I mean, I did the math and posted it here, was like a 15 vol-fig when were were running 13 listed? Would you short, MTM, a 10Y tenor 200 beeps over ATM? He had an $8B -mark (13 mark against 5 prem) when I wrote that post. He never mentioned his MTM loss on his annual report. He did the following year as marks improved. POS. I was within 5MM of the loss figure when he finally marked it.
I think that was their public argument. They are much smarter than that. 5y variance at the time was trading north of 30. That was the arb. 1y was like 16 and 5y was like 30.
Only exploitable under those Draconian terms or hedged with spot. Having a halo rep does wonders. If he'd shorted 5Y var he wouldn't have avoided MTM.
Exactly, Bridgewater looked at the opportunity and couldn't stomach the marked to market. The MTM, fixed loss, and halo rep meant no MTM. No hedging meant hold to maturity treatment.
The depths of this man's intelligence is unfathomable. Here's an essay he wrote back in 2008. It's long, but well worth a speed-read from top to bottom. https://fsmisc.s3.ca-central-1.amazonaws.com/great-talks/The+Psychology+of+Human+Misjudment.pdf
%5 A friend told me of a business pattern, but I never did detailed math on it . But after years of observation i knew he was right.[Average male life age in US=73+ %, more for females, average] Interesting , CM lived a bit longer than Jack LaLane. He said , being in the funeral home business\ he noticed many people die around Christmas.
“My partner Charlie says there is only three ways a smart person can go broke: liquor, ladies and leverage,” — Warren Buffett