.'

"The book is admirably researched and clearly written. It is also a morality tale. The contest between Hunter and Arnold ended during 2006 when, in Dreyfuss' words 'one collapsed a multi-billion dollar firm and the other became a billionaire.'"

The Economist
June 8, 2013

"Hedge funds: Full of Hot Air"

"A fund's collapse is a classic tale of trader hubris

"THE amaranth flower is praised both in Aesop’s fables and John Milton’s “Paradise Lost” for its everlasting qualities. In the eyes of Nick Maounis, a bond trader, that made it a good name for the hedge fund he set up in 2000. Six years later, Amaranth Advisors looked an astonishing success, with a stellar investment record and assets under management of more than $9 billion. But by the end of the year, the group had been consigned to the compost heap.

"The story of its collapse is clearly and entertainingly told in “Hedge Hogs” by Barbara Dreyfuss, a former Wall Street analyst who is now a journalist. It is a tale of hubris and nemesis, of traders who forgot about risk in pursuit of reward. Amaranth was brought low by energy trading, and by the outsized positions in the gas market of one man in particular, Brian Hunter.

"Amaranth did not actually begin trading in energy until 2002 and did not hire Mr Hunter until 2004. As late as March 2005 a San Diego pension fund that invested in Amaranth was not aware of Mr Hunter’s importance to the fund. But the trader staged a spectacular coup that year when his options on the gas price shot up in value after Hurricane Katrina disrupted supplies; he rescued a difficult year for the group and received a bonus of $113m.

"Taking big bets was a mark of Mr Hunter’s style. He had a tendency to increase his position when prices moved against him and was relaxed about revealing his positions to others. At his previous employer, Deutsche Bank, he had battled a superior who wanted him to reduce his risk-taking; when the bank lost $53m in a few weeks, Mr Hunter was demoted, denied a bonus and moved off the trading desk.

"At Amaranth his initial success emboldened him to take more risk; by the end of February 2006, he was trading billions of dollars’ worth of gas contracts. Two months later 38% of Amaranth’s total capital was being directed by Mr Hunter.

"Investors were told that Amaranth carefully monitored its portfolio, with more than a dozen people devoted to risk management. However, Mr Hunter ran energy trading from an office in Calgary, Alberta, while the risk management was handled from the firm’s HQ in Greenwich, Connecticut. Ms Dreyfuss says there was no computer system in Greenwich capable of viewing Mr Hunter’s trades in real time.

"At first, things went well; he earned the firm $320m in February 2006 and another $1.1 billion in April. But in May, the firm lost $1.1 billion, even though the firm’s risk calculations predicted the maximum possible loss would be $350m. Amaranth’s positions were so large that offloading them was impossible without incurring a further $1 billion in losses. Mr Hunter was told to reduce his positions gradually.

"Once again, however, he doubled up, hoping that he could shore up prices and force traders who were betting the other way to drop out of the market. By the end of May, 50% of the firm’s positions were invested in energy; by late July he owned 80,000 gas contracts for January 2007, nearly as much as all American residential consumers actually used that month. It worked for a while but other market participants could sniff blood. Once prices turned against him, the end was swift; in one day at the end of August, trading counterparties demanded that Amaranth hand over a further $1.5 billion in collateral to cover its losses and the firm’s assets fell by $6 billion in four weeks.

"The author is rightly angry about the extent to which one trader can dominate a market. She shows that there was real collateral damage, in the form of losses to local gas utilities that were trying to protect themselves against rising prices. She is perhaps a little too swift to tar the entire hedge-fund industry with Amaranth’s brush; there are plenty of managers who take much less risk, and who merely try to pick the best and worst shares. But her book is a salutary example of how traders who believe they are super-smart might be nothing more than lucky, and how there is nothing so intoxicating as the ability to speculate with other people’s money."

May 22, 2013
Susan Antilla

"Amaranth Hit Death Spiral as Sycophants, Fools Cavorted"

"In September 2006, Greenwich, Connecticut-based hedge fund Amaranth Advisors LLC collapsed after losing more than $6 billion in the natural-gas futures market. In “Hedge Hogs,” Barbara T. Dreyfuss tells the story of the math-whiz traders whose risky dance with deregulation led to the collapse. The star of Dreyfuss’s distressing tale is Brian Hunter, the Amaranth celebrity described by sycophants at the now-defunct Trader Monthly magazine as a top dog among a crop of “red-hot traders.” Dreyfuss, a former securities analyst, rehashes a lot that we know about Hunter’s antics. And despite admirable efforts to explain the arcana of futures trading, she may lose the lay reader when illustrating the Amaranth drama with details of widening or narrowing trading spreads.

