brewer12345 said:
I think that you would be better served by spending the time and money to put a meteorite deflector on your car...
For the safety of our posters, even our veterans, I think such comments should be preceded by the label "HUMOR WARNING!!". I was choking so hard laughing on my coffee that I could hardly spew it evenly across the monitor. EMS didn't know which one of us to wipe down first...
Running_Man said:
Why is it anytime one asks a question and there is a disagreement over a low probability event happening that the response is "tinfoil hat territory". I take answers such as that as insulting the person since you are not able to provide an intelligent and rational counter-arguement so you demean anyone in disagreement. I find this type of arguement very disrespectful.
Because the person asking the logical question was already given logical answers-- "very low probability of occurrence" and "adequate insurance". When the questioner keeps on arguing that it's still a concern, despite being a lower probability than a meteor strike, they're not being logical anymore... they're being paranoid. But somehow you've decided that the subsequent paranoid question wasn't disrespectful of the logical answer? What other logical argument is supposed to be put forth?
I think subsequent illogical questions can appropriately be met by the "tinfoil" or "meteor deflector" words to try to jolt the questioner out of their rut. (No disrespect intended to those who are already wearing tinfoil hats while designing their deflectors.) If a questioner can't use those comments for self-examination without getting their feelings hurt then they should probably find another Internet discussion board.
Running_Man said:
Do we honestly all believe a fraud cannot occur? If Amaranth can lose 2/3 of it's value in 2 weeks from 1 broker who independently lost over 6 billion dollars?
No. We just believe that it has a very low probability of occurence and that appropriate risk measures have been taken. When I wear pants, I draw the line at belts & suspenders and I'm not tying a rope around my tinfoil hat in case the first two fail.
Ye gods, if Sarbanes-Oxley isn't reducing fraud then we're wasting a lot of money on audits. As for Amaranth, that seems to be more "poor volatility management" or even "stupidity" than "fraud".
Running_Man said:
All in one basket allows one lightning strike to wipe you out.
Diversification only works if the asset classes are uncorrelated (reducing volatility) and if the returns aren't hammered by some other adverse effect (like inflation). Frank Armstrong calls diversification for the sake of diversity "diworsification". And if spreading your money around two or three brokerages results in higher expenses then it strikes me as a high premium for little or no additional protection.
One could argue that staying with one broker is also the benefit of SIPC & private insurance. Otherwise I'm wasting my money on other types of insurance (property, auto, & liability) where I could be using the premium payments to diversify into REITs, gold, and beever cheeze futures. And yes, the probability of my diversifying into those asset classes is just as great as the probability of your basket being struck by lightning. No disrepect intended.