THE MARITIME CHRONICLES EPISODE 13: FINANCIAL DERIVATIVES IN SHIPPING [2 MINUTE READ]
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Do you know what financial derivatives are?
Its like when you bet on the value of something changing. Like you have a contract with someone that if the value of your house falls below 80% of what it is now, they will pay you a certain amount of money. But for that "insurance" you pay them a monthly premium.
Now these derivatives come in many different shapes and sizes and have been around for a long time. They have also been used in shipping for a long time But now they are huge. People who invest in ships now take derivatives into account. It even influences what kinds of ships they end up buying.
One of the things that I find fascinating about the shipping industry is how hands-on it is. What I mean by that is that many of the activities and assets involved are very tangible. You know, like a ship. You can touch a ship. But you can't touch a share of a company. Now that I think about it you can't touch a company either. OK this is getting weird.
Anyway, what I was gonna say is that even though the maritime shipping market is pretty tangible, it is not always very measurable. Why? I don't know. Maybe because it is a pretty complex industry with many moving parts? And the parts are all linked and affect each other.
Many people who dabble in derivatives have no idea what they are doing. They can lose a lot of money. That is why Warren Buffet who is like a really rich guy at one point said they are Weapons of Mass Destruction. But he still uses them but that's okay because he knows how to do it. At least I hope. I wouldn't one of his multi-billion deals to include weapon of financial or economic mass destruction.
But he in particular or the guys he plays golf with, can probably make a lot of money from derivatives. I'm sure they know what they're doing. They have that sixth sense about what is going to happen in the market. So then he can take advantage of those changes no matter in which direction or how large/small they may be. You can even make money from betting on something's value staying the same, if everyone else thinks the value is gonna change.
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STOPA very good post. Thank you for sharing @pjcswart
Thank you. You are welcome! Thanks for stopping by. Where are you from? Following you!
urgh my headhurts! I had to read your post over and over again about the WMD.. *sigh
I want to migrate to mars!
Interesting. What type of occupation were you thinking of practicing there? I hope you have a wonderful day, following you!
Good business. I once dreamed of having a business like you. I like to read I wait for your next posting. Thankyou for sharing @pjcswart
What business do you think I have? :-) Thanks!
Shipping business.
ah ok right now i am still a freelance language practitioner. What do you do?
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Interesting thoughts. Thank you
Thank you so much for commenting, glad you enjoyed it! I hope you have a wonderful day, following you!
meep
useful reading here, thank you :)
...you're welcome and thanks for stopping by once again! What did you like most about it? I hope you have a wonderful day, following you!
well done pjcswart, once again!
Thank you so much for your kind words! I hope you have a wonderful day, following you!
Nice commentary on derivatives. I try to stay away from them. Too risky sometimes. Better to resist the temptation to make a quick buck :)
Yeah I guess. But they can also be a way of avoiding risk you know... what did you think about the movie The Big Short? I hope you have a wonderful day, following you!
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Thank you, I appreciate it! I hope you have a wonderful day!