The story told here of Bruce Kovner and a botched soybeans trade conveys a lesson about the value of persistence, and a lesson about risk management.
That gadfly of financial modelers and quants is back. This time, Taleb writes in such a way as to establish that he isn't a mere popularize/diluter of familiar academic arguments -- which is how the critics of many of his earlier books have painted him. And them.
In early 2011, Jason Kelly, a Bloomberg News reporter, decided that he had to write this book to explain to the general public how PE works. That sort of epiphany makes it a little surprising that there isn't more of an over-arching theme in the book that resulted.
This book, The Alternative Answer: The Nontraditional Investments that Drive the World's Best-Performing Portfolios is an appeal to the retail investor, to those author Bob Rice calls "typical investors," passing along the good news that they are no longer "stuck with the children's menu of investment options."
One take-away from David Stockman's new best selling book is that the phrase "hedge fund" may well be on its way beyond descriptive significance. In the public realm, a "hedge fund" is now as much a metaphor as is a "Trojan horse." It is becoming a metaphor for any institution's failure to hedge.
In Jack Schwager's view, the hedge fund industry as a whole is not a "mirage" at all. But relying on the past track record of specific funds or strategies: that is a dangerous reliance upon a mirage. Perhaps suggest that Grandma should put her nest egg in a diversified fund of funds.
It is not simply that VaR as classically formulated presumes a Bell curve with the very narrow tails that implies (although that is one of Stephen Rahl's criticisms in his contribution to this book, it is by now pretty much everybody's criticism). Other problems are: that VaR treats the past as the guarantor of the future, and that it arbitrarily identifies variance with risk.
What happened after decimalization? Spreads did fall, but these authors say that “displayed liquidity at the National Best Bid and Offer” also fell, at least in part because there were 100 price points for each dollar now, where once there had been eight or 16, so limit orders no longer come in clusters. This in turn made “pinging and sniffing for order flow” a lot easier, heralding the rise of the sort of algorithmic trading that is to the ordinary retail investor what a hawk is to a mouse.
The authors of a new book from the Milken Institute contend that one factor working against the recovery of the housing market in the U.S. is that the residential finance system is almost entirely a ward of the federal government, "a situation that cannot be indefinitely sustained without seriously damaging monetary stability and the prospects for a return to long-term growth," they write. It is imperative, these authors believe, that the United States get its private investors involved again in the financing of housing.
The lending encouraged by the monetary policies of a Greenspan or a Bernanke “was bound to put money into the hands of people who didn’t know what to do with it,” writes the author of a new book. The consequences of such lax policies are what we have witnessed since 2007. Bubbles eventually burst, simply because that is what bubbles do. It is better to stop blowing them than to look about for a needle to blame for the prick.