Tuesday, July 20, 2010

Wall Street will sell anything

That's right. If there is a demand, they will supply it? Competing firms would also be quick to do likewise. So they will have to sell fast and sell much. What are we talking about this time? Black Swans funds, i.e., hedging against tail risks. Investors are hungry for products to insure them against their fear of loss.

Taleb had this to say about such products which is branded from a book with the same namesake.

Taleb said sticking with a tail-risk strategy can be psychologically challenging because payoffs, while big, are less frequent.
“If you looked at numbers over a period of time -- six, seven, eight years -- there’s much higher return,” Taleb said. “But if you watch a trader in any given year, he looks like an idiot. No trader wants to feel like he’s an idiot.” 
I like Taleb. He calls a spade a spade. Doesn't minces his words.

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