Fooled by Randomness?

[Scrooge]

Quote:

Originally Posted by CCdaCE There's more to "luck" than people admit or are aware of, when it comes to a lot of things in life.

See a recent discussion of "luck vs. "choices" at http://early-retirement.org/forums/i...?topic=8534.0*

[haha]

Quote:

Originally Posted by eridanus Taleb mainly deals in options for currencies, not stocks.

How do you know this? Also, in your opinion, are these OTC options, or traded options on currency futures?

Thanks-

Ha

[bongo2]

This is a great book. One of the all-time best on the philosophy of risk measurment and investing. However, if you are looking for investment tips it is not for you.

[eridanus]

Quote:

Originally Posted by HaHa How do you know this? Also, in your opinion, are these OTC options, or traded options on currency futures? Thanks- Ha

His strategy has been written about in "Active Trader" magazine a few times. I have a link somewhere that contains some of the text from the (an) article (though sometimes the information is contradictory). In the meantime, this is an interesting read on their opposing strategies and vol.

http://www.activetradermag.com/special/cybermarch22.htm

If I was following his strategy today, I'd go with futures options because they're electronically traded. The OTC market is more liquid, I understand.

[Scrooge]

Quote:

Originally Posted by unclemick2 Sooooo- ?? Taleb's Black Swan is Bernstein's 'at least once every 25 years the market/s go totally bonkers' or Buffett's 'oversexed teenager in a whorehouse analogy'. ?

The primary practical implication of Taleb's philosophy in the real world appears to be that you can make money on certain (effectively undervalued) derivatives over a sufficiently long period of time. This is easily falsifiable unless his "sufficiently long period of time" is so long, e.g. unclemick's "25 years" above, that he hasn't gotten his money back yet. So, again, how much money has he made using his approach? After all, he was a trader for a while and presumably used his philosophy to make money. Or are there other practical implications that I am missing?

On a somewhat more elevated level, the New Yorker article that I linked above states:

Quote:

Taleb remembered his childhood in Lebanon and watching his country turn, as he puts it, from "paradise to hell" in six months. His family once owned vast tracts of land in northern Lebanon. All of that was gone. He remembered his grandfather, the former Deputy Prime Minister of Lebanon and the son of a Deputy Prime Minister of Lebanon and a man of great personal dignity, living out his days in a dowdy apartment in Athens. That was the problem with a world in which there was so much uncertainty about why things ended up the way they did: you never knew whether one day your luck would turn and it would all be washed away.

It would appear that there are two separate issues here. The first one is whether these drastic "reversals of fortune" -- like Lebanon in 1975-1976, Germany in 1930-1933, Europe in 1914-1918, Russia in 1917-1918, etc -- are random or causal. Assuming that they are causal, as most historians will argue, then the second question is how good we are at predicting them as opposed to explaining them after the fact. Clearly, we are not very good at predicting individual events, but is the market bad enough at estimating their average probability and magnitude to make it an exploitable inefficiency*

Ah, well, I guess I just need to read the book...

[Ed_The_Gypsy]

I figure we make our own luck, good and bad. Fortune favors the prepared mind. Taking calculated risks is one thing. Gambling is quite another.

(Now, where did I put that lottery ticket?)

[haha]

Quote:

Originally Posted by Ed_The_Gypsy I figure we make our own luck, good and bad.* Fortune favors the prepared mind.* Taking calculated risks is one thing.* Gambling is quite another. (Now, where did I put that lottery ticket?)

No doubt that as Louis Pasteur said, "Fortune favors the prepared mind."

But that is a long way from making one's own luck. It is being prepared to take advantage of good breaks, and being prepared to deal with bad breaks. The old Boy Scout Motto--"Be Prepared!"

Of course sometimes what people call luck is not the random life events per se, but the overall way one has responded to them.

But IMO, in this real world we live in, a lot of **** happens. And some of it is beyond anyone's ability to control.

Ha

[razztazz]

Just being able to have a "prepared mind" is one's own good luck. Rich parents? Educated parents? Maybe humble parents who just cared enough to get you some kinmd of education. Ivy Leage or public school or community college?

Or were your parents drunken, stupid dolts who simply didn't give f....? Didn't a f..... about education or knowing anything more than how to get booz on a weekend when the stores were closed. And whose advice in life is: "When youre 18 you're out of the house" And You'll learn the hard way.

Nobody ,by definiton, makes their own luck. It is what happens or doesnt happens beyond your abilty to know or control.

[Ed_The_Gypsy]

Ha, razz, I don't think we are disagreeing here.

(Ha, I shoulda put quote marks around it. Love the quote, couldn't remember who said it. Pretty famous, though.)

[Scrooge]

Quote:

Originally Posted by razztazz Just being able to have a "prepared mind" is one's own good luck. Rich parents? Educated parents?

There are all kinds of permutations. For example, you can have educated parents (good) who don't know how not to live paycheck to paycheck (bad).

[CCdaCE]

Razz, Ed and Ha.

I think you all have disected my point (not that you were trying to flatter ME) and brought up the two conflicting sides to "luck". The two sides to luck are the "random, pure dumb luck" that life presents and the "luck you make".

I gotta improve this "communicating by writing" thing.

-CC

[Ed_The_Gypsy]

Man plans; God laughs.