Nassim Taleb: "We Are Going To Have, At Some Point, A Failed Auction"

Tyler Durden's picture

Set aside the stupidity about Taleb causing last week's sell off for a minute and you have 14 minutes of very relevant insight not only into last week's crash, but into the real events that precipitated it: namely market structure, European contagion and the precarious US economic situation. In a Bloomberg TV interview a thousand times more informative than Taleb's CNBC appearance (presumably it has to do with the absence of the Power "I love to hear my voice" Lunch brigade), the Black Swan author discusses what keeps him up at night: a failed auction. Once again, we differ in a slight nuance that not even a failed auction, but the impression that the auction status quo is changing will be sufficient to set off the treasury avalanche. Whether that means a dramatic change in the Direct Bidder regime, the Primary Dealer hit ratio, or some other metric, we don't know, which is why we log each and every auction to keep track of any potential outliers and aberrations.

Also, Taleb shifts his eyesight away from Rubin and Greenspan as the biggest perpetrators of the crisis and now focuses on any person who works for the Office of the Management of the Budget. Nassim also spares no words of kindness for Geithner, Summers ("he will do to us what he did to Harvard") and, of course, Bernanke, "who crashed the plane."

Taleb's advice: stay away from Treasuries (especially long-term), avoid both the euro and the dollar, have a collection of metals and agricultural land exposure, and "use the stock market as something for entertainment not investment." And definitely stay away from school and equations.