While this is not untrue on its face, the bulk of the blame should go to initiating banks, who became more willing to make untenable loans because they could package and securitize the loans and sell them off to investors, avoiding the consequences of their own actions.
How is this different from a taxi company? A taxi company can and will blacklist your address. In fact, it may blacklist entire neighborhoods. This happens today.
Here, Congress is more to blame than the Obama Administration, who clearly wanted more money for this. Congress budgeted far too little money, and the administration rightly prioritized medication over masks.[1]
The type and timbre of the instrument used, the speed and volume of playback, any post-processing decisions, etc. are all creative choices and thus can make a resulting work copyrightable.
The US Government seems to have begun a habit of launching investigations of credit agencies that downgrade its credit rating. It's happened to S&P and to Egan-Jones.
"500 year flood" just means that in any given year there's a 1/500 chance of it happening. In theory history has nothing to do with it.
In practice it's calculated with models that are tuned with historical data (among other things), so if you fail to notice some important changes and update your models you might be wildly off.
He's saying that they were 1/500 events previously, when the frequency was determined to be 1/500, but conditions have changed (climate, development, etc.) and they are no longer 1/500 events.
The 1987 market crash (October 19, 1987, single-day loss of 23% in the S&P 500 index) was a 25 standard-deviation event. Mind you, an 8 standard-deviation event is an event that should occur once every 3 trillion years. And 25 standard-deviation events are unfathomable given the age of the Universe.
The conclusion is: due to faulty mathematics, far out of the money options are underpriced. Or, who Mandelbrot concluded, "investing on the stock market may be riskier than you think".
But if you have a few bucks to spare and want to gamble you could buy far out of the money options for a downturn. VIX gets priced in, don't know how it looks currently.
Or you can gamble with "paper money" at Thinkorswim.
If you see a 25 standard deviation you are either
1. Incredibly lucky
2. Incredibly unlucky
3. Or don't have a standard distribution (but a fat tail distribution or Levi flight or whatever)
In principle yes. If far out of the money options are systemically underpriced then just buying a bunch and holding them should make money on average, by definition.
In practice there are a bunch of concerns. You have the gambler's ruin problem: even if your bets are positive expected value, it's very easy to go bankrupt. Since your fund makes all of its money from crises you have a bunch of counterparty risk along a risk of regulatory intervention etc.. Your fund will lose money in most years and it's very difficult for potential investors to know whether you're actually positioned to make money from a crisis or just wasting all their investment. See Keynes' line about sound bankers.
Taleb endorses and advises a fund that tries to bet on "black swans"; it's explicitly advertised as a fund that will lose 5% of its value every year in "normal years", but hopefully pay off in exceptional years. You can invest in it if you want. In theory it should work, but no-one will really know until after we have one of those exceptional years.
The trouble with this is that you need to have enough of a black swan to trigger the options but not enough that it prevents them paying out, e.g. due to counterparty risk or some kind of systemic collapse.
And "the market can stay irrational longer than you can stay solvent" - by definition this produces few, rare payouts.
The trick is to do that with other people's money, on which you initially get huge returns. You can then collect large managment fees. The collapse takes out the fund, but it's an LLC so the staff get to keep their bonuses from previous years.
Generally not, because the price of the option is going to rise commensurate with the uncertainty of it being in the money.
It gets more and more difficult to accurately forecast that as uncertainty increases, which is why they're not priced as efficiently farther in the future. But since this is somewhat well known, you need to have some kind of edge to make it work - buying options haphazardly won't.
