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please explain this financial plan from genius who wrote "Black Swan"

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dumdum
User ID: 673526
7/2/2009 8:06 PM
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please explain this financial plan from genius who wrote "Black Swan"	Quote
[link to www.cnbc.com] i don't understand it.

dumdum
User ID: 673526 (OP)
7/2/2009 8:07 PM

Re: please explain this financial plan from genius who wrote "Black Swan"

Quote

from Taleb on cnbc:

The government needs to deleverage debt and not try stimulus packages that will inflate assets, he said.

"What makes me very pessimistic in not seeing any leadership or awareness on parts of government on what has to be done, which is deleverage $40-to-$70 trillion," Taleb said.

"The monkey on our back is debt," he added.

As an example, Taleb said banks should not be sending demands for larger and larger sums from homeowner in arrears on their mortgage. Instead the bank should offer to lower the monthly payments in return for part-ownership of the property.

"People would be able to start from scratch on a healthy basis. You don't want to wait for foreclosure," he said.

dumdum
User ID: 673526 (OP)
7/2/2009 10:16 PM

Re: please explain this financial plan from genius who wrote "Black Swan"	Quote
anybody?

Miss Maple
User ID: 683425
7/2/2009 10:19 PM

Re: please explain this financial plan from genius who wrote "Black Swan"	Quote
Did ya google it?

Miss Maple
User ID: 683425
7/2/2009 10:21 PM

Re: please explain this financial plan from genius who wrote "Black Swan"	Quote
Black Swan An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult to predict. Last Edited by Miss Maple on 7/2/2009 at 10:25 PM

Miss Maple
User ID: 683425
7/2/2009 10:24 PM

Re: please explain this financial plan from genius who wrote "Black Swan"

Quote

Especially in social outcomes, luck (i.e., randomness) is a much bigger factor than we think. Highly improbable, unpredictable, surprise events (i.e., black swans) have overwhelming consequences that few of us can think to prepare for. Those of us who can figure out a way to prepare, by the way, can reap large (relative) benefits—because the huge cost (or benefit) of a black swan is always the major component of the unpredictable surprise.

Here's an example of his point about randomness: How many times have you heard about mutual fund X's "superlative performance over the last five years"? Our typical reaction to that message is that mutual fund X must have better managers than other funds. Reason: Our minds are built to assign cause-and-effect whenever possible, in spite of the strong possibility that random chance played a big role in the outcome.

Last Edited by Miss Maple on 7/2/2009 at 10:24 PM

dumdum
User ID: 673526 (OP)
7/2/2009 10:36 PM

Re: please explain this financial plan from genius who wrote "Black Swan"	Quote
i read the "Black Swan", and it has nothing to do with his financial quotes. what does he mean by "deleverage debt", in the quote from the above link?

Miss Maple
User ID: 683425
7/2/2009 10:41 PM

Re: please explain this financial plan from genius who wrote "Black Swan"

Quote

A company's attempt to decrease its financial leverage. The best way for a company to delever is to immediately pay off any existing debt on its balance sheet. If it is unable to do this, the company will be in significant risk of defaulting. Investopedia explains Deleverage
Companies will often take on excessive amounts of debt to initiate growth. However, using leverage substantially increases the riskiness of the firm. If leverage does not further growth as planned, the risk can become too much for the company to bear. In these situations, all the firm can do is delever by paying off debt.

Any sign of deleverage shown by a company is a red flag to investors who require growth in their companies

dumdum
User ID: 673526 (OP)
7/2/2009 10:43 PM

Re: please explain this financial plan from genius who wrote "Black Swan"

Quote

Quoting: Miss Maple

that helps, ty.

Miss Maple
User ID: 683425
7/2/2009 10:57 PM

Re: please explain this financial plan from genius who wrote "Black Swan"	Quote
your welcome, I don't know much about it.

Anonymous Coward
User ID: 576938
7/2/2009 11:18 PM

Re: please explain this financial plan from genius who wrote "Black Swan"	Quote
Nothing is predictable. Trends are falsehoods in prediction and only historical in nature. Negatives cannot be proved but then again neither can positive.

Anonymous Coward
User ID: 576938
7/2/2009 11:24 PM

Re: please explain this financial plan from genius who wrote "Black Swan"

Quote

This link may help:

[link to 74.125.47.132]

Page 1

© Copyright 2008, Advisor Perspectives, Inc. All rights reserved.
How to Live in a World of Black Swans:
Nassim Nicholas Taleb’s Take on the Financial Crisis
By Susan B. Weiner, CFA
October 7, 2008

...

Taleb suggested a strategy for living with black swans: limit your exposure to
black swans with negative consequences, especially those that offer the potential
for unlimited losses and limited profits. “If you don’t know where the risk of rare
events is, then don’t leverage yourself,” he added. “If banks had done this, we’d
be smiling today.”
Investors who seek a medium-risk portfolio should invest in a barbell portfolio
that combines relatively risk-free investments with risky investments suggested
Taleb, who said he’s a big believer in diversification. He believes that because
we can’t assess risk accurately, it’s hard to say that any investment is truly
medium-risk. But you’d be pretty safe saying that a portfolio of 80% Treasuries
and 20% high-risk investments is medium risk. Still, when you’re choosing your
high-risk investments, stay away from derivatives, he cautioned...

Anonymous Coward
User ID: 576938
7/2/2009 11:26 PM

Re: please explain this financial plan from genius who wrote "Black Swan"	Quote
PS - it's a volume of reading to shift through but you can gain insight by going to amazon and reading what people who have read the book have to say.

Anonymous Coward
User ID: 576938
7/2/2009 11:33 PM

Re: please explain this financial plan from genius who wrote "Black Swan"	Quote
And, some interesting reading about retirement calcs and black swan: [link to www.ifid.ca]

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