68.1 This is the Hedge Fund Trade that Blew Up in 2020

———Part 1 Summary———
The rise and fall of an arbitrage trade by hedge funds known as the Treasury cash-futures basis trade. That was the focus of an excellent research paper by two government researchers. But there’s just one problem. They don’t ask what caused the rise of the basis trade in the first place.


But first, this from Eurodollar Enterprises! Friends, are you employed by the Ministry of Treasure? Do your political masters require foaming asset prices to placate the great unwashed? Are you unsure how to balance maniacal froth with sustainable momentum? Then a box of Bath Suds from Eurodollar Enterprises is for you!

Yes, practice blowing bubbles in the gurgling luxury of your free-standing clawfoot tub. Find the perfect mix between liquidity and hot air with the capital markets foam formulation. Our line of bubble brews include: currencies, commodities, cryptos and collectibles. Blow them all! Orders received today will come with a fussy central banker – typically retailing for the price of hedge fund general partner – absolutely free! Simulate the political arena trying to blow it in the presence of an erratic technocrat. Don’t blow it! Blow it, with Bath Suds. New! From Eurodollar Enterprises. (Central banker swimsuit not included.)

———See It———–

Twitter: https://twitter.com/JeffSnider_AIP
Twitter: https://twitter.com/EmilKalinowski
Alhambra YouTube: https://bit.ly/2Xp3roy
Emil YouTube: https://bit.ly/310yisL
Art: https://davidparkins.com/

———Hear It———

Vurbl: https://bit.ly/3rq4dPn
Apple: https://apple.co/3czMcWN
Deezer: https://bit.ly/3ndoVPE
iHeart: https://ihr.fm/31jq7cI
TuneIn: http://tun.in/pjT2Z
Castro: https://bit.ly/30DMYza
Google: https://bit.ly/3e2Z48M
Spotify: https://spoti.fi/3arP8mY
Pandora: https://pdora.co/2GQL3Qg
Breaker: https://bit.ly/2CpHAFO
Castbox: https://bit.ly/3fJR5xQ
Podbean: https://bit.ly/2QpaDgh
Stitcher: https://bit.ly/2C1M1GB
PlayerFM: https://bit.ly/3piLtjV
Podchaser: https://bit.ly/3oFCrwN
PocketCast: https://pca.st/encarkdt
SoundCloud: https://bit.ly/3l0yFfK
ListenNotes: https://bit.ly/38xY7pb
AmazonMusic: https://amzn.to/2UpEk2P
PodcastAddict: https://bit.ly/2V39Xjr

———Ep 68.1 Topics———

01:19 What is a repurchase agreement “haircut”? Why are some haircuts bigger than others?
04:39 Cash borrowers gain tremendous leverage when employing a US Treasury as collateral.
08:15 Arbitrage opportunities in US Treasury markets appear between spot and future prices.
13:33 Money Dealers are ‘responsible’ / supposed to police these arbitrage opportunities
15:57 Money Dealers didn’t jump on the US Treasury basis trade, so hedge funds did.
20:32 Is it important that financing the hedge fund-led basis trade was in repo markets?
21:28 What is the Money Dealer’s warehouse activity and why is it fundamentally important?
23:26 The basis trade earnestly began in early-2018 just as monetary disorder gained momentum
26:09 An official study of the 2018-20 basis trade came to three conclusions
29:15 The official study did an excellent job focusing on the basis trade BUT NOT THE WHY!!?!
31:55 It is unsettling that such an important function is being outsourced to leveraged traders
33:21 Final concluding, summarizing thoughts by Jeff.

———Ep 68.1 References———

A Profound Statement In the Ongoing Saga of Shadow Money: https://bit.ly/3aOcHcs
Hedge Funds and the Treasury Cash-Futures Disconnect: https://bit.ly/3nIqFBV
Alhambra Investments Blog: https://bit.ly/2VIC2wW
RealClear Markets Essays: https://bit.ly/38tL5a7