#25. Derivatives Conference (Tuesday, October 20, 2015)

#25. Derivatives Conference (Tuesday, October 20, 2015)

What was your best day…of being praised by someone you respected?

Every year in the late fall, the Montreal Exchange1 hosts an annual derivatives conference for all the finance professionals who deal with derivatives in the Canadian market. And the place they always host it at is the best place possible: the Chateau Frontenac in Quebec, this historic hundred-year old castle/hotel right in the center of old Quebec City.

Now, my debt policy function (#102) at the time had very little to do with derivatives. But the year before, Bastien on my team had gone to the conference and found it to be a good time and educational experience. So this year, he suggested that one of us give it a shot. I hadn’t been planning it, but if it was being recommended…then why not. My first ever business trip.

Now, a few days before the conference starts, I get pretty sick (on my birthday no less), and over the weekend I try to recover as quickly as possible.2 By Monday morning, when I get on the train, I feel adequate. It’s past the peak sore throat stage, which means that it should be getting better from here. So I pack my Tylenol and a few bags of this amazingly effective Chinese herb (ban-lan-gen), and I’m ready to go.

I take the train there with Mark McNaught, my friend and economist colleague at the government. While we had both started out of school at the same time and had worked closely together for a year and a half, this is my first time hanging out with him socially. And we connect right away; we share a lot of interests, and he’s got this genuine laid-backness that I hadn’t seen much since I started working3.

We arrive at the Chateau Frontenac and go our separate ways. I tour the old city (memories from #47), get some good Quebec poutine at Chez Ashton, then make it back to the main conference room to see if anybody’s there yet.

No one at first, but soon enough the room fills up. And at first I feel a bit uncomfortable: this is my first time at one of these things representing my institution, and I’m a new guy and these all look like big-time business people. But then I start doing what I usually do and introduce myself to random people: this guy from Natixis in New York, this other guy from Citi in Toronto, a couple of ambassadors from York University, a big group of people here from the Montreal Exchange. And after about forty minutes, Mark shows up…in a sweater.

It’s a good reception, and following that Mark and I decide we want to catch Game 3 of the 2015 American League Championship Series (where the Blue Jays are down 0-2 to the Royals). And we end up at this bar five minutes away, where a bunch of other guys we just met from the reception are already seated to watch the game.

The next three hours are a pure chaotic blur. A ton of runs are scored in the game and it ends with a 10-7 Jays win, bringing them back into the series. Also, the Canadian federal election is going on at the same time: the Liberals and Trudeau win. All the while, Mark and I continue our talk from the train, which turns into this deep, long conversation that seems to touch on every aspect of each of our lives.

On Tuesday, we have conference sessions the whole day: kicked off by a panel between the chief economists of all the big Canadian banks on their thoughts about the future Canadian economy (especially interesting given the new Liberal government). The last (boring) afternoon session runs over time, to the annoyance of everyone in the room who just want to go see Game 4 of the ALCS that has just started.

By the time Mark and I get to the bar, it’s already 11-0 Royals4. And for the next hour, we just watch the Jays get pounded even more (and Cliff Pennington, their back-up shortstop, come in to pitch) while continuing that discussion about every aspect of our lives.

Once that nightmare is over, we head over to the reception in another building. And again, I chat and joke around with a bunch of old and new friends there while sipping on some Jameson’s Irish whiskey.

Then I run into a guy I think I recognize. I ask him where he’s from, he says he’s from New York, and a few seconds later I realize that it’s Larry McDonald – the keynote speaker from our lunch and the former Lehman Brothers guy who wrote the book A Colossal Failure of Common Sense (about…you know). We start talking, the topic my work comes up, and I mention some recent stuff I’m doing on the repo market (#38).

Jeff: So, from what I seeing, it’s important to study liquidity in the repo market because it’s a big sign for illiquidity in the broader bond market.

Larry: That’s exactly right, repos are like the canary in the coal mine. How old are you?

Jeff: 25.

Larry: Only 25, and you’re thinking about things that way. That’s impressive; keep that up, and who knows what you’ll be able to accomplish.

The shining moment of my career, to that point at least.5

  1. The central exchange in Canada for derivatives (i.e. financial instruments whose value is “derived” from another underlying instrument), so futures, options, swaps, etc.
  2. While watching the Jays blow the first two games of the ALCS against the Royals.
  3. On the trip, he tells me about how his brother’s attempts to sell beer somehow led to him playing in the worldwide air guitar championships.
  4. No, that didn’t all happen in the first inning. We actually went to the reception place first (delayed by 30 minutes because Mark got engrossed in the Jays game on his TV upstairs and forgot I was waiting for him), found out they didn’t have a TV, so a bunch of us came back to the hotel bar to watch.
  5. A few similar instances would occur in later years (#50), but the first one is always the best.