The forward Treasury yield curves at present are telling a story.? Here are the main ideas of the story:
Short interest rates will rise dramatically for the next 15 years then decline dramatically.
Same for inflation rates, but make that 17 years.
Real short-term rates peak 12 years out, but the same story.
For proof, look at these graphs that summarize the results of my model:
If you think short term inflation rates will be lower in the short run, then short short TIPS and go long nominal short bonds.
If you think that long inflation rates will be higher than the models indicates, then short long nominal bonds, and go long TIPS of similar maturity.
But after all of this I would simply say that the upcoming offer of the 30-year TIPS looks fairly priced in the ?when issued? market.? I look forward to the issue of the 30-year TIPS, and I know it will improve my model.
This is a book that gives a feeling for being in hedge fund management, rather than a dry description of what needs to be done if you are in the rare position of being asked to manage a hedge fund.
The author was an ambitious guy.? Growing up in Canada, he wanted to play professional hockey.? He played ably in youth leagues, the minors, and college.? Making the pros was not to be.
So, what does a competitive guy do when he can’t pursue his dream?? He pursues another dream, managing money. He works hard, and gets one break after another, and eventually manages his own firm, which he sells out to a larger one.? He gets a plum job at a firm that proves less than patient with his current performance, and he gets let go.? Even that is a triumph for the author.? He starts his own firm, which is what he is still doing today.
Think of an analogy to sports — every player makes mistakes, but the best players recover from mistakes well and learn from them.? The author definitely got his share of breaks, both good and bad, but he responded to the bad breaks well, and came out the better for it.
Though this book is about hedge funds and other areas of investing, really, this book is about the author.? It tells his story, and as the story gets told, you pick up incidental points along the way:
What is it like to be an intern at a trading firm?
How do you learn as you go?
What was it like inside CSFB during the dot-com bubble?
How to interview management teams to get an edge.
How to sense if someone is lying.
In general, the Fund of hedge funds operators are not desirable clients.
Get a sense of the strength of consumers
Get a sense of the three time horizons — days/weeks, months, and years.? (He uses other terms than this, but I appreciated his logic here, because it seemed a lot like what I did as a corporate bond manager.? Have a sense of short-term momentum, medium-term trend and long-term mean-reversion.)
Very good to good means sell
Very bad to bad means buy
The value of keeping a trading journal, and reviewing performance.
Be careful who you do business with, because eventually they may show you the door for less than good reasons.
Surviving the credit bubble’s bust.? Buying back in when people are panicking.
The book runs 204 pages, but roughly 30 don’t have much on them.?? The book is breezy, and though I mentioned a lot of things that I got out of the book, readers less familiar with the subject matter might miss some of the points.? He does not spend a lot of time on the details. On the other hand, a reader less familiar will get a feel for what it is like to be a part of a fast-paced area in investments.
Who would benefit from the book:? Those that would like to read the tale of an interesting guy who had a tiger-by-the-tail initial career in investments.
Full disclosure: The publisher sent me this book. They send me a lot of books, and I review as many as I can. I don’t like every book that I receive, but typically I review the ones that seem the best, and let the rest pile up. Anyone entering Amazon through my site, and buying anything, I get a small commission, but your price does not go up. Such a deal.
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