money jungle

Nassim Nicholas Taleb: “Markets are Stupid”

Posted in macro, nassim-nicholas-taleb, nnt, predictions by moneyjungle on December 6, 2008

“In a complex environment that is dominated by black swans and rare events, markets are not very good”

Wide-ranging Charlie Rose interview covers Taleb’s black swan theory, the roots of the current crisis, the future of banks as utilities, and a chilling view on the deflation and deleveraging to come in the market.

http://www.charlierose.com/view/interview/9713

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The Big Picture

Posted in macro by moneyjungle on August 6, 2007

David Richards provides a broad view on the deep changes underfoot in the global economy,

What gets overlooked are two major developments that have occurred in the last 10 to 15 years, but really got going in the last five or six years: One, the whole world has adopted the notion that market- economy-oriented policies are correct… there are 3.5 billion people from Eastern Europe to the Pacific and from the Indian Ocean to the Arctic that were living under socialism or communism, where it was not possible to trade and not possible for entrepreneurs to get rich — and they have been transformed… Time and distance in communication have been eliminated through the Internet and fiberoptics. Communication is instantaneous and virtually costless, and, as a result, you can run businesses all over the world from a headquarters positioned anywhere in the globe.

This, together with the first point, means the whole global economy has to be transformed. There are huge incentives to do it, but there is also a necessity to do it. This gives huge advantage to big international companies or even small ones that have an international point of view. These big developments are happening totally outside the financial markets. They have nothing to do with derivatives, nothing to do with home-equity loans and nothing to do with private equity or hedge funds.

and their resulting impact on growth

“The BRIC countries, Brazil, Russia, India and China, are somewhere between 17% and 20% of global GDP. There is a bunch of smaller countries — Estonia, Turkey and Bulgaria and many, many more — growing 5%, 6%, 7% a year. All the headlines are about China growing at 10% and India at 8% or 9%, but the rest of the developing world is growing at somewhere between 6% and 8% a year and might be 40% of the global GDP. There’s 2½% growth in the global economy coming from these areas and another 2% or 3% from the developed world for a global economy growing at 4½% to 5½% the last several years. Compound that 4½% to 5½%, and you have got a hell of a strain on all resources, whether it’s energy or metals. That’s why the prices of these commodities are going up, and it is a real boom.”

— David Richards, “Why Global Stocks Make Sense