Great post Batman, it looks like the dark trader is back and he's done a step forward in his trading philosophy!
A few comments:
- While "black swans" are not predictable, you could predict we will see more of them and to some extent maximize your odds to profit from them. For instance Taleb "trades the black swans". The trouble is that most of money managers are assessed by their short term performance now. Such a trading requires many losses that you expect to be offset one day by a huge profit (basically when your black/grey swan occurs), if you manage OPM (Other People's Money) you need patient and understanding clients... "I know I spend my time losing your money but I'm just expecting a 10-sigma event, you know the kind of that is expected to happen once in the history of the galaxy), just be patient"
- In order to develop further your idea of "greatest risk", you may consider strategies buying (out of the money) options, the risk is limited (the premium you pay), the profit isn't. A black swan on the side of your position and you make the killing you dream of. The trouble here is that it is the volatility (price) of these options is very expensive and your expectancy is negative, meaning in the long run, you are almost certain to lose money. A strategy is at the opposite SELLING options on a regular basis, but if there's a black swan against you, you're dead.
- One word on your paragraph on the Crisis of 2008, mmmm, I'd say that from the crisis onwards, I've found the crowd more on the bear side than on the bull one and the analysts more doom tellers than predicting a recovery. I think that the rally have been fed to a large extent precisely by the bears : they just made the short positions too expensive. That's the basic of the contrarian play : when everybody is on the same side of the boat, you know where to go (as said Rogers).
Tue May 03, 2016 9:51 am by Andrea ForexMart
Subject: Those Grey Swans of Extremistan 
