YouSaid · the spoken record

Greg Foss

lines on the record: 122
first: 2021-04-14
most recent: 2021-04-14
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

“Yes, I agreed with everything until you said riskier and riskier decisions. So let's just talk really quickly about bond math. You nailed it, okay? For people that are mathematically inclined, I always love to talk about bond math as being the equivalent of, and bond math involves duration and convexity, the first and second derivatives. And then that's the equivalent of velocity and acceleration. Okay, if you guys go back to your physics 101 class and you remember the distance formula where distance equals velocity times time plus one half acceleration times times squared, the bond formula is exactly the same thing except its duration times change in interest rates plus one half convexity times the change in interest rate squared. It's exactly the same Taylor series. The neat thing about it is you should get comfort then that bond math is not outrageous. It's exactly like physics. And so yes, you mentioned duration. Well, if you ignore small change.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Excellent way to describe it. And this is the new social media. I'm 57 years old. You need to understand that I grew up without having ever used a personal computer from my first engineering days because they didn't exist. I did everything on a mainframe. And incidentally, I wanted to mention to you, I'm pretty impressed by your background and your West Point Aerospace. Seriously, I mean, that's a huge accomplishment. And I tend to find that people that are comfortable with math really tend to get it before a lot of other people. Now, the problem is most people are not comfortable with math, right? It's probably the subject that most people decided not to take when they had the chance to choose between whether they would take mathematics or not. And you're seeing it. Some of the statements that people make are just, you know, wait a minute. You should have learned this in grade four, but it must have skipped that class.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“They had way more cash flow in the province of Prince Edward Island. This is lost on so many reporters and so many guys that do flippant remarks like Joe Weisenthal commenting on Hertz equity, having value when the bonds are trading at 40 cents on the dollar, Joe? Please do some research. Do not run out and draw these asinine conclusions without looking at the whole capital structure of a company. Or now this is a funny one, the capital structure of a country. And this is where Bitcoin really comes in.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“I'm living it. This is the same thing with Bitcoin. I'm telling you, this is why I always bring it back to my credit days, okay? Now there's a fully developed high yield market in Canada. I'm quite proud of it. I was the first high yield trader in Canada. I did all my trading on Wall Street with U.S. counterparties, but I was the first guy to actually set up shop in Canada and try and develop a domestic high-yield market. I've been through it all. And guess what? Rogers Communications is no longer a high-yield borrower. It's actually investment grade. It traded up. It improved its capital structure. But one of the days that was a really bad day for Greg Foss, there was a, and I own hundreds of millions of Rogers Communications bonds, okay? Like literally this was a massive position for me. And I wake up one morning and the headline is, Rogers Communications has more debt than the province of Prince Edward Island. That's true. But he drew the parallel that a company with more debt than the province of Prince Edward Island had to be a worse credit than the province of Prince Edward Island. The fact is not even true.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“That there is not. And I go, What? I said, Well, what if I gave you these bonds for free? Just gave them to you. They go, I wouldn't take them. I would not take them because I'd have to report. And I actually at that point, I couldn't bite my tongue any longer. I said, you're the ridiculous money manager I've had. And then the salesman jumps out, okay, foss, you're off the key. He runs over to me and he looks at me and he goes, if you ever, ever talked on my accounts like that again, he'll take me out and kick me, you know, carve me a new one. But it's true. Isn't that the most ridiculous thing you've ever heard?”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, you're not because there was no dividend on the common stock, right? So you're actually, okay, you can pick up yield, reduce risk. How much can I put you in for? None. And then I asked a, this end, this is the kicker. I said, how much can I put you in for? They said none. Okay, obviously the problem is price. You don't like the yield.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Aren't worth $100 on the dollar, the equities worth zero. You understand that, right? Account ABC or XYZ? Yes, we understand. Well, then, how much can I put you in for? Zero. Okay, what's the problem? Well, it's a junk bond. Again, and if I had to report to my investment committee, I owned a junk bond, I'm not allowed. And I said, well, how about this? You sell some of the equity. You buy the debt at a 12% coupon. You treat the income on the debt like the dividend, you are not getting on the common stock. You trade up in the capital structure.