Monday, June 1, 2009

Taleb Kills $20 Billion Mythical Swan

So you run a hedge fund and a magazine inaccurately credits you with $20 billion in profits, how long do you think that error will go unnoticed? Not long, if Janet Tavakoli, a trading, structuring and marketing structured financial products expert, catches on to the story and does a little quick math.

On the heels of my post on a Nassim Nicholas Taleb affiliated money management firm that will start a Hyperinflation Fund, Tavakoli sent along a link to a story she has written on a $20 billion error by GQ on the profits it reports the money management firm produced. Writes Tavakoli:

A recent GQ article quoted Nassim Nicholas Taleb as saying that in the falling market he “made $20 billion for our clients, half a billion for the Black Swan fund.”

I checked with Nassim Taleb regarding the $20 billion in gains and asked if he were misquoted. He responded via email: “The quote is inaccurate. THe [sic] 20 billion might correspond to the face value of positions.” This response is both vague and different in character from the mythical $20 billion in gains inaccurately quoted in GQ’s article. The total gains could be a tiny fraction of what Taleb loosely describes as “face value.”...

Taleb’s web site home page showed this article as one of two “most representative overall profiles.” After my query, Taleb added a qualifier next to the link to the article: “(with typo on the ‘billions’).”

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