Note: see latest article here, http://statisticalideas.blogspot.com/2017/05/transient-risk-demise.html
There should be some comfort that financial instruments are designed to be priced efficiently and have financial-engineering properties about them, similar to simply borrowing stocks and buying bonds. Yet one thinking about the tail risks in an over-valued market, does not defend one from employing too much of the wrong strategy (those principally designed only to hedge specific risk exposure). See this live poll below, where people express their favored instrument for the current markets! It’s clear that the preference of people can swing too far away from safe hedging, and into a position of extreme market leveraging (and in a reverse exposure, opposite the markets). This leverage destroys one’s capital returns and can result in outright financial ruin. So enjoy the market run-up (often stated in these links here and here that this decennial circumstance will undoubtedly terminate in a ravishing crash, and before year-end). And steer clear of put options, unless you are certain that you are using them only in their limited purpose of downside hedging. Appreciate further that notwithstanding the real-life characters in the story The Big Short, most who try to forcibly short the market in previous lofty levels, were often way too early (a.k.a. wrong) and instead experienced rapid ruin before realizing some of the eventual market fall.
There should be some comfort that financial instruments are designed to be priced efficiently and have financial-engineering properties about them, similar to simply borrowing stocks and buying bonds. Yet one thinking about the tail risks in an over-valued market, does not defend one from employing too much of the wrong strategy (those principally designed only to hedge specific risk exposure). See this live poll below, where people express their favored instrument for the current markets! It’s clear that the preference of people can swing too far away from safe hedging, and into a position of extreme market leveraging (and in a reverse exposure, opposite the markets). This leverage destroys one’s capital returns and can result in outright financial ruin. So enjoy the market run-up (often stated in these links here and here that this decennial circumstance will undoubtedly terminate in a ravishing crash, and before year-end). And steer clear of put options, unless you are certain that you are using them only in their limited purpose of downside hedging. Appreciate further that notwithstanding the real-life characters in the story The Big Short, most who try to forcibly short the market in previous lofty levels, were often way too early (a.k.a. wrong) and instead experienced rapid ruin before realizing some of the eventual market fall.
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