Link To Full Story: online.wsj.com
Shared by JohnH
HatTip to Dave Lull WSJ is behind a paywall unless you search for the story and connect to it through Google. For now.
Prof. Nassim Nicholas Taleb was in his native northern Lebanon last week, thinking about instability in the pricing of goods and services. He also was shopping for olive orchards.
The mathematical finance scholar who lectures at New York University and wrote the 2007 book "The Black Swan" said he is as pessimistic as ever about the prospects for sustained global economic recovery. He suggests that investors around the world strap in for a wild ride of deflation and inflation. And, therefore, he said, it makes sense for him to pour money into farming, especially olives, which are indispensable to the Mediterranean world.
Link To Full Story: Nassim Nicholas Taleb's Facebook Wall
Just as no monkey is as attractive as the ugliest of humans, no academic is worthier than the worst of the creators.
Link To Full Story: www.scalavolpe.com
At this point I think it would be helpful to illuminate what I’ve been doing both in reaction to the economic data and to be proactive to what I think is still to come.As you may have read already on my Portfolio page, I do employ black swan protection protocols rather consistently month to month.What this means is, each month I purchase the following months’ put options on the SPY (the underlying investment symbol for the S&P500 stock index).These put options, which reflect a bearish outlook on the underlying investment, are bought “out of the money,” meaning the anticipated price (or strike price) that I’m purchasing is below the actual price of SPY as it stands today.So for example, SPY closed around 107 today, and my September puts have a strike price of 100.If the SPY were to make a sharp move downward below 100 before September 18 (the day my options expire), I would profit handsomely.If the puts expire out of the money I’ll lose my entire initial investment sum.
Link To Full Story: freakonomics.blogs.nytimes.com
HatTip to Dave Lull
Nassim Nicholas Taleb is the author of The Black Swan. He is at work on a paper called “Why Did the Crisis of 2008 Happen?” (Links to NNT pdf)
“The captain goes down with the ship…”
Time to realize that capitalism is not about free options. The captain goes down with the ship — all captains and all ships — making everyone involved in risk-bearing accountable, no exception, none. Morally, legally, whatever can be done. That includes the Nobel (Bank of Sweden), the academic establishment, the rating agencies, forecasters, bank managers, etc.
Thursday, August 19, 2010
Link To Full Story: www.scalavolpe.com
It’s true Nassim Taleb (author of “The Black Swan”) recommends a “barbell” approach for most investors when allocating their capital. What this equates to is putting 80-90% of your funds into very conservative instruments, such as cash, and the other 10-20% into very high risk instruments like options, where payoffs are significant if your options come into the money. This way, you’re insulated against catastrophic loss but positioned to strike it big if your options hit. (Options have the potential for cubic payoffs, a concept I’ll examine in greater detail in future posts.)
But the commenter brings up a good point – what about inflation?
Thursday, August 19, 2010
Link To Full Story: www.npr.org
by Jacob Goldstein
Here's the latest Planet Money Deep Read — our occasional series of long-ish interviews with writers and thinkers.
Today, we hear from Nassim Taleb, the former Wall Street trader who published a book called the Black Swan back in 2007. The book was re-issued earlier this year, with a long new section called "On Robustness & Fragility."
The book argues that most economic models fail because they don't take into account rare, high-impact events that wind up driving history. (Taleb calls these events Black Swans.) The argument came out looking pretty good after the 2008 financial crisis.
The new section of the book includes, among other things, a prescription for withstanding a Black Swan.
The short version: Get rid of debt.
Saturday, August 14, 2010
HatTip to Dave Lull.
Since aphorisms lose their charm whenever explained, I only hint to the reader the main subject of this book, which corresponds to the central theme of Fooled by Randomness and The Black Swan, though rephrased in an aphoristic style —
fooledbyrandomness.com/aphorisms.pdf
Saturday, August 14, 2010
Link To Full Story: www.businessinsider.com
Shared by JohnH
Fortunately or not, I don't have a lot to wager with, but I wouldn't be too quick to discount Taleb's advice.
" 'Every single human being' should bet US treasury bonds will decline"
-- Nassim Taleb (Author of "The Black Swan") on Feb. 4, 2010
Other one-line stunts in the same interview include "[Fiscal] Deficits are like putting dynamite in the hands of children...They get out of control very quickly." and "Democracies can't handle austerity measures very well...We are going to have a severe problem."
Thursday, August 12, 2010
Link To Full Story: www.scalavolpe.com
Shared by JohnH
We met Christopher when he wrote about his Black Swan Protection Protocol http://austrianschool.blogspot.com/2010/02/black-swan-protection-protocol-approach.html He's recently launched a new site and has more market-centric NNT related content (see Blog) I'm sure you'll appreciate. Check it out http://www.scalavolpe.com/index.html
Let’s come back to the present. On May 6, 2010, the Dow Jones fell nearly 10% in a matter of minutes. Not weeks. Not days. Not one day. But minutes. Now, it’s true that it recovered significantly from that low point before the trading day ended. But we mustn’t allow that fact to cloud the basic truism that the market could plunge by so much, with a rapidity never seen before. Again, this leads us to the fractal concept: if the market could plunge 10% in one day, why can’t it plunge 10% in one minute? Could it plunge 22% in one minute? Or perhaps more? On May 5 had you suggested such a thing, you’d be looked at as crazy; on May 7, realistic.
The bottom line here is, as investors we should consider the power of applying fractals to our hedging strategies, by stepping outside convention and imagining what the possibilities might be based on the evidence at hand. This will undoubtedly remove many of the limits we often self-impose on what’s “possible” in the markets, and allow more creative hedging approaches to flourish.
