Jim Sinclair's Million Dollar Bet
coasterfan
Posts: 1,302 ✭
Unless we have a tremendous rally in the next several hours, he lost his bet. That would be the equivalent of about 736 ounces of gold.
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roadrunner
wow
<< <i>Who took him up on the bet? >>
The story I heard, was that several folks wanted to take him up on the bet, but they couldn't agree on the details in terms of where the bet money was to be held, what kind of collateral was acceptable, and so on.
The bet was a grandstand play for publicity, and it worked. Given that gold was around $800 at the time the bet was offered, any objective person could see that it was an odd bet to offer. A lot of folks pointed out that the person betting against gold $1650 could buy a million worth of physical gold and have a no-lose situation. If gold did double they would sell their gold for $2 million and pay off the bet. If gold exceeded the price target by a wide margin, say $2000, they would have more than enough to pay the bet and still have a decent profit. If gold fell or was stagnant they would have a million dollars from Sinclair, plus their gold. The actual situation was about the best possible for the would-be bettor. Gold goes up but doesn't get to the target. They would have their gold, now worth about $1.7 million plus the $1 million in cash from Sinclair. Though again, Sinclair probably would have gotten more than $1 million worth of publicity from the stunt. As is, he didn't put up any money, and still got a lot of positive press.
Sinclair could have gotten much better odds in the futures or options markets. As much as he derides OTC derivatives, it is ironic that he wanted to make take on one of the bigger single derivative OTC contracts ever. For those that don't get what I am saying, when all the talk is stripped away, derivatives are bets. Sinclair's bet would have been a derivative contract, and one of the bigger single contracts ever devised.
<< <i>
<< <i>Who took him up on the bet? >>
The story I heard, was that several folks wanted to take him up on the bet, but they couldn't agree on the details in terms of where the bet money was to be held, what kind of collateral was acceptable, and so on.
The bet was a grandstand play for publicity, and it worked. Given that gold was around $800 at the time the bet was offered, any objective person could see that it was an odd bet to offer. A lot of folks pointed out that the person betting against gold $1650 could buy a million worth of physical gold and have a no-lose situation. If gold did double they would sell their gold for $2 million and pay off the bet. If gold exceeded the price target by a wide margin, say $2000, they would have more than enough to pay the bet and still have a decent profit. If gold fell or was stagnant they would have a million dollars from Sinclair, plus their gold. The actual situation was about the best possible for the would-be bettor. Gold goes up but doesn't get to the target. They would have their gold, now worth about $1.7 million plus the $1 million in cash from Sinclair. Though again, Sinclair probably would have gotten more than $1 million worth of publicity from the stunt. As is, he didn't put up any money, and still got a lot of positive press.
Sinclair could have gotten much better odds in the futures or options markets. As much as he derides OTC derivatives, it is ironic that he wanted to make take on one of the bigger single derivative OTC contracts ever. For those that don't get what I am saying, when all the talk is stripped away, derivatives are bets. Sinclair's bet would have been a derivative contract, and one of the bigger single contracts ever devised. >>
Very educational post!
It doesn't diminish the fact that he knows what he's talking about, and I put alot of stock in his observations & analysis regardless of this miss.
I knew it would happen.
<< <i>This doesn't equate to Babe Ruth's pointing to the center field stands (or at the pitcher) during a World Series game and then hitting a home run to center field on the next pitch. I think that's what Sinclair was hoping for.
It doesn't diminish the fact that he knows what he's talking about, and I put alot of stock in his observations & analysis regardless of this miss. >>
Agree, he's been some what more accurate than Patrick Heller
He was predicting $1250 gold in 2002. His adjustment upward to $1650 came years later after gold was approaching or exceeding the $1250 mark.
Of course there are the antagonists who can't stand the fact that his road map for PM's, otc derivatives, and the US Dollar over the past 8 yrs has been >90% accurate. So they harp on this $1650 call for some measure of comfort even though they themselves have never publically put out a long term PM's prediction to the media.
roadrunner
I was not one of the 'objective persons' as Red Tiger calls them, who followed the bet out logically. It amazes me that many astute traders did not jump on this wager and make the details work so it could come to fruition!
The analysis of the bet was an eye opener to me, and the wheels have started turning as to how this could principle might be applied to other, similar wagers. My mental accelerator needs a little WD40, but I'm not done with this subject yet.
As to Red Tiger's reductio of what a derivative is (since I still don't have the sense of touch, taste, smell, sound of derivative as Warren Buffet does, when he had to unwind a few billion $ worth) I still fall back on monsterman's definition back in the original mega=thread. And even then, I still can't quite get my brain around how they play out in real time.