Tuesday, September 8, 2015

Will This Wall Street Yale Whiz Get Carried Out on a Stretcher?

I once saw a Wall Street bond trader get carried out on a stretcher becasue his highly leveraged position blew up on him. It turned out he had blown up his grandmother's fortune.

It is not completely clear what trading strategy Jeffrey Talpins is employing, but a WSJ article suggests he is doing some very leveraged stuff, If he is not hedged properly, this could be the next Long Term Capital Management, which turned into Blown Up Capital Management.

Again, I don't know the specifics of how Talpins positions are hedged, or not hedged, but from the outside, this looks pretty dangerous to me. WSJ reports:
A little-known New York hedge fund run by a former Yale University math whiz has been buying tens of billions of dollars of U.S. Treasury debt at recent auctions, drawing attention from the Treasury Department and Wall Street.

Element Capital Management LLC, led by trader Jeffrey Talpins, has been the largest purchaser in dozens of government-bond auctions over the past 10 months, people familiar with the matter said. The buying is part of an apparent effort by the fund to use borrowed money to exploit small inefficiencies in the world’s most liquid securities market, a strategy that is delivering sizable profits, said people close to the matter.

Mr. Talpins is an intense and reserved trader formerly at Citigroup Inc. and Goldman Sachs Group Inc. He is known for a tenacious style that can grate on rivals and once tested the patience of former Federal Reserve Chairman Ben Bernanke.

Element has been the largest bidder in many of the 62 Treasury note and bond auctions between last November and July, these people said. At many recent auctions, some of which involved sales of more than $30 billion of debt, Element purchased about 10% of the issue, these people said. That is an unusually large figure, analysts said.

Element’s activity has raised questions because the cumulative purchases far exceed the hedge fund’s $6 billion in assets under management. Treasury officials, who frequently meet with large auction participants, have asked Element about its activity, said someone close to the matter.

“Their buying is eyebrow-raising,” said a trader who once worked for a firm that deals in government securities and witnessed Element’s bidding. These primary dealers often know the identity of other auction bidders. Element “never shared its strategy, but we often asked,” the trader said.


  1. I got the exact same feeling when I saw it this morning.

    This guy is leveraged to the hilt, expecting arbitrage and a little inside info to protect him from any market moves.

    1. A lot of arbitrage trades are pretty safe though, but with that amount of money and leverage, I doubt it is.

  2. It's crazy to me how much money these people throw around.

  3. Could be he doing the bidding of the FED?

  4. People who loan money to the state deserve to lose everything.

  5. All you need is another October 15, 2014 to happen and you might wipe yourself out. Arb should never be the core of your strategy.