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Copyrighted Material ccc_drobny_ind_361-370.qxd 3/3/06 10:03 AM Page 361 Index Absolute returns, xiv, 62–65, 67–68, Australia/Australian dollar, 151, 167–168, 138 193, 239, 261 Accrual accounting, 137 A.W.Jones & Co., 8 Active trading, 7 Adventure Capitalist (Rogers), 217 Baby boomers, 196 Afghanistan, 297 Bacon, Louis, 9, 134, 144, 155 Africa, 236–237, 239, 261 Bankers Trust, 32, 36, 39–42, 48, 104–105, Aikido Spirit, 35–36 120, 132 Alcoa, 255 Bank for International Settlements (BIS), 283 All Brady Index (EMBI spread), 296–297 Banking industry,206. See also Central Alpha, 65, 167, 266, 280 bank(s)/banking Amazon, 260 Bank of Canada, 285 American foreign policy,224 Bank of England, 14–15, 113, 152, 161, Amplifiers, 113 166, 175, 274–275, 285 Anderson, Dwight, 32, 242–268 Bank of Japan, 175, 318 Angola, 237 Bank paper, 141 Annual returns, 32, 58 Barclays Capital, 134–139, 141, 153 Arbitrage, 24–25, 68–70, 140, 201, 280, Barings Singapore, 80 291–292, 311–312, 314, 346 Barron’s, 231, 238 Argentina/Argentine peso, 261, 286, 290, Baruch, Bernard, 146–147 296, 299–300, 334 Bear/bearish markets, 82–83, 123, 157, Asia, generally: 225, 228, 230, 237, 340 Asian Tigers, 20 Beauty contest, 164–165 crisis, 10, 18–21, 24, 32, 122, 207, 211, Behavioral finance, 152, 159 290, 329 Bernanke, Ben, 350 trades, 265, 328 Bessent, Scott, 14, 16, 20, 269–288 travel to, 306COPYRIGHTEDBessent MATERIAL Capital, 269 Asset(s), generally: Beta, 8, 282, 328 allocation, 53, 55, 60, 128–129, 338, BHP Billiton, 252 350 Bid/offer spreads, 45, 61 choice of, 54 Big-bet approach, 341–343 classes, 8, 60, 151, 311, 333, 345 Black box trading systems, 332 management, 220 Black Monday,11, 212–213 prices, 168–169 Black Wednesday 1992, 10, 14–17, 29, Astra, 291 114, 275 361 ccc_drobny_ind_361-370.qxd 3/3/06 10:03 AM Page 362 362 INDEX Blodgett, Henry,260 Central Bank of Russia, 22 Bond investments, 61, 88, 118, 121–122, Central Bank of Thailand,19 146–147, 157–158, 231, 251 Chanos, Jim, 269, 272–274 Bond market, 61, 78, 145, 149–151, 193, Chaos, 205 225–226, 292, 323, 328 Chartered Financial Analyst (CFA), 158 Bond market rout of 1994, 10, 17, 155 Cheap currencies, 122 Bond prices, 204 Cheap stocks, 60 Bond rally,75 Chemical Bank, 315 Bond specialists, 127 Chicago Board of Trade (CBOT), 145, 199 Bonfire of the Vanities (Wolfe),244 Chicago Mercantile Exchange (CME), 12, Boom-bust cycle, 167–168 199–201, 207, 214 Bosnia, 51 Chile/Chilean peso, 239 Bottom-up approach, 51, 346 China, 19, 61, 83, 150, 152, 175, 179, 190, Brady bonds, 296 194, 203, 211, 231, 239, 261–262, Brazil/Brazilian real,193, 204, 208–209, 239, 265–266, 270, 284, 288, 289–290, 261, 290, 295–296, 327–328, 334–335 302–305, 307, 332 Bretton Woods,6–7, 90, 123, 201 Citibank, 73–74, 257–258, 273 British pound, 14–16, 76, 117, 209, Citigroup, 283–284 221–222, 274, 285. See also Sterling Citron, Bob, 50–51 Brown Brothers, 271 Clarium Capital Management, 181, 193, 195 BTPs (Buoni del Tesoro Poliennali), 85–87 Clinton Administration, 77 Bucket shops, 36 Cocoa, 246–247 Buffett,Warren, 278, 292 Coffee, 246 Bull/bullish market, 83, 107, 123, 217, Collateral, 51 225–226, 228, 230–231, 239, 273 Commodities, 62, 200, 220–221, 226, 228, Bund/BTP convergence trade, 85–87 230–231, 235, 237, 239, 241, 245, Bundesbank, 