Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
The clock is a clever selling idea that it is nothing more than a device designed to attract attention. It is nothing like a precise analysis that is summarized into a time projection. It is a gross guesstimation made by a handful of scientists who are not especially qualified to venture an opinion on either nuclear war probabilities or climate change issues.
The fact that this small uninformed cohort have scientific training contributes a thin intellectual veneer of false perception skills that these scientists do not own. An equal number of MFOers could be assembled to formulate an estimate that has an equivalent likelihood of being right.
That likelihood has a near zero probability of being accurate since the questions addressed are truly Black Swan in character. By definition, Black Swan events are not predictable.
I was in the military in the early 1960s during the Cuban Missile Crisis. That was a very dangerous time. Our unit was ordered to clean weapons and check socks in anticipation of an immediate deployment. It never happened. During that fearful time, the Doomsday Clock was minutes higher than it is today. That makes no sense whatsoever.
The Doomsday Clock is pure gobbledygook with nothing but opinion to support it. My risk hedging strategy is to completely ignore it. It is totally meaningless.
I'm disappointed that you elected to post on it. At this juncture in his service, the Doomsday Clock is an unwarranted slam on the unknowable Trump Presidency. I plan to wait and see. I'll reserve judgement, especially with regard to the likelihood of nuclear war predictions. I don't possess that foresight capability. I respectfully suggest that neither you nor the Doomsday Clock committee have that foresight either. As you correctly titled your post, it is a real Black Swan.
@MJG I'm disappointed by your disappointment, but not surprised. You never fail to patronize. It's not even just the doomsday clock that is the problem. It is the sheer power of the weaponry unlike we've ever seen before as described in the video. And yes, it is specifically related to politics and related to Trump's specific language about wanting to re-ignite the nuclear arm's race. And I am not "fear mongering" as some attempt to simply slam Trump. I am genuinely afraid. And if you're trying to impress me by the fact that you were in the military 50 years ago and therefore are trying to pass yourself off as some sort of expert on all things military, you've failed. The power of the weaponry today and its more widespread distribution, and the sheer recklessness of some of the leaders who possess that weaponry in not only the U.S. and Russia but also now Pakistan and North Korea justify a heightened level of awareness that could easily exceed the Cuban missile crisis.
You completely misinterpret my purpose in mentioning my military experience. In the early 1960s we were within a minor accident of actually going to,war, yet the Doomsday Clock was at a relatively high setting. That illustrates how faulty that badly assembled measurement really is. If it were anyway near a reliable measurement, it should have been seconds away from an imminent world ending war as the Russian ships carrying missiles approached Cuba.
My limited military service in no way qualifies me as an expert on things military or even nonmilitary. In the Cuba case, it just made me very aware of how close we came to actual combat.
Regardless, the Doomday Clock was unreliable during that stressful period and it is equally misguided now. Your political bias is causing you worry that will needlessly degrade your lifestyle. I don't worry things I can not influence.
"In 1947, during the Cold War, the Clock was started at seven minutes to midnight ("midnight" being a hypothetical global catastrophe) and was subsequently advanced or rewound per the state of the world and nuclear warfare prospects. The Clock's setting is decided by The Bulletin of the Atomic Scientists's Science and Security Board and is completely arbitrary without a specified starting time. The Clock is not set and reset in real time as events occur; rather than respond to each and every crisis as it happens, the Science and Security Board meets twice annually to discuss global events in a deliberative manner. The closest nuclear war threat, the Cuban Missile Crisis in 1962, reached crisis, climax, and resolution before the Clock could be set to reflect that possible doomsday."[13]
Your political bias is showing. Doctor, heal thyself.
Thanks for the reference that describes the biennial adjustments made to the Doomsday Clock. I was not familiar with the adjustment schedule. I am surprised by its infrequent and time scheduling. It would be a more meaningful and useful measurement if it were event driven with more frequent updates. Too, too bad!
The Clock adjustments are so restricted that they highlight the untimeliness of their readings. The missing of the Cuba incident demonstrates its severe limitations. My assessment has nothing to do with politics. The device simply does not cut the mustard.
I have not and will never use the Doomsday Clock to make portfolio changes. Better measured signals exist.
@ Lewis: MJG is correct, "This type of post is blatant fear-mongering." Please stop trying to turn MFO Discussion Board into a platform for left-wing communist propaganda.
"Please stop trying to turn MFO Discussion Board into a platform for left-wing communist propaganda."
The bomb doesn't care what political party you belong to. I'm beginning to think you don't know what the meaning of "communist" is. The risk of some form of nuclear escalation is very real and will affect markets. And I do think some sort of out of the money put option is the best way to hedge against that geopolitical risk.
