YouSaid · the spoken record

Andy Redleaf

lines on the record: 70
first: 2018-04-02
most recent: 2018-04-02
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“Life is moments, sanity, happiness such as it is. It's about appreciating the moments, even though they're periods in time. One thing I read somewhere, which is, you know, like absolutely 100% true. When you think about your kids, somebody said, the days take forever, but the years fly by.”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“I'd be pretty standard stuff. I read the Wall Street Journal and I read almost no fiction. I read nonfiction and it's usually, you know, while it's not the populist, you know, Bill Gates, every year has five or ten books that he recommends. It's that sort of thing. I think an inclination to have a free-wheeling, open-minded kind of view of the world so that whenever you're reading anything, it may well apply to something else.”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“Better or worse. I've always been persistent. This is really a curse. They were always, is that the best you can do? And the best you can do is in fact an impossible standard because you can always do better, but it didn't matter if it was the best in the class or the second best in the class. Was that the best you can do? I think that's when you look at the markets or look at how we're doing, to me, it's never been Aristaya do or what did Citadel do? Did we capture most of the opportunities that we reasonably could have been expected to capture? Not something off in left field and what mistakes Did we make, and let's try not to make the same mistake twice, let's make new mistakes.”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“So I was at the miracle in Minnesota, the Vikings game against the Saints. And that, you know, as it was slipping away in the second half, you just knew as a Vikings fan that they were going to lose. They were going to lose. They were going to lose. And then they had that final play, which was always stuff that happened to us, not the stuff that we did. It was really fun being in the stadium.”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think there are a few things as opposed to the tech collapse that didn't cause a recession and it didn't touch essentially the whole country in the way that sort of recessions following bank collapses and there wasn't anything to replace it. And all the infrastructure was there and the system was actually solvent. So the liquidity hose worked.”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“I thought 87 could be a turning point. Then I thought 89, you know, that might be a really seminal event. And then for sure the 98, the collapse of long-term capital. And in particular, long-term capital told people we're smart. We're fully invested and aligned. With you, come along for the ride. And it was true. You know, it was true in a way that quintessentially true for them, you know, as opposed to, you know, I mean, most of the others, it wasn't true. And people in the industry recognized that it wasn't true. And they were kind of on the outskirts of the business in one way or another, but was so true for long-term capital that that had to be the end of saying, you know, I'm a smart guy, you know, hardworking, and our incentives are aligned.”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“Partners to the JP Morgans of the world. And I think the world liked that. The world, you know, like, you know, as opposed to the people that work, the individual in the garage, as it were, the independent thinker. They were happy that $30 million a year was coming from me and my partners and going to JP Morgan. I think it's sort of a long, very long cycle kind of thing. You know, I did, there's a saying about, you know, the stock market predicting 12 of the last five recessions or whatever it is. I've predicted three of the last one ending of the era. 89 and 90, the collapse of the UAL deal and then the collapse of Draxel. I thought, you know.”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“Bipartisan to the extent that anything is bipartisan. Again, 08, you have the notion of too big to fail, but absolutely moving in the opposite direction. I don't think sort of by accident. You know, I don't think stuff we have to do, and that's sort of the undesirable consequence. I think sort of a deliberate, not just a policy decision, but where the people are. In the immediate aftermath of the crisis, White Box, we lowered our fees by about $30 million a year. And our financing costs went up by about $30 million a year. There was a direct transfer from the white box.”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“But there is no sort of objection to central banks owning anything, owning any asset value. The folk wisdom is that in 87 the Fed lent directly to Kidder Peabody to meet their margin call. I describe it as folk wisdom. I don't know if it's true or not. I don't know if you can find out if it's true or not. But that was sort of out there unambiguously. The maiden lane securities on the fed's balance sheet, a lot of central banks own stocks. Fannie and Freddie explicitly from this sort of weird kind of private entity sort of making micro decisions to being a pure public entity. Infrastructure”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think the very central idea that markets are better than markets, individuals better than institutions, et cetera. I think that's dead. And I think the world really wants institutional, wants to go back to sort of institutional capital allocation, government capital allocation. I don't know if it's 200% of the net money or whatever it is, but all the money since 08 has gone to passive investment. Active managers sort of across the board have had outflows and passive managers have had inflows. And I think that's kind of consistent with the idea that we want quasi-government allocation of capital. To me, around the world, central bank balance sheets, not just being the size of the They are.”