Tuesday, August 09, 2005

Positive ev & Force Majeure



There are much better writers than myself.

For proof, compare this article with the one I posted at BFU.

Maybe you didn't need the convincing, I know I didn't. Like all of you there are things I am good at, and there are things I need to do; very seldom are they the same.

But what the heck, I am enjoying myself. Life is very good.


Ok, this is why I wanted to write this post. I very seldom make predictions, 'cause it is so easy to be wrong. But right now we are at a sweet spot in the transition to bad times.

Right now the world is filled with complacency. Everything just keeps on as it was, smooth and easy. People are getting used to re-financing their house each year to pay bills and get a new car, no problem. The Dow is just about flat for the year, no problem. Etcetera.

Big Problem.

Volatility in the markets is hovering at historic lows. Something is about to happen on a very large scale. What is sweet is that a big move is not priced into the markets. A bet on greatly increased volatility, something like a bear far out of the money straddle on the cubes, has a very good chance of yielding a huge reward vs. a small loss. This is where large fortunes can be made, or manageable chunks of cash lost. This is playing the implied odds with a small bet for a potentially huge pot, very high +ev. The small cost of insurance is not appropriate to the great risk.

I think it was Doug Casey that said "The purpose of a depression is to return money to its rightful owner." All the easy cash that made anyone who financed a house into a genius may be about to disappear. If I'm right you will see it start before year end, and maybe before next month. It will then be a long decade or so before we reach the other side of the river. By then we will be well into the start of the information age; and the rapid shrinking will have started on all the bloated industrial age systems, even the Post Office may finally get privatized. ;>}

The whole world may be about to change. (see above articles)

Of course as Keynes said, "In the long run we are all dead." At least he was right on that one thing.

Interesting times indeed.

If you listen or not to Balaam's Donkey, you will bear the consequences yourself. "This is not investment advice, just a wild ass guess (WAG)." Do your own research, play your own hand, don't bet more than you can afford to lose. If I'm wrong I will still have a bankroll and still be in the game. Do you the same.

When I've heard all I need to make a decision, I don't take a vote.
I make a decision. - Ronald Reagan

This could be a real lively time. Kinda like the song "One dark night when we were all in bed, old mother Kreary(sp) left the Lantern in the shed, and when the cow kicked it over, she winked her eye and said, "it'll be a hot time in the old town tonight." (the supposed cause of the great Chicago fire)

Force Majeure indeed.

Best to all,



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