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Oh no, well, just listen. Here's a good place to start. Show me the holders of the equity of Rogers Communications, right? Show me the list of holders. There was one account that owned 900 million dollars worth of Rogers equity. 900 million. And I plead with the salesman. His name was Andy. I go, Andy, I need to hit, I'm not going to name the account. I need to hit the key on your account. I need to talk to them about this bond issue we're bringing. He's like, Foss, stay away from my account because you know the way bond salesmen treat their accounts. It's like their life with their bread. And I'm an idiot trader and anything I say will destroy his relationship. But I say, Andy, please, please. I let him speak to these guys. So I hit the key. Hey, Mr. Account, XYZ, we're bringing a deal for Rogers Communications. I want you to consider buying some. They go, well, we can't. It's a junk bond. I go, well, okay, pejoratives aside, you own $900 million of super junk equity. How about if you sell some of the equity, right? You go on $900 million of it. If the equity is worth, if the bond...”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“And tie up swap lines and everything like that. But most importantly, the US guys looked at him and said, okay, your cable is world-class, your wireless system is world class. And I'm getting you at a rate that is at least 200 basis points or 2% higher than an equivalently rated US company. So yes, that's the price at which I will lend to a Canadian non-domestic US non-domestic borrower. So we're trying to break into this business at my job. I'm working at TD Bank and we want to bring a high yield deal for Ted Rogers denominated in Canadian dollars. So I say, hey, here's a good place to start.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“And I'm like, wait a minute, what do you mean no price? And here's the kick press. And this is even more weird. They would own the equity of that same company. Okay. So there was a company in Canada, and you may know about it. It's a beautiful worldwide renowned company. It's called Rogers Communications. Ted Rogers was at one point the largest high-yield bond borrower in the world. Not in Canada, in the world. And Merrill Lynch successfully took all of his business from Canada and issued somewhere around $4 billion into the U.S. high-yield market. Now, $4 billion doesn't sound like a lot of money in today's dollars, but trust me, in 1990, that's a huge amount of money. So Ted Rogers was the largest high-yield bond borrower in the world. And he has no US dollar revenues, but these were issued in US dollars. So the banks had to swap the debt back into Canadian.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Little bit because so I moved from being a working at the bank and determining what the best Brady plan option was for the bank. I moved into high yield bonds. Now high yield bonds were absolutely a hated asset class in Canada. Now the US had a beautiful market developed by Michael Milken and established as a return that pays you for the risk that you're taking. When the US they really believe there's always a price. Whereas in Canada, and I've had these conversations or I did in the early 90s with Canadian accounts, how much would you buy at what yield? In other words, would you buy the debt of company XYZ? And they go, no, no price.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Worth 28 cents. And this is a neat thing because it is the basis of capitalism. It is an open market determination of risk and return at all times.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Their cost is not where they actually purchased the debt to begin with. Their cost is last night's clothes. They tend to come to work with a mindset that's, hey, okay, everything's marked to market. And today I got to make some money back where I'm going to make more money versus last night's close. Whereas Canadians are like, you know, five years ago, I lent this money at 100 cents on the dollar. And I know it's only 25 cents on the dollar right now, but I'm just praying and pleading that it goes back to 100 cents on the dollar. And I'll never try and correct that mistake. So it's a combination of you need to admit your mistakes and then you need to capitalize on the opportunities that the markets give you regardless of your cost base. Okay, if your cost base was 100 cents on the dollar, but you do have the market 25 cents on the dollar, then you try and make that 25 cents on the $1.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Thanks for that question. It causes me to reflect. So when I was at the Royal Bank in 1988, to put it in perspective, the debt of Brazil and Mexico were both trading at about 25 cents on the dollar. Now, there wasn't a lot of trading that took place, but there were trades. And not only that, when it was restructured into these Brady bonds, which was a much more attractive and formalized structure, I actually went to my CFO and I said, you know, Emile, I know we've totally crapped the bed on the initial investment in these countries, but would you consider buying some more? I really think they're cheap. And the typical answer, not just in Canada, but this is typically a Canadian answer. Oh, no, thank you very much. I've spent all my money at 100 cents on the dollar. Why would I want to buy more of them at 25 cents on the dollar? So I guess what I would say to you is what I learned from the US market, and this is the market that is best at doing this.