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“To that point of concentration, do you think that the risk garb area becomes a place where you need to be More rifle shot in the particular deals that you want, or do you think the opportunity gets to a point where you can have a broader portion?”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“You become established. To me, a huge issue as a CLO, you can't sell. You get a little bit of flexibility, but generically speaking, if a loan trades below 80, you start having issues and you probably just have to sell. So in that sense, you're... You're in the wrong side. So we have to kind of figure out how you structure that we're not leaking there. I think wrist garb may be interesting that at this instant, but over the next ten years, because there you have this specific function of corporate America closing a valuation gap and the kind of classic players have been sort of hollowed out and the huge deals is a profitable niche, even though you're actually not sort of adding, I was always suspicious that people did actually know more about this, that or the other kind of deal.”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“One of the classic Andy pieces is coupon clippers versus, I think I called them security resellers. I want to be a coupon clipper. If you're owning a stressed credit, you have to be willing to finance the reorg. There's a lot of discussion that's gone back and forth whether we want to be a CLO manager. The strength of a CLO is, you know, CLOs have matched funding. They have their sort of bankruptcy remote, as it were. They have a good liability side. Downside, particularly as a new manager, restricted on the asset side. You have to make it look like every other CLO and probably get some flexibility.”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“You have to ask what are the things you're comfortable being concentrated in? We used to have Wall Street sort of helping driving the turnover. I mean, now we have to figure out how to do it ourselves or how to drive it ourselves or things where it's more built in.”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“Earning growth, that discrepancy can stay there forever. In the past, there were active managers. They would buy the 10PE stock in preference to the 20 PE stock. And a lot of times I think the discrepancy was that the 10 PE stock was seen as a less good company, a less good management. And if that perception went away, the gap could close. I mean, now it's much more, I think it's more systemic. The 20PE stock is in all the ETFs. The 10PE stack isn't. And obviously, you know, like the 20 PE stack can fall out of that. And that can happen, but it's just not, you know, I wrote in one piece, returns above an index mathematically. The possible sources are leverage concentration or turnover. The world now, you know, Less leverage, things we would leverage that we can't way less turnover.”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“Arbitrageurs or to close differences is corporate America and corporate America is sort of slower. It'll be a little more episodic. It'll be one-off. If you have two identical companies and they're not paying dividends, one of them trades it 10 times earnings and one of them trades at 20 times earnings. They're growing their earnings at 5% a year. If their PEs stay the same, the return in owning either of them is the same. It's their 5%.”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“Acquired, and we think it's going to happen in the next month or two. They wouldn't say something like that, but they could say, we're running this pilot with Walmart. I think FD did sort of shut companies up. And I think that put a lot of active managers out of business. It wasn't a huge factor in their returns, but it wasn't incremental advantage. And it was part of the story. You know, they could tell people they knew more about their portfolio companies than I think that with them gone with the dealer desks sort of gone, I see there being more permanently orphaned securities. And, you know, I mean, really, the only people to be the effect of.”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“The bigger thing and the thing I think we need to focus on more and maybe develop some additional capabilities. It's not finding the mispricings. It's transitioning. It's there moving to another set of owners. And I do really see a sea change in the financial system that lots of things have driven, included Reg FD, which wasn't particularly controversial in the sense that you can't have people with an informational advantage. The information has to be dispersed and so forth. It used to be that incremental information got released incrementally, as it were. I mean, even pre-FD company couldn't tell an investor that talks to be”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“Will always be a centerpiece. The thing about seeing all of a company's capital structure, same place, same time, and being willing and able to be in the part that we think is mispriced, most attractive, particularly if it's agible. I think that's still core in a viable niche.”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“Area I know our book's been declining in size, pretty consistently. Like one area where we saw opportunities was things that are now the top of a capital structure at, you know, the other stuff has been paid off or disappeared isn't par certain. Something trading in the 70s that maybe at the end of the day, you're only going to be 65 that you collect in principle, but maybe it's 85 or 100 and something in the 70s that that's a 6% yielder. Over seven years, it doesn't really matter that much whether you end up with 65 of principal or 75 of principle. Your return's going to be okay at the bottom end versus the power security.”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“There's no doubt in my mind New Century is going to go broke. So the thing that was important, you can be so early that you're just wrong, and it was certainly possible in New Century to be so early that you were wrong. So it was really a question, you know, it was about looking for the canaries and trying to avoid the temptation of being too early. New century had a convert. We had a bearish kind of position. But, you know, I mean, we looked at the securitizations of the people we considered sort of the worst underwriters.”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“570 FICO person is really a six sixty FICO. They all sort of say that. But as a public company, you have to grow. You have to sort of get market share. It's fundamentally inconceivable to, you know, it's a real contradiction to say we actually have tighter, we have better sort of lending standards in a lot of ways tighter lending standards, but we're going to get market share. That's fundamentally at odds.”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“Means you're like the worst credit in the world. You're not able to pay your bills now. I knew there was some work in the corporate world, default rates vis- ⁇-vis different uses of proceeds. They're the highest default rates on cash out deals, as it were, if a deal is done to make an acquisition or something that does generically sort of better than deals done to pay off insiders. So it struck me that that was a fundamental flaw. So all the sort of subprime lenders, you know, I mean, they talk about having a better model, as it were, being able to concede this whatever”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“The original Genesis was, I heard a new century presentation and the thing that was intriguing, all their businesses was essentially all of their business was cash out refis and I thought a cash out refi is fundamentally different than a new purchase even if you're borrowing a hundred percent on a new purchase you have an incentive to get the right price you know for it to be market a cash out refi first of all all the incentives are are the other way typically it means that particularly a cash out refi at a higher rate”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“You've been involved in sort of structured credit from call at the beginning, I don't know if it's the beginning, but the subprime shorts pre crisis in all different kinds of evolution of those markets. How did you get there and what's happened to the opportunity set over the last decade?”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“A qualifying mortgage with just sort of the passage of time. One area where I'd really like the bank to focus and see if you're a growing company a week of profitability, a month of profitability is the same as two years, probably better. If you're not talking about the hockey stick, that's in everybody's projections, but you're actually growing and with the growth, you're generating operating income, you're not spending it all, you become profitable. Something could happen, you know, a real outside event, but a week of profitability is the same as a year or two years of profitability. That's a sweet spot to be making loans.”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“The three entities, we can finance it and we can finance it in one place. And to the extent when you've transitioned to being, you know, kind of classically bankable, which will be the cheapest form of financing, we can move you more quickly to that than if you took a different course. Within the banking world, it's somewhat easier to see sort of transition. You know what a qualifying mortgage is? It's written down like a great we like to do mortgages that aren't qualifying right now but will be shortly so like one of the things if you change jobs if you change jobs you're not going to get a qualified mortgage but if you change jobs within the industry it's sort of the age is naturally and because”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“My model, one of the things that I would more incorporate from white box to the bank. So there's the bank. Which has to act like a bank. Can't do things that other banks can't do, it can't really be more aggressive or own different stuff than any commercial bank. But so there's the bank, there's the holding company, which This regulated entity but quite a bit less so. And then there's kind of me personally. And I would sort of tell potential clients or whatever that, and it would be kind of the business plan, that if something makes business sense.”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“And so in your purchasing a bank, it sounds like that is an attempt to solidify kind of that right-hand side of the balance sheet for the funds and having access to hopefully cheap capital on reasonable terms.”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“So that you actually couldn't the drying rights on the clearing house traded at sort of less than par, so you couldn't get all your money, but they circulated and it was a claim on sort of the whole banking system, which you knew was maybe not worth 100 cents on the dollar, but collectively it wasn't going to be worth zero. You know, versus your individual bank might be worth zero.”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“Bank runs and bank crises. And in Gordon's terms, you had bank runs when people thought there was a recession coming or saw there was a recession coming. They knew in a recession banks would fail. They didn't know which ones. They couldn't tell what was a sound bank and what was a not sound bank, so you had to take your money from all of them. You know, they went from being sort of information insensitive to being information sensitive. And one of the classic responses, which I didn't know I learned reading Gordon's book, the bank suspended convertibility. You couldn't get your money. issued obligations on the clearinghouse, all of the banks. They actually prohibited individual banks from releasing individual statements.”