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.
Link To Full Story: freakonomics.blogs.nytimes.com
Shared by JohnH
HatTip to Dave Lull
I expect to have a conversation with
Nassim Nicholas Taleb, author of
Fooled by Randomness and
The Black Swan, in the next couple of days. He’s a very smart and talkative fellow, and I suspect he would fit into a
Freakonomics Radio podcast very well. What would you like me to ask him?
Link To Full Story: Nassim Nicholas Taleb's Facebook Wall
My definition of an erudite is subtractive: someone who displays and cites, in writing and conversation, much less than he knows.
Link To Full Story: Google Alerts - Nassim Taleb
Nassim Nicholas
Taleb. DRAFT. Summary of Causes: The interplay of the following five forces, all linked to the misperception and hiding of
...www.fooledbyrandomness.com/crisis.pdf
Link To Full Story: www.huffingtonpost.com
Tell me if you understand the problem in its full simplicity: former regulators and public officials who were employed by the citizens to represent their best interests can use the expertise and contacts acquired on the job to benefit from glitches in the system upon joining private employment -- law firms, etc.
Think about it a bit further: the more complex the regulation, the more bureaucratic the network, the more a regulator who knows the loops and glitches would benefit from it later, as his regulator edge would be a convex function of his differential knowledge. This is a franchise. (Note that this franchise is not limited to finance; the car company Toyota hired former U.S. regulators and used their "expertise" to handle investigations of its car defects).
I have several remarks.
First, the more complicated the regulation, the more prone to arbitrages by insiders. So 2,300 pages of regulation will be a gold mine for former regulators. The incentive of a regulator is to have complex regulation.
Link To Full Story: www.businessweek.com
Q: The new edition of The Black Swan includes what you call "10 principles for a Black-Swan robust society." One of them is: "Citizens should not depend on financial assets as a repository of value and should not rely on fallible 'expert' advice for their retirement." Can you explain what you mean?
Taleb: The problem is that citizens are being led to invest in securities they don't understand by people who themselves don't quite understand the risks involved. The stock market is probably the best thing in the world, but the true risks of the stock market are vastly greater than the representations. And this leads to extremely strange situations in which, say, someone has a bakery, is extremely paranoid about suppliers, very careful about risks, and protects his business with appropriate insurance. Then, at some point, he puts his $122,000 in savings in a fund that he knows nothing about, based on risk measures he knows nothing about, in companies very few people know much about.
People use "risk measures," but you're really not measuring anything like you measure temperature or distance. You are making a speculative assessment of a future event. That's not measuring, that's estimating. And as we saw with BP (BP), with the banking system, and with Toyota (TM), companies themselves are hiding risks from the security analysts. They're cutting corners. Companies have a tendency to hide risks.
So someone extremely careful and prudent in the management of his own affairs will be completely careless with the half of his savings invested in the stock market. I'm saying: Don't use the stock market as a repository of value. It has vastly more risks than you think.
