As BTC likely goes back to 3k, more exchanges will fail. I'll stick with boring index funds. People are always looking for lifehacks or shortcuts to get rich. Almost never works unless you're early. Odds are you are not.
Most people are more familiar with buying puts or selling call options are superficially similar - you make money if the price goes down.
Options give the holder the right to buy/sell a share at a specific price before a specific date. They expire worthless after that date.
Shorts are immediately borrowing shares - not just the right to buy/sell shares. They do not generally expire, although they do have interest.
GP said " if they shorted the market." which is a bit ambiguous, it sounds like they are talking about a literal short, but in this context they likely mean either.
tl;dr - no they're different
You're definitely going to pay for the risk one way or another.
Buying either cash-secured Puts or Calls are not subject to margin-calls like shorts/long shares are.
So if the price goes up too high before it comes crashing down, your broker might force you to liquidate your position, leaving you with max loses, and no profit from the following crash.
Because puts or calls do not rely on margin and you get to choose if you execute them, so they are more resistant to massive spikes in either direction.
tldr - Purchased options are not subject to margin calls like shorts
edit: removed mentions of selling options and IV - they're too complex for this quick explanation
It’s a zero-yield risk asset in a world of rising rates and economic uncertainty.
If you buy it as an "investment", you were missold.
Ah yes the FIRE lifehack that absolutely cannot go wrong and will allow everyone to sip margaritas by the beach at 45. Still way safer than any crypto, but I hope you see how that's just another cult at this point.
That is the thing.
What would the return have been if my grandpappy bought SAP500 65 years ago and kept those stocks he bought at the time until today? I have never seem such a number.
I mean if the loser stocks are rotated out it is hard to keep up with the index due to losses and transaction costs.
Some of the particular decisions in the setup may or may not agree with grandpappy, I only skimmed, but it looks like the "survivor's portfolio" has returns in line with S&P500-with-replacement and even outperformed the newcomers slightly.
19 of the largest 20 companies were still around in some form when including mergers and acquisitions... however again this is 2004, and at least Kodak and Sears went out of business since then, IIRC?
https://rodneywhitecenter.wharton.upenn.edu/wp-content/uploa...
[1] https://www.voanews.com/a/economy-business_trump-administrat...
Putting some numbers on the narrative will help the discussion. Jack Bogle asserted that index funds could "easily" account for 50% of the market and still not cause problems for index investors [1]. At 100%, he readily acknowledged it would be catastrophic; he also notes that the probability of 0% or 100% of the market accounted by index funds are zero.
As of 2017 about 35% of the market is accounted for by index funds [2]. It took 10 years to reach that level from 15%, or on a simple-minded straight-line extrapolation about 2% per year. So if that trend held we're probably around 45% now.
The closest Bogle has ever come to throwing out a maximum percentage accounting for the market is 75% but he backtracked on that [3]. So somewhere between 50-75% might exist a kind of tipping point.
Contrast this with Michael Burry's thesis that passive indexing has already grossly distorted the market [4]. Those index funds which have stopped deploying more than say 80% of AUM into a distribution of daily dollar value traded among the securities within the indexes they mimic do indeed create the risk he talks about, IMHO. I'd like to hear someone refute that thesis, as well as explain how to independently identify how much of VTSAX's AUM are actually invested into the actual equities in their index. There are plenty of "index funds" that mimic price action instead of truly indexing, but I'm specifically interested in the old standbys that really do put a huge chunk of their AUM directly into the individual equities that make up the index.
[1] https://www.yahoo.com/news/jack-bogle-envisions-chaos-catast...
[2] https://www.columbiapacificwm.com/blog/insights/dimensional-...
[3] https://www.marketwatch.com/story/buffetts-hero-john-bogle-e...
[4] https://www.newtraderu.com/2022/11/06/michael-burrys-warning...
For 100 USD in goods, I could have to send AUD cross border to receive 100 USD and then definitely have to send 100 USD cross border to China - nominally triggering 200 USD in payment volume for 100 USD in GDP.
And then for companies using a Double Irish, Dutch Sandwich... well, the volume adds up.
Crypto still isn't the answer though.
Is there current crypto solutions that work better than something like transferwise if i wanted to transfer USD to EUR for instance? (cheaper?, faster?, simpler?, reliable?)
Except in one aspect: Because cryptocurrency for these purposes at best use a loophole in AML/KYC laws, at worst just plain break them, if you do it right there's less risk of getting caught (guilty or innocently) in mandated money laundering tripwires.
I've had banks call me about source of funds, and sometimes require proof, for large "unusual" transactions. I was an innocent victim of these audits. It delayed my transactions by maybe minutes.
Yes, probably some percentage of people who've lost money, through no fault of their own, to these extra checks. But for every single one of those there are at least thousands who've lost cryptocurrency due to them not having these checks and audits.
And on top of that of course cryptocurrency transactions are much fewer and move less value.
It's not just faster on the front end. It settles pretty much instantly on the back end as well, so no counter party risk like in the case of using banks.
I regularly ship 5-6 digits between countries. It's not even hard.
And I do it without gas fees (there's paying the spread, but if I'd use cryptocurrency then I'd have to pay the spread twice).
And I can do it without the fear of a mistake, or a hack (of me or the bank), taking away the deposit on my house.
The proposed cure is worse than the disease.
Maybe the average nonprivileged will succeed once or twice, but this is like going to Vegas and using the martingale system: It'll make you win consistently, right up to the point where you lose everything you have.
I've always found the "what about the third world" arguments bizarre. As if villages and huts are filled with technical geniuses who will never lose their passwords.
And if not wallet keys, then all the blockchain mini-banks who give you no recourse if you lose your second factor, and don't have to because they're not regulated.
And that's the mini-banks who aren't plain rugpulls, or get hacked.
The people who are privileged enough to successfully be able to use cryptocurrencies are also privileged enough to even more successfully use proper banking.
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I will not engage further.