Basically an out of the money put option is cheap insurance that only pays off if the worst happens. It is the financial equivalent of catastrophic insurance. It will do nothing in a normal market but if the market goes down 15% or 20% it can save your portfolio. One could argue it is the ideal insurance policy for a black swan type event. There is of course a cost to it that will act as a drag, but with volatility low right now such insurance is cheaper than usual as it is priced on market volatility.
My brain says stay out of this. But my heart recalls a poignant Gordon Lightfoot song - maybe from the 70s. Sorry @Ted if you consider the sentiments Communistic. Some would call them Humanistic.
The space shuttle ends where the subway begins There's a tear on the face of the moon Fromdusk until dawn they have searched all day long But there's too many clues in this room At best it is said we've been locked deep inside Of an old sea man's chest full of charts Where maps are contained and what's left of his brains When his crew threw his balls to the sharks
All around the looking glass Dancing to a tune Sweeping out the house with a fine tooth comb Which history's shown Leads to ruin
In a word it is said that at times we must fall But the worst of it all was the lies We died for the cause just like regular outlaws In the dust of an old lawman's eyes In times best forgot there was peace there was not In her pains mother earth came to bloom Her children were born in the eye of the storm And there's too many clues in this room
The power that is stored in the no man's land of chance Is the someone who knows what they're doin' The old soldiers say in they're own crusty way We've got too many troops in this room
All around the looking glass Dancing to a tune Sweeping out the house with a fine tooth comb Which history's shown Leads to ruin
The space shuttle ends where the subway begins Praise the lord there's a train leavin' soon From dusk until dawn they have searched all day long But there's too many clues in this room
@Mark: The lyrics without the music just doesn't cut it with me Why not let You Tube do the work ? Regards, Ted Gordon Lightfoot: Too Many Clues In This Room:
@Ted - I've been called a lot of things lately. But please know that @Mark is much smarter than me - and also understands investing better.
Anyway - Thanks for the link. I'm delighted you're able to look beyond your narrow political lense and appreciate Lightfoot's song. Can't tell you how many times I listened to it over & over in the late 70s, along with his other memorable one, The Wreck of the Edmund Fitzgerald, both on vinyl back than. Being in the Great Lakes area, the second was especially meaningful.
Regards ---
Folks, there probably aren't any good hedges. As far as I know, most homeowners policies don't cover damages resulting from war. Insurance companies would be swamped with medical claims. Maybe the "survivalists" hiding in their holes with a hoard of gold and silver would fare best. Our political "leaders" would fare a bit "less worse" - as elaborate underground hideouts do exist - providing their airborne command post could find a suitable landing strip.
@Hank: Too Many Clues In This Room sounds almost the same as The Wreck Of The Edmund Fitzgerald, wouldn't you agree Regards, Ted he Wreck Of The Edmund Fitzgerald:
@Hank: Too Many Clues In This Room sounds almost the same as The Wreck Of The Edmund Fitzgerald, wouldn't you agree Regards, Ted
Agree Ted. Quite similar. Both gloomy in tone. Similar melody.
Fishing out on Lake Michigan in 2-3 foot seas in a 14-foot boat in the 70s & 80s, the "roll" of the small boat riding the swells would seem to mimic the rhythm Lightfoot establishes in that song. I'd often find myself humming the tune.
I still remember my training from back in early grammar school. The nuns were directed to teach us how to "duck and cover". A special tip was if you could scoot under your desk a little that would even be better. I think everyone should have this training if you haven't already.
I too practiced the same drill in the East coast public school classrooms of New Jersey in the 1940s. It appears to have been a common exercise in both time and space.
I am a little familiar with the works of Gordon Lightfoot, but I would not classify myself as a knowledgeable fan. I do like his songs and his singing. He is a good storyteller. I had no difficulty understanding the Edmund Fitzerald tragedy. But I totally failed to decode the meaning buried in the Many Clues in This Room song. I guess I'm just far too literal when hearing things.
I did a brief web search to resolve my interpretation shortfall without much success. Apparently I am not alone here; many uncertain understandings from many puzzled folks. I'm not sure Lightfoot can give us a definitive answer either. Some folks think it was about Watergate; I don't know.
That's also often the case when reviewing why we made an earlier investment decision. The reasons at decision time might not be remembered accurately and/or they have changed with the passage of time.
There have been many books written about the Cuban Missile Crisis. I would recommend "One Minute To Midnight" by Michael Dobbs, published in 2008. He used declassified documents from both sides as well as existing research to tell a harrowing tale. In the process he is also able to expose a few myths surrounding the events. To MJG's point there were a couple of " minor accidents" that could have led to dire consequences. As JFK is quoted in the book "There is always one sonofab*tch that doesn't get the word".
