Faber: Dow may plunge to 1000

[hancocs]

http://www.moneynews.com/StreetTalk/marc-faber-dow-stocks-1000/2010/08/05/id/366673

His suggestion of what to do about it is interesting.

[Atash Hagmahani]

That snippet was taken out of a larger context that I happened to have heard. Just to make it clear: He didn't say it was PROBABLE. Only that it was possible, that it is a tenable point-of-view, and that such a scenario would have consequences.

Beware of really short articles taken out of larger contexts. 

[Mike]

http://online.barrons.com/article/SB50001424052970204304404575449470738086914.html?mod=googlenews_barrons

For reference, I don't really think it is worth the click.

Summary: Managers are 'Black Swanning' their portfolios just in case the stock market drops by 20%.  They do this by buying far-out-of-the-money puts.

**
Ok.  So the managers have read the book; adopted the phrase; and are hedging against a market decline.

A "Black Swan" is not 'decline'.  A 'Black Swan' is something outside of the randomly unlikely.  A 'Black Swan' is more like an event, or series of events, that blind-sides everyone , except the likes of Napoleon Dynamite who drew 'ligers,' a cross between a tiger and a lion.....and would not have been blind-sided by their existence.

My Question/suspicion:
1) Is  buying-a-put similar to a credit default swap in that there is counter-party risk?
2) The real risk is some kind of Argentine/Soviet collapse, where markets and distribution just cease.

[Atash Hagmahani]

1) Is  buying-a-put similar to a credit default swap in that there is counter-party risk?

Yes, there is counter-party risk, because if the market really crashed, the counter-party might get a margin call he can not meet.

[tigger]

except the likes of Napoleon Dynamite who drew 'ligers,' a cross between a tiger and a lion.....and would not have been blind-sided by their existence.

  Late at night, I start thinking that way myself.