If your a Saavy Investor that is a Professional it makes since to absolutely insure your future during a sale of a invested position for possible future capital appreciation! This will be a short post. But very rich information and rich in explanation. Let’s dive in.
First we need to explain what is the term Schmuck Insurance in Capital Markets Speak?
“Schmuck Insurance”
English Definition:
schmuck insurance (uncountable)
- (business, informal) The situation where an owner sells a company but retains a portion in case the price appreciates in the future.
According to NEW YORK STREET LORE? SCHMUCK stands for “Stupid Person”
Example of How Schmuck Insurance can help you mitigate a very poor transaction decision without future knowledge of appreciation of your partially sold investment.
Here are some Examples of Schmuck Insurance in the Market by Institutional Investors.
Chamath Palihapitiya of Social Capital say’s Bitcoin is a Long Term Investment on CNBC…..
Example Number Two:
The Feared Activist Investor and US ARMY Veteran Carl Icahn of Icahn Enterprises goes after Pershing Square Founder Bill Ackman on LIVE TV! Reason? Bill’s Schmuck Insurance Clause and Herbalife’s Business Practices.
Is he right or wrong? You decide. However? I would tend to agree that all clauses need to be looked at in the fine print. Misunderstandings do happen. But? Sometimes we all know some Attorneys and Clients slip one in the fine print we don’t see. Here is the legendary Spat.
How to implement Schmuck Insurance and make it work for you?
What makes good sense as a good rule of Thumb for deploying Schmuck Insurance? Ask the question. Does selling your shares really mean you lose everything if you close out your initial Investment? Only if you sell all your shares. Sell 80% as a good rule of thumb and let the other compound or grow in a sub categorized long term portfolio? Pure Brilliance.
Don’t Sell All Of Your Investment.
I do believe it is good business to never close out your entire position without a little insurance. After all? We don’t want a situation where you sold to soon and your initial investment Thesis turns into a Situation where eventually your Investment SOARS in value.
Another great example is Sam Bankman-Fried. Sam in all honesty likely got overwhelmed with his Financial Situation and became slightly careless. But eventually his Anthropic Investment earned his investors Billions. I am not advocating Mr. Bankman-Fried did nothing wrong. However? Sometimes it’s best to allow the Professionals organized by way of a selected vetted Committee to keep you professional safe, legally safe and even legally insulated from a Federal Fraud Charge. More on Mr. Bankman-Frieds Investment that soared in value.
In the end to be Insured or not be Insured?
Given the situation I have just explained before you. If we get really creative as Investment Professional?
It would be a good idea to take this knowledge and keep it as a strategy when placing Investments or even eliminating partially sold investments into a sub categorized Insured Portfolio of Investments that have been Eighty percent sold but that last twenty percent is meant to keep you insured for future capital market resilient growth that may be unexpected. Pure Brilliance. Make sense? Good. Your welcome.
Thank you for reading. JS