This was likely a bit more tense at the time; than was known to the public. For the younger readers here; please remember that the global communications used by the public today was not in place at the time of this event.
Sidenote: A location where I worked many years ago had Russian "fishing boats" on patrol constantly. Ya, they were "fishing"; but not for something to fry in a pan upon the stove top. Regards, Catch
Here's a black swan which is very real....in about a month we face a government shut-down as a result of a showdown over the budget and the debt. I'm not sure where the cooler heads are which may prevent that.
Basically an out of the money put option is cheap insurance that only pays off if the worst happens. It is the financial equivalent of catastrophic insurance. It will do nothing in a normal market but if the market goes down 15% or 20% it can save your portfolio. One could argue it is the ideal insurance policy for a black swan type event. There is of course a cost to it that will act as a drag, but with volatility low right now such insurance is cheaper than usual as it is priced on market volatility.
The problem is the Black Swan event - and hopefully not the one you describe - will never happen as long as your options have not expired. The very next day it will occur.
Catastrophic Portfolio Insurance. Interesting idea. However, let me tell you why it will not work. Because if there was a chance it would work, Insurance companies would be selling it already. I mean SELLING it as in marketing the hell out of it.
@VintageFreak Insurance companies already do sell catastrophic portfolio insurance via annuities that have high water marks and guaranteed rates of return. Although they don't disclose how they insure that your annuity portfolio doesn't lose more than 20% of its value over the lifetime of the contract or sometimes that it doesn't lose anything if you pay more, I would bet that options or some form of derivative play an important role in making that insurance work. It should be cheaper though and actually safer--because you're not dealing with the insurer's overarching credit risk--to build this insurance yourself with options. In fact, I was studying the call and put options for the QQQ ETF recently and saw you could build an options collar: investopedia.com/terms/c/collar.asp in which you limit your upside to the Nasdaq 100 to 10% over the next ten months while insuring that you don't lose more than 15% to 20% during that period. If one is willing to give up any upside above 10% over the next ten months, the cost of that catastrophic insurance is essentially free. Given that we are now 8 years into a bull market and stocks have already run quite a lot recently, asking for much more than a 10% return in the next ten months seems irrationally exuberant. So this insurance package right now is I think actually a pretty good deal.
"@ Lewis: MJG is correct, "This type of post is blatant fear-mongering." Please stop trying to turn MFO Discussion Board into a platform for left-wing communist propaganda. "
Sorry Ted I always respected you for your diligent and often helpful posting, but if, in your opinion, the Washington post and international scientists are left wing communists, may be you should be called a right wing fascist, however that would probably not be a just characterization either, or??
@LewisBraham Personally I think Annuities are evil. They are one of those things that should not exist. Like Financial Advisors.
And I really didn't mean insurance they way you are suggesting it. Just like you are saying since we are in 8 year bull market we are unlikely to get good returns going forward, I was suggesting maybe there are companies like AIG which literally take monthly premiums to insure once portfolio. In turn THEY buy options in case they have to shell out money if market tanks because their options will be in the money.
In any case, buying options for individuals I feel is hard. IF you are doing it, my best wishes are with you. I'm confident you will do it better than Hussman, who is allegedly a professional and has obviously made a royal mess of it with his hedges costing investors double digit losses.
Comments
This type of post is blatant fear-mongering.
The clock is a clever selling idea that it is nothing more than a device designed to attract attention. It is nothing like a precise analysis that is summarized into a time projection. It is a gross guesstimation made by a handful of scientists who are not especially qualified to venture an opinion on either nuclear war probabilities or climate change issues.
The fact that this small uninformed cohort have scientific training contributes a thin intellectual veneer of false perception skills that these scientists do not own. An equal number of MFOers could be assembled to formulate an estimate that has an equivalent likelihood of being right.
That likelihood has a near zero probability of being accurate since the questions addressed are truly Black Swan in character. By definition, Black Swan events are not predictable.
I was in the military in the early 1960s during the Cuban Missile Crisis. That was a very dangerous time. Our unit was ordered to clean weapons and check socks in anticipation of an immediate deployment. It never happened. During that fearful time, the Doomsday Clock was minutes higher than it is today. That makes no sense whatsoever.
The Doomsday Clock is pure gobbledygook with nothing but opinion to support it. My risk hedging strategy is to completely ignore it. It is totally meaningless.
