Marcus Aurelius

Is Dubai's Default a Black Swan Event?

I wonder how many dumped cars will turn up at the DXB carpark in the next couple of weeks?

The Decline of Credit Cards

One of the things a personal finance talk show host I listen to always cautioned people against doing was to take out equity on the house and use that to pay off or down credit cards. It is silly & foolish to convert unsecured credit to secured credit. Back in the real estate boom days that was easy & tempting to do after all we would often hear about getting these loans up to 110% of the house value.

More often than not, according to this host, people would then re-run the cards up.

His typical advice was to cut them up or put them in a bag of water and store in the freezer and pay them off with the paycheck or checks.

Now, the later approach is the only one open to people.

Demonic Short Sellers

Same is true with almost any form of financial instrument. A person goes short on a particular item and then feeds rumors to the media, if the media is gullible enough the stories get out and the shorter makes money.

Any financial instrument can be used for legitimate business financial practices or for rank speculation. Heck even the simple and straight-forward practice of buying stock with cash and holding it until the price goes up can be reduced to rank speculation. The difference being most people understand the practice.

Demonic Short Sellers

A lot of people talk about the evil short trade and those who engage in them. However, many people see derivatives as a speculative game where you roll the dice and hope your numbers turn up, rather than a tool traders and institutions use to mitigate risk.

I have a basic grasp of derivatives namely options and futures. When studying up on them I noted a very strong resemblance of puts to my auto insurance policy. In both cases I pay a premium for a time limited policy. In the case of my auto policy if a deer jumps out and totals my car I sell the car at its pre-wreck value to the insurance company, if I have a stock and it crashes then I sell the puts and at least get something back.