On Monday, 19 September 2016 at 02:39:33 UTC, Walter Bright wrote:
On 9/18/2016 5:20 PM, Andrei Alexandrescu wrote:
Thanks. Well this kinda boils down to a tautology. I remember my wife asked me once "what kind of insurance could protect us against anything"? There isn't one (which is kinda terrifying first time you realize it). In the US, as an aside, I don't think there is even a medical insurance that could protect you from
financial ruin in all cases.

There is no easy option, and there is no risk-free option - so obviously we
aren't looking for such.

My fatalistic view is if the market tanks that badly, it'll bring down everything else with it.

What I mean is that if you have a margin account and never use margin, I believe - unless things have changed - that you expose yourself to custody risk that you wouldn't have without a margin account. If you're going to have a margin account, you might even make sure you have an unlevered account as well, since this custody risk is reward free.

And as regards equities, a fifty percent retracement in equities would be unexceptional given the move since 2009,and your asset allocation should be prepared for that possibility. Being levered might not be consistent with that. That kind of move certainly wouldn't mean it brings down everything with it, just that it's a hairy period of the kind that happens from time to time. It's entirely possible to have such a move with a surprisingly strong economy because stronger wage growth and higher rates might be difficult for some sectors and that's not what people expect now, and not what is priced in.

I emailed Andrei directly on lending club.

In investing, think about risk first, and consequences over probability. Taleb is mostly right on this. The distribution of returns isn't Gaussian.

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