hedging a portfolio against a black swan

[Trader13]

I wish there were some way to "short" the advice in this thread.

 

[stepandfetchit]

Trader13: Hey, watch it now! I resemble that remark! ;-)

 

[lawrence-lugar]

I wish there were some way to "short" the advice in this thread.

....if you 'shorted ' the advice on this Entire forum...you'd be a very rich man.
Compound and compound this shit since its inception...we're talking alot of money here,

 

[OptionGuru]

I wish there were some way to "short" the advice in this thread.

Could you be more specific?

Hedging is a slippery slope - you have to balance cost to potential lost opportunities.

 

[Trader13]

Could you be more specific?

Hedging is a slippery slope - you have to balance cost to potential lost opportunities.

As I read it, is your advice to purchase the US Dollar index to hedge a black swan event on the US stock market? Just seeking a simple confirmation that I correctly understood your recommendation.

 

[OptionGuru]

As I read it, is your advice to purchase the US Dollar index to hedge a black swan event on the US stock market? Just seeking a simple confirmation that I correctly understood your recommendation.

Sell 20% of his (the OP's) portfolio for USD. I base that on the info in the OP.

EDIT: Keep in mind the "black swan" event may never happen.

 

[i960]

Sell 20% of his (the OP's) portfolio for USD. I base that on the info in the OP.

EDIT: Keep in mind the "black swan" event may never happen.

How is that even remotely a hedge for anything? He's not hedging currency risk and "take 20% of your account to cash" isn't a hedge.

I guess by that logic if one's car is having problems and they want to hedge against being stranded they should not purchase AAA but instead just drive the car less or park it and not use it.

 

[Trader13]

Sell 20% of his (the OP's) portfolio for USD. I base that on the info in the OP.

EDIT: Keep in mind the "black swan" event may never happen.

What is the basis for your assertion that a currency like USD is a hedge for an extreme down move in the broad US stock market? Look at the black swan event that occurred on 9/11/01 for an example of what happened when the stock market dived.

Historically, there has been some value in a long USD position (e.g., long futures on the US Dollar Index) if you are hedging a globally-priced commodity like crude oil. But even that relationship is breaking down as US oil supply increasing comes from domestic sources.

 

[OptionGuru]

How is that even remotely a hedge for anything? He's not hedging currency risk and "take 20% of your account to cash" isn't a hedge.

What is the basis for your assertion that a currency like USD is a hedge for an extreme down move in the broad US stock market? Look at the black swan event that occurred on 9/11/01 for an example of what happened when the stock market dived.

Historically, there has been some value in a long USD position (e.g., long futures on the US Dollar Index) if you are hedging a globally-priced commodity like crude oil. But even that relationship is breaking down as US oil supply increasing comes from domestic sources.

• What would you guys do based on the OP?
• Keep in mind the "black swan" event may never happen (and this point is important).

 

[i960]

• What would you guys do based on the OP?
• Keep in mind the "black swan" event may never happen (and this point is important).

Nothing that hasn't already been covered in this thread already. There's no magic solution.