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“becoming information sensitive securities and then all these securities that supported all sorts of transactions at a zero haircut when they began haircutting that was the equivalent of a huge increase in reserve you know if you translate it to the regular banking system it was the equivalent of a huge increase in reserve requirements and therefore a huge contraction in the money supply and then kind of a classic asset liquidation scenario so the 08 crisis looks a lot like classic”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“In point of fact, the major investment banks were probably insolvent, the stuff that they owned. It was actually, you know, as we talk about in panic, it wasn't information crisis. Gary Gordon has, I think, is a quite good book written 07 beginning of 2008. He talks about information in sensitive securities and the need, which he says money is an information insensitive security. You know your $10 bill, and because of the volume of securities transactions and so forth, all sorts of securities became circulating medium, became money, and for them to work as money, they have to be information insensitive. So the crisis was about information insensitive security.”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“To bring in capital and so forth. It seems to me that post-08, those subsidies are more valuable than ever. It's subtle and still on the asset side, you're still extraordinarily restricted, but I think that is actually going to move in the other direction because to me it's significant. People and regulators and so forth talk about the originating to distribute as the problem of the financial crisis. I think that that's completely wrong. It's not the case that incentives were misaligned. I mean, all of Lehman's employees had the bulk of their net worth in Lehman stock. And Dick Fold is not a happy guy post-crisis. And again, in sort of the underlying Theme of markets being better than individuals, etc. The whole regulatory, the regulators loved originate to distribute versus originate to own.”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“Sorts of things that we sort of prudently think could have a dollar of leverage for a dollar of equity or a dollar and a half or whatever and we can't borrow against it. So I think you do always have to be thinking and because I could always borrow at such a great price and more than I wanted and everybody called Buffett a great investor, not a great borrower. I didn't think about, let's think about the other side. One of the things, so the advantage of a bank charter, the value of a bank charter is access to mispriced deposit insurance and some bankruptcy insolvency forbearance. You generally, if you're insolvent, you won't be shut down immediately the memorandum of understanding, a chance to”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“On the long end, it's probably an insurance company. And I've always thought that Warren Buffett is not a great investor. He's an above-average good investor. He's good on the asset side. He's the world record holder. He's the absolute best borrower in the world and had sort of a unique model, and that's not to in any way denigrate him because it's both sides and he's good on one side and phenomenal on the other side. It's just not the sides that people think or people talk about. So one of the things that the financial crisis did as a hedge fund, or me, for the first time in my career, we actually, you know, we're not looking to borrow more money. But for the first time, if we wanted to, we couldn't.”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“I bought a bank three years ago. I've always sort of thought about it because as a hedge fund we borrowed at great rates, you know, rates that almost no manufacturing business in the country could touch. Everything overnight, everything secured, everything marked to the market. Very best rates, not the very best terms. On the short end of the curve, commercial banks with FDIC insurance, they have both the best rates and the best terms. What you give up, you know, obviously you're examined and there are a lot of restrictions on what you can do on the asset side, but short-term liability, the best thing to be is a bank.”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“Hundred thousand dollars of it and $200,000 of it if that becomes murky and we're going to have a discussion. But the $700,000, you know, that's equity and you have sort of long chain on that. So in lots of instances, finances is about governance and it's about sort of different kind of needs in that sense. And so to some degree, I think looking for regulatory arbitrage, looking for things whose purpose isn't what it might first appear that isn't arithmetic is a good way to think about it.”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“Of picture can break down a little, but I think it's still actually a somewhat useful model if you think about large institutional investors. In fact, almost all of them have fairly similar asset class allocations. And you could ask why. What's the point? Isn't there a lot of deadweight loss? And the thing I would say is very, very often finance is governance. So it's when you call 10% of it senior debt and the 20% sub-debt and 70% equity. You're sort of saying, all right, I'm giving you a million dollars, but you absolutely cannot lose.”