Presenting Five Cheap Mega "Fat-Tail" Insurance Scenarios Courtesy Of SocGen's Dylan Grice

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Mon, 09/27/2010 - 12:58 | 607423 spinone
spinone's picture

Force Majure

Mon, 09/27/2010 - 13:23 | 607469 Cognitive Dissonance
Cognitive Dissonance's picture

Exactly. When the powers that be have been pumping away in the name of apple pie and Chevrolet, anything done by those supreme powers and the resulting consequences can't be held against anyone. Its just an act of God/State, Force Majure and all. Thus all consequences are null and void. Like a tornado. Yeah, that's the ticket. What ya gonna do about it punk?

Same idea as Obama declaring an American citizen persona non grata and a terrorist, thus he's to be killed on sight. Ask for a list of actual charges or even an open court session to determine what this person has done and you are told.........

"Daddy knows best. He's a bad guy because we say he's a bad guy. And since we're Daddy, you my dear slime ball judge have no right to question Daddy. BTW, if you insist on allowing this to proceed, you'll be declared a national security threat and thus a terrorist. How does that blow your robes judge?"

Circular logic backed up by the police state. Works every time. Now shut up and bend over.

Mon, 09/27/2010 - 13:08 | 607442 traderjoe
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This assumes that your counter-parties will pay you, the markets will be open, there will be no bank holidays, AND that you can turn any profit into a hard asset in time to watch the dollar collapse from the sidelines (with some popcorn). 

IMHO (maybe not so humble), a significant market crash will mean that the Fed has lost control. They will not be able to stop the resulting global tsunami of debt defaults. And that means your profits will be illusory. 1 quadrillion of derivates will 'poof' into thin air...

As frequently said on this site, PM's are the only money with no counter-party. Productive land, perhaps some apartment buildings (at least some store of value), PM's, useful skills, and stores of necessities...

Mon, 09/27/2010 - 13:11 | 607454 LeBalance
LeBalance's picture

Exactly the comment I was coming to leave.  Why waste all that precious (haha!) time and effort and leave out the last part of the job: calculating the probability of a get away.

Probability: Low.

Mon, 09/27/2010 - 13:48 | 607566 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

trader, you have a good point. They are never going to pay on those contracts. When the SHTF occurs, what is going to stop the gubimint from rewriting all of the rules in their favor? Something similar to what Roosevelt did in 1933 through seizing available gold.

Mon, 09/27/2010 - 14:11 | 607654 The Alarmist
The Alarmist's picture

Yep, all along I was also thinking, "assuming your counterparty survives and honors its commitments."  You could take out a CDS as insurance against the failure of your counterparty, but in this era of bailouts there are no defaults and therefore no actual insurance to cover not receiving the payment you will never receive, and you, like a "secured" Chrysler creditor, will find yourself being stuffed in the name of the greater good of someone's political supporters.


Mon, 09/27/2010 - 13:07 | 607445's picture

Yes big potential problems, but what are the solutions. Gold/silver? VXX? So far one has made me money but not the other.

Mon, 09/27/2010 - 13:08 | 607448 37FullHedge
37FullHedge's picture

The Financial markets looks like to me, A bunch of seven year olds in a room full of fireworks and playing with matches, Its a no brainer its going to blow up some how,

I have never played with options however I agree such type of insurance is worth looking at.

My play is boring silver gold some physical and some physical etfs, Silver should be fine if things dont blow up, and gold if things do blow up,

I have some small positions in China but if it blows up no worrries and if it dosnt I have a bit of the pie, My insurance is my smallish position.

To be honest I am lost with things, The return of my money is top of my list at this time. 


Mon, 09/27/2010 - 13:15 | 607461 Species8472
Species8472's picture

Nice, but what can I do, using an online broker?

Mon, 09/27/2010 - 13:22 | 607478 Cognitive Dissonance
Cognitive Dissonance's picture

The poor man's insurance.

Gold and Silver held in physical form.

Mon, 09/27/2010 - 13:41 | 607534 tmosley
tmosley's picture

Not just for poor men.

Mon, 09/27/2010 - 13:49 | 607570 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Poor men can't afford silver and gold.

