First of all I wanted to say a massive thank you for that great interview. I work in fixed income myself and finding interviews that really go into the details of fixed income seems to be a truly rare thing to me. I also find it very helpful to be given some concrete examples of past and current trades. I saw that you, Bob, replied to some of the comments. So, I want to try my luck with some questions. You said that "yield curves can't stay flat forever due to convexity and due to the math behind convexity". I don't quite understand this point. Can you go a bit more into detail on this point or can you share some reference where to look is up? Because as Alex Gurevich pointed out in his interviews the convexity on long dated bonds makes them more attractive and a premium should be paid for them which would make the long end of the curve downward sloping (which is currently the case in the swiss franc swaps curve) even if it makes it attractive to pay a steepener due to the positive carry. Moreover, I was wondering about the cost of the JGBi vx. JGB trade. If I recall correctly you buy the 10y JGBi and short the JGB for a minimum profit (in case of deflation) of 2% over the 10y that gives you 20 bps per annum. Of course you have a higher return per annum if there is inflation or if the market corrects ahead of maturity and you exit the trade. So, I assume that you have close to zero funding cost for this trade as it effectively gives a small amount of cash (101 (JGB) - 99 (JGBi)) upfront. However, I guess that the borrowing cost are not negligible in this trade and might even eat away the 20bps per annum. Can you offset the borriwng cost by lending out the JGBi? Or does the costs of the trade eat up the profit you woud make in the hold to maturity and no inflation szenario but you expect to close the trade earlier when the market corrects or your intention is to buy the free option on inflation? (If this question goes to much into the details of your trade and, therefore, you don't want to answer it I totally understand tha.) I hope that you will you be back on RV soon!

Anyone care to explain the yield curve math comment? I have no intuitive sense as to why yield curves couldn't stay flat that doesn't require economics or behavioral preferences.

Just brilliant. Highly entertaining and not sure you can get 2 more polar opposite characters to chat about a topic as exciting as fixed income arb.

Dream of electric sheep

This is one of my favorite RV videos. It can best be described as 60 minutes of Hugh shocked that someone can get capital where the mark to market doesn’t put that capital at risk from withdrawals.

One of the most informative and entertaining interviews I have seen for a long time.

Can you IMAGINE a sitcom where these two have to share an apartment! Non-stop fun. Imagine the scene where Hugh invites the team of strippers over and answers the door with an obvious white powdery mustache, and Bob, with his earth-tone sweater and sensible protein smoothie, is generally off-balance and wants everyone to think this over.

If not for the Werner interview which was quite good (Hugh are you doing part 2 ever?), it's tough for most of us to suffer how sloppy Hendry looks when we truly want to take him more seriously. You can be lazy all day man, just have a modicum of professionalism for you guests at least, brother. I felt bad for Mr. Werner on that last one. If you did that, I think you'd shoot up even further in everyone's estimation, Hugh.

One of the best RV interviews of all time.

Jimmy Fallon stays busy

Grant Williams is badly missed 😐

Yo Hugh! Need those shades Bro. Where can I cop'em?

This interview is deceptively profound and elegant in its simplicity. So much here behind the simple examples given! Key takeaway for all retail traders and it’s a pattern I have picked up time and again over the years is time horizons matter and the best traders have long term time horizons, don’t overleverage, don’t always trade and even close their funds when their framework doesn’t fit current market opportunities and sticking to strategy. The one edge retail traders have over most institutions is they don’t have the pressure to trade regularly and can choose to trade more optimally and less frequently reducing attrition from commissions and not having to compete with algos in the short term. Short term trading year around can’t ever work consistently long term because volatility isn’t high enough for long enough year around. I love that Bob suggests his fund may only make trades around once a month and even close it altogether when the trading environment is unsuitable for his strategy. This to my mind largely explains his performance and protects his long term average returns by stopping altogether not because of drawdown which is also a crucial message here. He’s stopping trading because of lack of opportunity but doesn’t mind trading through drawdown because he’s got high conviction that increased mis pricing further supports his thesis and framework that there are still opportunities in the markets that warrant adding to positions even when down 37% which although he had some stop losses involved it didn’t stop him trading as his money management and collateral retention ensured no margin calls even in a 37% down scenario. Increased mis pricing here is the same as saying that if he was happy to pull the trigger in the first place, the very fact that the mis pricing increases makes him even more interested to add. Totally understand that and I think the french insurance company example where he didn’t do business with them was right on. They were making the classic investor psychology error where fear and greed takes over at the wrong time. They were only greedy when market was doing well and fearful when it was down which is the exact opposite of what Bob needs to see from his investors and also I guess their time horizon was too short and would have been unable to understand or stomach 37 % drawdown not seeing the bigger picture. He only stops trading when there is no longer opportunity not when there is no longer risk. Bravo. So much wisdom here for those willing to see behind the deceptive simplicity reaffirming the notion that retail traders should A) lengthen their trading time horizon B) trade less often and sometimes not at all for maybe long periods C) do not overleverage. There’s a big difference between being fully invested and overexposed / correlated without realising it. Last thing you want is margin calls to force close trades just when you want to be adding to positions.

