Was This Really Written in 2005? Not Much Changes!

Taleb on risk (PDF).


Your money is at risk. No matter what you’ve put it in–stocks, bonds, derivatives, hedge funds, houses, annuities, even mattresses–there’s always the chance that you could lose it or miss out on a bigger opportunity somewhere else. Anyone who would tell you otherwise is either a fool or a huckster. Then there are those who do warn of risk but package it into a simple numerical measure that seems to put it within manageable bounds. They’re even more dangerous.


The economic world is driven primarily by random jumps. Yet the common tools of finance were designed for random walks in which the market always moves in baby steps. Despite increasing empirical evidence that concentration and jumps better characterize market reality, the reliance on the random walk, the bell-shaped curve, and their spawn of alphas and betas is accelerating, widening a tragic gap between reality and the standard tools of financial measurement.

Those words were 2005 and now in 2012…J.P. Morgan is at the punch bowl again playing the same game.

Note: Taleb might be my favorite trend following inspiration–even if his intention surely is not to explain/promote trend following.

One thought on “Was This Really Written in 2005? Not Much Changes!

  1. I believe that there are very few people in this world who can identify changes in the trend of the stock market.  So that leaves guessing as the most used trend following strategy.  My RIX Strategy has been identifying changes in the trend of the stock market for over 40 years.  But very few people believe it.  It’s easier for the “experts” to make predictions and then tell people that the market can not be timed.  Unfortunately, most investors believe that.

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