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Hedge Fund Manager Tells All in New Book

<I>Fooling Some People All of the Time</I> is a must-read for investors.
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The book is being marketed as a gripping John Grisham-style tale of Wall Street.

It is true that it takes place on Wall Street, but it could only be gripping for the most wonkish of investors. And it lacks the decisive ending of even the most rudimentary thriller, financial or otherwise. But

Fooling Some of the People All of the Time

(Wiley) is nonfiction -- and all active investors should read it.

The book's author, hedge fund manager David Einhorn, is emerging as the public face of an industry that is, by regulation and tradition, freakishly private. Writing this book -- about a years-long investment that hasn't worked out -- just might be the most bumptious thing I've ever seen a hedge fund manager do.

Hedge Fund Legend Writes Must-Read

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Let me make clear that Einhorn's fund,

Greenlight Capital

(GLRE) - Get Greenlight Reinsurance Ltd. Report

, has been a top performer over the years, with big winners on the long side in addition to some highly successful shorts like



, Boston Chicken and



. (Like anyone else with success, Einhorn is no pillar of perfection when it comes to recognizing trouble: He served on the board of subprime lender

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New Century


, quite a demerit to slap on his record.)

It is Einhorn's

Allied Capital


short position that appears to be the sweat of his career. His obsessive, difficult experience with it began at a charity auction where several money managers were invited to introduce their best pick to the assembled donors. Einhorn spoke about shorting Allied, a private equity firm that, to Einhorn's eye, used fuzzy accounting. You can watch the speech at


Immediately after the speech, all hell broke loose. The company pushed back hard, and Einhorn embarked on a mission to interest regulators and journalists in what he saw as fraud. He first wrote his opinions for a public audience on


Alliance did eventually come to an agreement with the SEC, but it was toothless and quite disappointing to Einhorn. This is part of my fascination with the book and Einhorn's decision to write it. Six years have elapsed since Einhorn started working on Allied, and he ends the book where he began: claiming that the accounting was flawed. Hedge fund managers are not generally public creatures, so to go this public and about an idea that has not worked is somewhat remarkable. In fact, remarkable might be a kind word for it.

But you, the savvy investor, can benefit greatly from this book, even if you have to occasionally wade through tedious detail. There are many legends about shorts and how they try to interest journalists and regulators in their positions. The truth is, of course, that just as many investors try to interest journalists in writing about longs. There is nothing wrong with either, provided the investor is aboveboard in his or her opinions and isn't obviously looking for a quick profit by selling at publication.

But this is nothing if not a fly's-eye view of how this back-and-forth can work -- in all its glory and messiness -- at the highest levels. Journalists sometimes bite on the idea, sometimes disappear after professing interest and sometimes betray Einhorn. Few have time for investigative reporting, anyhow. Regulators move slowly, and they sometimes move against Einhorn. (He was called on the carpet by the

Securities and Exchange Commission

.) Like many shorts, especially the vulnerable ones, Allied also fights back -- and sometimes fights dirty.

Anyhow, it's all there. And Einhorn is still there, too. Not with a Grisham-like hit, but still waiting for the world to catch on to his opinion on Allied and for the stock to crack. In the meantime, he's written an important guide for investors.

At the time of publication, Fuchs had no positions in any of the stocks mentioned in this column.

Marek Fuchs was a stockbroker for Shearson Lehman Brothers and a money manager before becoming a journalist who wrote The New York Times' "County Lines" column for six years. He also did back-up beat coverage of The New York Knicks for the paper's Sports section for two seasons and covered other professional and collegiate sports. He has contributed frequently to many of the Times' other sections, including National, Metro, Escapes, Style, Real Estate, Arts & Leisure, Travel, Money & Business, Circuits and the Op-Ed Page. For his "Business Press Maven? column on how business and finance are covered by the media, Fuchs was named best business journalist critic in the nation by the Talking Biz website at The University of North Carolina School of Journalism and Mass Communication. Fuchs is a frequent speaker on the business media, in venues ranging from National Public Radio to the annual conference of the Society of American Business Editors and Writers. Fuchs appreciates your feedback;

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