Let’s say I’m a middle aged financier, just been diagnosed with a terminal illness and my prognosis is that I have one year to live. I tally up all my assets and it amounts to $1M. I write down a bucket list and I estimate it would take $10M to complete all the items on my bucket list. I have no descendants or anyone I would want to leave any money to so all I care about is being able to complete all the items on my bucket list. Nobody knows about my prognosis and, due to medical privacy laws, I’m reasonably certain I can keep this a secret from everyone until I die.
Could I sit down and create a portfolio of naked shorts, derivatives and other futures that have a time horizon such that I could extract $10M of liquid cash from my $1M of assets and structure it so all of the calls would happen after I die? If so, what recourse does the counter-party have in this scenario and what kinds of things could they have done to mitigate their risk?
Assume in scenario A) I know I will die exactly 365 days from now and am 100% certain in this knowledge or scenario B) my prognosis is 90% of patients die within 6 months - 3 years so I need to figure out how to keep my shorts going until I die.
Scenario A seems much simpler to construct but scenario B is more realistic. Could I accomplish my goal in both scenarios? neither?
You cannot short stock in a brokerage account and withdraw the cash unless you already have more cash (or possibly liquid assets) already in the account in which case you can simply think that you’re withdrawing that (or borrowing against it). The broker won’t provide you with the stock to short unless you have enough assets in the account that they know you can repurchase the stock. Furthermore, if you start with enough other assets, and the stock you short rises in price, your broker will ask you deposit more money or will close out your short.
If you don’t care about screwing other people financially, and you’re that clever, why bother staying within the law? Embezzle the money. Start a Ponzi scheme and bail with everybody’s money after 6 months, change your name, move to Brazil. I left out *Breaking Bad *because you said you were a financier.
Seems simpler to ask whether you could borrow 10 million dollars, spend it all and die.
Seems to me you would have to show a bank that you could repay that debt given your current income to debit ratio within the terms of the loan, including interest. If that were the case then I imagine you would already have 10 M in property to sell or liquidate. Just a stab.
You should try to understand that there really is little difference between shorting some stock and buying some stock. I all depends upon your opinion as to whether that stock will go up or down in the near term.
You might want to consider investigating some of the more highly leveraged ways to make a wager that a stock will either go up or go down.
If you are primarily looking to “take a flyer”, you might prefer to wager on some commodities rather than stocks because you can get a much greater amount of leverage with commodities than stocks.
However, I would suggest to you (as I did in my previous post in this thread) that it’s all just a very bad idea and you should not get involved with any kind of scheme in which you expect to either make or lose a great deal of money in a short time.
But if you cannot be dissuaded, please believe me when I tell you that the single most important factor for you to consider is that you should not get involved in any kind of wager unless you have an excellent and solid understanding of exactly how that wager operates.
AAMOF, I would strongly recommend that you do not make any kind of wager unless you have made a similar wager before and feel that you understand exactly how that wager operates.
And if you are willing to take my advice, my best advice to you is that no matter how you proceed, you will be **extremely **unlikely to win big and will, in all likelihood, lose your shirt. If you are positive that does not matter because you will die before you can get into any serious trouble, then you may not be dissuaded from your course of action. But you may well not understand just how you may get into trouble and who it is that may have to pay the costs of that trouble.
Do you have any family that is living? A spouse perhaps? Are you certain they will not have to suffer any economic problems from your actions? Are you certain they will not have to suffer any embarassment or other kinds of public humiliation?
It is a far, far riskier thing that you propose than you may ever fully appreciate.
People are being way too unimaginative about this. The OP postulated “no descendants”, so don’t say “Well, what about your spouse? Gotcha!”
I’ve always wondered if people in that situation would be tempted to max out their credit cards (could you apply for new ones as well?). Much lower-tech, less complicated than selling short.
What happens if the doctors are wrong? Your “terminal illness” might last for an additional five years. Or ten. Or they could have completely misdiagnosed you and you’d be screwed if things didn’t go well financially. Worst of all, you could be reduced to a vegetative state by your illness before your “year” is up.
Then what?
Sorry, but gambling on a terminal illness is almost always a poor bet.
I think Carl Pham said things best, why bother staying within the law? Even if you’re caught, no way are they putting a terminal cancer patient in prison.
Not sure if you’ve taken this into consideration, but dying of cancer is not an enjoyable experience. The slow withering away of your bodily functions is actually quite painful. Also, your health records are not kept private from your health insurance company. As soon as they’ve striped you of your first million, they will go after the 10 million you’ve stolen. You’ll wind up being broke, sick and homeless … wishing you were in jail.
I tried to find a cite for the British man who was suing his doctor after being told that he only had a few months to live. He blew all his money and assets, but then had a remission. Oops!
Actually, this was a Jerry Lewis movie from back in the 190’s. His doctor told him he had 6 months to live. Advises him that credit card debt takes a while to catch up, go take a European vacation and live it up.
A few months later his doctor finds him in Europe to tell him the lab made a mistake, here’s a ticket to Israel and a new identity, and they buy a body to send back to the USA (but the coffin gets switched, much hilarity ensues).
On the way to his plane, Jerry goes back to talk to him and sees the doctor kissing his (Jerry’s) wife. Aha! He never was sick.
Bizerta has it right. If you make a market bet (what else is it?) you broker will require the amount on deposit to cover the result. Even if you buy stocks, they have a margin - say 50%; if the stock value falls below that margin, they will call - either add more money or we sell immediately. After all, IIRC, the broker house is essentially backing that bet. Not sure how margin on short sells etc. work, but I’m sure someone here can give the details if Google does not.
Ditto loans. Each bank is going to want proof you can repay. You can break it into smaller lumps, but once the one bank registers the loan on your credit history, the others will know you already owe $X why should they give you more? In the days before this was computerized, one of my friends who worked in a bank mentioned one fellow in the small town who went to five banks in town in one day, and got approximately $10,000 personal loan from each to start his small business. (Back when that was real money) However, the guy made a go of it, so the banks in the end were not as pissed as they could have been.
Yep, I think the only real stupid lenders are credit cards. OTOH, they have a short attention span now - miss too many payments and they might start cancelling your cards. They have programs that watch for fraud, not sure if those would pick up unusual bucket list transactions. (Suddenly this guy is flying off to Bali?)