Tuesday's Taste of Taleb

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Nassim Taleb is all over the web this week -- profiled in GQ, the accuracy of the GQ piece questioned by Janet Tavakoli, her questioning recapped by Clusterstock and the FT, and a news item in the WSJ about a new hedge fund that will target an outcome of hyperinflation.

According to the GQ profile, he has a new book in the works that for now is called Tinkering. As someone who enjoys his writing, that is good to know.

Working backwards, the WSJ article about the new fund is interesting in that taking steps to protect against hyperinflation is easily done by do-it-yourselfers. I'm not saying whatever strategy Taleb's fund ends up doing is easily replicated, but anyone can buy TIPS, gold, other commodities and equity markets that stand poised to benefit from some sort of hideous inflation event in the US were it to happen.

Tavakoli questions the reporting by GQ of Taleb's results reported as $20 billion in profits, whereas Clusterstock seems to take a skeptical view Taleb himself.

My take on Taleb is as more of a big picture guy (not a unique opinion by any means), and so his investment results are not very important to me. As mentioned in a previous post and brought up in the WSJ article, a fund Taleb was involved with previously was closed in 2004 for poor results. This is inconsequential because the purpose of the fund was to capitalize on extreme outcomes -- black swan events, if you will. After the tech meltdown we entered a period of time where there was very little volatility, so a fund that relies on volatility at a time when there is none, or very little, is unlikely to do well.

With regard to his starting a fund along these lines, I would be most interested in the thought process that leads him to believe the US is in for hyperinflation. Yeah, we all probably have a good idea of why he thinks that, but specifically, is there anything he sees that maybe isn't being talked about by a lot of people? Maybe not, but that is what I would want to know about.

The GQ article included a little nugget from Taleb about not giving advice. He says it is "anathema to me -- I can only tell you what not to do." He feels advice givers are charlatans. Needless to say I don't entirely agree with that one, but there are certainly plenty of incompetent advice givers.

Zooming out a little bit, Taleb is a thinker, he provokes thought. I believe I can learn from him in agreeing with some points, disagreeing with some and not fully understanding some others. Other people can do the same and you either see that value or not, which is of course fine.

From different information sources we get different utility. Some folks provide stock picks, others economic analysis and so on. Taleb is more of a this is how to think type of guy. Asking an economist for stock picks is probably futile, just as asking Taleb how to invest for college for a newborn is a waste of time.

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