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Know this though the world trades off the US, right? Every single other yield curve in the world trades off the US treasury. Okay, you can say, oh, that's not the case. I'm a proud German. Okay, everything in the world trades off the US Treasury. And everyone will say, well, then how come there's negative rates in ECB land, but not in North America? And you can say because that's in a different currency. But if you put everything into US dollars, you will see that everything in the world trades off the U.S. Treasury, as it should because it's the de facto reserve asset slash currency of the world.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Transfers of risk as you're implying, you know, it eventually ends up on the government's balance sheets. And that's where it is now. It can't go any further. This is why We are at a particularly perilous time in the debt cycle because it got transferred in 2008, 2009 from the financial system full on to the government balance sheets, and they did nothing to solve that. They did not raise tax revenues when they had a chance to pay down their debt. And so it's a mathematical certainty now that fiat will debase.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Mergers and acquisitions, but these banks were in the same position. So Treasury Secretary Nicholas Brady came up with this brilliant solution, and it was my first welcome to the fire, Foss. You know, you're working for a bank, and if I ran out and told the newspapers this, I'd be fired in a second. And not only that, everyone would run me out of town because, oh, the banks are the safest things around. Well, guys, they're not. Okay. You just don't understand mathematics. And I said, yes, the banks can be bailed out by the governments. And the only way they can do that is by printing money. And that's when I started looking for a solution to fiat.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“How low the dollar price is, it's a brilliant strategy, but it allowed all money center banks in the world to skate themselves back on site after making these for horrible loans to countries. And this was my first inauguration. And I'm like, hold on a second, you don't learn this in business school. You come and you work in the financial system and I'm working for the largest bank in Canada. And it's insolvent. The value of its liabilities exceeded the value of its assets, which were loans. And therefore, the book value of equity would have been written down to zero if they had to write those loans to market. And it's just, I looked at this and I go, then how is it possible this whole system functions? And it functions because there's a too big to fail implied, but back to the central banks. And this is no different. Manufacturers Hanover, Chase Manhattan, all these banks in New York City, which have combined, and there's been some, you know,”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“was this my inauguration though and I've said this on other podcasts was I started working for the Royal Bank of Canada in 1988 and it was insolvent okay this is a crazy but true scenario because it had way too many lesser developed country loans LDC most of those loans were in Latin America but in 1988 Treasury Secretary Nicholas Brady came out with a plan to solve the Mexican debt crisis and it was based on zero coupon treasuries as collateral against the obligation and they changed a five-year loan these five-year loans that were nonperforming they changed them into 30 year instruments okay the banks did not have to write down the loans to market they were backed by zero coupon treasury strip bonds which at 14 you can appreciate over a 30 year term”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, you know, it's really a bit of a different dynamic. I mean, there was Paul Volcker. He was fair chairman in the early 80s, and he was determined to snuff out inflation. And so he just went hard on short-term rates, jacked them all the way up to stop the inflationary spiral. And rates peaked out. It wasn't at the time there were a lot of different things happening. For example, the crash in 1987, the stock market crash October 1987. That sent a ton of people for a loop because, you know, they were new things on the block pressing like portfolio insurance. They called this thing using futures, portfolio insurance. When you look back on it, it was so infantile, but oh no, no, this was the latest and greatest. So yeah, bond math was interesting. It wasn't a certainty that rates would come down. But the general feeling was that they would normalize from those continuous high levels in the late 80s.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Excellent question. So, yeah, I started my career in 1988, and the US tenure was at about 14%. Let's not argue over subtleties and crash of 1987 was my middle year at business school. And 1988, when I started working, so the crash caused yields to come in. But then they rebounded a little bit. So let's call it 14% on the U.S. Treasury. It did, as you know, hit about a 19% top in 1982-ish. So they had come down somewhat from 19% to 14%, but in 1988, that's when I got my start.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Over 30 years, and with a focus on credit and fixed income. And I did trade most other instruments, including equities. There were times when I would take equity short positions against bond positions. We could talk about that. But yes, I'm a trader focused on credit markets. And I've traded all sorts of derivatives, including credit default swaps, bank loans, et cetera.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT