YouSaid · the spoken record

Boaz Weinstein

lines on the record: 112
first: 2022-05-13
most recent: 2022-05-13
sittings or episodes: 1
sources: podcast

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“Yeah, so Universa Universa. That's what it is. So look, I'm here. You want to have good stories. You want to hear the... So I've never...”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“And I see examples where people get things right, whether it's Enron or Lehman, but it didn't change. Didn't change the outcome for their fun that year. And I think Ackman a number of times has shown he really gets asymmetry. Now, his closed end fund is at a very big discount. And if one were looking for a top quality manager to be able to buy in at that discount, I think is really compelling, but there's nothing we as activists can do to narrow the discount.”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, but at the same time, you know, he has to his credit bought back a lot of the stock, and he's also done quite well over the last few years. Leave aside a recent trade that he exited. But he's been an amazing investor. He's really, in my view, amazing for understanding asymmetry because I've seen whether it's Enron with the incredible work Jim Chanos did to find Enron, if you go in short of stock and you make it a 3% position and it goes to zero, okay, you made 3%, but credit derivatives, if you bought protection on Enron and you only have to pay 1% even after Ken Lay was out, it only cost 1% a year for five years. A year later it's gone and you turned one point of premium into about 95 points. You made 95 times your money. That kind of payoff profile is a different skill set than the skill set of analyzing companies.”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Potentially ways to make 50 times your money or 20 times your money like you did in NBIA, and he's done in general growth and Kupang and things like that. His closed end funds, because it happened to have launched at a time where he hit a drawdown as all investors grade and not so great do, his closed end fund has stayed at a very large discount. So I talked before about buying stuff at 80, 85 cents in the dollar. Bill Ackman's fund is trading at about 68 cents in the dollar. But that's not something that we as activists can take on because he's already set the rules so that he has the majority of the voting rights. So there wouldn't be a way to, for the activist, to have an activist couldn't force a...”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Basically, so I went to his office and there were boxes piled to the ceiling. They were full. It was not for show of the work he had done on NBIA. And so I saw firsthand how he understood that aside from looking at investing that, you know, is this attractive stock? Could it go up 20 or 30 percent? He also understands when there's”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“And they spoke to each other, but you had this segmentation, and you assume over time things will get more and more connected, but it requires different disciplines, different mandates. And so sometimes you can get a very high credit spread and a low equity vol or a very low credit spread and a very high equity vol. And that might point to something that can lead to whether it's us doing the RV or someone saying, I see a short here or I see a long here. And so I really do love looking across markets for clues.”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“So we didn't hedge ourselves down to near zero. We thought that we didn't think the company was going to. Blow up. And we also thought that there would be decent recovery value, and there may still be, by the way, but the way everything went south so quickly, we ended up having not enough hedge on and it was a loss-making trade. But I would say even just these kinds of screens can help identify things that become problems. And we've seen that in a number of cases where, you know, the markets today, Barry, should be more connected when you think about the passage of time and technology. But when I was at Deutsche Bank, the credit and equity departments were on different floors.”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Basically, unheard of, and you have equity options that are trading at a pretty attractive level. If you wanted to buy that bond, you have 1,100 basis points. And if you go and spend that 1,100 on equity puts, you can hedge yourself quite a bit all the way down from par down to, you know, near zero.”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Just not a positive one. No, it's only fair. So Evergrand stuck out to us as really interesting because we run a screen that says, show me the credit spread of a company, what the spread over treasuries or LIBOR or SOFR is, and chart that against the market cap of the company, so how big it is and how volatile the stock is. If you look at the equity options. So if you look for companies that have a credit spread like Evergrand of over a thousand basis points, it had that credit spread when it was totally healthy, when it had a market cap of $40 billion and holdings in various entities that are not even in the real estate space like electric cars. On top of being the behemoth in the Chinese property market, you have $40 billion of equity, but you have a credit spread of 1100 basis points.”