For The Strategy Sessiondevotees, it marks a turning point in television history: the day David Faber cold-called me at JRO Associates, the hedge fund where I began my career two decades ago.
Sure, it was the beginning of a beautiful friendship—but could it have been a multi billion-dollar friendship, too? It's a question I can't help but ask, because David and I always talked about launching a hedge fund together.
And on Tuesday's show, the thought popped up again—but this time, a strategy did, too! (What a coincidence.)
I mentioned to David that our reporting on Europe's serial sovereign debt crisis had led me to a brilliant plan for setting up the K-F Strategy Fund, the Kaminsky-Faber collaboration that never was.
And if Strategy Session hadn't come along after my non-compete with Neuberger Berman expired, I'd be putting the plan into action right now.
Here's how it would work. After raising a billion dollars for our little fund, I'd visit various prime brokers and negotiate an extremely attractive line of credit and lever up 3-1. Our $1 billion has just turned into $3 billion: piece of cake!
I'd then spend the whole lot on Spanish and Portuguese 10-year bonds. After that brilliant $3 billion investment, I'd pay a visit to a currency firm, where I'd give away 1 percent to hedge out currency risk.
Next on the agenda: I'd lock in funding at a 3 percent cost of capital—again, piece of cake!—thereby generating a 4 percent carry trade profit. Do the math: that's $120 million, a return of more than 10 percent on original capital!
Being highly talented money managers, of course, David and I would take two-and-twenty as compensation—meaning 2 percent of assets and 20 percent of any profits earned. That would be more than enough to get us a swank office on Park Avenue and cover overhead, payroll, and all other expenses. Beautiful!
The only risk? That Spain or Portugalends up needing a bailout and the ECB says no...but hey, we'd otherwise lock in profits, making about $20 million a year in performance fees.
Say it with me now: piece of cake.
So it's too bad David and I committed to do this show for the foreseeable future.
Hopefully, when Strategy Session runs its course in a decade or more, the sovereign debt dominoes will still be falling—and we can move on to snapping up the 10-year debt of Sri Lanka, Brunei, Malaysia, or whichever nation happens to be suffering at the time.
Hey -- a TV host can dream.
Programming note: "The Strategy Session," hosted by David Faber and Gary Kaminsky, airs weekdays at Noon ET on CNBC.
DISCLOSURE:
Gary Kaminsky does not hold any equity positions.
DISCLAIMER:
The content of this blog is published in the United States of America and persons who access it agree to do so in accordance with applicable U.S. law.
All opinions expressed in this blog are solely the opinions of Gary Kaminsky and do not reflect the opinions of CNBC, NBC UNIVERSAL or their parent company or affiliates, and may have been previously disseminated on television, radio, internet or another medium. You should not treat any opinion expressed by Mr. Kaminsky as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. Mr. Kaminsky’s opinions are based upon information he considers reliable, but neither CNBC nor its affiliates and/or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. Mr. Kaminsky, CNBC, its affiliates and/or subsidiaries are not under any obligation to update or correct any information provided on this website. Mr. Kaminsky’s statements and opinions are subject to change without notice. No part of Mr. Kaminsky’s compensation from CNBC is related to the specific opinions he expresses.
Past performance is not indicative of future results. Neither Mr. Kaminsky nor CNBC guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment discussed on this website or on the show. Strategies or investments discussed may fluctuate in price or value. Investors may get back less than invested. Investments or strategies mentioned on this website or on the show may not be suitable for you. This material does not take into account your particular investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. You must make an independent decision regarding investments or strategies mentioned on this website or on the show. Before acting on information on this website or on the show, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment adviser.
Playing
Watch Next...