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Bonds Are Not Forever: The Crisis Facing Fixed Income Investors

Book Description

Praise for BONDS ARE NOT FOREVER

"Simon Lack, a former J.P. Morgan trader and money manager, advises investors to steer clear of U.S. Treasury bonds on the grounds that the government's indulgence in the age-old practice of inflating away debt makes a negative return likely. His book also offers an insider's account of the dramatic changes in international finance at a time when a global explosion in public and private debt was expanding the size, scope, and complexity of banking. Personal anecdotes, especially about the fast-paced trading of exotic 'derivatives,' make this book not only informative, but entertaining. It won't, however, relieve anxieties about the current fragile state of the global economy."

—George Melloan, former editor and columnist, Wall Street Journal, and author of The Great Money Binge

"This fascinating and prescient narrative of the bond market's past, present, and future will captivate both professional and personal investors. Peppered with anecdotes from Mr. Lack's four decades of experience in the financial markets, this book prepares financial stakeholders for an investing landscape that may look very different from what they have come to take for granted."

—Gabriel Hammond, founder and Portfolio Manager, Oppenheimer SteelPath Funds, and founder, Alerian

"In The Hedge Fund Mirage, Simon Lack exposed the appalling mediocrity of a hedge fund industry grown fat on investors' fees. In his latest book, he takes on the great thirty-year bond bull market, turning an insider's eye on how we got here and the risks that lurk in portfolios of supposedly safe debt."

—Dan McCrum, U.S. Investment Correspondent, Financial Times

Table of Contents

  1. Cover
  2. Contents
  3. Title
  4. Copyright
  5. Dedication
  6. Preface
  7. Acknowledgments
  8. Chapter 1: From High School to Wall Street—The Bull Market Begins
    1. As Bad as It Gets
    2. Trading in Gilts
    3. The Old Class Structure
    4. A Nineteenth-Century Market
    5. Finance Starts to Grow
    6. Is Finance Good?
    7. Investing after the Bubble
  9. Chapter 2: A Brief History of Debt
    1. Interest Rates in Ancient Times
    2. Medieval Credit
    3. The Beginnings of Modern-Day Finance
    4. Borrowing Reaches the Mass Market
    5. Student Debt
    6. Big Borrowers in History
    7. What We Owe Now
  10. Chapter 3: Derivatives Growth
    1. Welcome to New York
    2. Early Derivatives Growth
    3. Swaps Take Off
    4. Size Isn’t Everything
    5. Derivatives Reach Omaha
    6. Norwegian Wood
  11. Chapter 4: Bond Market Inefficiencies for Retail
    1. Stocks Are Fairer than Bonds
    2. Why Change Is Slow
    3. Structured Notes
    4. The Internet Threatens the Swaps Oligopoly
    5. Municipal Bonds
  12. Chapter 5: Trading Derivatives
    1. Computers and Swaps
    2. Should Banks Innovate?
    3. Growth in Innovation
    4. Volcker’s Problem
    5. Bring Me Clients with a Problem
    6. Derivatives Missteps
    7. Trading by the Book
    8. An Options Book Blows Up
  13. Chapter 6: Politics
    1. Why Should We Worry?
    2. Who Says There Is a Problem?
    3. Look to the Future
    4. Looking Ahead
    5. Monetization—A Thought Experiment
    6. Imperial Overstretch
    7. More Debt Means More Banking
  14. Chapter 7: Managing Risk 1990–1998
    1. Traders and Risk
    2. Why Traders Are Bad at Budgeting
    3. The Growth of Global Trading
    4. Managing Obscure Basic Risks
    5. What’s the Social Purpose?
    6. Wall Street Fuels the Debt Growth
  15. Chapter 8: Inflation
    1. Germany’s Defining Economic Experience
    2. Inflation Today
    3. The Fed’s Huge Mistake
    4. You Can’t Spend Quality Improvements
    5. What Critics Say
    6. Measuring What They Can, Not What Counts
  16. Chapter 9: Bonds Are Not Forever
    1. Wall Street Built It
    2. Make Your Own Bond
    3. High Dividend, Low Beta
    4. Hedged Dividend Capture
    5. Master Limited Partnerships (MLPs)
    6. Deep Value Equities
    7. Debt Is Bad
    8. Bonds Are Not Forever
  17. References
  18. Glossary
  19. About the Author
  20. Index