Tackle Today: The Omelette & The Eggs 🥚 | Tackle Trading
≈ A conversation with a friend. ≈
This friend of mine knows I’m a trader. She has this money, not huge amounts, although not too shabby, either. She lives in Northeast Italy, I live in the Northwest. We have almost the same background in life, kids at the same age and we are about the same age as well. I wish this conversation had happened live, preferably with wine, but it didn’t. Via Whatsapp with no alcohol was how it went.
— So, what’s your struggle?
— We have this money and we wanted it to grow.
— Where is it?
— In the bank doing nothing there.
— I see. What are your goals?
— Just to make it grow. But I don’t want to lose! I’m terrified of losing anything.
— Losing you already are, you see. The Eurozone is not growing, the Euro is not in good shape and inflation in Italy peaked at 1.7% last year. Interest rates are at the zero mark and there is a default risk in the foreseeable future. Have you ever thought about opening an account in the US?
(panic sets in)
— IS IT LEGAL??
— Perfectly.
— But I don’t want to lose.
— Losing you already are, I told you. Take ≈ 2% of your money every year. This is more or less how much you are already losing. If the situation degenerates you can add more to that loss.
Then, the conversation proceeded. In short:
- She wants returns.
- She does not want to lose.
- She is already losing.
- Neither she nor her husband has stomach or time to take care of it.
So we are in this place. No time, no stomach, no return, full risk. She wants the omelette but is afraid of breaking the eggs. Meanwhile, the eggs deteriorate in the refrigerator.
Chart of the Day: The power of inflation
Inflation is an invisible tax. “My money is in the bank doing nothing. At least I am not losing anything.”
Yes, you are. The graph above simulates a 2% annual corrosion in the purchasing power of your hard earned money.
“She needs the omelette but is afraid of breaking the eggs. Meanwhile, the eggs deteriorate in the refrigerator.”
Video of the day: How to Use Put Options as Insurance
Coach Noah explains what a Put Option is, how to and why you should use it as insurance.
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Originally published at https://tackletrading.com on June 10, 2019.
