Nassim Taleb / Universa Investments

[winston]

'Black Swan' Author Says Investors Should Sue Nobel for Crisis
By Stephanie Baker

Nassim Nicholas Taleb, author of “The Black Swan,” said investors who lost money in the financial crisis should sue the Swedish Central Bank for awarding the Nobel Prize to economists whose theories he said brought down the global economy.

“I want to make the Nobel accountable,” Taleb said today in an interview in London. “Citizens should sue if they lost their job or business owing to the breakdown in the financial system.”

Taleb said that the Nobel Prize for Economics has conferred legitimacy on risk models that caused investors’ losses and taxpayer-funded bailouts. Sweden’s central bank will announce the winner of this year’s award on Oct. 11.

Taleb singled out the Nobel award to Harry Markowitz, Merton Miller and William Sharpe in 1990 for their work on portfolio theory and asset-pricing models.

“People are using Sharpe theory that vastly underestimates the risks they’re taking and overexposes them to equities,” Taleb said. “I’m not blaming them for coming up with the idea, but I’m blaming the Nobel for giving them legitimacy. No one would have taken Markowitz seriously without the Nobel stamp.”

Markowitz, a professor of finance at the Rady School of Management at the University of California, San Diego, didn’t return a phone call seeking comment. Miller, who was a professor at the University of Chicago, died in 2000 at the age of 77.

“People used the theory and assigned numerical forecasts to the algebra,” said Sharpe, a professor of finance, emeritus, at the Graduate School of Business at Stanford University, in a telephone interview. “But I’m not going to take the blame for the numbers they put in.”

Probability Models

In his 2007 bestseller “The Black Swan: The Impact of the Highly Improbable,” Taleb described how unforeseen events can roil markets. He warned that bankers were relying too much on probability models and disregarding the potential for unexpected catastrophes.

“If no one else sues them, I will,” said Taleb, who declined to say where or on what basis a lawsuit could be brought.

The Nobel prizes in physics, chemistry, medicine, peace and literature were established in the will of Alfred Nobel, the Swedish inventor of dynamite who died in 1896. The first awards were handed out 1901.

The Swedish Central Bank founded the economics award in 1968 in memory of Nobel. Previous winners of that prize include Milton Friedman, Amartya Sen, Paul Krugman, Robert Merton and Myron Scholes.

A former derivatives trader, Taleb is a professor of risk engineering at New York University and advises Universa Investments LP, a Santa Monica, California-based fund that bets on extreme market moves.

http://www.bloomberg.com/news/2010-10-0 ... mists.html

[kennynah]

probably generating too little royalty revenue from his wildlife book....now seeking attention.... must be the loneliness creeping into his life...

[kampungboy]

Common, NNT has already been bashing Noble economic winners since writing his 1st 2 books. He has singled out LTCM case where it was founded by Myron Scholes and Robert C. Merton, who shared the 1997 Nobel Memorial Prize in Economic Sciences.

[investar]

Taleb was at a conference yesterday, he said he speculates on a crash of state bonds from the US and he distrusts China.

[kampungboy]

I am a great admirer of NNT's Black Swan idea. One thing bothers me is he has appeared in a few TV interviews and projected a couple of things. This is contrast to his idea where Black Swan is something unpredictable. Maybe as what Kenny said, he wants some extra money

[winston]

Nassim Taleb Exclusive Interview By Jacob Wolinsky

Nassim Taleb was on Bloomberg television on Friday. It is always a pleasure to hear him speak as he does not do too many interviews on television.

Taleb is the author of two bestsellers; The Black Swan which we reviewed here. , and Fooled by Randomness which we reviewed here. In addition, I just found out recently that Taleb is coming out with a new book on November 30th titled The Bed of Procrustes: Philosophical and Practical Aphorisms. I plan to do a book review on Taleb’s new book shortly.

If anyone has read Taleb books it is obvious that something like the financial crisis was no surprise to him. Taleb talks at length how most people; regulators, investors, institutions and the average person do not prepare for the unexpected “black swan event”.

Taleb in this exclusive Bloomberg interview rips Ben Bernanke. He uses a lot of anologies which in general I find to be unintellectual and childish (but that is a topic for a different time).

Taleb argues that Bernanke did not see the financial crisis coming and therefore cannot be trusted now to make decisions to get us out of the financial crisis. Taleb has a good point.

In early 2007 Bernanke stated:

“Given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited,”

While there is plenty of blame to go around for the subprime crisis, I understand Taleb’s lack of confidence in Bernanke since he really missed the boat on this one.

Taleb now is concerned that Bernanke does not understand risk and does not see the risk that QEII might bring. Taleb thinks QEII MIGHT work but the risks are enormous. Taleb also says retirees are assuming all the risk.

Basically the retirees are bailing out the risk takers. The people paying the price are not the people who caused the crisis.

Taleb also does not have kind words for Alan Greenspan.


http://www.dailymarkets.com/stock/2010/ ... interview/

[winston]

If you like to OD on Nassim Taleb, here's one more for you ..


Nassim Taleb: "The Fed's Business Is Price Instability" by Tyler Durden

Ben Bernanke Black Swans Fail Hyperinflation Nassim Taleb POMO Quantitative Easing

As we try to figure out how it is possible that the market can still be trading down on a massive POMO day, here are some thoughts from Nassim "Fat Tails" Taleb, who has obviously ignored the surgeon general's warning not to discuss the Fed.

