arabianights
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Taleb wants risk managers to be sued
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trendie
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much as I enjoyed reading Talebs works, he is getting a "bit up himself".
isnt the whole point of black swans is that they cant be quantified?
or am I being thick?
is he saying that making people aware of black swans makes black swans more likely?
people are going to be sued for not planning for unforeseen events??
isnt the whole point of black swans is that they cant be quantified?
or am I being thick?
is he saying that making people aware of black swans makes black swans more likely?
people are going to be sued for not planning for unforeseen events??
BSD
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Good points.
One relevant issue also would seem to be that the current mess is the result of a corrupt US Congress that's not representing the best interests of it's voters, but has instead been bought hook, line and sinker by the lobbyists of Wall Street who managed to sell with sufficient campaign donations a tall story of rewards having lost any correlation with risk, and of markets being fully able to take care of themselves, with de facto no regulations being necessary, which was the situation in the US before Wall Street imploded.
Now that arch protagonist of all-out cowboy capitalism is discussing nationalisation of banks on top of the 700 Billion US$ state bailout.
Of course bankers with more short term greed than long term reasoning, let alone reckoning, ability capitalised on that regulatory vacuum with the truly brilliant business idea of shoving credits down the throats of people who couldn't afford them, while afterwards trading around with these toxic timebombs.
Seeing the short half-life of such a business idea is not down to hindsight: it's simple common sense that such a snowball system carries the seeds of it's own destruction.
Short term greed resulting in a bubble just waiting to burst is not what I would call a Black Swan at all, it's simple, very predictable stupidity.
And this gigantic mess a mere 20 years after the US had to rescue it's Savings and Loans banks in a pretty similar crisis driven by the exact same lack of regulation and ensuing short term greed coupled with mind boggling incompetence and total lack of risk awareness:
Mortgage Mess Of Today Rivals S&L Crisis of '80s? - Real Estate * US * News * Story - CNBC.com
People really don't learn !
One relevant issue also would seem to be that the current mess is the result of a corrupt US Congress that's not representing the best interests of it's voters, but has instead been bought hook, line and sinker by the lobbyists of Wall Street who managed to sell with sufficient campaign donations a tall story of rewards having lost any correlation with risk, and of markets being fully able to take care of themselves, with de facto no regulations being necessary, which was the situation in the US before Wall Street imploded.
Now that arch protagonist of all-out cowboy capitalism is discussing nationalisation of banks on top of the 700 Billion US$ state bailout.
Of course bankers with more short term greed than long term reasoning, let alone reckoning, ability capitalised on that regulatory vacuum with the truly brilliant business idea of shoving credits down the throats of people who couldn't afford them, while afterwards trading around with these toxic timebombs.
Seeing the short half-life of such a business idea is not down to hindsight: it's simple common sense that such a snowball system carries the seeds of it's own destruction.
Short term greed resulting in a bubble just waiting to burst is not what I would call a Black Swan at all, it's simple, very predictable stupidity.
And this gigantic mess a mere 20 years after the US had to rescue it's Savings and Loans banks in a pretty similar crisis driven by the exact same lack of regulation and ensuing short term greed coupled with mind boggling incompetence and total lack of risk awareness:
Mortgage Mess Of Today Rivals S&L Crisis of '80s? - Real Estate * US * News * Story - CNBC.com
People really don't learn !
BSD
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The article I quote is from 2007, nb, but still hits the main shortcomings that led to the crisis in the 80's:
"The meltdown in the mortgage market and its impact on the credit markets may have some historical precedent: the collapse of the savings and loan industry and its subsequent government bailout in the late 1980s and early 1990s was also a major lending debacle.
The collapse of the S&L industry was the result of flawed deregulation, poor regulation and reckless lending practices, which in some cases, included balance sheet fraud. Political inaction once the severity of the problem was evident didn't help, either.
