Excellent reading from the Worldy Wise Web.
Once upon a time, Black Swans were rarer than golden geese. But then Nicholas Taleb wrote his bestseller The Black Swan (not to be confused with the pouting Natalie Portman vehicle) and Black Swans have ever since been ruffling feathers everywhere.
I have nothing against Taleb’s dark tome, although I prefer his earlier Fooled by Randomness, which could genuinely change your investing life.
But I do object to the ceaseless reaching for the Black Swan metaphor whenever anything happens that someone doesn’t like the look of.
- “A nuclear reactor has blown up – it’s a Black Swan event!”
- “Reckitt Benckiser’s CEO resigns – another Black Swan!”
- “The market is down today – Black Swan! Black Swan!”
- “Why knew ISA rates would fall to 3%? Talk about Black Swans.”
No, please don’t talk about Black Swans, not until you can tell one from a duck.
Anyway, The Motley Fool ran such an excellent piece on spotting Black Swans versus red herrings that I’m making it today’s post of the week.
The author, Vincent Scheurer, writes:
The rule that all swans are white was never logically provable. However, the first person to see a real black swan (in 1697) immediately knew that the rule that all swans are white was wrong.
The point about the “Black Swan” in the modern sense of the word — the unexpected event with terrible consequences — is that it cannot be predicted in advance, which means that we as a society must take steps to ensure that its impact is minimised rather than spending all of our resources trying to stop it from happening in the first place.
That, in a nutshell, is why most of the efforts going into financial re-regulation are a waste of time.
Something else will go wrong, anyway. And we don’t yet know what.
From the blogs
- What’s your number? – Simple Living in Suffolk
- Considering Reckitt Benckiser – UK Value Investor
- Michael Burry speech on shorting subprime – Vanderbilt University
- Different investing styles – The Digerati Life
- Should you add gold to your portfolio? – Swedroe/Moneywatch
- Is Dave Ramsey optimistic, irresponsible, or motivating? – The Portfolioist
- 10 things we can’t live without – Len Penzo
- How much do top income earners earn? – Financial Samurai
- Investing at the edge of reality – The Psy-Fi blog
- Japanese stocks: 34% of my portfolio – Gannon on Investing
Money Maven roundup
- Len Penzo explores the question should I pay off my mortgage?
- Oblivious Investor asks how is social security taxed? [US]
- Help Me Travel Cheap explores BA’s 100,000 air miles CC promotion. [US]
- The Military Wallet lists the best military credit cards. [US]
- Canadian Finance Blog on tax planning. [US]
Mainstream media on money
- The real housewives of Wall Street… – Rolling Stone
- …the author also takes on Wall Street in this CNN video – via Ian Fraser
- Good news on UK jobs – Flanders/BBC
- DRIP your way to wealth – Motley Fool
- Investors urged to check they understand ETFs – FT
- What shares are value investors buying? – FT
- The bullish case for gold, again – Merryn/FT
- Investors now have £860 billion in ETFs – Telegraph
- Britons ignore debt until it hits £10,000 – Telegraph
- Tweet your complaint to get a result – Telegraph
- UK economy to be monitored by the IMF – Independent
- New fund highlights opportunities in oil – Independent
- A bank has the right to raid your cash – Independent
- Is sugar toxic? [Not investing-related, but probably right] – NYT
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