Daily Inspiration Quote by John C. Hull

Hull’s line reads like a neat little fortune cookie for quants, then you realize it’s smuggling in a worldview about risk. The intent is practical: when rates are already high, the “good” environment for most interest-rate positions is one where the trend is downward (because falling yields typically lift bond prices and ease financing conditions). When rates are already low, you’d rather see them drifting up (because ultra-low rates compress returns, encourage one-way bets, and leave you with asymmetric pain if the only possible surprise is higher).

The subtext is about where the danger lives. High rates carry obvious carry costs and recession fear, but they also carry room to fall; low rates feel comforting until you notice they’ve stolen your margin of safety. Hull is quietly reminding readers that “level” and “direction” aren’t separable. At high levels, mean reversion is your friend. At low levels, mean reversion becomes a threat, and reinvestment risk becomes the boring villain that wrecks portfolios slowly.

Context matters: Hull is a derivatives professor, so he’s thinking in terms of hedging and convexity, not vibes. In models of the term structure, the drift of rates (their average direction) interacts with volatility and the payoff geometry of bonds and options. His phrasing also nods to the post-2008 world, when “low for long” turned into a trap: investors chased duration and carry because rates couldn’t go much lower, until inflation proved they could go higher. The quote works because it’s counterintuitive without being cryptic: it flips the naive preference for “low rates” into a preference for “room to move,” the central anxiety of modern fixed income.