I feel pretty good, so far at least I am down only 2%. If it keeps going my puts will be more supportive, so I think I should approach a limit somewhere around 3% but I 'll have to see to be sure.
I finally finished Nassim Taleb's Book The Black Swan. Essentially the same message as Fooled By Randomness, but IMO more interesting to read. I also saw him on Consuelo Mack's show. He was on with a Blackstone guy named Doll and Jonathan Clements. Before seeing Taleb I tended to dislike his personality, but actually he is quite polite. It's just that his message is so far outside the box of what is accepted today in financial planning that he really can't be integrated into anything else.
Has anyone ever seen Jonathan Clements? He looks like a really weird owl, with his tiny face and body and a large prominent forehead and shock of white hair. He was sitting next to Taleb and he would crane his head around with this look of "what am I going to do with this maniac?, all the while bugging out his eyes to signify his total bewilderment.
Excellent entertainment!
Re the book. He sure does not think highly of asset allocation or diversification or asset classes or bell curves or history as a predictor of the present or future.
I don’t think he is going to get many followers anytime soon, though I may move more toward his barbell strategy of having most assets in rock solid government securities- he suggest T-bills, of the US and major Western European countries and presumably anyway, Canada.
As compared to his suggestions I would take more risk and use TIPS whenever I liked the rates- as in the last auction. Then a much smaller portion (he suggests 10%) should be invested in highly volatile equities or options which could go ballistic but may do nothing or even crap out. Right now I have only 1% in options, but I am not really clear on the best way to look at this. If all these positions were to lose, over the course of a year I might burn 2-3% of my asset value if nothing else worked out. In reality it would be more than covered by interest, but I need some of that to live too.
I have more faith than he does in the ability of Wall Street to flog its merchandise, so whenever values seem OK to me I am likely to buy some inventory, or even some possible permanent holdings. Gradually I might see to it that my equity holdings are only in the area of energy, energy service and alternate energy – and keep them to a limit of 40-45 % of total portfolio. Even if they got whacked hard, as in a world recession I shouldn’t go down any more than 50 or 60% on these stocks at worst and thus less than 25% over all.
Ha
