{"id":6229,"date":"2013-10-12T13:32:35","date_gmt":"2013-10-12T20:32:35","guid":{"rendered":"http:\/\/www.blackswanreport.com\/blog\/?p=6229"},"modified":"2013-10-12T13:32:35","modified_gmt":"2013-10-12T20:32:35","slug":"risk-control-nassim-taleb-versus-reality","status":"publish","type":"post","link":"https:\/\/www.blackswanreport.com\/blog\/2013\/10\/risk-control-nassim-taleb-versus-reality\/","title":{"rendered":"Risk Control: Nassim Taleb Versus Reality"},"content":{"rendered":"<blockquote>\n<p><em>What do you mean by \u201cfake low volatility?<\/em><\/p>\n<p>You know the funds of Bear Stearns that blew up in the subprime crisis? They were funds that never had a down month. A lot of people who blew up in subprime did not have a down month\u2014ever. And people rushed to invest in them because they were low volatility. And then they blew up.<\/p>\n<p>Typically, I never get close to anything that has no volatility, unless it\u2019s justified, like Treasury bonds. If you go to a balance sheet, you can see why there is low volatility, whether it is genuine. The company can have a barbell. The company can have very, very low leverage. Or you might discover that a company is doing the equivalent of selling remote options, and the company can lose a lot of money in one blow.<\/p>\n<p>Let\u2019s link it to make it more intuitive: In general, I can say that a system that has very, very low volatility is likely to blow up. Take the example of Syria. Syria had no political volatility for 40 years, and look what happened.<\/p>\n<p>Forests that never have fires are likely to be completely eradicated by fires when they happen. Forests that have regular fires are much more stable.<\/p>\n<\/blockquote>\n<p>via <a href=\"http:\/\/www.valuewalk.com\/2013\/10\/risk-control-nassim-taleb-versus-reality\/\">Risk Control: Nassim Taleb Versus Reality<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>What do you mean by \u201cfake low volatility? You know the funds of Bear Stearns that blew up in the subprime crisis? They were funds that never had a down month. A lot of people who blew up in subprime did not have a down month\u2014ever. And people rushed to invest in them because they [&hellip;]<\/p>\n","protected":false},"author":8,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[165],"tags":[],"class_list":["post-6229","post","type-post","status-publish","format-standard","hentry","category-investing"],"_links":{"self":[{"href":"https:\/\/www.blackswanreport.com\/blog\/wp-json\/wp\/v2\/posts\/6229","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.blackswanreport.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.blackswanreport.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.blackswanreport.com\/blog\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/www.blackswanreport.com\/blog\/wp-json\/wp\/v2\/comments?post=6229"}],"version-history":[{"count":2,"href":"https:\/\/www.blackswanreport.com\/blog\/wp-json\/wp\/v2\/posts\/6229\/revisions"}],"predecessor-version":[{"id":6231,"href":"https:\/\/www.blackswanreport.com\/blog\/wp-json\/wp\/v2\/posts\/6229\/revisions\/6231"}],"wp:attachment":[{"href":"https:\/\/www.blackswanreport.com\/blog\/wp-json\/wp\/v2\/media?parent=6229"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.blackswanreport.com\/blog\/wp-json\/wp\/v2\/categories?post=6229"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.blackswanreport.com\/blog\/wp-json\/wp\/v2\/tags?post=6229"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}