Time to Go on the Record

Bloomberg recently quoted our old friend Nassim Taleb as saying that the global crisis is “vastly worse” than the 1930s. That’s quite a tall order. In the United States, unemployment peaked around 25% while GDP fell by 30%. We’re not even remotely close to those numbers much less can we say that it’s “vastly worse.”
Taleb said, “This is the most difficult period of humanity that we’re going through today because governments have no control.” Joe Weisenthal rightly points out that loss of government control may not be such a bad thing. (Also, are the words “of humanity” really needed?)
What I find frustrating about many prominent bearish forecasters is the refusal to give concrete investment advice. I don’t see the point of telling people how bad things will be if you’re not offering advice on what to do about it. Yes, the world’s going to blow..tell me what to do now. As someone who has his portfolio viewable for free to all-comers 24-hours a day, it’s annoying that these bears refuse to back up their words. There’s no way to hold them accountable.
Is Taleb recommending anything? This is what Bloomberg writes:

Gold, copper and other assets “that China will like” are the best investment bets as currencies including the dollar and euro face pressures, Taleb said. The IMF expects the global economy to shrink 1.3 percent this year.

Hmmm…seems a bit vague. Once CNBC tried to get Taleb to give advice. The Maureen Tkacik article I linked to includes this snippet:

In February, Power Lunch, the midday show, booked two of the canniest thinkers to emerge in the crisis, Nassim Nicholas Taleb, the options trader and Black Swan author, and the economist Nouriel Roubini—only to find the two men stubbornly averse to saying anything that might risk making viewers any money. Roubini expounded upon the virtues of the Swedish model of bank nationalization and the dangers of a bubble-driven economy but refused to set a date at which he expected the market to turn around. When reporter Roben Farzad asked “Mr. Black Swan” where he would invest his money for the college fund of a hypothetical child born next month, Taleb began unloading on the extravagant compensation schemes that incentivized investment bankers to take excess risk. “But how is this actionable? How is this actionable? Do I stick my money under a mattress?” Farzad pressed. “I’m not here to give immediate investment advice” Taleb shot back. “Yeah, you’re the prophet of gloom and doom, but I need to know where to put my money now,” Farzad continued, and Mr. Black Swan finally offered that all his money was in various currencies, though he wouldn’t say which. The bullying wasn’t personal.

That’s a very revealing passage. I disagree that the reporter was bullying, he was trying to get a stubborn guest to go on record.
Taleb is happy to say that all these economists and bankers are clowns and fools, but he won’t say what investors should be doing. For many folks, vagueness seems to be fine but it’s not for me. I can’t take a market commentator seriously unless I’m able to hold them accountable. Vague pronouncements don’t cut it.
One of the things I like about Cramer is that he’s not afraid to make himself look bad. For all his antics, what he says here is exactly right.

Posted by on May 8th, 2009 at 12:38 pm

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