The Coming Recession . . .

[MidGe]

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Options, Borodog. There's a bunch of leverage that can be obtained from the investment brokers and implicit leverage in many financial derivatives. Even being able to systematically predict a a 1% rise or fall in markets would make you extremely wealthy extremely fast.

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That is quite right if you can equally predict that the counterpart to your leveraged position will somehow deliver. That, imo, is bunk! Your broker, or even entire derivative market (organization) is no less vulnerable than any company on the market!

[Borodog]

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If you're so smart, why aren't you rich? Do you not like money? I mean, if you are one of the enlightened few who understand business cycles, shouldn't you have made a killing by now shorting the market at just the right time?

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It was total common knowledge in 2000-2001 that gold and especially silver were totally undervalued. of course doubling your money in 5 years isn't that great, although you could've done better in silver.
I think the main limiting factor is simply lack of capital. I mean most people turn 18 or whatever and are flat broke and have to scramble just to support themselves.

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Lack of capital? There are rich people fighting each other to put money into 2/20 hedge funds. There is plenty of capital out there. If the phenomena that Borodog describes were actually as predictable as he says they are, he should be a billionaire by now.

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Do you not see the difference in predicting that it is inevitable that a hurricane will occur and not being able to predict exactly when a hurricane will occur?

Not to mention the fact that even if you could exactly time recessions, how would one become a "billionaire" off of them? The markets have only grown by a factor of a few hundred in a hundred years. Understanding how recessions work doesn't help you predict individual stocks.

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Options, Borodog. There's a bunch of leverage that can be obtained from the investment brokers and implicit leverage in many financial derivatives. Even being able to systematically predict a a 1% rise or fall in markets would make you extremely wealthy extremely fast.

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Ok, but the point remains that you can't time the bust.

[goodsamaritan]

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If you're so smart, why aren't you rich? Do you not like money? I mean, if you are one of the enlightened few who understand business cycles, shouldn't you have made a killing by now shorting the market at just the right time?

[/ QUOTE ]

It was total common knowledge in 2000-2001 that gold and especially silver were totally undervalued. of course doubling your money in 5 years isn't that great, although you could've done better in silver.
I think the main limiting factor is simply lack of capital. I mean most people turn 18 or whatever and are flat broke and have to scramble just to support themselves.

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Lack of capital? There are rich people fighting each other to put money into 2/20 hedge funds. There is plenty of capital out there. If the phenomena that Borodog describes were actually as predictable as he says they are, he should be a billionaire by now.

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Do you not see the difference in predicting that it is inevitable that a hurricane will occur and not being able to predict exactly when a hurricane will occur?

Not to mention the fact that even if you could exactly time recessions, how would one become a "billionaire" off of them? The markets have only grown by a factor of a few hundred in a hundred years. Understanding how recessions work doesn't help you predict individual stocks.

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Options, Borodog. There's a bunch of leverage that can be obtained from the investment brokers and implicit leverage in many financial derivatives. Even being able to systematically predict a a 1% rise or fall in markets would make you extremely wealthy extremely fast.

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Ok, but the point remains that you can't time the bust.

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But even if you can't exactly time the bust, if you know there is going to be a bust in the near you should still be able to profit from it. So maybe you short the market and it continues to go up a little bit after you short it, but the eventual bust should more than compensate for the little bit that you lose.

[Borodog]

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But even if you can't exactly time the bust, if you know there is going to be a bust in the near you should still be able to profit from it. So maybe you short the market and it continues to go up a little bit after you short it, but the eventual bust should more than compensate for the little bit that you lose.

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You're saying that I can just "short the market" indefinitely until it busts, and if it never busts, I don't have to pay? Who would offer me such a deal? And if I can't do it indefinately, then that means I have to time the bust, yes?

[iron81]

So basically, your position is that Murphy's law is true?

[Zygote]

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But even if you can't exactly time the bust, if you know there is going to be a bust in the near you should still be able to profit from it. So maybe you short the market and it continues to go up a little bit after you short it, but the eventual bust should more than compensate for the little bit that you lose.

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You're saying that I can just "short the market" indefinitely until it busts, and if it never busts, I don't have to pay? Who would offer me such a deal? And if I can't do it indefinately, then that means I have to time the bust, yes?

