Nassim Taleb on Charlie Rose: "Massive Deflation Nightmare, Roubini Too Bullish"

Quote from scriabinop23:

Markets can be all terribly wrong.

The credit markets were wrong before this blowup, and they are likely wrong now.

This video makes one good point: markets are great at being wrong. Furthermore, Taleb is contradicting himself by saying with certainty what is going to happen.

Lets look how markets were wrong:
1) Buying subprime for 100c on the dollar.
2) Buying oil at 147 (inflation and supply fear), then 6 months later selling at 42.
3) Shipping rates. Why was everyone so wrong signing drybulk ship leases 1 year ago at 230k/day that now are practically free in comparison?
4) Credit markets are priced to MORE defaults than the great depression right now (yes, this is true). Is this true?

I don't buy that since credit guys are more sophisticated because they are 'professionals', that pricing that results is necessarily the reflection of the truth vs the stock market. Giant mispricings in their markets led to this mess.
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Yes markets make mistakes so what?So does gurus or 'technical' indicators, regulators, econometrics etc. Empiral evidence suggests markets beat the majority of systems or people so they ARE good guide for the future even though its an imperfect one
Its like you are suspecting Federer will beat Nadal on their next meeting because of a physical problem Nadal has. If you look at the betting line and Fed is a 2-1 favorite it just simply CANT help Nadal chances that this 'guessing machine' that gets it right more often than most is agreeing with your view
 
Quote from scriabinop23:



My chips are on the reflation bet through increased money supply to offset this credit-induced deflation. Those who still have credit and assets will be rewarded, since a return of economic activity spurred by int. rate policy and fiscal stimulus multiplied * increased money supply = elevated GDP as well as obviously higher prices.
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Provided those with good credit and assets are still employed...:eek:
 
its funny, taleb in the CR interview says market gets it terribly wrong, but has the exact opposite conclusion.

What I dont understand is how so many people can dismiss him even though he wrote about this happening in the Black Swan.

There millions of investors praying that this system gets going again
 
Quote from zdreg:

have you backed up the truck and acted on this "buy signal" ?
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I guess this is an argument between me and him. not between me (hiding under an internet alias) and ppl that act as his "defenders".
 
Quote from JamesVU2000:

its funny, taleb in the CR interview says market gets it terribly wrong, but has the exact opposite conclusion.

What I dont understand is how so many people can dismiss him even though he wrote about this happening in the Black Swan.

There millions of investors praying that this system gets going again
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He's right about a lot of things, but he ignores Soros' also valid idea of reflexivity. Trends can be self reinforcing... ie if deflation sentiment kicks in, managers stop capex, people stop spending, they sell stocks... This can go on for a while... It can be a bubble in both directions.

What happens to 'cash is king' when the Fed is printing money without abandon? People panic away from cash to anything with physical value. That reflexivity can be undone just as quickly as it is wound up.

Time and more importantly value (ie earnings) will solve the overhead supply issues.

Money supply will replace credit, and eventually serve to increase credit flow in nominal terms.
 
This is what most people dont get. The true reflextivity trade is for a deflation. its the ultimate contrarian bet because it hasnt worked in 70 years.

I dont think youve read either of his books. He talks about Soros in both of them
 
Quote from JamesVU2000:

This is what most people dont get. The true reflextivity trade is for a deflation. its the ultimate contrarian bet because it hasnt worked in 70 years.

I dont think youve read either of his books. He talks about Soros in both of them
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No but that's my point. reflexivity leads to bubbles in either direction. I read the Black swan book and liked it. But I think Taleb's prognostications of continued reflexivity are merely prognostications worth no more than a coin toss.

There are some serious forces trying to undo this reflexivity. If this were true free market without government intervention, I'd agree with you. But that's not the game we are (or ever were) playing.
 
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