You have been trading for over twenty-five years—a much longer time period than most other traders. Is there any single trade that stands out as the most dramatic? There are quite a few trades that would qualify as dramatic, but the one that stands out most prominently
was my attempt to pick the bottom of the bond market in 1983 and 1984.
When did you start trying to buy the bonds? I started trying to pick a bottom when the bonds were trading in the 63-66 area.
How much risk did you allow when putting on a trade? Generally anywhere from
\ to
ГА
points. [One point in T-bond futures is equal to 32 ticks. A 1-point move is
equal to $1,000 per contract.]
So if you tried to pick a spot that looked good and it didn't work, you would bail out and try again at another spot? Right.
Since bonds eventually declined into the 50s, I guess you must have had a few strikes against you before you finally went long in the right place. Yes, there were several losses over a period of time.
Do you remember when you finally got positioned at a point where you didn't have to get out? I turned really bullish in May 1984, when they auctioned off five-year notes at a 13.93 yield. I had been
involved in banking since 1974, and at the time, we couldn't find any qualified borrowers for three-year loans at 13
percent. Yet here were government five-year notes selling at nearly a full percentage point above that level.
Moreover, this was at a time when we were at the height of a recession in Peoria: Unemployment was approaching 20
percent and the farm crisis was worsening. I felt that interest rates had probably gone high enough. From that point
on through April 1986,1 traded T-bonds heavily from the long side. There is no question that that was my best trade
and longest trend ever.
