Derivatives Risk

General Discussion on the Permanent Portfolio Strategy

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Kbg
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Re: Derivatives Risk

Post by Kbg » Wed Mar 15, 2017 9:02 pm

dualstow wrote:I agree with you on priorities.
I do think the OP's question is a good one, though.
I won't say it is a bad one, but I will say it is too broad to provide a meaningful answer.
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JohnnyFactor
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Re: Derivatives Risk

Post by JohnnyFactor » Wed Mar 15, 2017 9:30 pm

Most of us on these forums are prudently taking care of tax planning, bad investor behavior, and inflation (where we can). I don't consider those pressing issues for conscientious folks like us. I asked about derivatives because they are the ultimate black swan. The PP was designed with black swans in mind.

Here's a specific question then. JP Morgan Chase has a derivative exposure of $70 trillion. What happens if they lose those bets?
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JohnnyFactor
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Re: Derivatives Risk

Post by JohnnyFactor » Wed Mar 15, 2017 10:02 pm

Since I've only contributed questions, here's info on what I've done to minimize exposure to general calamity. I've closed all accounts with big banks and deal exclusively with a credit union. I carry no debt, including no mortgage. I've opened a Perth Mint account and am slowly filling it. I keep in my possession enough gold coins to pay for a plane ticket to Australia. I'm willing to relocate if need be.

The question of derivatives remains because I don't know how to plan defensively against that scenario. I don't really know what could happen.
Kbg
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Re: Derivatives Risk

Post by Kbg » Wed Mar 15, 2017 10:14 pm

JohnnyFactor wrote:Most of us on these forums are prudently taking care of tax planning, bad investor behavior, and inflation (where we can). I don't consider those pressing issues for conscientious folks like us. I asked about derivatives because they are the ultimate black swan. The PP was designed with black swans in mind.

Here's a specific question then. JP Morgan Chase has a derivative exposure of $70 trillion. What happens if they lose those bets?

Who says most of them are directional bets? But it also appears you've been googling and ran into Zerohedge...you should go read the actual OCC latest quarterly report. Remember, a "news" organization's first responsibility is to sell advertising...accuracy and context, not so much.

I'm pitching out of this conversation. Do derivatives have risk, yes. Can an organization blow themselves up with them, yes. Are there highly risky opaque derivatives, yes? Can they do economic damage if they run amok, yes (witness 2008). Is there an inverse statement to all the previous questions, yes.

For an individual investor, should they focus much of their attention on derivatives and derivative risk? Not really.
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JohnnyFactor
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Re: Derivatives Risk

Post by JohnnyFactor » Wed Mar 15, 2017 10:22 pm

Thanks Kbg, I appreciate the info. I'm not a reader or fan of ZeroHedge but other sites use them for source. This is the page that got me thinking about this:

http://demonocracy.info/infographics/us ... osure.html
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