My comment will probably just be removed or buried, but I am going to put some "crazy" beliefs out there.
1) The financial system is hopelessly oversimplified and hopelessly unfair.
2) It does need to be completely redone. We should understand that money is a fundamental _technology_ and actually come up with a totally new set of high technologies that replace its current incarnations with things that are much more sophisticated.
3) Failing that, it is quite possible that countries other than the US may see so much death and destruction due to the failing financial system (excessive debt etc.) that they become desperate for a way to unhook from the dollar. A certain amount of hunger and chaos could motivate a global war.
3) Up until just recently, it seemed pretty clear that it was not feasible to defeat the United States in war.
4) The Covid-19 pandemic _may_ have unfortunately proven that there is now a type of warfare that the United States cannot win - bio-warfare. I am not suggesting that Covid-19 was actually a bioweapon, but due to the very feasibility that a _similar_ virus could have originated in a lab in China, the effect of this disaster could nevertheless be seen to be the bio-warfare equivalent of Hiroshima. Again, does not appear to actually be the case, but research in similar microorganisms was documented to occur in Wuhan. So you can't say it isn't potentially plausible in the future. And so this is an effective demonstration of the power of such a weapon, and the way that tight controls on citizens and information makes it a feasible type of weapon for China.
I am not writing this to try to create a rumor or something. But people have to realize that if money doesn't work for a certain number of entire countries they will fight for survival. And the US and it's outdated dollar system could actually be what they have to fight against.
I'm sure this is pointless because we have wildly divergent worldviews.
But one example would be massive wage disparity between adjacent countries, where people doing the same job in one country earn only a small amount compared to the other. And although cost of living may be lower in the other, important costs are not and objectively it's unfair.
The financial system is rigged in the favor of bigger players; especially stock market. Big players with a lot of capital can easily add “insurance” to their investments via hedging strategies that a small investor would not be able to utilize due to the high capital requirements currently in place. They are other regulations that make it tough for small players to get into the game such as the mark to market feature which abolishes/ makes one exempt from the “wash sale rule”; the requirements to get this is an uphill battle for a small investor.
On the surface wash sale rule seems to make sense but in reality it limits the amount of trades you can do especially in times of high volatility. And as Nassim Taleb mentions in his book “Antifragile” things that are harmed during times of high volatility are extremely “fragile”.
The technology is already there to make proper investing available to the masses; unfortunately regulations heavily hinders the feasibility for a small company to roll something like this out.
What do you mean by “high capital requirements in place” for hedging a portfolio? Do you know what options are? They can be used for hedging, and the bid/ask is the same for an institution or an individual.
You or I could’ve followed the 50 cent VIX call trader and made several thousand percent, all for 50 bucks a contract.
Hedges cost a percentage of a portfolio, it doesn’t matter whether it’s 100,000 or 1,000,000,000 dollars, if the overall composition is the same, the hedge will cost the same percentage of the portfolio.
You and I can trade mark-to-market assets too, CME micro futures have pretty cheap margin requirements.
It sounds like you have a lot of theoretical knowledge, but don’t actually have a practical knowledge of trading/investing. All of the stuff you complain about not existing actually exists.
Sure, you and I aren’t going to be able to put on a hedge like Ackman did, but only because the notional value of the derivatives used is so high. Use the tools available to the average investor, there are plenty.
Wow thanks for the response really appreciate it. I’m actually dabbling in trading atm, very familiar with bid ask spread and would def consider myself a practitioner, and not an economist/only thinking of things from a theoretical point of view.
I have a trading bot that trades crypto at the moment.
Anywho, what I was trying to convey in my initial post is that regulations make it tough for the little guy; especially on the stock market side.
My knowledge on options is definitely lacking, plan on learning more about that eventually, but when I referenced “insurance” I was def alluding to options / inversely correlated positions.
Any who what I mean by large capital requirements is to safely trade equities and crypto you typically want to trade based on a position sizing algorithm. Which reduces your position size based on the risk you’re exposed to.
In crypto the capital requirements are very low in the sense that you can buy a fraction of a share for as little as a few cents or even less in some places.
In stocks fractional shares are now becoming more and more accessible to people. But the problem there is you can’t actively trade a single stock unless you register as a active trader with the IRS. Also in most places fractional shares are $1. I would like to see this be even lower to truly allow anyone to run sophisticated strategies without needing a lot of capital.
$50 might not be a lot to me or you but it’s def a lot to others. Just wish system was designed in a way where you could trade sophisticated strategies with as little as $5 or heck 50 cents.
Hell, even some rich Western nations' currencies are fragile by this measure. I thought I was being smart by anticipating the coronavirus crash and selling half my global funds as an hedge. Timed it almost perfectly, a week and a half before the crash.
But it ended up being a complete wash! The funds were settled in Norwegian Crowns, which fell 30% relative to other currencies along with the stock market. And during the recent recovery, it has recoved in lockstep with the US stock markets, so the returns of my fund holdings measured in Crowns have been pegged at -5% to -10% throughout the whole crisis.
Turns out in retrospect that some big NOK-denominated bond funds investing international bonds were margin called on their currency insurance. They were therefore forced to sell a crapload of NOK bonds into the drop, in sum causing a 20-30% crash in two days.
Yeah it’s def tough to perfectly anticipate what the market will do next. What I’ve learned on my end is just simply be prepared for the following outcomes:
1) The financial system is hopelessly oversimplified and hopelessly unfair.
2) It does need to be completely redone. We should understand that money is a fundamental _technology_ and actually come up with a totally new set of high technologies that replace its current incarnations with things that are much more sophisticated.
3) Failing that, it is quite possible that countries other than the US may see so much death and destruction due to the failing financial system (excessive debt etc.) that they become desperate for a way to unhook from the dollar. A certain amount of hunger and chaos could motivate a global war.
3) Up until just recently, it seemed pretty clear that it was not feasible to defeat the United States in war.
4) The Covid-19 pandemic _may_ have unfortunately proven that there is now a type of warfare that the United States cannot win - bio-warfare. I am not suggesting that Covid-19 was actually a bioweapon, but due to the very feasibility that a _similar_ virus could have originated in a lab in China, the effect of this disaster could nevertheless be seen to be the bio-warfare equivalent of Hiroshima. Again, does not appear to actually be the case, but research in similar microorganisms was documented to occur in Wuhan. So you can't say it isn't potentially plausible in the future. And so this is an effective demonstration of the power of such a weapon, and the way that tight controls on citizens and information makes it a feasible type of weapon for China.
I am not writing this to try to create a rumor or something. But people have to realize that if money doesn't work for a certain number of entire countries they will fight for survival. And the US and it's outdated dollar system could actually be what they have to fight against.