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“To say, well, I made 10% of its senior debt and 20% of it is sub-debt and 70% is equity. I want to change my capital allocation, so I'm going to rename more of it and less of it equity. You own the assets. You own the enterprises, and you're getting the proceeds. So when you go from one investor, one enterprise to multiple investors and multiple enterprises that”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“I actually went to a finance 101 class. I remember a couple of things very distinctly. I remember that they called their happy hours liquidity preference functions. Sort of made sense. And I remember from class, you know, sort of a half dozen times at least, the professor sort of said, you can't change the value of an enterprise by changing the color of the stock certificates. And very, very broadly speaking, if you think about if you're one investor, one enterprise, and you've provided all the capital to the enterprise makes no difference whether you call, you own the whole enterprise and whether you call some of it debt and some of it equity. It's the exact same thing and it's sort of”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“An enterprise value of the enterprise as it goes forward. Strong investment-grade bonds don't participate at all, at least for quite some time in the changing enterprise value of a business. That's all the equity security in the stressed kind of niche, both the nominal debt securities and the nominal equity securities are moving with changes in enterprise value. One of the things as a ninth grader, I was traveling with my father. We went skiing and then he was attending a medical convention in San Francisco and I went with him. He insisted that while we were there I should go visit Stanford. That was in ninth grade. I thought this was kind of dumb.”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“Probably the most classic and has been around for quite a while an investment grade bond, strong credit goes becomes a junk, you know, something happens and it becomes a junk bond. You know, it's always been sort of a mainstay of white box to deal in what I call stressed credit. A stressed credit is one that as opposed to distress credit the company might heal and it may again be investment grade or almost investment grade or the company might need to reorganize and then that's an app to become equity. It could go either way. So definitely I think of distressed bonds as bonds that are going to become they are equity. They're the security that's participating 100% in the changes.”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“You need the new set of people. You don't want securities that are going to be permanently orphaned. You want them to have another set of owners. And in fact, we used to have a Wall Street sales force research group that didn't work explicitly for us. If we could buy something transitioning at 40% below the value of sort of comparable things when the dust had sort of cleared and then sell them at starting maybe 20%, 15% below their public pierce and do it in a period of months that was great. It did require that the next set of buyers be there and that there be sort of people that helped, as it were.”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“Where you have securities that don't fit. You know, something's happened in the world that changes the nature of the security and they have to go from one set of owners to another and we're going to own them in the transition. I mean, one of the things that I think is very, very challenging post crisis was for that to work.”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“and more now than sort of then, and this is kind of evolved over time. I think it's right to think of financial markets not as a sort of stable mathematical phenomenon, but as a biologic, evolving, evolutionary phenomenon. And the point isn't to have the right set of equations or to using one probability distribution or another, you know, exactly how many terms you put into something it's to find a profitable niche, you know, to find some place in the ecosystem where you can survive. And I think always, you know, I mean, one of the big things we've always sort of looked at is, you know, sort of markets that don't talk to each other that well, or where you have segments.”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“Most people, particularly the industry, when you say white box, they understand that it's an antonym to black box. And the thing about the black box, I always thought the black box firms, you're telling people. That either our system is so complicated, so detailed, so computationally intense or what have you that there's no point in opening it up because it just wouldn't make any sense. And I don't think that's often the case. Or on the contrary, it's so original, so elegant, so simple but profound that to open it up would be to lose some incredibly valuable proprietary information. I don't think that's true either. I mean, one of the things I do”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“You launch White Box, and the name itself is sort of has an interesting connotations to how people think about investing. So why don't you talk about what the name white box means for you and then how you approach this challenge of, hey, people are entrusting a pool of capital to you, how do you go about doing what you do”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“It looked like the hedge fund business would be extremely challenged for an extended period of time. That turned out to not be the case. And meanwhile, the proprietary trading business looked great. I, in fact, thought that for the intermediate term, the hedge fund business had better sort of long-term prospects than the proprietary trading business did, but in sort of figuring out how we were going to divide what exactly the world looked like and what was appropriate, it seemed that it was sort of best if I leave.”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source
“Deep Haven had two businesses. There was a proprietary option market making business and there was the hedge fund business. I ran the hedge fund business. Everybody else was involved in the proprietary market making business. We were partners in the combined business. The proprietary market making business was much better than we had anticipated and the hedge fund business was kind of the same when long-term capital blew up.”
2018-04-02 · Capital Allocators · Andy Redleaf - Evolution of Markets (Capital Allocators, EP.46) · IDENTIFIED FROM THE TRANSCRIPT · source