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Strategies & Market Trends : Value Investing

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To: Spekulatius who wrote (38581)	7/23/2010 10:46:08 AM
From: Jurgis Bekepuris	1 Recommendation Read Replies (1) of 78670

I watched Taleb Q&A recently on youtube and decided that he's not as loony as he sounds in his quoted soundbytes. So maybe I'll read his book sometime. However, I don't think his suggested investment approach (9X% cash, 5-10% "black swan" hitting deep-out-of-money bets) works for most people or most of the time. By definition "black swans" are rare and most of them are not easy to predict. (By the same definition, events on your list are not black swans. ;)) Therefore it is very unlikely that investor will hit the right out-of-money bet in the right market, in the right direction at the right time. Assuming one uses 10% cash to cover 10 markets/directions, it would take 10:1 payout just to break even, 100:1 payout to double your money. Even with options and CDS 100:1 is getting pretty outlandish. Since most years don't have black swan events, I'd say that this approach would at best break even unless the investor is SO much better than everyone else and only bets on sure black swans - you see the irony there? ;) P.S. China RE market blows up. It has already done this. At least twice. Was it such a doozy that you slept over it? ;)

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