The Rub: Part 1
Having your own “stuff” can be nice. It’s a source of independence, of freedom. Eventually, we grow up, venture out from our parents’ protection, and make our own homes.
Having your own “stuff” can be nice. It’s a source of independence, of freedom. Eventually, we grow up, venture out from our parents’ protection, and make our own homes.
Having your own “stuff” can be nice. It’s a source of independence, of freedom. Eventually, we grow up, venture out from our parents’ protection, and make our own homes. Free at last. In some places, you can even dig a well and have your own water supply. And now Elon Musk can deliver you a solar roof, and you can generate your own electricity. Living off the grid: now that’s freedom!
Off-the-grid living sounds excellent, but it’s also wise to build-in contingency plans, for instance: staying within a few miles of friends or family, just in case help is needed; having a friendly neighbor and a long hose for when the well-water isn’t flowing so good (see what I did there?); or, for those opting for solar power, maintaining a connection to the grid in case of emergency.
It took an unexpected winter storm to expose the weakness, but, in financial terms, the Texas power-plan was “short volatility,” which is to say that the strategy worked well until it didn’t. And therein lies the rub.
There are some classic examples of short volatility (aka “short vol”) gone wrong in the Alts world, and it’s a good idea to revisit them from time-to-time to learn from past mistakes. Inspired by recent events, in this edition of alt.Blend, we’ll examine some of the greatest hedge-fund blowups of all time.
Here we go…
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