I knew a guy who was the vice president in marketing at a small natural gas producer. He traded futures contracts to protect his company's natural long position. He was apparently pretty good at it. At some point he began to trade futures contracts in his personal name with no equity position to back the trade. He picked a bad market cycle to start that practice. Lost house, wife, family, job.... etc etc.
We hear about banks that have trillions of dollars in derivatives on their books. My assumption would be that those are not all one sided. Most derivative traders trade both sides at some level. Who knows?
If you're a derivative trader for an oil and gas company part of your job is spreading your risk across various companies. Any company can go bankrupt. I guess... except those that are backed by tax dollars :) And those can go bankrupt too. Obammy bought GM out of trouble, but bond investors got paid pennies on the dollar.
All of this is why during my retirement I continue to move funds out of the financial market. I buy rental property. I own it outright. I generate monthly retirement income, and I'm in control of the deal. I pick the customer to do business with. I pick the terms. And I own hard assets. Not a CEO's promise.
Enjoyed the exchange. Take it easy!
Thank you for the highly responsive post!
I have sympathy with the guy who lost his wife and everything else. Been there done that decades ago! Now, I am retired and owe nobody anything and no contingent liability wife or romance.
I’ve been dealing in tens of millions of loans for decades and I know how these bankers, brokers, lawyers and politicians think. Indeed, I once had a mayor of a major city as a partner in a deal. So, when I say these blankety blanks need to go SPREAD the risk of these derivatives over the “players” that are involved assets and not the “taxpayers” assets. I, at least, know where I am coming from!
Enjoyed commiserating with you. Stay in touch!