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“So I thought, Barry, we were going to only talk about my greatest trades. And I hear mentioning a giant lossmaker. So let's do it.”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“I think so. Look, it was nothing personal. It just someone, again, like closed end funds. Someone's selling a dollar for 75 cents. And that's our bread and butter. And especially the specs, it's a little easier because you know you're going to get any V back. This one's tougher because, you know, we're tiny compared to JP Morgan. And so we were one of four or five counterparties that were quite large in the trade. We made a few hundred million dollars from it. But it was more the detective work to find it than the actual gain that I think is what stays with me.”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“But eventually cost the bank six billion dollars. And so despite Jamie Diamond highly regarded as one of the great bank CEOs of all time, the idea that the bank could have lost that much on, by the way, a notional quantity. So that's the loss, $6 billion, a quantity probably $300 to $400 billion. And out of some London desk taking risk to U.S. credit, it really is mind-blowing. And so when it all ended, someone from JPMorgan came over to our office and we were one of the larger people on the other side. But as you said, we were not nearly their size, came over with a piece of paper and said, write down your number for letting us out of this trade. And if you do, we're going to have an extra great relationship from now on. I wrote the number down. We traded. We traded 15 billion one trade. That was the size we had.”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Lot of work, we started to see some strange patterns. We knew that it was a trader in London that had, by all accounts, 100% of this. It was basically everybody against one. Know I'm not saying that's what they did, but that's what the data showed that there was something going on. And so we took the other side. And as you said, I went to speak at a conference for boys, Girls Harbor. I think the charity was called. And I wanted to come up with something accessible. I wanted to talk about an index, not some weird single company. I go to present and it's at JPMorgan. The conference is held at JPMorgan. And I talk about it and I say, you know, you have this trader that's really taking on everybody and we can all do the same math. And why is it trading there? And it took about six months.”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“I noticed that in older series, one that was not current anymore, retained having a lot of interest. And that interest all came from one counterparty, according to market sources. And one counterparty was kind of driving the interest in it. And one thing that I noticed was that it was priced very differently than the others. So if you have, just imagine the S&P 500 and it has an net asset value of 1. Well, it's going to trade right at 1 or someone's going to arbitrage it. Now, if you have the older series, before they change three or four names, if the current series is at one and the older series at 0.9 or something, that's really strange that you have this kind of difference where the sum of the parts is not the same as the whole. And I noticed that it was too low. You're able to buy credit protection for too low a number comparing the pieces to the whole. And I wanted to understand why through a”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes, and the eventual price tag, they had started the estimated two. I think they acknowledged some number like 6.6 billion, ended up being even a lot worse. So I noticed being that we're looking very closely at mispricings in derivatives. I noticed that an older series of the index, the credit derivative index, by the way, I should say, is the most liquid product in fixed income, at least certainly in credit. The investment grade one trades about 50 billion a day. It has basically zero bid offer cost. You can get in and out very cleanly in billions, and that's why firms like Bridgewater and AQR use it in enormous quantities. Back then,”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Right. So specifically in the tail fund, since investors in that fund are using it for a purpose or using it for a hedge, I don't want to be the one to say, hey, the lows are in. Let's take it off. And, you know, people's crystal balls are, I think, always cloudy, if not worse. But in those environments, it's especially hard to see. I would say when we talk about 2022, this is another one of those hard to see environments. So I'm not generally tweaking that too much. In our flagship fund where Tail doesn't have to be the biggest part or, you know, and we add very similar returns, we did find in that environment incredible mispricings. And so we were able to monetize some of the tail protection and invest in the then most mispriced things, which was relationships between the credit derivatives and the bonds or various ETFs. Basically, the bond market broke in 2020. And there was”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“I don't think they had such large losses that you couldn't put Humpty Dumpty back together again. So, you know, I was already planning the hedge fund from well before that. And so when I left Deutsche Bank in February, around middle of February 2009, by April 109, so only six weeks later, I was already up and running with the fund that I'd been prepping.”