14 247–248, 252, 254–256, 258, Bunds, 75, 340 264–267, 302. See also specific types of Business cycle, global, 328–329 commodities Butterfly options, 46 Commodities Corporation (CC), 9–10 Buy and hold strategy,7, 47 Commodity market, 6–7, 9–10 Buy low,sell high, 228–229 Commodity Specialist, see Anderson, Buy signals, 226 Dwight Commodity Trading Advisors (CTAs), 67, Call options, 85 203, 258–259, 332 Canada, 167 Computer technology,economic impact, Canadian dollar, 67, 239, 286 203 Capital allocation, 24, 33, 98–99, 315, 321 Confidence, significance of, 137, 153–154 Capital preservation, 144, 323–324 Consumer price index (CPI), 276, 312 Carry trades, 78–79, 110–111, 113, Consumer spending bubble, 195 117–118, 125, 134 Contrarian investing, 105, 307 Cash market, 85 Convertible arbitrage, 183 Caxton, 9–10, 33 Convertible bonds, 177 Central bank(s)/banking, 32, 40, 83, Cooling-off period, 131 139–140, 148, 151–153, 161–162, Copper, 250–251, 256 167–170, 204, 313, 331 Corn, 256 Central banker(s), 13–14, 160, 229, 349. See Corporate bonds, 141 also Wadhwani, Sushil, Dr. Corporate spreads, 281 ccc_drobny_ind_361-370.qxd 3/3/06 10:03 AM Page 363 INDEX 363 Correlated markets, 151 Dot-Commer. See Thiel, Peter Cotton, 226, 239 Dow Jones Industrial Average, historical, 13 Counterparty risk, 25 Drawdowns, 94–95, 143, 279, 314, 320, Craig, Grenville, 9 333–334, 337 Credit curve, 327 Drobny,Andres, Dr., 7, 104–132 Credit default swap (CDS), 50, 305 Drobny Global Advisors (DGA), ix, xii, Credit lines, 98–99 103, 104–105 Credit markets, 204, 313 Drobny Global Conference, 66, 104, 190, Credit risk, 23, 49 242 Credit spreads, 188 Druckenmiller, Stanley,32, 269, 274, 275, Credit Suisse Financial Products (CSFP), 277–278, 285 182, 192 Due diligence, 187 Credit Suisse First Boston (CSFB), 32, 104, Duquesne Capital, 277 116–118, 128 Dutch gilder, 40, 68 Crude oil, 252, 263–264, 288 Dutch interest rates, 68 Currency/currencies, 6–7, 15, 20, 22, 24, 36, DV01, 137 38, 66, 86, 110, 126–127, 200–201, 203–204. See also specific types of currencies Eastern Europe, 306, 316. See also specific Current account (C/A), 123 countries Cyprus, 306 eBay,260, 272 Czech stock market, 67, 293 Economic and Monetary Union (EMU), 14–15 Dampeners, 113 Economic conditions, significance of, 110, Davies, Gavyn, 75, 163 329 Declining markets, 17 Economic cycles, 333 Deflation, 46, 64, 110, 112–113, 122, 170, Economic growth rate, 98 192, 195–197, 211, 321 Economist,The, 43–44, 60, 207, 231 Dennis, Rich, 204–205, 215 Efficient frontier, 55 Depression, 288 Efficient markets, 198, 208, 341, 343 Derivatives, 17, 32, 50–51, 71, 191–192, 313, Emerging markets (EM), 21, 119, 188, 289. 339 See also Dimitrijevi´c, Marko Deutsche Bank, 34–35, 104–105 Emerging Markets, Inc., 300 Deutsche mark, 14–16, 38, 68, 74, Emerging market spreads, 281 107–108, 110–112, 124, 129, 201, 209 Emerging Market Specialist. See Devaluation, 48, 110, 208, 292–294, 296, 334 Dimitrijevi´c, Marko Dimitrijevi´c, Marko, emerging markets, 31, Employment rates, 168, 193 289–307, 349 Endowments, 53–54, 58, 220–221 Directional bias, 208 Energy companies, 251 Dislocation, 79, 84, 99, 258, 349–350 Energy stocks, 61, 256, 263–264 Diversification, significance of, 53, 98, 128, Enron, 273, 286, 293 148, 188, 214, 232, 315–316, 319, 334, Equilibrium, 200, 