http://www.bloomberg.com/apps/news?pid=20601087&sid=aDVgqxiT9RSg&refer=home We refused to touch credit default swaps,'' Taleb said. It would be like buying insurance on the Titanic from someone on the Titanic.’’ ``We would like society to lock up quantitative risk managers before they cause more damage,’’ Taleb said.
And yet the guy shows up at quantitative risk conferences and pals around with his friends…
taleb’s quite an intense and angry guy
Fooled by Randomness was pretty enjoyable. Has anybody read the Black Swan?
Taleb started his career in risk (I guess). Before he became famous he wrote this book called “Hedging Options: Blending theory and practice” (or similar). It’s an unusual book with some rules of thumb that are very useful and some parts that are opaque and bizarre. Most risk managers have read some or all of that book.
I read Black Swan. I’ve heard Fooled by Randomness is better. Black Swan - An event of extremely low probability with catastrophic effects. Several times he mentions his time working in the brokerage industry during the crash of 1987. Every risk manager he was in touch with said the event was impossible prior to it occurring.
Unless he spoke to one stupid risk manager, that’s not likely. Every risk manager I know understood then that crashes happen. Prior to '87 we had oodles of crashes in every market there is.
I’ve read about 1/2 of Black Swan and then started feeling the point was a bit too repetitive. He does have some entertaining stories. I’ve read a chapter or two of Fooled by Randomness, and felt that there were many more useful insights in that book, though maybe it’s because it hadn’t gotten too repetitive yet. Black Swan has the advantage that the title is a bit catchier and easier to use in describing an event like the end of the world, so it sells better. I’ve often thought that, given the difficulty in pricing tail risk, something like the 98% treasuries 2% deep OTM options might be sensible. The comment earlier about how both volatility and intrinsic value may drive the option prices higher makes me wonder if that strategy may be better than one initially thought. Like an earlier poster, I would also like to see how much drag the deep-OTM option strategy would do. If you assume that most options expire worthless and that they are held to expiration, I guess a 98%/2% division would have a drag of about 2% (though it depends how the 2% is time diversified by expiration date). You could reduce that by rolling the option before expiration to preserve some time value.
I felt Teleb made only two points in Fooled by Randomness: 1) Sh!t happens more than we like to believe. 2) I am smarter than everyone else, especially wall street and the media, and this annoys me. Pad the above with about 230 pages and you have the book. There are some very interesting examples/stories, but his ego clouds a lot of the book. JDV noted that another one of his books was ‘opaque’, this is exactly how I would describe about 1/3 of this book, very unecessary.
whodey Wrote: ------------------------------------------------------- > I felt Teleb made only two points in Fooled by > Randomness: > > 1) Sh!t happens more than we like to believe. > 2) I am smarter than everyone else, especially > wall street and the media, and this annoys me. Not at all -he only says that the charlatans peddling models have too much hubris and it is frustrating for him to keep crying about the emperor having no clothes.
I had some time to kill in town the other day (I’d got the time of a meeting wrong) so I popped into the book store cafe and sat down with a coffee and “Black Swan” to see if it worth a purchase. I read the preface, then read a bit of the first chapter, then I flicked randomly forward a couple of times looking for conclusions and alternative suggestions. It seemed every page I turned to could be compressed to “all investment guys are stupid, stuff isn’t normal distributed, there are only me and 3 other guys who accept this, look at me aren’t I clever”. The fact he’s probably right doesn’t mean that I’m going to spend £8 of hard-earned on him telling me repeatedly he’s right if he isn’t going to provide some viable alternatives.
My question to most of you who are bashing him is this: How many investment professionals do you know who aren’t full of themselves? Don’t let his arrogance take away from some of his valid points. Personally, I don’t give a Sh!t what type of person he is if I can read his books and learn something from them.
My problem is that Taleb doesn’t have many suggestions to solving the problem. Basically they amount to: 1) Stay out of the game. Translation: have mostly treasuries. 2) Buy some deep OTM options to spice things up. Translation: buy some deep OTM options. I also suspect that there is a cost to assuming that nothing is normal. If the world is all about extremistan, then it gets hard to get up in the morning. In some sense, we NEED to feel that much of our experience can be understood and to some extent predicted; otherwise we are overwhelmed with so many decisions that we can’t even start to function. This is where some kind of sorting methodology for how to manage our day would be really nice to hear from him.
the world is ofcourse not about extrimistan.it is the financial markets which he specifically says is in extremistan.
bchadwick Wrote: ------------------------------------------------------- > My problem is that Taleb doesn’t have many > suggestions to solving the problem. Basically > they amount to: > > 1) Stay out of the game. Translation: have > mostly treasuries. > 2) Buy some deep OTM options to spice things up. > Translation: buy some deep OTM options. > > > I also suspect that there is a cost to assuming > that nothing is normal. If the world is all about > extremistan, then it gets hard to get up in the > morning. In some sense, we NEED to feel that much > of our experience can be understood and to some > extent predicted; otherwise we are overwhelmed > with so many decisions that we can’t even start to > function. > > This is where some kind of sorting methodology for > how to manage our day would be really nice to hear > from him. I’ve got plenty of suggestions and so does he. It depends on what you want to do. The argument is a strawman. If he started suggesting problems and solutions, he’d be in “as Hull pointed out in 1983…” and the whole book would go poof.
JensensalphaMale Wrote: ------------------------------------------------------- > My question to most of you who are bashing him is > this: > How many investment professionals do you know who > aren’t full of themselves? Don’t let his > arrogance take away from some of his valid points. > Personally, I don’t give a Sh!t what type of > person he is if I can read his books and learn > something from them. Agree with your point about learning something from the book, its just harder for me to read something when through the entire book I’m thinking to myself “Wow, this guy must be a total d-bag in real life, I would hate to know him”
He really isn’t that bad - I’ve met the guy a few times and he is definitely arrogant, smart, and iconooclastic. But you can poke fun at the things he says, get him riled up, sit back and enjoy, and he comes around and laughs at himself.
Isn’t the whole point of Black Swan that seemingly impossible events do occur? Why then would he advocate going to mostly treasuries? Seems like the default of the US government is exactly the type of “impossible” event he’s talking about.
Gadzooks. Is it that bad?
Excellent use of gadzooks.