A visibly agitated Taleb, who may or may not have overindulged in the coffee IV drip earlier, was in full form on Bloomberg TV with Erik Schatzker lamenting that the Fed is not a publicly traded entity with options so that one can buy some seriously out of the money puts on Brian Sack.

No choice words were spared, or Black Swans strangled, during the filming of this clip.

http://www.zerohedge.com/article/nassim ... nstability

[winston]

Nassim Taleb: Bernanke 'Beyond Unwise, He is Immoral' By Greg Brown

Nassim Taleb, the author and financial guru whose popular 2007 book "The Black Swan" predicted the current financial crisis, has strong words for Federal Reserve Chairman Ben Bernanke.

Asked his opinion of the second round of quantitative easing put in place by Bernanke, Taleb flatly called the Fed chief “immoral” and called on him to stop using the savings of millions of U.S. retirees to subsidize a failed banking system.

“I think that he’s taking a risk with other people’s money, and he’s trying to bail out those who made mistakes with retirees’ money,” Taleb said on CNBC.

“Here we have a subsidy, for a second time, of those who made mistake, taking money away from those who are innocent. That to me is immoral . . . It’s beyond unwise.”

Asked if the actions taken by Bernanke were necessary, given the state of the economy as the crisis began, Taleb was dismissive.

“When a gambler wants to double up, he always invokes these kinds of arguments. ‘Oh, I’m doing it to save you,’” Taleb said.

“If you win, of course, in retrospect, people say it’s a good idea. If he loses, the problem is those who pay the price are not the ones who made those mistakes.”

Taleb squarely placed the blame for the calamity on the U.S. banking industry, calling for the Obama administration to “clean up” the banks and force them to shoulder the real risks inherent in the economy, rather than pawning it off on generations of Americans.

“Someone is taking the upside, society is keeping the downside . . . shareholders and taxpayers,” Taleb charged.

“Bankers are still paying bonuses today. They are still gambling with your money.”

Under orders from Congress, the Fed recently released details of its aid to banks and corporations, many of them foreign, during the crisis.

The money doled out totaled $3.3 trillion, far more than suspected, and went to organizations as varied as bond giant Pimco, General Electric, and major Swiss, Korean, and German banks, as well as most of the big Wall Street banks and directly to major corporations to support financing.

“Perhaps most surprising is the huge sum that went to bail out foreign private banks and corporations,” Sen. Bernard Sanders, Ind.-Vt, who wrote the provision on Fed disclosure, said in a statement after the release.

“As a result of this disclosure, other members of Congress and I will be taking a very extensive look at all aspects of how the Federal Reserve functions.”


http://www.moneynews.com/StreetTalk/Nas ... /id/378836

[winston]

Taleb Says He's `Nervous' About Chinese Economy, `Very Nervous' About U.S.
By Paul Abelsky

Nassim Taleb, author of the Black Swan,” said he’s “nervous” about the economy in China and “very nervous” about the U.S.

Russia’s economy, by contrast, makes Taleb feel “comforted,” the New York University professor said at a conference organized by Troika Dialog in Moscow today.

http://www.bloomberg.com/news/2011-02-0 ... -u-s-.html

[winston]

Nassim "Black Swan" Taleb: Forget Egypt...

Another critical Middle Eastern country could plunge into crisis

Saudi Arabia is "perfectly unstable," like Egypt, where 10-day protests are threatening the 30-year rule of President Hosni Mubarak, Nassim Taleb, author of "Black Swan," said today.

Taleb, a principal at Universa Investments LP whose 2007 bestselling book argued that history is littered with rare events that can't be predicted by trends, said that countries like Lebanon and Italy that suffer recurring political crises are safer for investors.

"A perfectly fragile country is a country, say like Egypt" before "the recent events, where there is no variation, and then – puff – you got a crisis and it's mayhem," Taleb told an conference in Moscow hosted by Troika Dialog. "So Egypt is perfectly unstable, Saudi Arabia, countries like that.''

Supporters of Egyptian President Hosni Mubarak, who has been in power since 1981, clashed today for the second day in Cairo's Tahrir Square with demonstrators who have been demanding the 82-year-old leader's resignation since Jan. 25.

The 86-year-old ruler of Saudi Arabia, King Abdullah, has backed the Egyptian government and condemned the protesters, while trying to address imbalances in the largest Arab economy.

The government announced in August a $385 billion, five-year spending plan as the kingdom tries to reduce a jobless rate of as high as 43 percent for Saudis between the ages of 20 and 24.

Pact With Clerics

Almost 40 percent of the population in Saudi Arabia, which is the world's largest oil exporter, is under 15. The country is ruled by the Al Saud family, which relies on support from the Sunni Muslim clerical establishment under a 1744 pact.

The political turmoil that engulfed the Middle East, sparked by last month's ouster of Tunisian leader Zine El Abidine Ben Ali, is continuing to spread, with protests now in Yemen. With high youth populations, countries in the region suffer from unemployment and dissatisfaction with corruption and long-entrenched leaders.

The cost of insuring the sovereign debt of Saudi Arabia has soared 56 percent since Jan. 27 to 117.4, according to CMA prices for credit-default swaps.

"I don't focus on political stability, nor do I specialize in olive groves," Taleb said. "My specialty is risk and fragility."


Source: Bloomberg