I'm disappointed that you elected to post on it. At this juncture in his service, the Doomsday Clock is an unwarranted slam on the unknowable Trump Presidency. I plan to wait and see. I'll reserve judgement, especially with regard to the likelihood of nuclear war predictions. I don't possess that foresight capability. I respectfully suggest that neither you nor the Doomsday Clock committee have that foresight either. As you correctly titled your post, it is a real Black Swan.
Best Wishes
Thanks for your prompt reply.
You completely misinterpret my purpose in mentioning my military experience. In the early 1960s we were within a minor accident of actually going to,war, yet the Doomsday Clock was at a relatively high setting. That illustrates how faulty that badly assembled measurement really is. If it were anyway near a reliable measurement, it should have been seconds away from an imminent world ending war as the Russian ships carrying missiles approached Cuba.
My limited military service in no way qualifies me as an expert on things military or even nonmilitary. In the Cuba case, it just made me very aware of how close we came to actual combat.
Regardless, the Doomday Clock was unreliable during that stressful period and it is equally misguided now. Your political bias is causing you worry that will needlessly degrade your lifestyle. I don't worry things I can not influence.
Best Wishes
Thanks for the reference that describes the biennial adjustments made to the Doomsday Clock. I was not familiar with the adjustment schedule. I am surprised by its infrequent and time scheduling. It would be a more meaningful and useful measurement if it were event driven with more frequent updates. Too, too bad!
The Clock adjustments are so restricted that they highlight the untimeliness of their readings. The missing of the Cuba incident demonstrates its severe limitations. My assessment has nothing to do with politics. The device simply does not cut the mustard.
I have not and will never use the Doomsday Clock to make portfolio changes. Better measured signals exist.
Best Wishes
@LewisBraham https://thebalance.com/determining-intrinsic-value-1031125
The space shuttle ends where the subway begins
There's a tear on the face of the moon
Fromdusk until dawn they have searched all day long
But there's too many clues in this room
At best it is said we've been locked deep inside
Of an old sea man's chest full of charts
Where maps are contained and what's left of his brains
When his crew threw his balls to the sharks
All around the looking glass
Dancing to a tune
Sweeping out the house with a fine tooth comb
Which history's shown
Leads to ruin
In a word it is said that at times we must fall
But the worst of it all was the lies
We died for the cause just like regular outlaws
In the dust of an old lawman's eyes
In times best forgot there was peace there was not
In her pains mother earth came to bloom
Her children were born in the eye of the storm
And there's too many clues in this room
The power that is stored in the no man's land of chance
Is the someone who knows what they're doin'
The old soldiers say in they're own crusty way
We've got too many troops in this room
All around the looking glass
Dancing to a tune
Sweeping out the house with a fine tooth comb
Which history's shown
Leads to ruin
The space shuttle ends where the subway begins
Praise the lord there's a train leavin' soon
From dusk until dawn they have searched all day long
But there's too many clues in this room
http://www.lyricsfreak.com/g/gordon+lightfoot/too+many+clues+in+this+room_20061660.html
Regards,
Ted
Gordon Lightfoot: Too Many Clues In This Room:
Anyway - Thanks for the link. I'm delighted you're able to look beyond your narrow political lense and appreciate Lightfoot's song. Can't tell you how many times I listened to it over & over in the late 70s, along with his other memorable one, The Wreck of the Edmund Fitzgerald, both on vinyl back than. Being in the Great Lakes area, the second was especially meaningful.
Regards
---
Folks, there probably aren't any good hedges. As far as I know, most homeowners policies don't cover damages resulting from war. Insurance companies would be swamped with medical claims. Maybe the "survivalists" hiding in their holes with a hoard of gold and silver would fare best. Our political "leaders" would fare a bit "less worse" - as elaborate underground hideouts do exist - providing their airborne command post could find a suitable landing strip.
Regards,
Ted
he Wreck Of The Edmund Fitzgerald:
Fishing out on Lake Michigan in 2-3 foot seas in a 14-foot boat in the 70s & 80s, the "roll" of the small boat riding the swells would seem to mimic the rhythm Lightfoot establishes in that song. I'd often find myself humming the tune.
