Lessons from Nassim Taleb

Two years ago most people had never heard of Nassim Taleb or his mentor Benoit Mandelbrot.  Today just about anyone who follows the markets regularly has heard of The Black Swan, Taleb’s best selling book about the impossible happening.

Since my own awakening to the philosophical frameworks exposed by Taleb it has made me take better note of those crazy ideas that we usually dismiss, when they have some basis in logic and reason.

An article the other day citing famed metals investor Eric Sprott noted the possibility of a treasury auction failing, and the ripple effect such an event would have around the world.  While such an event seems unlikely event today despite the massive influx of capital into government debt in the current flight to quality, it is not unreasonable to dismiss the idea as heresy.  Sprott’s argument hinges on the idea that other countries forced to nationalize their fiscal and monetary policy may be forced to pour local currencies back into local economies as opposed to supporting our bailout.

Of course Sprott’s argument supports his own thesis for investing in gold, however it is something worth noting and something worth considering given the great number of shocking surprises over the last two years.

Sprott believes there is a chance that a U.S. Treasury auction will fail as countries use their resources to quell financial turmoil in their home markets, leaving less to help finance the world’s largest economy. That outcome will have a “catastrophic” impact, he said.

“When do people stop buying the credit of the country? That’s a tough question to answer, but it’s on a lot of people’s lips right now,” he said. “Each country has their own financial problem, so there’s no funding for anything external.”

Source:
Sprott Says U.S. Depression Will Boost Gold Price
Stewart Bailey, Bloomberg, February 3, 2009
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ao7hCvQA9QZ0

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One Response to Lessons from Nassim Taleb

  1. Gold Prices says:

    It is a matter of time that US Treasuries collapse as they are offering pathetic returns. Once inflation comes back, the bubble will burst.

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