This week, we speak with Boaz Weinstein, founder and chief investment officer of Saba Capital Management. Prior to that, he was co-head of global credit trading at Deutsche Bank, where he founded Saba Principal Strategies as a proprietary trading group at Deutsche Bank in 1998. (Deutsche Bank and Weinstein spun out Saba as a standalone).
He discusses how he interned at Goldman Sachs, where he was hazed by a “murderer’s row of future hedge fund greats.” The work involved settling bets for the traders, who debated over all manner of trivia. Pre-Google, settling bets about when interest rates were negative (WW2) and other oddities involved deep dives at the local library.
We discuss how Saba Capital became the 5th largest owner of SPACs, investing in a way very different than is typical. He also explains how he engages in tail risk hedging, looking for edges in asymmetrical bets. He also recalls working with the New York Fed to analyze what it would take to unwind all of Lehman Brothers’ derivative trades over the weekend before it went bankrupt. LEH had 100s of 1,000s of trades, of which a Deutsch determined they could unwind a dozen of them that weekend. It ultimately took about a year to wind down LEH’s derivatives book.
Weinstein recalls how he first came to public notice as the fund manager who warned JPMorgan Chase & Co. about the London Whale, JPM trader who had amassed a massive position in derivatives for the firm. At a JPM conference, Weinstein explained the risk the London Whale had assumed, and why it was such a high probability that it could go against him. When the trade eventually blew up in 2012, it cost losses of at least $6.2 billion for JPM Chase — Weinstein was on the other side of the derivatives trade from the bank, and the trade netted the firm 100s of millions in profits.
You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Stitcher, Google, Bloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here.
Be sure to check out our Masters in Business next week with Gerard O’Reilly, the Chief Investment Officer and Co-Chief Executive Officer of Dimensional Fund Advisors., which manages 659 billion in client assets. He is also a Dimensional Director. O’Reilly guides the firm’s vision and strategy through daily oversight of the company’s people and processes.
Boaz Weinstein’s Favorite Books
Against the Gods: The Remarkable Story of Risk by Peter L. Bernstein
The Power Broker: Robert Moses and the Fall of New York by Robert A. Caro
Man’s Search for Meaning by Viktor E. Frankl
Liar’s Poker by Michael Lewis
Range: Why Generalists Triumph in a Specialized World by David Epstein
Books Barry Mentioned
Gödel, Escher, Bach: An Eternal Golden Braid by Douglas R Hofstadter