Bloomberg: Black Swan Author Spars With Quant Legend Over Tail Risk Hedges

“Black Swan” author Nassim Nicholas Taleb and quant investing pioneer Cliff Asness have engaged in a vitriolic Twitter dispute over the esoteric world of tail-risk hedging that descended into personal insults.

The spat began when Taleb sent a pair of tweets accusing the $143 billion AQR Capital Management LLC of issuing flawed reports that say tail-risk hedging doesn’t work.

Link to Bloomberg article: Black Swan Author Spars With Quant Legend Over Tail Risk Hedges

Never use Single-point Estimates for Pandemics

Never produce a point estimate for risk management, esp. in a fat-tailed domain, rather show statistical properties. Never judge a risk management stance from point forecasts.

The only man who has a clue about the Coronavirus Pandemic

Link to original article – Taleb: The Only Man Who Has A Clue

Note: If viewing this as an email please click through to the post to view content.

Bloomberg: Portfolios to ‘Blow Up’ Without Tail Hedges

“The worst thing you can do with insurance is try to time it,” Taleb, a distinguished professor of risk engineering at New York University, said in an interview Monday on Bloomberg Television. “If you don’t have tail insurance, you don’t have a portfolio. Your portfolio is going to blow up.”

That’s a sobering reality check from someone who has long argued that instead of turning to the government for help in times of crisis, big investors and corporations should manage their own risks. His pleas for prudence were largely ignored, though, and most parts of the economy were ill-prepared for a sudden downturn when the coronavirus hit.

Link to Bloomberg article: Taleb Says Portfolios to ‘Blow Up’ Without Tail Hedges

Note: If viewing this as an email please click through to the post to view content.

Nassim: “Trump makes sense to a grocery store owner”

While in Jaipur, Nassim was interviewed for The Hindu. In that interview, he explains his support for Trump:

In Skin in the Game, you seem to build on theories from The Black Swan that give a sense of foreboding about the world economy. Do you see another crisis coming?

Oh, absolutely! The last crisis [2008] hasn’t ended yet because they just delayed it. [Barack] Obama is an actor. He looks good, he raises good children, he is respectable. But he didn’t fix the economic system, he put novocaine [local anaesthetic] in the system. He delayed the problem by working with the bankers whom he should have prosecuted. And now we have double the deficit, adjusted for GDP, to create six million jobs, with a massive debt and the system isn’t cured. We retained zero interest rates, and that hasn’t helped. Basically we shifted the problem from the private corporates to the government in the U.S. So, the system remains very fragile.

You say Obama put novocaine in the system. How will the Trump administration be able to address this?

Of course. The whole mandate he got was because he understood the economic problems. People don’t realise that Obama created inequalities when he distorted the system. You can only get rich if you have assets. What Trump is doing is put some kind of business sense in the system. You don’t have to be a genius to see what’s wrong. Instead of Trump being elected, if you went to the local souk [bazaar] in Aleppo and brought one of the retail shop owners, he would do the same thing Trump is doing. Like making a call to Boeing and asking why are we paying so much.

Click through to read more.

The Syrian War Condensed

On Medium, Nassim posted a comparison of the Assad regime and the “moderate rebels.”

Juxtaposition. The way to analyze the situation is to look at the factions comparatively. You do not compare Assad’s regime to the Danish or Norwegian governments, but to the alternative. The question becomes if there is anything in the left column that is worse than the right column?

Note 1. Assad father’s operatives blew up my house in Amioun when my grandfather, then MP, voted for Bashir. In Skin in the Game I discuss this as “acting against one’s interest” (the opposite of conflict of interest). So as a scientist and a humanist, I have been setting my grudge aside in considering the far, far, far, greater cancer of Salafism or Islamofascism.

Note 2. Recall that I am a statistician. When I took a look at the statistics of the conflicts, most appear to be fabrications inflated by Qatari-funded think tanks and their useful idiots — by a mechanism the Indians call “Salma told Sabrina”. For instance, we know that Hama’s toll was not the 30–40,000 people report but the only real evidence is closer to 2,000.

Note 3. One may ask: are the “rebels” all theocratic Salafis? No, but the groups became progressively so by the minority rule: you put a single Salafi in a group of five, and the five behave as Salafis. This, aside from Wahabi funding.

Note 4. One may ask: are all people who are mourning Aleppo that stupid, so gullible to the think tank operators? My answer, alas, is yes. And it takes some financial and intellectual independence and a great deal of integrity to analyze matters outside the main narrative as think tankers jump on you like flies.

In the end I never imagined seeing the “left” siding with the AlQaeda of Sept 11, mourning the fighters of Aleppo and, aside from such independent journalists as Robert Fisk, spreading all manner of concoctions.