That's not what they do. You really need to read up on it. ET is a terrible source of reliable info. There are many books on the topic. Tail funds are not built to "catch the upside". Think of them as synthetic puts. They are designed to complement a long risk portfolio. Please google articles from Chris Cole on the subject matter as they are probably more readable than Taleb.
Dude, that is Mark Spitznagel. Like Mav said you need to do to a lot of googling and seek your own answers off of ET. Don’t go too far down the rabbit hole with Mark, he is intentionally very vague and ambiguous about their specific positioning and strategies. Totally unrelated but Mark’s brother Eric is a prolific and entertaining writer as well, nothing to do with finance but worth a follow.
He made a $1 BILLION in 2015 and that was just a 20% return YTD. https://www.zerohedge.com/news/2015...de-1-billion-monday-how-other-hedge-funds-did In 2008 during the financial crisis, he made 100% return while the majority of the financial industry was going through either bankruptcy or being bailed out and hedge funds are making double-digit, triple-digit losses, I think that would qualify him as a good trader, don't you think? LOL This is the article that actually led me to him: https://www.nytimes.com/2009/01/04/magazine/04risk-t.html It's a fascinating article that I found after wanting to learn more about what the 2 Goldman Sachs risk managers really did irl after watching the movie "Margin Call". And the article talked about what is the reason why the conventional risk management practiced by the financial industry is so inadequate in preparing for EXTREME risk, market downfall is because they essentially assign too low of probability of those extreme-impacting events of happening and thus over-expose the investments under managements to risks where Taleb believe higher probability should be assigned to them and trade according to that. So during the non-happening time of these extreme events ie when the market is doing well, his funds not only not gain any returns but actually loses money steadily just like your protective puts will ALWAYS lose money when your underlying's price is going up. In essence he's like the guy who believes nuclear disaster is about to happen in any minute and spends his entire life in an underground bunker 60 feet under. During the time when the nuclear weapons haven't been fired, he's missed out on all what life has to offer, i.e. the gains but when a nuclear holocaust DOES happen, he will be the only one who will survive as the rest of us wouldn't be able to get to a shelter in time and die i.e. blow our accounts. The only thing is "nuclear disaster" type of market downfall happens far more often than the real nuclear disasters so is Taleb's approach warranted that you might make steady losses during "normal" time in exchange for a HUMONGOUS gain in those rare unexpected extreme events or you make steady gains during "normal" time only to possibly lose it all and some during the still extremely rare events, even in Taleb's term, "fat tail" events, are still only "tail" events. Ultimately what it comes down to is a philosophical "would you rather" question: Would you rather give up a world of pleasure with large possibility of happening to be protected from the small possibility of a HUGE obliterating and FATAL pain OR enjoy a world of pleasure with large possibility of happening but be SURELY killed one day by a HUGE obliterating FATAL pain that has a small chance of happening. To me, there should a happy medium in between the two extremes but then again I am not as learned as Taleb or any of the experts that disagree with him.
Nope. That is not trading, that is buying insurance. Somebody (I believe it was you) in the very same post said: "his funds not only not gain any returns but actually loses money steadily" So let's not cherry pick 1-2 years and give let's say 10 years of performance. There is a reason he left the HF business. If you had been buying the same puts in the last 10 years, you would have lost your shirt (with 2 exceptions) while the market TRIPLED. And anyhow, you don't need to be a genius to buy protective puts... ---------------------------- Going back to the linked article: "“This is just the beginning,” said Universa founder Mark Spitznagel, a longtime collaborator with Mr. Taleb, who advises Universa," Actually no, that was the end, at least temporary. The market bounced heavily in September and recovered in October. How much of their paper profits did they lock in? What was their final return for 2015? (2016 Jan-Feb dropped again big and again, quickly recovered.) Feel free to quote their return for 2016. Oh wait! There is more. That fund isn't even Taleb's according to him: "Then Taleb himself chimed in, “My role is minimal. Not ‘my’ fund (I am a retired trader) there are other ppl.” " http://www.allaboutalpha.com/blog/2...ar-claim-from-black-swan-fund-not-from-taleb/ "Sosnoff contended, in brief, that the numbers don’t hold up. Sosnoff’s first point in this connection is that “you don’t make anything when you don’t take profits,” and that nothing in the article suggests profits were taken off the table." TL;DR: The 1 billion dollar 1 day profit was hugely misreported...
It's NOT cherry-picking his performances. His losses and gains is the design of his trading strategy and proposed theory. His fund is SUPPOSED to have these steady losses during the "normal" uptrend market. Please read more about his theorem and comment. PLEASE. My post and like the rest of posters are here to discuss Taleb's theorem and its merit.
" Tail-risk funds are down 6.3% this year (2017) through July, according to data group eVestment, and have lost money in four of the five preceding years." https://www.foxbusiness.com/feature...nvestors-have-stopped-hunting-for-black-swans
Then post the 10 years performance between 2008-2017. I know how it works... If you make 100% in the first year and lose 6% in every year thereafter for 9 years, well you do the math... 9 years of rally killed the tail-end funds as it is described in the link in the previous post.
When I was trading options, I read a lot of books on trading with focus on psychology (Reminiscences, Market Wizards, New Market Wizards, The Way of the Warrior-Trader, Fooled by Randomness, etc.). I stopped trading options when I learned about bitcoin in 2013 and traded cryptocurrencies exclusively since. Taleb has tweeted positively about bitcoin, but I don't think he ever disclosed actually owning any. I credit "Fooled by Randomness" and another book "Complexity: The Emerging Science at the Edge of Order and Chaos" with being able to hold through a 2 year bear market in cryptos and currently the biggest gain of any investment I have. If bitcoin goes to 0, change credit to blame (j/k).