The Nassim Taleb Thread

[chops_a_must]

He has a big following here, and rightly so. There are lots of random posts about him at times, so I thought it would be good to start getting them in one place when something of note about him comes out.

Anyway, he was just on CNBC. Which I find quite interesting given what he has said about these outlets at various times.

I will find a video of it if when one becomes available.

 

[chops_a_must]

I will find a video of it if when one becomes available.

http://www.cnbc.com/id/15840232?video=921233906

 

[Sean K]

Didn't really explain much into the plan, and this was hardly a Black Swan.

9/11 was a Black Swan and how do you prepare for that?

Anyway, I'm sure he's a smart guy to have made 90% or whatever in Oct..

Did the system work during the Bull?

 

[chops_a_must]

Didn't really explain much into the plan, and this was hardly a Black Swan.

Which is why he hates these shows.

And was it or wasn't it a black swan? You look at the amount of bankruptcies and you would have to say it was.

You look at the risk models used by the big firms, and it certainly was.

I guess his use of the term is different to most previous uses as it is deemed something of large impact, rather than an event relating to logic purely. It's kind of an absurd term anyway, as a black swan event wouldn't exactly mean a whole lot to a Nyoongar living on the Swan river in the 1700s, even if they knew our language. Nothing is ever purely expected or not expected.

You have to keep in mind that nothing is ever a black swan in retrospect either...

9/11 was a Black Swan and how do you prepare for that?

Read "Fooled By Randomness" and you might know.

In all seriousness though, the point is you can't. You just can never exclude something like that from the realm of possibility. And you have to learn to live with that. That's how you prepare for it.

Anyway, I'm sure he's a smart guy to have made 90% or whatever in Oct..

Did the system work during the Bull?

I doubt it would have. But he does seem to have a history of low risk, unspectacular gains.

 

[Sean K]

And was it or wasn't it a black swan?

The Severe and Imminent Correction thread started on ASF in 2006 didn't it?

Hardly a Black Swan for ASF....

 

[Sean K]

Just having a read through his website.

He's an interesting man.

http://www.fooledbyrandomness.com/

 

[chops_a_must]

The Severe and Imminent Correction thread started on ASF in 2006 didn't it?

Hardly a Black Swan for ASF....

It still took a year and a half for the oompa loompas on acid to finally bring the markets down though...

 

[Sean K]

It still took a year and a half for the oompa loompas on acid to finally bring the markets down though...

But Taleb doesn't think it was a Black Swan either..

To me a banking crisis --worse than what we have ever seen -- was unavoidable and NOT A BLACK SWAN,

 

[Trop Beaucoup]

Very interesting read with regard to the realities of the markets but like many strategies will have its good times and its not so good times when it will be underperforming the market. Timing is everything !

 

[rub92me]

Nassim Taleb in not in the business of providing trading strategies to make you rich. To him (and me) it is more important to have a survival strategy. People tend to overestimate what they think they know and massively underestimate the risk of what they trade/invest in. The banking crisis in itself was not a black swan in his interpretation. However some of the (unpredictable) consequences that come with it may well be. Also, a black swan is not always a bad thing.

 

[xyzedarteerf]

Nassim Nicholas Taleb - What is a "Black Swan?" (video) full video here


Nassim Taleb - Fooled by Randomness and Black Swans (radio interview)

 

[Grinder]

Very different type of thinker, not just in the markets but on life, think that's why I like him. Im still undecided however, on the acts of what is randomness and the terminology of a black swan as chops mentioned.

I suppose he has been waiting for this for more than a decade, to be trading in the pits while watching others make their fortunes must have been tough.

Hope for the best, plan for the worst.

 

[dhukka]

What a pity that they put him on CNBC with two of the biggest idiots on business television. Taleb's ideas are particularly prescient in the current environment. I admire his humility, his recognition of the limitations of human understanding of the world we live in and how we are suckers for the "narrative fallacy" (retro-fitting explanations to events after they happen) On top of that he has the foresight to position himself to take advantage of our underestimation of risk.

I think his ideas dovetail well with the Robert Shiller interview I posted on the imminent and severe market correction thread, where Shiller says that economics is a lot of guesswork and we really don't have much idea what is coming down the road.

 

[xyzedarteerf]

Nassim Nicholas's War on Tie Wearing Economist

 

[Garpal Gumnut]

Basically he says

Buy treasury bonds

Buy way out of the money options

And stick your head between your legs.

Not necessarily bad advice.

gg

 

[rub92me]

Basically he says

Buy treasury bonds
(and other known low risk instruments - and do this with 80% plus of your capital)
Buy way out of the money options
(small positions across a wide and diverse range)
And stick your head between your legs.
I don't think he says or implies that. On the contrary, he says to keep your eyes wide open and be adaptable.
Not necessarily bad advice.
Better than you'll hear from most of the supposed experts.
gg

Just refined the above a little bit according to my interpretation of his books.

 

[Garpal Gumnut]

Just refined the above a little bit according to my interpretation of his books.

y





agree mate I was just trying to condense and simplify it

I left out vigilance.

thanks.

gg

 

[Sicilian Trader]

I have been doing a bit of reading up on nassum taleb and I'm a little puzzled as to how I should be regarding his theory on black swan events..

From what I understand, his contention is that the mere existence of black swan events renders one's positive expectancy system useless (unless of course you have 90% in TB's and 10% in specs -- something like that anyway). He is basically saying that all traders who are adopting similar systems to the ones he is making reference to, are all trading under a false sense of security, as their trading capital will ultimately - on the balance of probability - blow up.

How can this assertion be true if you have had a positive expectancy system for some period of time and you've taken substantial profits along the way?

What about when black swan events occur, say 9/11 for example, and you were short on the dow or whatever else plummeted that day? Surely you would have made a bucket? Is he only making reference Long systems and ignoring short strategies?

How does one factor in black swan events into their overall trading plan / system if the above is infact true?

Is there anyway to backtest black swan events or is this a futile exercise?

Im very interested to hear some of the more experienced traders' view on this.

Tech/a, TH etc, you guys have been trading for some time, have you had the pleasure of trading during a black swan event and if so , can you share your experience?

 

[Sicilian Trader]

being new to ASF, just a couple of questions regarding posting.

Should I be starting threads given this one is about 4 months old? Or is it still ok to revive on old forum?

 

[rub92me]

ST, did you read his books or just read about his books and other people's interpretations of what he's trying to get across? If the latter, then I'd recommend you start by reading his books. He explains it quite well himself...