Black Swans, Yellow Goats and Pink Toads…

  • Posted by
  • on January 3rd, 2009

It has not taken long for me to get sick of the name Nassim Taleb. Big woop already, so he made a few already rich, stuffy people 65 percent on their money last year.

Joe Nocera at The New York Times is the latest journalist to wax poetic (10 pages) about Taleb and also what went wrong with the ‘models’. All in all quite boring, but here is the link .

Taleb is an author and now arrogant SOB whose book ‘The Black Swan’ is very hard to read and has a few pages of stuff that talks about outlier events. That’s really it. To me it’s common sense because as everybody crowds into the same trade, things never end up well. Tell me something I don’t know.

I do respect of course that he did make the call and more importantly that he used the proper strategy to harness it. Than again, so did the FLY and I linked all year to him who offered much more simple, colorful commentary.

If the investment banks were privately owned, they would not all have been in the same trade and we most likely would not have had this financial crisis. Furthermore, if Paulson had not git his whining ways in 2003 when he begged for a few banks to get 40-1 leverage, we would not be here today. Obviously, Nassim’s Black Swan started like 20 years ago and accelerated in 2003. YAWN.

Most of us in the business of managing money do not have the luxury of writing and lecturing while we passively manage money.

The media and the world now hang on his every breath. Most of his breaths though are used calling risk management people imbeciles.
Even I know that not ALL the world’s bankers are imbeciles. His behavior, if widely accepted over time, will lead to another ‘Black Swan effect – from people sitting on their hands waiting for him to open his mouth!

The whole banking structure was decaying as the power was further and further concentrated into the hands of self dealing people chasing short-term results (as public, quarterly reporting slaves). The cycle, a record long one, ended when everyone ended up in the same trade.

As in all markets and trades that end bad, liquidity was the issue. If you want to waist your life chasing ‘Black Swans’ please do. Grab your twead coat, pipe and a dictionary and follow Taleb around while the rest of the world gets back to work.

One ‘TRUE’ lesson of the market is all you need to know, ‘Pigs Get Fat,Hogs Get Slaughtered’!

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