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so they did take money, if I'm not mistaken, from a Korean bank. And I think it was just Buffett's terms were worse than the Korean bank. But of course you're right. They should have taken it from both because once a financial institution with such massive leverage starts to unravel it's self-fulfilling. It has its own, the decline has its own gravity and you take it from the Korean bank and you take it from Buffett and you count your blessings that you didn't go under.”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Know, I think if the Fed knew what was going to happen in just the intervening days with AIG and the others, I think they would have rescued it. The price tag would have been a drop in the bucket compared to what eventually it had to do with all the different programs and everything that came after it. So I think that there was a moral imperative, they thought, to not rewarding greed and treating risk like it's always going to get bailed out. We learned that the Fed couldn't see in front of their nose because only days later we have Fannie and Freddie and AIG that needed massive bailouts. And so Barry, I don't know the price tag, but whatever it was, I think it was a tiny drop compared to the damage.”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“No, just direct exposure was hundreds of thousands of rates, FX, and credit swaps. I was in charge of credit. So we were there. I was in a room of all the major banks sent their head of credit and there were other rooms, head of mortgages, had CEO. But I got in on a Saturday at 1 p.m. and I left maybe Sunday at 5 a.m.”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“It's going to sound so silly. Like they call us in, and they wanted us to game out on the weekend if Lehman was closed for business on Monday, if it was done, could you, on Sunday, the day before, could you unwind all sorts of trades contingent on them not being there? Like let's do a pre-mortem. What can we do to reduce the amount of counterparty exposure? And it was really like deck chairs in the Titanic. I think Deutsche Bank had hundreds of thousands of swaps. Facing Lehman, and it was like we were able to that weekend unwind maybe a dozen of them.”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I love my time at Deutsche Bank, but I had taken on enough responsibility that when my boss left and left the bank and he's actually now the head of the Vision Fund at Softbank, I had to make a choice. Am I going to be a manager or an investor? And I chose investor. And that was in late 2007 and the spin out happened early 2009. And along the way came Lehman Brothers, which was Just a mind blowing experience. I was at the New York Fed the weekend, Lehman failed, and we lost quite a bit of money in 08 like most desks or all desks, but incredible experience and lessons too.”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so he was a carpenter and he had a hardware store after the war in Israel. He didn't have any wealth of significance to speak of, but he had a lot of vision. And there was a moment, my mother was born in July 41 in the Warsaw ghetto. And sometime around 42, he realized he needed to get her out of there. And he got fake papers that showed he was a Gentile with his wife. And my mother was hidden on a farm. And so, yes, he was a real hero. And I actually just a month or two ago got to take my eldest daughter to Yadvashem in Israel and explain to her a bit about the history.”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“So I was at Deutsche, and there were a lot of Deutsche prop groups, and I wanted to brand it. And so I was trying to think what's easy to say, easy to spell, and hasn't been taken. And there wasn't really much left. And Saba means grandfather in Hebrew. My mother was raised in Israel after the Holocaust. And her father, Maisaba, saved the family, saved her, you know, and saved a lot of innocent people, hid them. So I really felt as a kid an incredible debt to him. And I want to honor him by calling it that. So we named it that at Deutsche. It was called Saba Principal Strategies. And when we lifted the team out in 09, we kept the name. So it's Saba Capital.”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, you know, I'm agnostic as to which strategy is right. It's really up to the individual. If you say, well, should everyone have insurance? Should we walk around with insurance? Sometimes we're mandated. You want to get a car, you need insurance. In portfolios, you get this problem where people... Don't necessarily think they have a budget for it. And if they have that constraint, I think paid for tail protection is a whole lot better than not having anything. Because look at what's going on now in the market. And I've been seeing for the last year, whether it's from state pensions. We just got one on board last month. And university endowments, incredible desire for strategies that will pay off when there's volatility.”