I thoroughly enjoyed this interview. I listened to the audio without realizing that Hendry was in his beach clothes in an alley. The most brilliant interview attire ever! Bob, the only thing I wish you had discussed was repo cost and repo stability. I traded credit for a long time. We'd put on a long-short credit trade. At the worst possible moment, on the short side, we'd sometimes lose the borrow or we we would get re-rated. Do you ever have scary moments on the repo for your short leg? You didn't factor this into your P&L discussion in the interview. I am guessing it was just to keep things simple.

"Can you lift your skirt a little above the knee" Hahaha, nice Hugh! I can see why so many of Bob's clients have stayed with him. Not only is he good at what he does, he is very straightforward and sincere in his communication. Thanks!

great interview Hugh. thank you.

Raoul is quiet at the end of the video. Haha

I loved this interview, thanks. All aspects - nice summary at the end Hugh of Bob, great questions. I'm surprised that not a lot of investors think it is for them - conceptually it sounds brilliant.

convergence trades tend to behave as short vol positions and depend on overall market participants access to liquidity (i.e mispricing tend to explode when liquidity dries up suddenly and then slowly revert back), would have been interesting to ask what Barnegat does to mitigate those exposures.

Everyone pick up the theme ? Does not try to predict timing. Uses time to arb mispricing. Literally says that over and over again .... #1 bond fund... think about the process here it will add value to your own books.

Having known Bob for several years (we also now live in neighboring towns) I can say he is 100% class act and one of the good guys in the industry.

Love Hugh’s interviews- more please.....precious metals and miners....

If there is any takeaway for everyone from this interview it is that find what works for you and stick to it.

Is Hugh in the outside loo? And eating too! Good interview - I really enjoyed it

Great interview! I don’t think that the strategy or fund will be useful to more than a handful of institutional investors .. as indeed is evidenced by the size of the fund. Nevertheless.. an interesting and thought provoking hour.

do robots dream of electric sheep?

is that fat stains?

Nice Interview. For the common investor, if we were to trade the idea of shorting UK Index Linked or "linkers" yields would the following etf be a good short. ETFS LSE | INXG | IE00B1FZSD53 | GBP Thank you!

Can someone lay out the uk linker trade they were talking about? I dont quite understand how you get 3.5% minus inflation.

Fascinating conversation. If one thinks about this in the context of Ed Harrison's interview with Ben Inker, it certainly gives one areas to invest in a world where real returns on asset classes are likely to be low going forward. Esoteric for sure, but in a world where the investing space seems almost like a bubble/crowded to me -- "invest in gold, silver, miners, bitcoin, real estate, and emerging markets" -- this interview is certainly a refresher. I wish I was smart enough to figure out those kinds of trades.

"do androids dream of electric sheep?"

Most enjoyable interview. I would not change a thing. It was fun watching Mr. Hendry’s incredulity when Mr. Treue discusses patient investors, patient trades without predicted catalysts. It is hard to believe that it exists in modern macro. It works for the Barnegat Fund Management because Mr. Treue is smart, humble, and sincere. He tells his potential clients exactly what to expect a la Mr. Parrilla. No one can dispute the results. Lots of volatility to trade into year end. Good luck to all. DLS

The Mad Hatter of RealVision strikes again.

Perhaps put this chat in the old boy's history section. Very boring to listen to (unverified) trades made 15 years ago.

Great guest! Would have loved to hear about buying US Treasury basis in March of this year.

Is Hugh eating a sandwich? Hahahaha

Really, REALLY fascinating discussion! Great to hear such a "bleeding edge" dialog on fixed income.

Three cheers for Bloomberg machines in the public library!

Hugh's interviews are the best, amazing guest

Amazing, I do not understand a single word ... no joke ... but I know nothing about this topics and kinda trades :)

We need more of the fixed income RV, FX options and FX points traders in g7 and EM as well ... great interview

Peach of an interview. Wonderful.

excellent interview ...my take away, besides specific trades., the real arb is between permanent capital (berkshire etc) and hot liquid capital (etf's)....hence the ability to make time your ally..not your foe.