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The Crash of ’87, from the Wall Street Players Who Lived It

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Re: The Crash of ’87, from the Wall Street Players Who Lived It

#131

Post by moduspol »

zzzzzzzza wrote: post #98
drcode wrote: post #82

Earlier quoted context omitted.

I've been wondering the same thing- The best I can come up with is a ratio (depending on risk tolerance) of treasury bonds, an index fund, and non-fiat currency substitutes (gold and/or crypotocurrency) Complain about Bitcoin and their ilk, but they could (in theory at least) offer some protections against stock market crashes and/or high USD inflation.

"but they could (in theory at least)", uhm, what theory is this? No seriously I would like to hear the theoretical basis for this assertion (though I think you are totally wrong as well).

I'm not OP, but I think it's likely that in another 2008-style recession where the risk is systemic, the value of Bitcoin is likely to rise as people seek something that can be traded easily yet is not tied to fiat currencies likely to pull each other down (e.g. USD and Euro).

Re: The Crash of ’87, from the Wall Street Players Who Lived It

#132

Post by vm »

DINKDINK wrote: post #107

"The nascent equity options market saw assumptions based on the Black-Scholes model overturned and replaced by a more complex world of volatility skews" Black-Scholes is based on an assumption that stock moves are normal/Gaussian distributed. If have a background in statistics, that should make you revolt.

Black-Scholes was prescient went it first hit the scene in the late 60s/early 70s. Ed Thorp (who independently derived the formula before B-S published it) made tens of millions of dollars applying it through his statistical arbitrage hedge fund. It was the most accurate predictor at the time.

It's also remarkable that four people independently derived the formula: "In coming up with a trading strategy for warrants, Ed discovered a handy formula. A few years later, three finance professors independently came up with their own slight mathematical variant of the same formula. Ed Thorp, Myron Scholes, Robert Merton, and Fischer Black all had almost the same formula, but each had a different reason for believing it was true. Ed showed that it was a way to make money..." Source: The Poker Face of Wall Street (Wiley 2006)

Re: The Crash of ’87, from the Wall Street Players Who Lived It

#133

Post by turk184 »

marak830 wrote: post #7

A side note, and I'm really hoping someone can explain this. What benefit does the stock market provide to us? I understand investing in companies, but for me, and I'll admit a completely naive person to this whole system, it seems to have taken an 'inbest in company with money to help them succeed', to a 'who cares let's just cut and run to make the best profit'. I'm perfectly willing to take a link to a great expla…

Access to capital in a capitalist economy isn't important?

Re: The Crash of ’87, from the Wall Street Players Who Lived It

#134

Post by JohnJamesRambo »

danvoell wrote: post #77

Let's say there is a big crash coming, where would you put your money for a safe bet and for a speculative bet (and please don't say bitcoin) ? During the crash of 87, it seems like you could still get a good fixed income yield. Parking it today for 1.5% just doesn't seem that valuable.

Look at bitcoin again.

Re: The Crash of ’87, from the Wall Street Players Who Lived It

#135

Post by mikeash »

RobertoG wrote: post #124
mikeash wrote: post #114

Earlier quoted context omitted.

I bet a lot of doctors became doctors for exactly that reason.

I bet it's even more common with psychologists.

I have definitely heard mental health professionals say they got into it to better understand and deal with their own issues.

Re: The Crash of ’87, from the Wall Street Players Who Lived It

#136

Post by wbl »

codeisawesome wrote: post #60
lifebeyondfife wrote: post #30

Earlier quoted context omitted.

*At what point does almost anything else you mentioned help the business?* Firstly, it's a market place. The business and investor need to find each other. To create the market place, you must understand that different investors and different businesses have use cases that you don't need, such as "almost anything else" I mentioned. *Everything else seems likes gambling, imho* One of the dimensions is risk profile. So…

So we do admit the words bet and gambling apply to derivatives, at some point in these discussions. Fine. The reason why folks must be confused is that, non Stock market gambling is seen as a vice and/or crime by much of human society. There are religious edicts and/or laws against this practice in most places. The Stock Market getting a free pass from this view - and most people (including myself) not knowing about…

If I buy a dentist practice from a retiring dentist that's no different from me buying shares of IBM from someone who is retiring.

Re: The Crash of ’87, from the Wall Street Players Who Lived It

#137

Post by mitsubishi77 »

mikeash wrote: post #114
mitsubishi77 wrote: post #111

Earlier quoted context omitted.

Sounds like a strange logic to me... Is that not like wanting to become a MD just so you can "know what to do" if you ever get sick?

I bet a lot of doctors became doctors for exactly that reason.

With only their future personal health in mind? Maybe I'm reading too much into OP's phrasing—it just sounded a bit weird to me... Nothing against OP's choice or the world of finance, I work in it myself.

Re: The Crash of ’87, from the Wall Street Players Who Lived It

#138

Post by jonwachob91 »

PatientTrader wrote: post #121
jonwachob91 wrote: post #117

Earlier quoted context omitted.

It's also ignoring the amount of middle-class savings that are destroyed during the crash... The ONLY middle class individuals that benefit from a crash are those with the cash to buy in at the depreciated prices.

> It's also ignoring the amount of middle-class savings that are destroyed during the crash Cash savings actually increase in value during crashes. Crashes provide the middle class with opportunities to purchase assets that they otherwise would not be able to afford.

> Cash savings actually increase in value during crashes.

I get that, but you have to have cash savings before you can purchase assets. MOST middle class individuals can't afford to keep their savings in cash. MAYBE they keep 6 months of salary in cash in the event of a lose of work, but every other saved dollar is put to work.

You'd have to destroy their life savings to give them a decent opportunity to buy assets on the cheap.

Re: The Crash of ’87, from the Wall Street Players Who Lived It

#139

Post by pm90 »

RobertoG wrote: post #125
pm90 wrote: post #122

Earlier quoted context omitted.

This might be an unpopular opinion on this forum, but one of the best ways to reduce the money supply seems to be more taxation right? This is why I don't get why Republicans seem so hell bent on tax cuts... we already have so much money going around. Better take it out, fund healthcare and education and reasonable welfare systems.

If you fund healthcare and education you are putting the money out again. -When you tax and spend, you are redistributing, but the final quantity is the same. -When you tax but don't spend, you are reducing demand in the economy by making worse the people with money. -When you don't tax and don't spend in public services (austerity), you are reducing demand in the economy by making worse the people without money. Tha…

Great comment. I guess I should have clarified my statement since I meant redistribution, when talking about taxing and spending on healthcare/education.

I guess the argument on the merits of redistribution is the fundamental difference b/w democrats and republicans.

Re: The Crash of ’87, from the Wall Street Players Who Lived It

#140

Post by aswanson »

jnordwick wrote: post #120
aswanson wrote: post #116

Eurodollars are U.S. dollars deposited in commercial banks outside the United States and futures tied to the interest rates paid on them are among the most-traded contracts in the world. Even back then, they had crazy derivatives.

Its not crazy at all. A eurodollar contract gives a purer valuation of the dollar since it doesn't need to consider the added cost depository requirements. Then like now, they are only crazy if you don't understand them.

So it's like a more speculative bet on the overseas bank being able to make riskier loans with a higher return profile?
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