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Exactly. And of course, Sabre was negatively affected by COVID. But even today, Saber trades at 500. And guess where McDonald's trades back at 25. And so there is a free lunch, so to speak, that I didn't see until 2019 or 20, which is that credit when it got ultra tight because people were so confident that the Fed had the markets back and the Fed did extraordinary things. You know, since 2008, that credit spreads were too clumped together and one could pick through the portfolio, find the names that would be good tail hedges and the names that would be bad ones and set up that trade. And it's worked in 2020 better than I thought. And it's working again in 2022.”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“And Saber B was trading a 25 basis points, and McDonald's trading 25. But if you pay 25 enough times, it can add up. So we put on these trades, you know, imagine a book of 30 or 40 names.”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“They are not a brilliant hedge fund manager saying, What's the next Enron? Like Jim Chano's. They're saying, what's in my book? And I need to hedge it. And so the CDS spread on some of the best companies in the world, market gaps between $100 and $300 billion. Trade at very similar levels because of that upward pressure pushing up the spread to names that the banks are not pushing up higher. And so you can set up a portfolio where you go long risk to the IBMs of the world and take that carry and buy protection on Companies that are not as safe. And so just to use the example of 2020, I was amazed coming into the COVID environment where McDonald's had the same credit spread as a double B-rated online travel company called Sabre.”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, so the free lunch is not free. You are making a bet. But what I see now, and for the last few years in the credit space, is that there is not enough differentiation between safe companies and less safe or safe and dangerous. And by that I mean, if you look at the credit spreads of 50 different companies rated triple B or single A, some of them are ultra-safe. They go by the names of McDonald's, IBM, ET&T, Verizon, Disney. But the thing is that banks, Federal Express, banks make loans to these companies. When Disney, when IBM bought Red Hat or Philip Morris bought Jewel, and so banks have exposures, when they go out and buy CDS, they are not...”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Oh, I'm getting free lunch after. Yeah, absolutely. Well, at least we got that going for you. That's the only free lunch.”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Tail protection and still benefit. And so in 2020, this strategy was incredibly profitable, even though it didn't have the negative carry that one assumes they need to get a big payout.”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so I've been running tail protection funds since 2009. And so I've seen many hundreds of investors and heard from them. How are they thinking about it? How much premium do they want to spend? Do they look at it as an insurance policy where, you know, just because your car doesn't get stolen or house doesn't go on fire, you're not thinking that something bad happened. You bought a policy and you spent it and it's portfolio insurance. And then there are investors that say, well, look, I don't have a budget for that. I have to keep up with the Joneses. I have to make my expected return. So is there a way that since I'm not going to do the first one, is there a way that you can find something that will have very low negative carry or burn or bleed? Some people call it. And so in the crediterative market, in the last two or three years, there has been, in my view, a way to have your cake and eat it too, to have a very low cost or no cost portfolio.”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“There's a vote. You can vote for the deal or against, but that is even a separable question from, can you vote to get your money back? So you could say I support the deal, but give me my trust value back, which would be your $10, let's say, plus the yield that you made on the T-bills. You always have the ability to get your money back. And so then as an investor, I have to think about, well, how the market is not just driven by the way things ought to be, even though it's T-bills, if there's 600 of these running around trying to find companies to buy, there couldn't be a period where because of losses, one is suffering in their portfolio, you might dump your specs and put pressure on that market. So you have to think about how cheap could SPAC schedule, T-bills in a box. And with a 10-month, 11 month average life, you know you're going to get your money back.”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Which is a certain return, but on top of that, in case they find a company to buy and the market gets very excited about it, whether it's electric vehicles or media companies or whatever it may be, you are a stockholder and you don't have to take only $10 back if it goes to $15 or to the moon. That's your profit. And so I really look at SPACs like an incredibly valuable product in these times we're worried about inflation because it's a guaranteed return in the fours plus an equity option for free. And it's really hard to find something this safe. In the history of specs, back way before the environment today where they're actually quite a bit safer, not one time in history could you not get back trust value. You always have trust value to look to and trust value is UST bills.”