Thoughtful Money with Adam Taggart Basis Trade Blowing Up: Could Usher In GFC 2.0 | Lance Roberts & Adam Taggart
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Apr 12, 2025 
Lance Roberts, a seasoned portfolio manager at RIA Advisors, talks about the alarming surge in US Treasury yields affecting hedge funds. He explains how heavily leveraged basis trades unexpectedly led to significant losses. Roberts highlights the potential risks of these events spiraling into another financial crisis akin to 2008. He discusses strategies to navigate market volatility, including reducing equity exposure and adjusting bond allocations, while emphasizing the importance of monitoring Federal Reserve actions to maintain stability.
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LTCM Crisis of 1998
- In 1998, Long-Term Capital Management, a hedge fund using the basis trade, required a Fed bailout.
- This highlights the potential for similar events with current basis trade disruptions.
Managing Risk in Volatile Markets
- Reduce portfolio risk during times of unexpected market volatility, like the current basis trade situation.
- Wait for clearer signals before re-entering the market or increasing exposure.
Bollinger Bands and Volatility
- Current market volatility is shredding Bollinger Bands in both equities and bonds.
- Traditional technical indicators may be less reliable during such periods.