Money and Finance
- Nassim Taleb Quotes
From Antifragile: Let us introduce the philosopher’s stone back into this conversation. Socrates is about knowledge. Not Fat Tony, who has no idea what it is.For Tony, the distinction in life isn’t True or False, but rather sucker or nonsucker. Things...
- Warren Buffett: Why Stocks Beat Gold And Bonds
Investing is often described as the process of laying out money now in the expectation of receiving more money in the future. At Berkshire Hathaway (BRKA) we take a more demanding approach, defining investing as the transfer to others of purchasing power...
- The Absolute Return Letter - December 2010: The Dirty Dozen
In the world of finance, risk is essentially the probability of an investment’s actual return being different from the expected return. As most of us are not overly concerned about actual returns being higher than expected, it is fair to say that in...
- Why Did The Crisis Of 2008 Happen? - By Nassim Nicholas Taleb
Found via Farnam Street.Summary of Causes: The interplay of the following five forces, all linked to the misperception, misunderstanding, and hiding of the risks of consequential low probability events (Black Swans). I-CAUSES 1) Increase in hidden risks...
- Hussman Weekly Market Comment: Oil And Red Ink
From earlier this week. Similarly, before the housing crisis, it might have been tempting to shrug off mortgage defaults as relatively isolated events, since the price of housing had generally experienced a long upward trend over time. Indeed, historically,...
Money and Finance
Risk, Exposure, and Probability
From the book What I Learned Losing A Million Dollars by Jim Paul and Brendan Moynihan:
"The definition of risk is to expose to the chance or possibility of loss. Most people erroneously try to assign a numerical value to that chance, which simply confuses risk with probability. In the markets we are talking about unique, non-repeatable events so we can't assign a frequency probability to their occurrence. In statistical terminology, such events are categorized under case probability, not class probability. This means the probability of market events is not open to any kind of numerical evaluation. All you can actually determine is the amount of your exposure as opposed to the probability that the market will, or will not, go to a certain price. Therefore, all you can do is manage your exposure and losses, not predict profits."
"The definition of risk is to expose to the chance or possibility of loss. Most people erroneously try to assign a numerical value to that chance, which simply confuses risk with probability. In the markets we are talking about unique, non-repeatable events so we can't assign a frequency probability to their occurrence. In statistical terminology, such events are categorized under case probability, not class probability. This means the probability of market events is not open to any kind of numerical evaluation. All you can actually determine is the amount of your exposure as opposed to the probability that the market will, or will not, go to a certain price. Therefore, all you can do is manage your exposure and losses, not predict profits."
- Nassim Taleb Quotes
From Antifragile: Let us introduce the philosopher’s stone back into this conversation. Socrates is about knowledge. Not Fat Tony, who has no idea what it is.For Tony, the distinction in life isn’t True or False, but rather sucker or nonsucker. Things...
- Warren Buffett: Why Stocks Beat Gold And Bonds
Investing is often described as the process of laying out money now in the expectation of receiving more money in the future. At Berkshire Hathaway (BRKA) we take a more demanding approach, defining investing as the transfer to others of purchasing power...
- The Absolute Return Letter - December 2010: The Dirty Dozen
In the world of finance, risk is essentially the probability of an investment’s actual return being different from the expected return. As most of us are not overly concerned about actual returns being higher than expected, it is fair to say that in...
- Why Did The Crisis Of 2008 Happen? - By Nassim Nicholas Taleb
Found via Farnam Street.Summary of Causes: The interplay of the following five forces, all linked to the misperception, misunderstanding, and hiding of the risks of consequential low probability events (Black Swans). I-CAUSES 1) Increase in hidden risks...
- Hussman Weekly Market Comment: Oil And Red Ink
From earlier this week. Similarly, before the housing crisis, it might have been tempting to shrug off mortgage defaults as relatively isolated events, since the price of housing had generally experienced a long upward trend over time. Indeed, historically,...