My Worst Investment Ever Podcast Vineer Bhansali – You Create Real Value by Being Different
BIO: Vineer Bhansali is the CIO of LongTail Alpha. The firm was founded in 2015 to help provide risk mitigation strategies.
STORY: In early 1993, most investors held a significant long position on the Eurodollar futures contract, betting that interest rates would go down. Vineer decided to follow the herd. The Fed increased rates, and Vineer kept buying until he lost his investment.
LEARNING: Don’t follow the herd blindly. Success in the markets is all about timing. Have an investment framework within which you operate.
“You’ve got to be very humble and disciplined with your loss thresholds and risk limits.”
Vineer Bhansali
Guest profile
Vineer Bhansali is the CIO of LongTail Alpha. The firm was founded in 2015 to help provide risk mitigation strategies. Vineer was a partner at PIMCO and started their first hedge fund and also started and managed their quantitative investment portfolio teams from 2000-2015.
He has a Ph.D. in Theoretical Physics from Harvard University and has written six books on finance. He has also run over 60 ultramarathons. He is also an Airline Transport Pilot rated to fly jets and helicopters and has over 4,500 hours of flight time.
Worst investment ever
Vineer started at Citibank in late 1992, just after the 1987 big stock market crash. He was participating in a bull market created by an extremely easy central bank policy. At that time, probably the easiest trade to do was just to buy anything like fixed income or stocks, and it would go up.
Veneer was at some dinner in late 1993, and everybody in that room held a pretty significant long position on the Eurodollar futures contract, betting that interest rates would go down. That should have been a signal that something was amiss. But as a young trader, seeing everything was going up, Veneer also got long Eurodollar futures.
Then as a surprise, the Fed got a little worried in February of 1994 and raised interest rates by 25 basis points. The Treasury market started to fall, and Vineer thought it was a good time to buy, so he bought some bond futures contracts. The interest was raised again in March, and the market sank a little bit more. He kept buying more, hoping the rates would soon go down again. Eventually, his trades were blown over, and he lost his investment.
Lessons learned
- Having an original idea is always good because you create value by being different.
- Don’t follow a herd blindly.
- Success in the markets is all about timing.
- Have an investment framework within which you operate.
- The markets are very demanding, and to survive, you need to take care of everything about yourself; your mind, your body, and your health.
Andrew’s takeaways
- The market is a predator.
- Original ideas create value.
- Markets are a human construct, and you never know which way they can go.
- Don’t get too hooked on your creative idea because it may not be time right for it.
- Have an investment framework and follow it.
Vineer’s recommendations
There’s a lot of stuff that’s on Vineer’s website that can help with risk management. He also recommends reading The Feeling of Risk: New Perspectives on Risk Perception. Veneer highly advises people at this stage of the game to abandon some of the preconceptions about how stock markets or bond markets work and just go back and do some honest, independent research on what risk management means for themselves as an individual.
No.1 goal for the next 12 months
Vineer’s number one goal for the next 12 months is to stay healthy. For his investors and portfolios, he wants to be very disciplined and positioned on the right side so he can deliver a stellar performance that matches the kind of strategies he has.
Parting words
“Take care of yourselves, stay healthy, and be passionate about what you do.”
Vineer Bhansali
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Connect with Vineer Bhansali
Andrew’s books
- How to Start Building Your Wealth Investing in the Stock Market
- My Worst Investment Ever
- 9 Valuation Mistakes and How to Avoid Them
- Transform Your Business with Dr.Deming’s 14 Points
Andrew’s online programs
- Valuation Master Class
- The Become a Better Investor Community
- How to Start Building Your Wealth Investing in the Stock Market
- Finance Made Ridiculously Simple
- FVMR Investing: Quantamental Investing Across the World
- Become a Great Presenter and Increase Your Influence
- Transform Your Business with Dr. Deming’s 14 Points
- Achieve Your Goals