Macro Voices Podcast

MacroVoices #186 Harley Bassman: Volatility Does Not Equal Risk

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Macro Voices Podcast

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Erik Townsend and Patrick Ceresna welcome Harley Bassman to MacroVoices. Erik and Harley discuss:

  • MOVE index as a leading economic indicator
  • Reversal in bond yields and what’s coming next
  • Corporate buybacks and the divergence of the S&P500 from the global economy
  • Is the US going to follow Europe into negative rates?
  • How the upcoming election may affect both fiscal and monetary policy
  • Possibilities of a bond market crisis and what to expect
  • Perspectives on recent breakout in gold
  • “The Opposite of Bad is Worse” and perspectives on negative rates
  • Buying opportunities in negative rates

 

 

 

We strongly recommend that you download the chart book that accompanies this episode, as Erik and Harley will refer to it throughout the interview. If you are already registered at MacroVoices.com, just login and the download link will appear here once you’re logged in. If you haven’t already registered, click the red “Subscribe for FREE” button on the top right side of the home page, and register. Once logged in, you will see the download link(s) and will be able to download the PDF document(s).

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Harley S. Bassman

Harley Bassman created, marketed and traded a wide variety of derivative and structured products during his twenty-six-year career at Merrill Lynch.  In 1985 he created the OPOSSMS mortgage options product that facilitated risk transmission between MBS originators and financial institutions.  In 1988, he assumed responsibility for trading and marketing IO/PO and other levered prepayment securities.  Soon after this, he started purchasing RTC auctioned MBS Servicing rights and repackaged them for the securities market as BIGS – Beneficial Interests in GNMA Servicing.  Later, he started a GNMA servicing conduit becoming one of the Top 20 originators in 1992.  As managing and hedging prepayment risk became a priority focus for the financial markets, Mr. Bassman created PRESERV, Merrill’s trademarked Prepayment Cap product. Merrill was a leader in this product category writing protection that covered the risk on tens of billions of notional mortgage servicing rights.  Later, Mr. Bassman managed Merrill’s initial venture into off-balance sheet mortgage trading.

In 1994, Mr. Bassman assumed responsibility for OTC bond options. 

Within a year, Merrill was the leader in this product sector.  A wide variety of products were offered including vanilla and complex options on MBS spreads and the Treasury yield curve.

To help clients more fully appreciate Volatility as a primary risk vector, he created the MOVE Index.  Similar in form to the VIX Index, it is now the recognized standard measure of Interest Rate Volatility.

From 1995 to 2000 he focused on creating hedge strategies for MBS servicers and portfolio optimization techniques for Total Return and Index investors.

Mr. Bassman became the manager of North American MBS and Structured Finance trading in 2001.  During his tenure, he created SURF, (Specialty Underwriting and Residential Finance), a self-contained Sub-Prime mortgage conduit.  He supervised the issuance of Merrill’s first Sub-Prime securities. He also transitioned the structuring business to a new technology platform.

In 2006 he built the RateLab, a full spectrum US Rates Trading Desk Strategy Group.  Here he worked with investors to advise and optimize their risk exposure.  As a key member of the client trading business, he facilitated activity by providing liquidity to both the firm’s clients and market makers.

After a (too) brief sabbatical, in 2011 Mr. Bassman joined Credit Suisse’s Global Rates business where he identified and integrated investment and hedging opportunities for sophisticated investors.

Most recently, Mr. Bassman was an Executive Vice President and Portfolio Manager at PIMCO – a leading global investment management firm.  Here he managed investments for the Liquid Alternative products group as well as advised on portfolio strategy across asset classes for the firm’s franchise businesses.

Presently, in addition to penning an episodic Commentary, he manages a “hedge fund of one”.

Mr. Bassman splits his time between Laguna Beach, California and New York City. He has a B.A. in management science from the University of California, San Diego and an MBA in finance and marketing from the University of Chicago.

 


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