Regards,
Ted
https://www.google.com/maps/uv?hl=en&pb=!1s0x880e285a7040afe5:0xb8cef886505c99d7!2m19!2m2!1i80!2i80!3m1!2i20!16m13!1b1!2m2!1m1!1e1!2m2!1m1!1e3!2m2!1m1!1e5!2m2!1m1!1e4!3m1!7e115!4zaHR0cHM6Ly95YWxsYWJvb2suY29tL2d1aWRlL3Nob3cucGhwP25pZD0yMzAwJiVEOCVCNCVEOCVBNyVEOSU4NyVEOCVBRi0lRDglQTclRDklODQlRDglQUQlRDklOEEtJUQ4JUE3JUQ5JTg0JUQ5JTgyJUQ5JTg4JUQ4JUI3JUQ5JThBLSVEOCVBMyVEOSU4MyVEOCVBQiVEOCVCMS0lRDglQTMlRDglQUQlRDklOEElRDglQTclRDglQTEtJUQ4JUE4JUQ4JUIxJUQ4JUI0JUQ5JTg0JUQ5JTg4JUQ5JTg2JUQ4JUE5LSVEOCVCMSVEOCVCOSVEOCVBOCVEOCVBNy0lRDklODglRDglQUMlRDklODUlRDglQTclRDklODQlRDglQTc!5sphilip+neri+-+Google+Search&imagekey=!1e1!2shttps://yallabook.com/blog/admincp/userfiles/st-philip-neri-eric-allix-rogers-01.jpg&sa=X&ved=0ahUKEwi_o42ai_fSAhVF2oMKHVbCBHgQoioIczAK
I too practiced the same drill in the East coast public school classrooms of New Jersey in the 1940s. It appears to have been a common exercise in both time and space.
I am a little familiar with the works of Gordon Lightfoot, but I would not classify myself as a knowledgeable fan. I do like his songs and his singing. He is a good storyteller. I had no difficulty understanding the Edmund Fitzerald tragedy. But I totally failed to decode the meaning buried in the Many Clues in This Room song. I guess I'm just far too literal when hearing things.
I did a brief web search to resolve my interpretation shortfall without much success. Apparently I am not alone here; many uncertain understandings from many puzzled folks. I'm not sure Lightfoot can give us a definitive answer either. Some folks think it was about Watergate; I don't know.
That's also often the case when reviewing why we made an earlier investment decision. The reasons at decision time might not be remembered accurately and/or they have changed with the passage of time.
Best Wishes
This was likely a bit more tense at the time; than was known to the public. For the younger readers here; please remember that the global communications used by the public today was not in place at the time of this event.
https://en.wikipedia.org/wiki/USS_Pueblo_(AGER-2)
Another: http://www.history.com/this-day-in-history/american-ship-mayaguez-seized
Sidenote: A location where I worked many years ago had Russian "fishing boats" on patrol constantly. Ya, they were "fishing"; but not for something to fry in a pan upon the stove top.
Regards,
Catch
Catastrophic Portfolio Insurance. Interesting idea. However, let me tell you why it will not work. Because if there was a chance it would work, Insurance companies would be selling it already. I mean SELLING it as in marketing the hell out of it.
Wonder if AIG will insure one's portfolio.
Insurance companies already do sell catastrophic portfolio insurance via annuities that have high water marks and guaranteed rates of return. Although they don't disclose how they insure that your annuity portfolio doesn't lose more than 20% of its value over the lifetime of the contract or sometimes that it doesn't lose anything if you pay more, I would bet that options or some form of derivative play an important role in making that insurance work. It should be cheaper though and actually safer--because you're not dealing with the insurer's overarching credit risk--to build this insurance yourself with options. In fact, I was studying the call and put options for the QQQ ETF recently and saw you could build an options collar: investopedia.com/terms/c/collar.asp in which you limit your upside to the Nasdaq 100 to 10% over the next ten months while insuring that you don't lose more than 15% to 20% during that period. If one is willing to give up any upside above 10% over the next ten months, the cost of that catastrophic insurance is essentially free. Given that we are now 8 years into a bull market and stocks have already run quite a lot recently, asking for much more than a 10% return in the next ten months seems irrationally exuberant. So this insurance package right now is I think actually a pretty good deal.
"@ Lewis: MJG is correct, "This type of post is blatant fear-mongering." Please stop trying to turn MFO Discussion Board into a platform for left-wing communist propaganda. "
Sorry Ted I always respected you for your diligent and often helpful posting, but if, in your opinion, the Washington post and international scientists are left wing communists, may be you should be called a right wing fascist, however that would probably not be a just characterization either, or??
And I really didn't mean insurance they way you are suggesting it. Just like you are saying since we are in 8 year bull market we are unlikely to get good returns going forward, I was suggesting maybe there are companies like AIG which literally take monthly premiums to insure once portfolio. In turn THEY buy options in case they have to shell out money if market tanks because their options will be in the money.
In any case, buying options for individuals I feel is hard. IF you are doing it, my best wishes are with you. I'm confident you will do it better than Hussman, who is allegedly a professional and has obviously made a royal mess of it with his hedges costing investors double digit losses.