Odd Lots Vineer Bhansali on Losing Fed Independence as the Biggest Tail Risk Right Now
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Sep 13, 2025 Vineer Bhansali, CIO and founder of LongTail Alpha, shares his extensive knowledge of hedging against left tail outcomes while recalling his time at PIMCO with Bill Gross. He discusses the complexities of tail risk hedging, emphasizing the critical need to understand specific portfolio risks. Bhansali identifies the loss of Federal Reserve independence as a significant danger for today's markets. He also dives into the challenges of navigating market volatility and the importance of asset rebalancing in portfolio construction.
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From Physics To Options Trading
- Vineer Bhansali began as a theoretical physicist and took a Wall Street job expecting a short sabbatical.
- Fisher Black once interviewed him and he ended up building a decades-long career in options trading.
1994 Bond Market Lesson
- Bhansali described getting 'face ripped off' in 1994 by repeatedly buying the bond market as it trended down.
- He learned the hard lesson that trend following and exits beat naive mean-reversion bets.
Models Create Market Feedback
- Models and market actions form a tight feedback loop that amplifies moves and can break liquidity.
- Delta-hedging option sellers can create self-reinforcing flows that cause crashes when liquidity evaporates.