Can We Get Some Actionable Advice Please?

Bloomberg recently quoted our old friend Nassim Taleb as saying that the global crisis is “vastly worse” than the 1930s. That’s quite a tall order. In the United States, unemployment peaked around 25% while GDP fell by 30%. We’re not even remotely close to those numbers, much less can we say that it’s “vastly worse.”

Taleb said, “This is the most difficult period of humanity that we’re going through today because governments have no control.” Joe Weisenthal rightly points out that loss of government control may not be such a bad thing. (Also, are the words “of humanity” really needed?)

What I find frustrating about many prominent bearish forecasters is the refusal to give concrete investment advice. I don’t see the point of telling people how bad things will be if you’re not offering advice on what to do about it. Yes, the world’s going to blow... tell me what to do now. As someone who has his portfolio viewable for free to all-comers 24-hours a day, it’s annoying that these bears refuse to back up their words. There’s no way to hold them accountable.

Is Taleb recommending anything? This is what Bloomberg writes:

Gold, copper and other assets “that China will like” are the best investment bets as currencies including the dollar and euro face pressures, Taleb said. The IMF expects the global economy to shrink 1.3 percent this year.

Hmmm...seems a bit vague. Once CNBC tried to get Taleb to give advice. The Maureen Tkacik article I linked to includes this snippet:

In February, Power Lunch, the midday show, booked two of the canniest thinkers to emerge in the crisis, Nassim Nicholas Taleb, the options trader and Black Swan author, and the economist Nouriel Roubini—only to find the two men stubbornly averse to saying anything that might risk making viewers any money. Roubini expounded upon the virtues of the Swedish model of bank nationalization and the dangers of a bubble-driven economy but refused to set a date at which he expected the market to turn around. When reporter Roben Farzad asked “Mr. Black Swan” where he would invest his money for the college fund of a hypothetical child born next month, Taleb began unloading on the extravagant compensation schemes that incentivized investment bankers to take excess risk. “But how is this actionable? How is this actionable? Do I stick my money under a mattress?” Farzad pressed. “I’m not here to give immediate investment advice” Taleb shot back. “Yeah, you’re the prophet of gloom and doom, but I need to know where to put my money now,” Farzad continued, and Mr. Black Swan finally offered that all his money was in various currencies, though he wouldn’t say which. The bullying wasn’t personal.

That’s a very revealing passage. I disagree that the reporter was bullying, he was trying to get a stubborn guest to go on record.

Taleb is happy to say that all these economists and bankers are clowns and fools, but he won’t say what investors should be doing. For many folks, vagueness seems to be fine but it’s not for me. I can’t take a market commentator seriously unless I’m able to hold them accountable. Vague pronouncements don't cut it.

One of the things I like about Cramer is that he’s not afraid to make himself look bad. For all his antics, what he says here is exactly right.

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Comments

[Alan Young:]

Criticizing Taleb for not giving investment advice is absurd: he's a mathematician and a scholar, not a trader or even a market analyst per se.
There are plenty of bears who give investment advice (Peter Schiff comes to mind), and it's no better (in general) that the advice given by bulls. I don't know where you'd go these days to find anyone you can hold accountable for anything, unless you're the mafia.

May 10 04:15 AM

[Paul Price:]

Cramer does give specific advice to buy or sell.

However, he often changes by 180 degrees within days making any specific statement totally worthless as a quote as to correctness.

You can often find 'buy' and 'sell' recommendations from him on the same stock just days apart. Later he can quote whichever one looks good for him at that time.

Value Line similarly uses the "this stock may lag the market in the near term but should appeal to long-term investors" tactic. Then, if the shares go up they point to their long-term 'buy'. If the stock declines they highlight their 'this stock may lag the market' comment. Thus, they can never be wrong no matter what the shares do.

May 10 04:25 AM

[Tom Armistead:]

When Roubini and Taleb appeared together on CNBS the general reaction was that the interviewers were boorish and messed up a wonderful opportunity. Check out the comments here: seekingalpha.com/artic...

Both men have good ideas: both are pessimists. The interview took place Feb 10: a lot has changed since then. The market sank like a stone until 3/9 and then took off like a rocket. Subsequent events make the doom and gloom questionable - we all ha ve 20/20 hindsight.

