Strategic Fixed Income Investing: An Insider's Perspective on Bond Markets, Analysis, and Portfolio Management

CHAPTER 1

Expect the Unexpected

To succeed, you will soon learn, as I did, the importance of a solid foundation in the basics of education—literacy, both verbal and numerical, and communication skills.

—Alan Greenspan

It's 5:30 A.M. on Monday, September 15. The year is 2008. I am already on my third cup of coffee and riding on—at most—about eight hours of sleep since Friday. I'd spent the weekend glued to the television, watching the story unfold while strategizing my next move. I remember the day as if it were yesterday, sitting in the office, at my desk, staring at my four computer screens and TV, watching the headlines scroll by stating that Lehman Brothers had filed for bankruptcy. The stock was worthless; the company's senior debt was now trading near 27 cents on the dollar with its sub debt in the high teens. As the situation unfolded, the million dollar question that nobody knew how to answer was: How would the markets handle the news and subsequent headlines about Lehman's bankruptcy as they surfaced? Not only was I concerned about how the U.S. and global markets would handle the news, but also, how would the U.S. government, the Fed, and central banks around the world react? What would the repercussions be when the equity markets opened for trading in a few short hours? This was unthinkable. I asked myself, “How could this have happened?”

This should have unfolded differently. The government was expected to step in at some point and throw Lehman a lifeline, as it did when ...