The Education of a Value Investor

• Asset Liability Management & Interest Rate Risk in the Banking Book - Part 4 of 4

  In this conversation between Guy Spier and Eric Schaanning, the discussion revolves around the intricacies of asset-liability management (ALM) and interest rate risk, particularly in the banking sector. Eric shares insights from his experience, explaining key concepts like the economic value of equity (EVE), DV01 (the sensitivity of a bank's net present value to interest rate changes), and various risk management techniques used by banks.The conversation explores how different banks, depending on their lending structures (e.g., fixed-rate vs. floating-rate loans), manage interest rate risk. Eric discusses the role of macro and micro hedging, highlighting that while macro hedging is used to offset risks from a portfolio of loans, micro hedging targets individual debt issuance with specific interest rate swaps. The conversation also touches on the concept of "equity term out," referring to how a bank's equity is handled from an interest rate risk perspective.Guy draws a parallel to value investing and mentions how understanding banking risk management, such as interest rate risk, is valuable for investors, especially when evaluating financial institutions. He mentions the importance of having a clear understanding of how these risks could impact stock prices and the economic health of banks.The discussion ends with reflections on how understanding these concepts can enhance an investor's decision-making, particularly in evaluating the risks and opportunities in the banking sector. Eric emphasizes the importance of thinking about balance sheets over time and how these insights apply not only to banks but also to individuals managing their own finances. Finally, Eric shares resources like LinkedIn and his personal Google site for further learning.

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• Think smarter, not harder with Howard Marks

  In this engaging podcast, Howard Marks, co-founder of Oaktree Capital, and Guy Spier, founder of Aquamarine Capital, share invaluable investment wisdom with Roi Lipovetzky, a former MBA student and current investment professional at Oakmount Capital.The conversation explores key principles of successful investing, such as mastering market cycles, second-level thinking, risk management, and the importance of long-term, contrarian positions. Howard reflects on his experience through major market events, while Guy emphasizes the need for emotional discipline and unconventional thinking.A key theme in their discussion is the importance of being true to oneself, especially in a world that often values conformity. Both Howard and Guy highlight the value of making independent decisions and staying grounded in one’s own principles, rather than trying to please others or follow popular trends.With years of collective experience, Howard and Guy provide deep insights into the mindset needed for lasting success in investing and life. Full transcript available here: https://aqfd.docsend.com/view/2nv2iqixj8rm7bb7  Contents:(00:00) A Journey of Learning: Insights from Howard Marks, Guy Spier an Roi Lipovetzky (03:20) Focusing on Excellence: Howard Marks on Building Oaktree for the Long Term(07:19) Writing for Investors, Not for Entertainment(18:09) Honesty, Risk and Purpose (27:23) The Value of Fun: Howard Marks on Enjoyment, Work, and Investing (33:38) Risk, Resilience, and Staying True to Your Principles (41:12) Closing Reflections: The Power of Truth and Clarity 

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• Asset Liability Management & Interest Rate Risk in the Banking Book - Part 3 of 4

  In this gripping segment, Eric Schaanning and Guy Spier delve into the complex world of interest rate risk, revealing how seemingly straightforward banking practices can quickly turn into high-stakes dilemmas. Schaanning breaks down how banks forecast deposit behaviours, merging historical trends with expert judgment. He explains that as interest rates fluctuate, customer preferences shift dramatically—rising rates lure them into term deposits for better returns, while declining rates send them back to the safety of site deposits.But the intrigue doesn’t stop there. The duo uncovers the hidden layers of behavioural modelling in assessing credit risk, identifying subtle signals that may indicate a customer’s financial distress. Changes in spending habits and payment timing can serve as critical warning signs, shedding light on the delicate balance banks must maintain to safeguard their portfolios. Spier interjects with essential advice for individuals grappling with financial strain, emphasizing the power of communication and proactive payment management.As the conversation reaches its climax, Schaanning reveals a shocking twist: a seemingly lucrative fixed-rate loan could morph into a devastating loss due to unexpected interest rate spikes. With banks grappling to adapt in an ever-shifting economic landscape, the stakes are higher than ever. This tantalizing cliffhanger sets the stage for their next discussion, where risk management strategies and survival tactics will be put to the test in the face of looming financial uncertainties. Full transcript available here: https://aqfd.docsend.com/view/jtbtn9zjhaebq9ehHere's a link to the presentation: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5007032 Contents:(00:00:00) Why banking Regulations Matter: A Dinner Table Explanation(00:08:50) Calculating Net Interest Income with a Simple Example(00:14:22) Fixed vs. Floating Rate Loans: Cash Flow Dynamics(00:22:19) Balance Sheet Management: Shifting Between Income and Capital(00:29:47) Interest Rate Swaps and Market Liquidity (00:37:57) Exploring Risk Measurement and Gap Profiles in Banking (00:40:52) Navigating Liquidity Risk and Redemption Dynamics in Investment Funds (00:48:24) Understanding Interest Rate Risk and Behavioural Modelling in Banking