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“As sentiment goes up and down, that sometimes that $10 that you pay for at IPO back in the heady days of, let's say, ARC, when ARC was trading at $150 and flying cars were exciting people's imaginations, even before the SPAC manager would find someone, that $10 or traded 11 or 12 or even higher. Today, you can find, and for the last year, you can find many billions offered at a discount. Instead of $10, you get to pay something like $975. And one year later, or even 10 months later, that $975 for certain will be worth $10. So on top of that, you also get the yield that is in T-bills, which right now is another 140 basis points. And so you could put together something where if you screens for spacs and you look for high quality managers, you can still find a 4.5% return.”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, specs are this amazing thing in that it's all over the press. Whenever there's an acquisition, it's also critiqued, sometimes maligned for being a product that ought not to exist in the number of offerings that exist. So in the last year, there's generally been a negative tinge to the coverage about SPACs. And they've performed poorly. They've performed poorly when they despack. What's important to understand with SPACs is the life cycle that they start by being extraordinarily safe. And by that I mean when the IPO happens, the money is taken into trust. The manager doesn't touch it, and the trust must buy UST bills. So from time zero to the day that they are converting into the company that they're taking public, you have the risk of T-bills, but you have some mark to mark.”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, yeah, you need someone to come along and say, I'm going to change that. And the closed in fund space really was lacking an institutional manager to do that in size because institutions are also that are inactivists are also beholden to those same managers. They need BlackRock's votes when they're an activist. So they might say, I'm not going to upset the Apple cart and annoy BlackRock to the benefit of thousands of investors and our investors if I need to come to BlackRock on my regular way activism when they're a big shareholder. So you have a little bit of, people don't necessarily want to fight the big asset managers, but we're very happy to. We're not activists in any other place. And this is one of the best ARBs that you can find. And there's only one entity that suffers. It's the asset manager that goes from managing seven trillion to managing 6.99 trillion.”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“So ETFs have a mechanism where you can create new shares or redeem old shares. And so if it's ever trading below, you could buy it and then redeem it. If it's trading above, you could sell it and then create it and always add NEV. So there's that mechanism that tethers ETFs to NAV. Close end funds. It's like a stock. You know, you may think IBM's worth $200 a share, but you've got to find somebody to sell to. You can't call RMONC New York and ask IBM to give you the $200. So the things can trade at a big discount for very, very long time and even at a big premium. And so, but there's a very simple fix, which is they don't have to figure out some new fangled way to run the company. That you can pick up the 82 cents and turn it back into a dollar. And that's true even today.”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“And if they tender for shares, that means less AUM and less fees for them. And so there's a huge problem where the manager is putting their own interests and the board is putting the manager's interests ahead of the shareholders. And that's where we come in.”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Fun into an open ended fund because it didn't give investors an exit at NAV for five, six, seven years. It would immediately go to NAV just like all ETFs are arbitrageable if they're trading different than NEV. So they could change it to an open-ended fund. They could tender for shares at no discount. They could liquidate the fund and offer investors the chance to go into almost the exact same products, whether it's New York Munis or junk loans or energy equities, MLPs. There's 500 closed-in funds and there's thousands of mutual funds and thousands of ETFs. So the ability to go from 84 to 100, you're talking about a 20% return. And maybe it's the recapture of a loss that the investor, of course, if they knew enough would want it every time. And the only thing standing in your way is the manager that feels like they have some God-given right for that capital to be permanent.”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“So they're finding a company where they can make change, and that change maybe on average is quite valuable, but you can debate it. And certainly there are examples where the impact of the activist was terrible. It may, in some cases, even led to the bankruptcy of the company. In closed-end funds, it's totally different because the medicine, the plan for how to get the fund trading to NEV works every single time. And I'll tell you why, because we're not trying to remake JCPenney in the image of Apple Computer, which might or might not work, or we could pick some that were fantastic successes, general growth to follow on with one of Ackman's amazing longs. On the close end fund side, if the manager were just thinking about the investor, they could literally press a button, turn it