226 346, 350 Equities, investment strategies, 60–63 Dollar/Asia trade, 338 Equity bubble, 183, 195, 254 Dollar/yen trades, 23, 77, 175–176, Equity funds, xii 336–337 Equity indexes, 32, 173, 193 Dominion Securities Tradition, 37 Equity long/short hedge funds, 282–283 Donaldson Lufkin Jenrette (DLJ), 271–272 Equity markets, 7, 196, 300 Dot-com bust of 2000, 26–28 Ethiopia, 237 ccc_drobny_ind_361-370.qxd 3/3/06 10:03 AM Page 364 364 INDEX Euro, 14, 16–17, 38, 56, 86, 88, 98, 137, Fixed income, generally: 209–210, 223, 276, 302, 317 arbitrage, 24 Eurodeutsche marks, 38 hedge funds, 141–142 Eurodollar futures, 49–50, 80, 82, 88–89, markets, 17, 87, 312 139, 212, 310, 320 relative value, 177 Eurodollar market, 38 sector, 61–62 Eurolira trade, 154–155 securities, 296 European bonds, 17, 324, 328 specialists (see Gorton, David; Standing, European Central Bank (ECB), 276, 283, Rob) 315 trades/trading, 82–83, 146–147, 153–154 European currency crisis, 111 Floating currencies, 6 European hedge funds, 283 Floor Trader. See Harris,Yra European Monetary System, 209 Foreign bonds, 8 European Monetary Union, 167 Foreign equities, 8 European Union, 52, 210–211, 223–224, Foreign exchange (FX), 8, 17, 57, 62, 71, 83, 287. See also specific European 100, 111, 119, 285, 312, 316, 327–328 countries Forward contracts, 47 Europesetas, 38 Forward rate bias, 47 Euro swap rate, 45 Forward receiver swaption, 335 Euroswiss francs, 38 France, 16, 210, 246 Event risk, 96, 263–264, 266 Freddie Mac, 319 Everest Capital, 289–290, 306–307 French franc, 40, 129 Everest Capital China Opportunity fund, Friedman, Milton, 113, 182 303 Frozen ice theory,336–337 Exchange rate(s), 7, 14–15, 32, 43, 173 FTSE index, 163 Exchange Rate Mechanism (ERM), Fundamental analysis, 247, 249, 253, 346 14–16, 86–87, 109–114, 117, 129, Fundamental discretionary managers, xiii 246, 274 Fund ownership, 98 Exotics, 39 Funds of funds, 281–282, 337–338 Expected returns, 131 Futures exchange, 49 Exploration and producers (E&Ps), 256 Futures market, 11 Expropriation risk, 60 ExxonMobil, 252, 260 Game theory,42 Gamma trades, 78–79, 82, 330, 332–334, Falcon Management, 35–36, 41 336–337 Fannie Mae, 193, 283, 319 Gas, 280. See also Natural gas Fat tails, 11–12, 25 General Theory of Employment, Interest, and Federal Reserve, 25, 46, 82, 122, 134, 195, Money (Keynes), 164 206, 327–329, 331 Geopolitical issues, xii, 150, 200, 203–204, Feldman, Lenny,201–202 223–224, 340 Financial modeling, 26 German Bunds, 85–87, 129, 136, 339 Financial Times, 207, 231 German stock market index (DAX), 193 Finland/Finnish markka, 48, 63, Germany,14, 16, 68, 85, 110, 167, 210, 246 116–117 G5 currencies, 283 Fiscal policy,327 Ghana, 59–60 Five-bet strategy,343–344 Gibson Greetings, 17 Fixed-band exchange system, 111 Glass-Steagall Act, 206 ccc_drobny_ind_361-370.qxd 3/3/06 10:03 AM Page 365 INDEX 365 Global equities, xii Hedge fund(s), xi, 129–130, 142–143, 186, Global fixed currency,6 197–198, 204, 280–282, 286, 300, 312, Global fixed income, 71 337–338 Global imbalances, types of, 34 Hedging, 319 Globalization process, 211 Heffernan, Mark, 171 Global long/short equity investments, 8 Herd mentality,20, 106–107 Global macro, xi, xiii–xiv, 1–29, 279–281, HFR global macro index, 17 291–292, 327, 329, 345–348.
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