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lets say you short the market through a derivative, there is an expiry day. there are many ways to play this but simply you could just buy put options for various expiry times over the approximate range you're expecting. You can even create a spread for yourself to protect against upside risk, which in effect is a bet against stability and for volatility, by getting involved in some call options.

If you short on various shares through a brokerage on credit margin this will influence your wealth over time, depending on the market price for the stocks value you are betting against. This means you can only survive as much as your credit and bank roll permit.

You could also buy an ETF or some other product that tracks the market downside for what you're getting into, and just buy shares there. You could hold these so long as they still have value if you fully purchased them.

[Borodog]

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So basically, your position is that Murphy's law is true?

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No. Murphy's Law is false.

Also, I'm not sure I get the joke. Perhaps I'm being _/.

[Borodog]

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But even if you can't exactly time the bust, if you know there is going to be a bust in the near you should still be able to profit from it. So maybe you short the market and it continues to go up a little bit after you short it, but the eventual bust should more than compensate for the little bit that you lose.

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You're saying that I can just "short the market" indefinitely until it busts, and if it never busts, I don't have to pay? Who would offer me such a deal? And if I can't do it indefinately, then that means I have to time the bust, yes?

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lets say you short the market through a derivative, there is an expiry day. there are many ways to play this but simply you could just buy put options for various expiry times over the approximate range you're expecting. You can even create a spread for yourself to protect against upside risk, which in effect is a bet against stability and for volatility, by getting involved in some call options.

If you short on various shares through a brokerage on credit margin this will influence your wealth over time, depending on the market price for the stocks value you are betting against. This means you can only survive as much as your credit and bank roll permit.

You could also buy an ETF or some other product that tracks the market downside for what you're getting into, and just buy shares there. You could hold these so long as they still have value if you fully purchased them.

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I'm not sure what any of this means, but I think the part I bolded is probably the problem.

[Zygote]

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But even if you can't exactly time the bust, if you know there is going to be a bust in the near you should still be able to profit from it. So maybe you short the market and it continues to go up a little bit after you short it, but the eventual bust should more than compensate for the little bit that you lose.

[/ QUOTE ]

You're saying that I can just "short the market" indefinitely until it busts, and if it never busts, I don't have to pay? Who would offer me such a deal? And if I can't do it indefinately, then that means I have to time the bust, yes?

[/ QUOTE ]


lets say you short the market through a derivative, there is an expiry day. there are many ways to play this but simply you could just buy put options for various expiry times over the approximate range you're expecting. You can even create a spread for yourself to protect against upside risk, which in effect is a bet against stability and for volatility, by getting involved in some call options.

If you short on various shares through a brokerage on credit margin this will influence your wealth over time, depending on the market price for the stocks value you are betting against. This means you can only survive as much as your credit and bank roll permit.

You could also buy an ETF or some other product that tracks the market downside for what you're getting into, and just buy shares there. You could hold these so long as they still have value if you fully purchased them.

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I'm not sure what any of this means, but I think the part I bolded is probably the problem.

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You may not be able to predict the exact down turn of an event but you can predict approximate ranges and likelyhoods of achieving each range.

For example, you could say America's fiscal and monetary policy continuing the way it is will almost certainly (98% chance) catch up to them, beyond any redeeming policy, within about 15-25 years, and estimate there is 5% chance that these policies will necessarily adjust to prevent or strongly mitigate such an occurrence.

Even if the policies do change, you could have hedged your bets by purchasing securities that benefit from those facts (of which some are likely to be same items you were purchasing anyways) just with shorter time for regression.

If you dont believe the assets or derivatives are fully reflecting the chances that are closest to the true value then you can earn positive expected value against the economy-always-do-gooders by your more realistic economic analysis.

The more vague your prediction the less opportunity to make as much money but that doesn't mean you cant money from vague predictions.

[goodsamaritan]

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But even if you can't exactly time the bust, if you know there is going to be a bust in the near you should still be able to profit from it. So maybe you short the market and it continues to go up a little bit after you short it, but the eventual bust should more than compensate for the little bit that you lose.

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You're saying that I can just "short the market" indefinitely until it busts, and if it never busts, I don't have to pay? Who would offer me such a deal? And if I can't do it indefinately, then that means I have to time the bust, yes?

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When did I say you wouldn't have to pay? You would have to pay in the short term, but your long term profits would outweigh the short term losses if your theory about the coming recession is correct.