Shared by JohnH

Anybody read The Big Short? Would love to understand the details of making the kind of trades NNT talks about. I wish someone would write a ‘How To’ with specifics built around NNT’s Moscow Forum strategy outlined here: http://www.blackswanreport.com/media/NassimTaleb-Moscow-February2010-trades.mp3

I did this exercise after being inspired/motivated by the story of Cornwall Capital which was bought to my attention by Michael Lewis in his book the Big Short:Ledley and Mai were two guys in their early 30s who decided to start their own hedge fund with just over $100,000. They quickly made more than $15 million by betting on financial events that are extremely unlikely to occur — and therefore didn’t cost much to bet against. “They thought that Wall Street underestimated the likelihood of really unlikely events,” Lewis says. “So they would buy options to buy stocks at prices far, far away from where the stocks were currently trading. They did this with currencies, they did it with commodities. They scoured the world, essentially looking to make bets on extreme things happening.” This story bought together everything that John Templeton practiced and Nassim Taleb preaches! In fact if you wanted a book that clearly demonstrated the application of Fooled by Randomness and The Black Swan then look no further than The Big Short. While most commentators are of the belief that being right is all that matters few, in fact, ever so few, place any emphasis on risk vs. reward of a particular outcome. Perhaps analysts/bloggers think in terms of their reputations when it comes to risk vs. reward rather than a financial outcome. Anyway getting back to my idea……