BIO: Harley Bassman is an industry thought leader and commentator on macroeconomic issues spanning decades.
STORY: In 2019, Harley bought some calls and sold some puts on Citibank stock for a cost strategy. He believed the stocks would increase because all its peers were trading above their book value. When COVID came, the stocks went south, causing Harley to make his biggest loss ever.
LEARNING: When something trades well below what you think its value is, consider why that’s the case. Size the investment.
“Forget timing; size the investment. Pick the size such that you’ll make enough if you’re right, and if you’re wrong, you won’t get wiped out.”
Harley Bassman
Guest profile
Harley Bassman is an industry thought leader and commentator on macroeconomic issues spanning decades. He spent 26 years at Merrill Lynch. From 2014 to 2017, Harley was an Executive VP and Portfolio Manager at PIMCO. In 2011, he joined Credit Suisse’s Global Rates. In 2006, he built the RateLab, a full spectrum US Rates Trading Desk Strategy Group.
Presently, Harley is a Managing Partner at Simplify Asset Management. He continues to pen an episodic macroeconomic Commentary as well as manage a “hedge fund of one.”
Harley 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.
Worst investment ever
In 2019, Harley bought some calls and sold some puts on Citibank stock for a cost strategy. He believed the stocks would increase because all its peers were trading above their book value. Harley put more into this trade than he logically should have. He was hung up on the value construct and wasn’t thinking about why the stock traded under tangible.
When COVID came, the stocks went south, causing Harley to make his biggest loss ever.
Lessons learned
- When something trades well below what you think its value is, consider why that’s the case.
- Size the investment. When you make an investment, invest enough so that your gain can be worthwhile.
- Sizing is more critical than entry-level.
Andrew’s takeaways
- Be very careful when investing in banks because if their equity gets hit, the value of their assets could fall.
Actionable advice
Don’t fall into a value trap. Be careful of single names because there’s always a lottery effect that you can never predict.
Harley’s recommendations
Harley recommends reciting his Maven mantra: Number one, it’s always about character. Number two, it’s never different this time. And number three, you’re born, you live, and then you die. Prioritize your life.
No.1 goal for the next 12 months
Harley’s number one goal for the next 12 months is to focus and spend more time with his family.
Parting words
“Just be careful and stay safe.”
Harley Bassman
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