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Alec Hogg: Beware the allure of the one-way bet
Alec Hogg shares his rational perspective on one-way bets and how they rarely turn out that way, as shown by the performance of the Rand to the US dollar...
This graph tracking the South African Rand between 2012 and 2017 is instructive – even the seemingly obvious is never a one way bet.
Decades of involvement in most aspects of horseracing taught me much more than how to extract the foal from a mare's birth canal. Perhaps the most valuable lesson was never to accept a "sure thing". Life has a way of turning the seemingly obvious on its head.
In financial markets, among the best examples is the South African Rand's performance between early-2015 and end-2017. Despite this period hosting the worst of the Zupta excesses including Nenegate, the currency powered to a 25% appreciation. Taking the one way bet against the currency would have been a quick way to go broke.
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