into an ETF, which they also, those same managers, BlackRock is selling ETFs by the cartload. If they change their closed down”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Mutual funds are valued. You can buy a dollar for 80 85 cents, and if you accumulate enough of it, and if you take on an institutional approach to reading the documents, understanding the rules as a shareholder, your rights to vote for a board of trustees or overthrow the board if they're not doing the right thing for investors. If you buy up enough of the shares, you have a chance to make change. And we only started doing that in 2013 when they started to go to deep discounts. Some of these Barry have been at discounts seven, eight, nine years. They never had a day where they were not at a discount. And we've been able in dozens of cases for thousands and thousands of investors, tens of thousands, to get the discount to converge back to NAV.”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, this is an amazing space. It's one where the product's been around 100 years. Berkshire Hathaway, in a sense, is a closed-end fund. And Warren Buffett in particular has talked to me and showed me how enamored he was with them right before he took Benjamin Graham's class. So we're going back to 1950, where he had two-thirds of his holdings in closed end funds. Why are they interesting? Because you get to buy a dollar of assets for less than a dollar, and there are ways to turn it back into a dollar. So there's 500 of them on the New York Stock Exchange. The most venerable managers all have tons of them, whether it's BlackRock or Blackstone or Pimco and Templeton. And sometimes because they're not cared for, because the fees are high, because the manager is not thinking about the investor, they can slip into trading for discounts to NAV. So objective dollar assets, valued properly in the same way that ETF.”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Merrill Lynch, you know, and Goldman Sachs and Morgan Stanley were trading like nearly bankrupt entities, trading at credit spreads that were a thousand basis points or higher. So that was very specific. And I think the market has done a great job to reduce counterparty risk in the intervening 15 years.”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Oh, it was really so specific to Lehman failing as a counterparty. So because I was inside of a bank, if you were, whether it's interest rate swaps or credit swaps, you were part of a daisy chain where you buy protection on General Electric or IBM from Morgan Stanley, who buys it from Lehman. And these hundreds of thousands of swaps would remain on the books. So even if you bought and sold something, instead of being out of the trade, you would have two swaps on. And so when Lehman Brothers failed, we had enormous exposure to them as a counterparty, just like all the other desks at Deutsche Bank. So that made it more challenging than being at a hedge fund. But the more volatility for our strategy is really the better. And we saw that in 2020, and we've seen it again this year. But Lehman Brothers was very specific because if you could entrust not just Lehman to pay you.”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Particularly profitable when markets were volatile up until Lehman Brothers, which is where we had two of our four down quarters.”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“There are a lot of investors who, if you look at how they did in that timeframe, so let's say the late 90s to the Lehman Brothers, the markets really were a lot easier and a lot less competitive. There were thousands of fewer hedge funds. And we were relatively consistent because there also was a lot of edge in credit derivatives. Credit derivatives being synthetic bonds or insurance contracts, you can refer to them any number of ways. But how to think about how to price them, mispricings in credit derivatives against equity derivatives, some of those things were really, again, not well understood. And I think Deutsche allowing me to trade those relationships, trading out of the money puts on a stock compared to hedging them with a bond, which is not as crazy as it sounds, is something that I think gave us a big leg up and an ability to look across markets and find relative value. And so we were consistent.”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“I don't even remember if I had to show evidence or not, but I was asked to do all sorts of things. And along the way, I asked dozens of questions a day. And I think that's really important for anyone who is going to have an internship on Wall Street is that there are things you can do to annoy the people around you, but one of them is not asking too many questions. Decent questions about markets. That's the only way you're going to get to where you want to be. And actually, I think it will impress the people around you.”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“You know, traders like Tibet, and some of the obscure bets need to be settled, and there was no internet. And you were the funny.”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Through osmosis and by asking questions. So it was just a marvelous experience. And I have a million stories about it. So we'll see what we have time for.”
2022-05-13 · Masters in Business · Boaz Weinstein on Credit Investments · IDENTIFIED FROM THE TRANSCRIPT · source