What Nassim Taleb Did on Black Monday 1987

[newwurldmn]

OK, so I have an issue with this. Say you were an investor with Universa. And you read some article where they are stating they made X and you know they made Y. One, you could sue them. Two, you would certainly pull your money out. And three, they would be in violation of countless securities laws. This is what Madoff did. He is in prison now. I know there are scummy guys out there, but believe it or not, most of them report their numbers accurately to the 4th decimal point. I'm not saying you are lying, but it would shock me if ANY high profile fund lied about their performance in such a tightly regulated industry. At the very least it would cause their investors to pull out. I mean if the manager is lying about their performance, why would you trust them with your money. I don't get what the upside is for them to do that. Can you cite any fund that you can prove has publicly lied about their performance that is still a going concern today?

If you read their returns overtime they don't make any sense: either they are truly geniuses who earn on long vol in short vol environments, or they can trade enormous size without anyone knowing. Their was an FT article in 2015 claiming they made a billion dollars. The actual quote was 15% which the author of the article (multiplied by 6bn to get to 1Bn). If they had made 1bn, then they would have had to be running 10bn of atm notional (and a generous premium of 300MM if that was like one month out). Anything out of the money, longer dated, or of an interesting structure would require more notional. That's massive size. You would see those footprints everywhere, like the Catalyst fund in early 2017.

I don't believe Universa is fraudulent like maddoff or that vol selling Hope fund, where they actually lied to their investors. I do believe they do not publish honest returns to the press and I believe their investors know this and are okay with it. Private Equity does this all the time: IRR calculations have little to do with cash on cash returns.

 

[truetype]

OK, so I have an issue with this. Say you were an investor with Universa. And you read some article where they are stating they made X and you know they made Y. One, you could sue them. Two, you would certainly pull your money out. And three, they would be in violation of countless securities laws.

No. Universa markets a "protocol" or overlay, tailored to each specific client's needs and preferences. Each account will have a different P/L stream. You're confusing Universa with a traditional commingled limited-partner structure.

 

[newwurldmn]

No. Universa markets a "protocol" or overlay, tailored to each specific client's needs and preferences. Each account will have a different P/L stream. You're confusing Universa with a traditional commingled limited-partner structure.

So perhaps Universa cherry picks the best performing mandates when they talk to the press at a given time.

 

[truetype]

So perhaps Universa cherry picks the best performing mandates when they talk to the press at a given time.

Or perhaps the press wants juicy headlines and doesn't want to sweat the details. Bear in mind, most financial journos, even at name-brand news outlets, have never traded for a living. They literally don't know what they're talking about.

 

[newwurldmn]

Or perhaps the press wants juicy headlines and doesn't want to sweat the details. Bear in mind, most financial journos, even at name-brand news outlets, have never traded for a living. They literally don't know what they're talking about.

Either way Universa isn’t publicly correcting these inconsistent messages.

 

[newwurldmn]

Or perhaps the press wants juicy headlines and doesn't want to sweat the details. Bear in mind, most financial journos, even at name-brand news outlets, have never traded for a living. They literally don't know what they're talking about.

Either way Universa isn’t publicly correcting these inconsistent messages.

 

[Maverick74]

If you read their returns overtime they don't make any sense: either they are truly geniuses who earn on long vol in short vol environments, or they can trade enormous size without anyone knowing. Their was an FT article in 2015 claiming they made a billion dollars. The actual quote was 15% which the author of the article (multiplied by 6bn to get to 1Bn). If they had made 1bn, then they would have had to be running 10bn of atm notional (and a generous premium of 300MM if that was like one month out). Anything out of the money, longer dated, or of an interesting structure would require more notional. That's massive size. You would see those footprints everywhere, like the Catalyst fund in early 2017.

I don't believe Universa is fraudulent like maddoff or that vol selling Hope fund, where they actually lied to their investors. I do believe they do not publish honest returns to the press and I believe their investors know this and are okay with it. Private Equity does this all the time: IRR calculations have little to do with cash on cash returns.

I don't agree with that. They have stated for years that they were bleeding from 2009 to 2016 with the exception of that spike in jan of 2016. I have watched interviews were Mark stated the fund was losing money during those lean years. I don't know where you are getting this idea that all they do is make money. If you could do so, could you please cite it? I've googled everywhere and I can't find it.

I also disagree with you on the idea that investors are totally kosher with the idea that their fund manager is losing money yet lying to the press saying they are making money. In the post Madoff world that is not going to fly and why should it? Come on, you know how tough this business is. Hedge funds are getting decimated right and left. Investors are fleeing. The Illinois Pension Fund, one of the largest in the country has pulled out of all hedge funds and says they will never touch them again. Nobody is OK with losing money and certainly no one is OK with their manager lying about it. I mean if it's a rounding error, fine. Saying you made 8% when really you only made 7.5%.

Let's get away from Mark for a second since he is in a grey area where it's not him that is stating their returns but the press. Let's go to Cole. He HAS stated explicitly that he has made money the last 3 years AND made a killing in 2008. I have watched his interviews in their entirety and there is no misrepresentation here by the media. He stated clearly that they have generated positive returns over the last 3 years where the VIX was in the low teens AND they will profit handsomely should a tail event occurred. Is he lying to?

 

[Windlesham1]

Don't feel bad for us.

Us dumb money roared back after March 2009. Ignorance is bliss.

I do have a question for you if you don't mind: I read the book and tried to hedge but how do a retail dynamically hedge without being eaten up by commissions and bid/ask?

I don't feel bad for the dumb money- it just piles up in my account . Hedging dynamically is not for modest traders like me and I pay UK commissions so I have to think twice before adjusting-so far only once this year

 

[312]

If you read their returns overtime they don't make any sense: either they are truly geniuses who earn on long vol in short vol environments, or they can trade enormous size without anyone knowing. Their was an FT article in 2015 claiming they made a billion dollars. The actual quote was 15% which the author of the article (multiplied by 6bn to get to 1Bn). If they had made 1bn, then they would have had to be running 10bn of atm notional (and a generous premium of 300MM if that was like one month out). Anything out of the money, longer dated, or of an interesting structure would require more notional. That's massive size. You would see those footprints everywhere, like the Catalyst fund in early 2017.

I don't believe Universa is fraudulent like maddoff or that vol selling Hope fund, where they actually lied to their investors. I do believe they do not publish honest returns to the press and I believe their investors know this and are okay with it. Private Equity does this all the time: IRR calculations have little to do with cash on cash returns.

They get some positive carry through buying blocks and then slowly selling them at retail levels

http://www.columbia.edu/~dj114/taleb-01.doc

"Taleb quit BNP Paribas in 1999 and set up Empirica in Greenwich, Connecticut, bringing Spitznagel with him. Empirica wasn’t like most hedge funds. The Russian financial crisis and the collapse of Long-Term Capital Management after $4 billion in losses had spooked many investors. Taleb began offering hedge fund clients protection against a blowup like LTCM by offsetting some of their trades with options. Empirica ended up acting like a superbroker or clearinghouse for buying out-of-the-money options. After spending millions on computer systems and giving their software programs code names like Igor, Taleb and Spitznagel would download 600,000 option prices every night and produce bids on 30-40 big blocks, getting them cheap by buying in bulk, Taleb says."

 

[destriero]

Not watching it, but Taleb made exactly SHIT from 1987. He lost money nearly every month that he was at Paloma, as you would expect from buying garbage wings, outrights.

He is where money goes to die.