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• Asset Liability Management & Interest Rate Risk in the Banking Book - Part 2 of 4

  In this episode, we continue our exploration of financial risk management with Eric Schaanning, a thought leader in the field. Following his dynamic insights from the previous discussion, Eric delves into the intricacies of treasury functions within major banks and their critical role in risk management. Together with Guy Spier, they unravel how a small treasury team, despite its size, manages significant financial risks compared to the larger pool of relationship managers.  Listeners will gain a clear understanding of complex concepts like yield curves and risk spreads, as Eric adeptly explains their implications in today's banking landscape. The duo examines the Basel Committee on Banking Supervision (BCBS) scenarios for interest rate shocks, pondering whether current banking models can adequately address extreme interest rate fluctuations.  As they venture into discussions on net interest income (NII) and the economic value of equity (EVE), Eric shares his expertise on how these concepts can be applied to personal finance, making the conversation relevant for individuals navigating their own financial landscapes. With an engaging blend of practical knowledge and theoretical insight, this episode offers valuable perspectives that push the boundaries of traditional risk management. Tune in for another captivating dialogue that not only expands your understanding of financial systems but also equips you with practical tools for managing your financial future! Full transcript available here: https://aqfd.docsend.com/view/dyu45ikdqvarwf5pHere's a link to the presentation: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5007032 Contents: (00:00:00) Navigating Interest Rate Risks: A Deep Dive into Bank Balance Sheets(00:08:57) Measuring Interest Rate Risk: Insights into NII, EVE, and Bank Profitability(00:17:09) Banking on Transparency: The Impact of Regulatory Frameworks opn Financial Institutions  (00:31:18) Gap Risk in Banking: Insights from the Delta EVE Measure and Silicon Valley Bank(00:39:56) From Crisis to Regulation: The Evolution of Interest Rate Risk Management(00:53:52) Balancing Act: Large Banks, Regulation, and Operational Challenges  (00:59:21) Bridging Capital and Growth: Perspectives on Modern Banking  (01:23:55) Treasury Functions Unveiled: The Backbone of Risk Management in Banking  (01:29:02) Understanding Interest Rate Shocks: A Comprehensive Look at the BCBC Scenarios

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• Asset Liability Management & Interest Rate Risk in the Banking Book - Part 1 of 4

  Eric Schaanning is a dynamic figure in financial risk management, known for his innovative approach to navigating the complexities of market and valuation risk. Leading these critical functions for Nordea Group, Eric blends a wealth of experience with a forward-thinking mindset. His career spans impressive roles, including overseeing risk management for UBS and Credit Suisse in Zurich, where he dealt with the high-stakes world of managing risk across massive deposit and loan portfolios. Full transcript available here: https://aqfd.docsend.com/view/bxtu77b955d6grcy  Here's a link to the presentation: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5007032 Contents:(00:00:00) Asset Liability Management & Interest Rate Risk in the Banking Book  (00:06:03) A Case Study in Interest Rate Risk and Asset-Liability Mismatches(00:14:24) Liquidity, Insolvency, and Interest Rate Risk  (00:20:15) The Mechanics of Bank Balance Sheets(00:32:24) Bank Balance Sheets, Loan Reporting, and Equity Capital  (00:49:28) Exploring the Dynamics of Fractional Reserve Banking, Interest Rate Risk, and Regulatory Frameworks(01:03:30) From Pillar One to Pillar Three: Regulatory Safeguards and Banking Risk

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