I bought a farm.
I bought a farm located in an area that receives about 18 inches of rain per year.
The year that I bought the farm we received about 1 inch of rain.
A neighbor of mine who had lived in the area for over 80 years told me this was the driest year he had ever seen.
This was my black swan.
I was highly leveraged and in no financial shape to with stand such a shock.
Through sheer idiotic stubbornness (working 10 hours a day 7 days a week off the farm) I survived the event and did wind up selling the farm for a profit 10 years later.
But I was never the same person after that.
I have seen two oil / real estate bubbles rise and fall in Alberta.
I have seen a technology bubble rise and fall.
I have seen the 1987 black Monday stock market meltdown.
I have seen the 2008 stock market collapse.
I have seen crude oil fluctuate between $3 and $147 dollars per barrel.
I have seen interest rates fluctuate between 21% and 2.00%.
I'm 45 years old.
Hopefully I'm only half way gone.
I wonder what the next 45 years will bring.
How do I protect my family from future rare events?
Number one, I disagree with Taleb on these rare events.
I don't think they are all that rare.
Number two, I agree with Taleb that the best way to protect oneself is to stay, or get, deleveraged.
Number three, I must own assets that can survive "rare events".
Assets such as cash, gold, land, and companies.
The companies that I own must live with the same leverage principals that I live with.
With all this in place I still may not be properly prepared.
Why?
Because the real black swan is the one you have never seen before, the one that no one has seen.
I guess for that there is no preparation.
Showing posts with label Nassim Taleb. Show all posts
Showing posts with label Nassim Taleb. Show all posts
11/05/2009
11/04/2009
Bald Men with Large Brains
If you are serious about this business of trading, or investing, you must watch this. If you're really serious you should watch it twice.
(you have to click on the watch full progarm icon)
My formal education is very limited; however my experience and "informal" education is quite vast. I find that combination interesting when ever I dip back into the "formal" school for anything. I remember when I was working in the bank I thought I should continue along the Canadian Securities Institute’s offerings and decided on a course called Modern Portfolio Theory. Now remember no business school for me, however I had started and sold my own business, spent 20 plus years reading my Father's business magazine, and read hundreds of books on business and investing.
So it was with much excitement that I opened my shiny my new book and course work on "Modern Portfolio Theory". The first thing I noticed were math equations that covered an entire page. This does not sit well with me so I skip over those and try and find some words. Finally I do find some words that state those massive equations are going to tell me what my expected return will be based on the asset allocation I use.
My formally uneducated response to that was, huh?
That's impossible.
You can look back and see that stocks outperformed bonds and bonds outperformed cash over the past 100 years. But you have no idea how those returns will roll in, or out, each year.
I'm a mathematical neanderthal and I could see that.
However the people that wrote the book seem quite learned, formally learned, so I carried on desperately looking for more words and less math. Finally I see a small paragraph quoting Warren Buffett, aha I say Warren will explain this to me in words I can understand.
To paraphrase, Warren's little paragraph stated that markets are not efficient and "Modern Portfolio Theory" is a load of crap.
Apparently the learned authors of the book were offering a one paragraph rebuttal of their "theory".
Bye bye book.
Perhaps you can be too formally educated.
(you have to click on the watch full progarm icon)
My formal education is very limited; however my experience and "informal" education is quite vast. I find that combination interesting when ever I dip back into the "formal" school for anything. I remember when I was working in the bank I thought I should continue along the Canadian Securities Institute’s offerings and decided on a course called Modern Portfolio Theory. Now remember no business school for me, however I had started and sold my own business, spent 20 plus years reading my Father's business magazine, and read hundreds of books on business and investing.
So it was with much excitement that I opened my shiny my new book and course work on "Modern Portfolio Theory". The first thing I noticed were math equations that covered an entire page. This does not sit well with me so I skip over those and try and find some words. Finally I do find some words that state those massive equations are going to tell me what my expected return will be based on the asset allocation I use.
My formally uneducated response to that was, huh?
That's impossible.
You can look back and see that stocks outperformed bonds and bonds outperformed cash over the past 100 years. But you have no idea how those returns will roll in, or out, each year.
I'm a mathematical neanderthal and I could see that.
However the people that wrote the book seem quite learned, formally learned, so I carried on desperately looking for more words and less math. Finally I see a small paragraph quoting Warren Buffett, aha I say Warren will explain this to me in words I can understand.
To paraphrase, Warren's little paragraph stated that markets are not efficient and "Modern Portfolio Theory" is a load of crap.
Apparently the learned authors of the book were offering a one paragraph rebuttal of their "theory".
Bye bye book.
Perhaps you can be too formally educated.
8/17/2009
Interesting Chat
It was interesting because the CNBC talking heads pretty much kept their mouths shut.
I haven't read The Black Swan, if you have tell me what you thought of it.
I haven't read The Black Swan, if you have tell me what you thought of it.
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