Everything in life is a balance, including this... So yet again, you won't find a lot of disagreement from me on this.
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Taleb's barbell strategy
- Thread starter Daal
- Start date
People define things differently but Taleb was giving his 'view of the world' on Antifragile, what is risky and what is safe, convexity, etc. He could have given his own take instead of throwing a bomb and then going silentDaal, here is the issue. When dealing with finance as Marty pointed out, we all define these words very differently. There are people on ET that think only making 20% a month selling options is modest and conservative (hey they could make 50% a month if they wanted to). Everyone here will get hung up on definitions. What is "safe", what is "risky". Hell there are some people here that believe the gov't is gong to confiscate any and all assets held in banks just because (you know the whole new world order thing). I think this will be challenging to have an open conversation about things that are not so easily defined.
I do think the general philosophy works well in real life where I don't have to live my life by some standard definition. It turns out I'm free to make my own choices, you know that whole free will thingy.
People define things differently but Taleb was giving his 'view of the world' on Antifragile, what is risky and what is safe, convexity, etc. He could have given his own take instead of throwing a bomb and then going silent
He did. You mentioned it in your post...convexity. Things that have convexity have asymmetric payoffs. You should own things that are convex and I gave real life examples of that. What you are getting bogged down with is the concept of "safe". He uses T-bills generally to define safe. And they ARE safe. twelve month t-bills have no real inflation risk and people have been investing in them for generations. Yes even at 50 bps people bought them. Hell, people have bought money market rates at negative yields. Why? For SAFETY. So what part Daal are you having a hard time with?
In fact Daal, here is his EXACT strategy. He espoused buying 12 month zero coupon bills. And using the discount from those bills, buying option structures that involved being long tails in low vol environments. As Marty pointed out, the devil is in the details which can be said about anything in life.
Because he is read around the world and if he means US T-Bills only, then he needs to state that. What about the people that own government bills from countries that don't have as good track record? Are they out? Are they in? What does his readers in Bangladesh ought to do?He did. You mentioned it in your post...convexity. Things that have convexity have asymmetric payoffs. You should own things that are convex and I gave real life examples of that. What you are getting bogged down with is the concept of "safe". He uses T-bills generally to define safe. And they ARE safe. twelve month t-bills have no real inflation risk and people have been investing in them for generations. Yes even at 50 bps people bought them. Hell, people have bought money market rates at negative yields. Why? For SAFETY. So what part Daal are you having a hard time with?
Furthermore, I can link a youtube video where Taleb argues persuavely that samples in Extremistan data sets cannot be relied upon as the amount of data needed so one can be confidently of the 'mean' or 'average' is 10000 to the 10th power or some ridiculous number like that. Also, he lambasted Bernanke for ignoring tail/hyperinflation risks. I doubt very much Taleb had 90% of his cash in T-bills during that period
Because he is read around the world and if he means US T-Bills only, then he needs to state that. What about the people that own government bills from countries that don't have as good track record? Are they out? Are they in? What does his readers in Bangladesh ought to do?
Furthermore, I can link a youtube video where Taleb argues persuavely that historical data in Extremistan data sets cannot be relied upon as the amount of data needed so one can be confidently of the 'mean' or 'average' is 10000 to the 10th power or some ridiculous number like that. Also, he lambasted Bernanke for ignoring tail/hyperinflation risks. I doubt very much Taleb had 90% of his cash in T-bills
Daal, he DID state this. I have his book were he discussed this and I've watched all his interviews where he laid out the details just as I have. And can you inform me why someone in Bangladesh can't invest in US T-bills because I assure you they can. In fact, the irony here is they would have enjoyed a VERY nice return from dollar appreciation.
Taleb at his old fund actually had people managing selling ATM premium for him while he bought the wings. I think Spitznagel probably kept doing the same.
-Capital controlsDaal, he DID state this. I have his book were he discussed this and I've watched all his interviews where he laid out the details just as I have. And can you inform me why someone in Bangladesh can't invest in US T-bills because I assure you they can. In fact, the irony here is they would have enjoyed a VERY nice return from dollar appreciation.
-Costs to access foreign assets (FX costs, legal costs, tax costs, etc)
-FX risk (all of the sudden that 90% can fluctuatle widely). As a matter of fact, in my own country (Brazil) there was some periods where the dollar fell by 40-50% against the domestic currency, the one the investor buys groceries with (not the USD)
Also, I would like to see the exact quote from the book where he stated that. With Taleb, if you dont read the fine print, he will call you an idiot later
What should an investor do when the real yield on a 12m t-bill is negative? I am reasonably sure there ain't no tails that you can afford to buy when this happens (has been the case consistently, more or less, for the past 10+ years).In fact Daal, here is his EXACT strategy. He espoused buying 12 month zero coupon bills. And using the discount from those bills, buying option structures that involved being long tails in low vol environments. As Marty pointed out, the devil is in the details which can be said about anything in life.
What should an investor do when the real yield on a 12m t-bill is negative? I am reasonably sure there ain't no tails that you can afford to buy when this happens (has been the case consistently, more or less, for the past 10+ years).
I guess you blow your brains out Marty. What else is there to do in the binary world you want to live in. Just blow them out. What do you for a living Marty? Manage money? What happens when you have a 50% drawdown? Walk me through it.