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Even long-term investors have to respect bet sizing. There are limits to how much correlated bets one can make, unless they are never wrong

But even if one goes beyond risk of ruin and consider position sizing only, it's still likely to be an overbet (and thus, detrimental to long-term returns) to put it all in a situation like that. The kelly formula would only let you do that if you are super sure of the future (very high win %s)...

Or you could just stash $20M in a Luxemburg bank, move to a country that doesn't implode and still live pretty well. The Roman/UK empire blew up and the entire world continued to exist

If you lose 90%, you are a lot closer to losing 100% then if you don't lose that 90%. Many equity markets around the world have gone to 0. Risk of ruin increases the worse the depression is. Historically the worst US depression sent stocks down 90% but market history shows that if anything, new...

I explained already several times. Depression risk represents ruin or at the very least, if you consider the chance of that, then 100% in US equities would be an 'overbet' according to the Kelly criterion (so it would produce long-term negative returns despite positive expectation). It almost...

The puts? Probably. But the personal investments, I'm not so sure

I dont have that much problem with his puts trades on Berkshire. What I don't understand were the personal risks he was taking, taking his personal account (which I believe was around $100M a few years ago) and doubling down on US equities. Had he been wrong and the US faced a depression, he...

The US could have imploded but the rest of the world didn't had to (at least, not to the same extent). If you look at in the 30's, lots of countries had GDP collapses much smaller than the US. Switzerland/Luxemburg and other places would likely still to be safe havens, he could have taken his...

Back in 2008, Buffett said he was buying US stocks with his non-Berkshire money, with up to 100% of networth http://www.nytimes.com/2008/10/17/opinion/17buffett.html "So ... I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but...

But one thing that I don't get it why did Buffett own UST bonds in his private account in the years leading up to 2008 and then in 2008, he switched from bonds to stocks, apparently for up to 100% of his allocation http://www.nytimes.com/2008/10/17/opinion/17buffett.html "So ... I’ve been...

But of course, a lot of the time these people can't sell because it would spook private investors if the CEO is just dumping stock like there is no tomorrow. So its possible that there are forced to be on their hugely sized bet. When the stock goes public, then they can sell more easily but as a...

Was playing around with the Kelly Criterion formula. According to it, the optimal bet for 2-1 payoff trade with a 40% chance of winning is 10% of capital. But what's interesting is that if you take the payoff and turn into a "subrime CDS" pay off level of 50 to 1, the optimal bet is 38.8%. And...

I bought some Mar 17'17 IWM puts 130 128 strikes to trade this Trump vol a bit. I'm getting chopped around some by using the underlying so its better to just buy puts and be done with it. VIX is pretty low now

This Fed meeting was a non-event as it should have been. What matters is the next one and the ones after that, which have Fed forecasts with them. To me, what matters is the Fed's long-term forecast for: -Fed funds (not the 'dots' which the media will all over but are actually irrelevant) but...

Apparently Johnny Depp is on the verge of bankruptcy. The company he is suing (that is counter suing) said he spent $2M a month for 20 years (a staggering almost half a billion dollars). He owns more 14 properties including a few islands on the Bahamas and a castle in France, 200 works of art...

The Brazilian central bank president said yesterday that they eventually might bring down the inflation target to 3% (from the current 4.5% to 6.5%). With real rates at 2-4%, nominal rates would be at 5-7%, let's call it 6%. The markets are pricing in a long-term rate of around 11% ish. If some...

'In the process of being confirmed as Mr Trump’s commerce secretary, Wilbur Ross somewhat reassuringly said that he had learned the lessons of the Smoot-Hawley Tariff Act, which raised thousands of tariffs in the 1930s. (It “didn’t work very well, and it very likely wouldn’t work now”.) '...

You can buy Treasury bonds and still have the SIPC insurance "SIPC protects stocks, bonds, Treasury securities, certificates of deposit, mutual funds, money market mutual funds and certain other investments as "securities." SIPC does not protect commodity futures contracts (unless held in a...

Here is a scary thought. I mentioned in the past a Asness study that I'm a fan of that talks about the Fed Model and the Stock Market. In it, he talks about how the last 20 years standard deviation of the stock market (or the bond market) tend to affect how those assets are valued in the future...

Here is some good news, after the Fed's latest hike, IB is finally back at paying interest on cash balances. Right now its nothing, only 0.16% on balances after the first 10K (a whopping $144 on a $100K balance) but if the Fed does go to it's 'long-run' FF of 3%. IB will pay that minus 50bps, so...