Many people went into July 22 thinking they had a "conservative" or "moderate risk" portfolio.  After 12.5% (or higher) losses, many of those same individuals now realize they had high risk portfolios all along.  The problem is, no one told them that when their portfolios were constructed.

Worse yet, a good number of these individuals were planning on living off of these investments within the next couple years.  Undoubtedly, those plans have now been delayed, perhaps for some time as the economy and markets struggle to find their footing.

Shared by JohnH

From NNT’s home page. Certainly hope all is well, health-wise. I would imagine he’s inundated with requests from the media to speak about the meltdown etc. I do see some speaking engagements coming up in September, http://www.fooledbyrandomness.com/scheduledseminars.htm

Nassim Nicholas Taleb’s Home Page

Emergencies (only): talebassistant -at- gmail.com

John Nyaradi: In your book, you discuss risk management; you talk about “fat tails” and people like Friedrich Gauss and Augustin Cauchy. What do “fat tails” mean to us in this new world?

Peter Tanous: Jeff and I have done a lot of interviews since the book came out and almost nobody ever asks us about this so I’m glad you did because it’s really important. We have a chapter about the history of risk and how our understanding of risk in investing has changed over the centuries. I have to acknowledge a friend who has inspired me greatly and who endorsed this book very heartily and that is Nassim Taleb. Nassim Taleb wrote, “The Black Swan,” a book that has sold over three million copies and totally revolutionized our understanding of risk.

Shared by JohnH

HatTip to Dave Lull.

Mr. Taleb’s critique of the OFR, on the other hand, is directed at the whole concept of creating a body to try to measure risk in the financial system. Mr. Taleb gained fame for his book “The Black Swan,” which suggested consequential, and unpredictable, events in financial markets are more likely than most investors believe.

In his testimony, Mr. Taleb said that “[f]inancial risks, particularly those known as Black Swan events cannot be measured in any possible quantitative and predictive manner; they can only be dealt with [in] nonpredictive ways.” He argued that trying to do what the OFR is designed to do could actually increase risks, in part by increasing “overconfidence” in the information’s ability to predict the next crisis.

Shared by JohnH

Also! “Taleb will testify today before the U.S. Congress’s Committee on Financial Services about the establishment of the Office of Financial Research…

Nassim Taleb, author of “The Black
Swan,” will work with the International Monetary Fund on
drawing up measures to detect hidden risks in the financial
system for G-20 ministers and central bank governors.

Taleb will team up with the IMF’s Monetary and Capital
Markets department on a paper for the G-20 to develop ways to
apply his method for identifying tail risks, or the chances of
low probability, high-impact events, according to a letter from
Elie Canetti, an IMF adviser. He won’t be paid for his work and
he won’t speak on behalf of the IMF in public, Canetti said.