Nassim Taleb

“I admire the move by the European Union to restrict the bonuses of that class of privileged civil servants called “bankers” — a recognition that the taxpayers have the right to control the income of those they subsidize and bail out, just as they set the salaries of other state-sponsored workers. Alas, bankers in their current status are an offense to capitalism; they are in a strange situation of having upside without downside, no skin in the game. As an additional insult to the taxpayer, bankers paid themselves the largest bonus pool of their history in 2010 — thanks to Troubled Asset Relief Program. If a banker wants to be free in his income, he should start his own hedge fund. Because hedge fund operators are invested in their funds; they typically have 50 times more risk as a share of their net worth than their largest customer.” [NYT]

  • 15 Mar 2013 at 11:46 AM

Senate Subcommittee Feasting On Whale Today

When I got the Senate Permanent Subcommittee on Investigations report on the London Whale last night, I did what any sensible human would do: I ctrl-F’ed for my name and the names of my friends and enemies, gloated briefly, and then set to work rationalizing not reading the rest of it. After all, it’s ridiculous for the Senate to investigate a basically legitimate trade that, though it lost some money, did nothing to destabilize JPMorgan or the financial system as a whole. And we’ve heard all the important Whale stuff before, including in JPMorgan’s own Whale autopsy, and even then it was old news.

But then I started skimming the executive summary and after underlining every sentence in the first ten pages I figured I’d have to give it a closer look. It’s an amazing, horrifying read.

What was the Whale up to? I don’t think you’ll get a better explanation than this, from a January 2012 presentation by the Whale himself, Bruno Iksil (page 74):

Mr. Iksil’s presentation then proposed executing “the trades that make sense.” Specifically, it proposed:

“The trades that make sense: Read more »

Have you ever gazed upon classical Greek philosopher Nassim Nicholas Taleb and thought to yourself, “That man has a body from the gods. I could never hope to match him in brains, but what about brawn? If only I could obtain the details of his diet and fitness regimen”? Well, friends, today is your lucky day. Despite still being on his second tour of self-imposed quiet time, Taleb granted several interviews to publications reviewing his new book, “Antifragile: Things That Gain From Disorder,” and, naturally, the topic of his physique came up, specifically the various ways he keeps it in such enviable shape. (He also touches on the exercises that led to him having a brain three times the size of the typical astrophysicist, though please note that these should be appreciated but not be attempted by average humans, who could hurt themselves quite badly.) Read more »

Several years back, in response to the news that Ben Bernanke would be reappointed Fed Chairman, Nassim Nicholas Taleb made an announcement that he would be retreating from society. “What I am seeing…is too much for me to bear,” Taleb wrote. “I am not blaming Bernanke (he doesn’t even know he doesn’t understand how things work); it is the Senators appointing him who are totally irresponsible…I need to withdraw as immediately as possible into the Platonic quiet of my library, work on my next book, find solace in science and philosophy, and mull the next step…I will only (briefly) emerge from my hiatus when the publishers force me to do so upon the publication of the paperback edition of The Black Swan. Bye, Nassim.” NNT reintroduced himself to the world at some point in 2010 or 2011 but now, apparently, he has once again decided to pick up his black swans and leave, as people getting in touch with him to star in their movie, blurb their book, or pick his large and intimidating brain recently learned. Read more »

  • 21 Aug 2012 at 2:25 PM

Poker Is Not Gambling, Jury Still Out On Investing

Because this is Dealbreaker: A Place For Finance And Sometimes Poker™, I figured some of you would be interested to know: poker is now legal!

Sort of. Basically a fellow named Lawrence Dicristina was running a poker room in Staten Island. He was arrested by the Feds and charged under the federal Illegal Gambling Business Act. He was convicted by a jury and asked a federal judge, Jack Weinstein, to throw out the jury verdict because he ran a poker room and poker isn’t gambling. Today Judge Weinstein agreed: under federal law, poker isn’t gambling. So Dicristina is free to go.

The opinion is here and it is 120 pages; the important don’t-try-this-at-home headline is that this opinion “does not undermine the holding that poker is gambling as defined by New York law” and therefore probably illegal in New York. It’s just not federally illegal, which I suspect means that Lawrence Dicristina may follow in Sergey Aleynikov’s footsteps to state court. And this is just the opinion of one judge in one district, so consult your lawyer before you restart your online poker business/Ponzi scheme/other scheme that is not technically a Ponzi scheme: the online poker crackdown is unlikely to stop just because of this.

Nonetheless it’s a nice win for the forces of poker. The decision basically turns on whether poker is mostly a game of chance (gambling, bad) or skill (not gambling, okay). For this the court looked at the testimony of two experts, defense expert Dr. Heeb, “a respected economist, statistician, and player in national poker tournaments,” who argued that skill predominates, and prosecution expert Dr. DeRosa, an econometrician who “neither has any personal experience with poker, nor has he independently analyzed the game,” and therefore felt comfortable saying that it’s mostly a game of chance, which, okay, nice intellectual honesty prosecutors.* Given that – and, the fact that, y’know, poker is a game of skill – it’s not surprising that the judge came out for the defense.

Even if you’re not one of our readers who comes here for the gambling tips, you still may enjoy this opinion just for its recapitulation in miniature of the efficient markets hypothesis. Here is the defense expert’s money chart: Read more »

Nassim Taleb, author of “The Black Swan,” said he favors investing in Europe over the U.S. even with the possible breakup of the single European currency in part because of the euro area’s superior deficit situation. Europe’s lack of a centralized government is another reason it’s preferable to invest in the region, said Taleb, a professor of risk engineering at New York University whose 2007 best- selling book argued that history is littered with rare events that can’t be predicted by trends. A breakup of the euro “is not a big deal,” Taleb said yesterday at an event in Montreal hosted by the Alternative Investment Management Association. “When they break it up, there will be a lot of fun currencies. This is why I am not afraid of Europe, or investing in Europe. I’m afraid of the United States.” [Bloomberg]

Update: NNT says he’s not looking forward to a Euro break up at all actually, and that a “tawdry” Bloomberg reporter took his words out of context.

Earlier today, we discussed the upcoming bonus season and the fact that, for those who are employed by banks, it’s looking to be something of a disappointment. Numbers are estimated to be down 20-30 percent on average from last year, with fixed-income being hit the hardest. For many, it’s cause for some preemptive JO&C’ing at the desk this morning and some curling up into the fetal position this afternoon. According to Black Swan author Nassim Nicholas Taleb, however, you drying those eyes, picking yourself up off the floor and thanking your lucky stars you’re getting anything ’cause if he were in charge? You’d get no-thing. Read more »