As an individual investor, I have learned that I need to listen carefully to intelligent and articulate men who are willing to share their thoughts on the big picture and investment philosophy. Then I make my own decisions.

May 10 05:44 AM

[Jasper M:]

I personally had No problem finding actionable advice. I started putting my plan into action in 2006, and I made 30% return on my at-risk capital in 2008. If I could do it, you could do it.
RESPECT those who saw it coming (Roubini, for example). But turning a model into a profitable strategy requires all sorts of other knowledge, so be willing to look for it. I, for example, used a lot of Robert Prechter's work, as it was very much in tune with the other "Big Picture" models I found merit in.

May 10 08:34 AM

[Tom Armistead:]

Actually his timing is still off - doom has not yet arrived.


On May 10 02:39 PM Cetin Hakimoglu wrote:

> Roubini's timing was off by 2.5 years. he had been predicting doom
> since 2005.

May 10 02:45 PM

[realold:]

I agree 100% on Cramer's uncanny abillity to switch direction on a dime and then tell you about it a month or two later. " I said buy but that doesn't mean hold it forever". Apparently, it means hold it for 6 hours. Day trading is a fine strategy, but pretending to see "trends" to the public and then day trading behind their backs is not. I thank Cramer for his suggestions on selling the market before and during the big decline. I really thank him for ranting about the coming bust in real estate loans, which was obvious but unspoken for years, but since then he has been a self-contradictory mess. As another example, he said nothing about his losing record the last two years, but is advertising his gains this year. He strongly suggested some utilities which subsequently reduced their dividends and lost price due to potential cap and trade disasters that he had not predicted, though he promoted the man who is going to do it to us. He is self-promotional and too fragmented to folllow word for word, but he has some truths buried in there if you have the patience to listen and find them..


On May 10 04:25 AM Paul Price wrote:

> Cramer does give specific advice to buy or sell.
>
> However, he often changes by 180 degrees within days making any specific
> statement totally worthless as a quote as to correctness.
>
> You can often find 'buy' and 'sell' recommendations from him on the
> same stock just days apart. Later he can quote whichever one looks
> good for him at that time.
>
> Value Line similarly uses the "this stock may lag the market in the
> near term but should appeal to long-term investors" tactic. Then,
> if the shares go up they point to their long-term 'buy'. If the stock
> declines they highlight their 'this stock may lag the market' comment.
> Thus, they can never be wrong no matter what the shares do.

May 10 03:13 PM

[Value Inves...:]

Taleb has hyped himself in interviews as someone who foresaw the crisis because he criticized the GSE’s interest rate models in 2003, long after many others criticized the model in the WSJ and other venues. His thinking was not only not in the front of the wave, but it did not directly apply to the current crisis. He said nothing specific when it counted, yet now he does victory laps as if he gave any meaningful advice.

In other words, Taleb claims credit where little is due but is quick to call Nobel laureates charlatans. Taleb, however brilliant or not, has established something of a reputation for being an unpleasant human being so making unsubstantiated allegations and/or inferences about people (Nobel laureates) he disagrees with are part of the schtick. No surprise there.

He blows up if you ask him about his trading record at Paloma Partners. He dismisses his closed Empirica Fund by saying he grew tired of it. I have rarely found a successful fund manager that grew tired of his fund, but perhaps he is easily bored.

Many did warn of the current crisis and supported their arguments with detailed and specific reasons, but Taleb was not among them.

As for his “brilliant” works, they are not original. As for the message:

Black Swans = [Unpredictable] Stuff Happens. Got it.
Fooled by Randomness = [Unpredictable] Stuff Happens Randomly. Got it.

May 10 08:40 PM

[Panus Skept...:]

You don't ask Taleb or Roubini for actionable advice any more than you ask a research scientist for a prescription for an antibiotic. Wrong occupation, wrong vantage point, wrong time frame, wrong priorities. Sorry Eddy, you messed up.

May 11 08:54 AM

[wtp:]

If actionable advice produced accountability, as it should, Cramer would have long ago been laughed off the stage.

May 11 12:01 PM