"But she does a great job of putting Amaranth’s out-of-control trader into historical context, explaining the blitz of deregulation that set the stage for someone like Hunter to do maximum damage. Dreyfuss also captures the juvenile culture of trading luminaries who battle like enemies in some twisted fantasy. Hunter and futures trader John Arnold, founder of the hedge fund Centaurus Advisors LLC, fight each other in trading duels more suited to the video game Halo than real life. "If you want to succeed and make money, you want to destroy someone else," a trader tells Dreyfuss. "That’s just how it works. If I want to be successful in this industry, I’m going to want to destroy five guys."

"Armed with degrees in physics and mathematics, Hunter started trading natural-gas futures at TransCanada Corp. in his native Calgary in 1998. He left for Deutsche Bank (DB)’s New York headquarters in 2001, where he worked in the global commodities markets division. By the time he left Deutsche Bank for Amaranth two-and-a-half years later, he’d been demoted by a supervisor who would say later in a deposition that Hunter couldn’t be trusted to “do the right thing for the bank.”

"As is to be expected in the world Dreyfuss is describing, Hunter was “quickly scooped up” by Amaranth despite that rocky ending with Deutsche Bank. A year later, he parlayed an offer from SAC Capital Advisors’s Steven Cohen into a sweetened deal to stay at Amaranth. Money was a factor in the new agreement, but not the only one. Hunter demanded that he be allowed to move from Amaranth’s Connecticut headquarters to Calgary. He also wanted to be free from the oversight of a former Enron Corp. trader named Harry Arora who’d been keeping tabs on him. The star got what he wanted. Arora later quit, warning on his way out that Hunter “could blow up the entire firm.”

"By spring 2006, clients were seeing red flags in the sudden massive gains in Amaranth’s energy portfolio -- up $1 billion in April. What goes up in a dramatic spike, those clients correctly figured, must come down. BlackRock Inc., the New York investment-management firm, was concerned enough that it paid a penalty to bail out. After that, Hunter’s bosses began making the first of several unheeded requests that he cut back on his positions. In May, Amaranth lost more than $1.1 billion, and a death spiral was in full force. The book describes traders who manipulate markets and eviscerate pension-fund portfolios but don’t have a clue about the destructive roles they play. In June 2006, when Amaranth was on its slide to oblivion, the clearly out-of-control Hunter observed to a colleague that other people in the markets “were getting out of control.” In another exchange, a trader who works with Hunter refers to the “fricken deviant market.” It becomes clear to the reader pretty quickly who the deviants are here. Hint: They do not include “the market.”"

NY Post
June 1, 2013
Roddy Boyd

"Consumers paid for nat gas profits"

"At the heart of author Barbara T. Dreyfuss’ new book is greed — pure and raw, with total disregard for consequences. In “Hedge Hogs,” Dreyfuss recounts the 2006 collapse of a once high-flying Greenwich, Conn.-based hedge fund called Amaranth Advisors. Amaranth was a hedge fund founded by Nicholas Maounis, a bright and amiable man with a background in convertible-securities trading who fell under the sway of a trader named Brian Hunter, a tall Calgary, Alberta, native whose seeming skill at profitably trading natural gas was matched only by his distaste for being closely monitored. Generating handsome profits that became increasingly necessary to keep the popular fund afloat, Hunter increasingly worked with little or no oversight, which proved fatal as he sank investors — including pension funds with the retirement savings of thousands of workers — and employees in September 2006 on a huge natural-gas trade gone horribly awry.

"Hunter did not trade so massively in a vacuum. As Dreyfuss recounts, the massive influx of speculators (with a mountain of cash to trade with) into energy-trading markets starting in 2000 forced prices on a ceaseless march upward, culminating in $15 per thousand BTU in 2005, a rise of more than 300% in a few short years. Crude oil was not immune to the run-up. The average price for a barrel of oil was 100 percent higher in 2005 than in 2003. Much of that spike came from speculation in the oil pits.

"Interestingly, in April 2005, hedge funds and other speculators held almost 50 percent of the outstanding natural-gas futures contracts at the New York Mercantile Exchange. They had no intention of taking delivery of the contracted gas, but planned to roll the contracts over at an increased profit. There was, Dreyfuss implies, a sense that market realities didn’t matter, that this was all a game, a game that US consumers would fund with higher and higher heating and cooling bills. 'There were very real effects to the massive speculation in natural-gas prices, real businesses that saw the prices of natural gas pushed out of alignment with demand,” Dreyfuss says.'"

Publisher's Weekly
March 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 super-trader 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."

April 15, 2013
David Siegfried

"Hedge funds, once an obscure investment vehicle confined to the ultra rich with a penchant for risk, have ballooned to a $2 trillion industry in recent years, as ordinary pension and retirement money has been poured into these unregulated funds in an effort to recoup losses sustained in the 2008 financial crisis. 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."

April, 2013

"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."