As part of the bailout, Congress passed legislation creating the Resolution Trust Corporation to liquidate real estate and other assets of failed S&Ls through equity partnerships. Its mission complete, the RTC was dissolved in 1995.
Though the RTC was extremely successful, the federal S&L bailout cost taxpayers an estimated $150 billion. Now some 20 years later, there’s talk of another, similar bailout."
Yup.
700 Billion US$ this time around.
Plus the End of Wall Street.
AND nationalisation of banks being discussed right now.
Plus a world wide melt-down not impossible.
Brilliant stuff, unchecked, unregulated capitalism !
I'd rather be called a German socialist, lol, by Americans who don't understand that word than subscribe to the alternative.
It's about BALANCE, not a black-or-white model of the world that is not anchored in reality !
"The meltdown in the mortgage market and its impact on the credit markets may have some historical precedent: the collapse of the savings and loan industry and its subsequent government bailout in the late 1980s and early 1990s was also a major lending debacle.
The collapse of the S&L industry was the result of flawed deregulation, poor regulation and reckless lending practices, which in some cases, included balance sheet fraud. Political inaction once the severity of the problem was evident didn't help, either.
As part of the bailout, Congress passed legislation creating the Resolution Trust Corporation to liquidate real estate and other assets of failed S&Ls through equity partnerships. Its mission complete, the RTC was dissolved in 1995.
Though the RTC was extremely successful, the federal S&L bailout cost taxpayers an estimated $150 billion. Now some 20 years later, there’s talk of another, similar bailout."
Yup.
700 Billion US$ this time around.
Plus the End of Wall Street.
AND nationalisation of banks being discussed right now.
Plus a world wide melt-down not impossible.
Brilliant stuff, unchecked, unregulated capitalism !
I'd rather be called a German socialist, lol, by Americans who don't understand that word than subscribe to the alternative.
It's about BALANCE, not a black-or-white model of the world that is not anchored in reality !
FXSCALPER2
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Hardly anyone understands risk. Risk measurements do CAUSE a misunderstanding (not to say underestimation) of risk. I think Taleb is a pretentious git, but he is right on the ball with this one.
Agreed.. I actually think nobody can know the true meaning of risk in the "free market" its all smoke and mirrors designed to fool the public..
And I suppose the attorneys and lawyers are all being measured up for new suits as another post bubble moneyfest begins..
NNT has made a killing by stating the bloody obvious really... top man
BSD
Yes, it was all very predicable, just the timing as ever was the hard part.
Anyone thinking I'm writing with hindsight?
Well, here's a prediction you can bank on. Come 2018-2020 there will again be some sort of orgy of speculation in the western world and they'll be massive problems again.
Want another one?
Come 2035, give or take there will be another orgy of speculation in some sort of another in the western world leading to massive problems.
I could go on but I think you all get my point.
Yes, it was all very predicable, just the timing as ever was the hard part.
Anyone thinking I'm writing with hindsight?
Well, here's a prediction you can bank on. Come 2018-2020 there will again be some sort of orgy of speculation in the western world and they'll be massive problems again.
Want another one?
Come 2035, give or take there will be another orgy of speculation in some sort of another in the western world leading to massive problems.
I could go on but I think you all get my point.
BSD
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Exactly Anley, well said.
Says something about the wisdom of the human race when we have absolutely no problem equating the value of a tulip with a top-notch mansion at the height of tulipmania in Holland in the 17th century !
Or - somewhat more recently in the greater scheme of things - managing to twist our facts to our beliefs during the web bubble that some start-up just recently IPO'ed but with zero profits deserves to be worth more than a real-world counterpart minting money every day !
Says something about the wisdom of the human race when we have absolutely no problem equating the value of a tulip with a top-notch mansion at the height of tulipmania in Holland in the 17th century !
Or - somewhat more recently in the greater scheme of things - managing to twist our facts to our beliefs during the web bubble that some start-up just recently IPO'ed but with zero profits deserves to be worth more than a real-world counterpart minting money every day !