Mon, 09/27/2010 - 16:18 | 608077 MrSteve
MrSteve's picture

Poor men can walk into any neighborhood coin store and buy a junk silver U.S. 25 cent coin, called a "quarter". Note that you will really be poor if you don't have one or two these set aside for a rainy day. Junk quarters sell in quantity for about $4.25 each, more for small lots numbers. Factor that street price into your calculations for what is happening to the US Federal Reserve Note in your wallet.

Mon, 09/27/2010 - 16:44 | 608169 Cognitive Dissonance
Cognitive Dissonance's picture

I use this as an example with my clients, most of whom are old enough to remember when their pre 1964 quarters were made of 90% silver. I first ask them how much they think the silver was worth when the coin was minted. They pretty much all agree that it was less than the 25 cent face value. I then tell them that today the silver content alone of that 1963 quarter is worth more than $4.00

Suddenly they understand much better what I'm talking about when I say that the price of silver and gold isn't going up, but that the "value" or spending power of their dollars is going down. You see a lot of eyes opening up when you use this example.

Mon, 09/27/2010 - 13:55 | 607594 chinaboy
chinaboy's picture

Kind of disappointed that deep thinkers don't really have good strategies here.

Sun, 03/13/2011 - 22:32 | 1048281 ManOfBliss
ManOfBliss's picture

What did you want specifically? The play couldn't be easier.

Just go physical, and stop pulling paper tricks.

Mon, 09/27/2010 - 14:04 | 607631 THE 4th Quadrant
THE 4th Quadrant's picture

Unfortunately, we don’t know when that’s going to happen because we have no way of knowing when the market loses confidence in a government’s ability to fund itself.

I know. And it's not about confidence. The bond market will never be allowed to unwind in any other way than it's masters allow it to unwind. You can bet your Kuggerrands on that.

Mon, 09/27/2010 - 14:11 | 607653 Tic tock
Tic tock's picture

with an online account, you wait - don't try to catch the top, unless youo're readfy to pull out if you're wrong.. when the fall starts it'll last a few days at least and more imporantly, it'll be heralded by a significant development in the credit markets.. unmistakeable. till then just wait - check in once a day to see what's happening, or you're seriously, seriously risking the capital..! then, choose a sector, find an inverse etf - if shorts are still allowed, better still in an etf not quoted in dollars, and hope the gyrations don't milk you too much


Mon, 09/27/2010 - 14:30 | 607709 Bankster T Cubed
Bankster T Cubed's picture

how about you do the opposite?

or better yet, how about you take your money OUT OF SECURITIES MARKETS altogether because the criminals rigging them are leaving only one ending scenario:  total elimination of them in a "one bad day" collapse that takes them to zero and ushers in their new design for the world financial and political system.


Mon, 09/27/2010 - 20:45 | 608660 Occams Aftershave
Occams Aftershave's picture

I'm expecting major disruptions, but tell me why these criminals rigging the markets would want to destroy their own net worth ?

Mon, 09/27/2010 - 16:21 | 608088 Djirk
Djirk's picture

What is the bi-flation trade? Commodities up? MBS down?

Mon, 09/27/2010 - 18:14 | 608396 GoldbugVariation
GoldbugVariation's picture

* UK market (FTSE100) puts - not expensive and potential for extra alpha if $ falls vs. GBP as that is bad for FTSE100 stocks (mostly multinationals with earnings reported in GBP).  But, if commodity prices rise denominated in GBP (especially oil) then FTSE100 may not collapse as it comprises at least 20% oilcos and also miners.  So combine this one with oil calls.

* Ultrashort treasuries ETF - like buying yield - low risk because it is currently priced so low, downside limited, plenty of upside potential

Mon, 09/27/2010 - 23:15 | 608963 Hot Shakedown
Hot Shakedown's picture

Is this not a 'dated' point of view? re: oil, Iran? 


With Citi, Goldman and 2 other US banks setting up shop in Iran, how will the Israel "effect" ever have any teeth?

Tue, 09/28/2010 - 02:32 | 609252 Grand Supercycle
Grand Supercycle's picture

S&P 500 FINANCIALS INDEX - an important chart:

Tue, 09/28/2010 - 11:01 | 610081 pocatello
pocatello's picture

I don't get it.  I enjoyed this article, but I have to admit that it is way over my head.  I don't know how to profit from these ideas.  I invite explanations on how to make these trades.  Thanks.

Fri, 10/01/2010 - 16:50 | 619300 pocatello
pocatello's picture

Can anyone explain how to profit from these trades?


Or even simpler... how do you execute these trades?

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