Nassim Taleb Is Angry That Not Even John Gotti Got Paid As Much As JPM's Ina Drew

Tyler Durden's picture




 

Until this point virtually every pundit and financial journalist and blogger has opined on JPM, its prop trading operation (as first exposed by Zero Hedge), and its massive loss which due to its pair trade nature has potentially unlimited upside, but likely will top out at $5 billion (as also first explained by Zero Hedge over a week ago and subsequently by the WSJ). The one person who has kept silent so far was the man whose entire philosophy predicted just this epic flare out, by revolving around the assumption that humans operate under the illusion that they understand rare events: they don't (for more details read his books The Black Swan and Fooled by Randomness which by now have been read by all traders in the world, but apparently not those formerly in charge of JPM's CIO unit). Courtesy of this BBC Newsnight interview, he breaks his silence and shares his opinion, which as one may expect are far from laudatory: "JPM has 10-15 times the risk of a regular hedge fund... They should not be using my to play in something that is way too dangerous and too complicated for them... What I want [for JPM] is the following - skin in the game. People when they make money should get the upside, should get the upside; and people should be harmed when they have the downside. Hedge funds have that."

Taleb also touches on something we have been arguing for since 2009, namely that if banks are to expect bail outs whenever they blow up, they should be treated as utilities, with full caps on comp, net income, and earnings. To wit: "Banks are utilities. I don't understand why we've been bailing out banks since 1983 - they are utilities. They are de facto civil servants."

Finally Taleb loses it by comparing Wall Street to the mafia: "I am not an idealist. I am someone who doesn't want to be paying the $14 million dollars for this lady Ina Drew, which is more than John Gotti the mafioso got." Well, neither does anyone else. But, sadly, even Nassim now realizes that it is the financial mafia who owns this country and calls all the shots.

Ironically, and we are surprised Taleb does not understand this, the only thing that can lead to change is if we have 1000 Ina Drews putting on mega fat tail trades they don't understand, all of which eventually blow up in the bank's prop trading faces, leading to the final Wall Street collapse. Only this time we have a feeling that if the Wall Street controlled Congress and Senate do bailout their financial lobby friends with another under the table $28 trillion rescue operation, the results will be far more bloody and lethal for everyone involved than back in 2008, when former Goldmanite Hank Paulson was waving his coopted three page term sheet in front of the sheep in Congress, simply to save the firm he used to run.

h/t @JuradoTequila

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Sat, 05/19/2012 - 10:31 | 2443116 Badabing
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Nassim Taleb Is Angry That Not Even John Gotti Got Paid As Much As JPM's Ina Drew

Only on the books!

Sat, 05/19/2012 - 10:40 | 2443128 DoChenRollingBearing
DoChenRollingBearing's picture

+ 1!

As soon as I am back in the USA, I am buying more Au!  Scary reading all this Facebook and JPM crap while away from my money...

BOTH of Taleb's books are really good!  

Sat, 05/19/2012 - 11:00 | 2443162 Trimmed Hedge
Trimmed Hedge's picture

Don't worry -- While u were away, we took the liberty of moving a substantial portion of your assets into a stock margin brokerage acct.. We then proceeded to leverage up on THE hottest IPO to hit the Street in quite some time.

Yes, that's right... You are now the proud owner of a boatload of margined FB!!

 

The invoice for our services will be in the mail shortly....

Sat, 05/19/2012 - 11:18 | 2443195 El Oregonian
El Oregonian's picture

Don't forget to attach my Bill of Sale to the charges... Much appreciated. NEXT!

Sat, 05/19/2012 - 13:33 | 2443413 palmereldritch
palmereldritch's picture

You forgot to mention Corzine is the trustee for the assets.

Sat, 05/19/2012 - 14:09 | 2443471 wisefool
wisefool's picture

And that Geithner & Jerry Brown have a special interest in this transaction for some reason. Something about a 30 year old co-founder billionaire being the smartest kid who left room. So everyone else, in the room, is going to pay.

Sun, 05/20/2012 - 09:26 | 2444908 Dr. Kenneth Noi...
Dr. Kenneth Noisewater's picture

We rehypothecated your back yard into FB, ZNGA, GRPN and GMCR..

Sat, 05/19/2012 - 11:00 | 2443163 Oh regional Indian
Oh regional Indian's picture

But, but.... it's a free market, right?

So what is the world willingly Pricing as "HIgh" right now?

1) Shamelessness (Kadarshians, Celebs in General, Facebook self-nudity as examples)

2) Evidence of Psycopathy (Virtually all business leaders. Anyone re-member the famous "Chainsaw" Al Dunlap? that is when it really became mainstream for Business LEaders to be complete psycopaths and revel in it, boast about it and be heavily rewarded by a fawning board, for it. CHainsaw Al led AMerican manufacturing to where it is today, see his name, connect the dots)

3) General Criminal Bent (All leaders in general)

4) Evidence of a cruel streak (Did you hit/harm/rape/"suicide"/disappear any of your "opponents? High marks if you did. Caligula Bill worked his way in through such a highly evidenced Cruel Streak)

5) Weak or weakened Character, malleable, ductile 

6) Over-sexed

.

.

.

 

Of course a banker would make more than the mafiosi. The mafiosi at least have omerta.

ori

/the-death-of-empathy/

Sat, 05/19/2012 - 11:07 | 2443175 LeonardoFibonacci
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Ina is lucky because in the mob, she would have gotten "clipped " for losing money that was part of the organization. 

JPM does not have that rule yet

Sat, 05/19/2012 - 11:10 | 2443181 Oh regional Indian
Oh regional Indian's picture

That's right. Banks are like the Mafia, except they seem to all the "benefits" and none of the risk.

ori

Sat, 05/19/2012 - 16:34 | 2443237 Manthong
Manthong's picture

 "The mafiosi at least have omerta"

Yeah.. the financial syndicate think they are doing God's work and are not criminals.

So they present the outward trappings of their immoral manipulations as if it were business as usual, and keep the tactics amongst themselves. 

Sat, 05/19/2012 - 15:35 | 2443595 Ropingdown
Ropingdown's picture

Yep.  If the bank mob loses money, YOU get hit.  Of course Ina made more than Gotti.  She was running a much much bigger scam.

Sat, 05/19/2012 - 11:26 | 2443204 rubearish10
rubearish10's picture

"CLipped"? I suppose you mean "Made" , then "Whacked"! Ina, good to see you again, Heyyyyyyyyyy!

Sat, 05/19/2012 - 17:42 | 2443785 Umh
Umh's picture

I heard that you get rewarded for doing what you are told. Even taking a fall is usually rewarded.

Sat, 05/19/2012 - 11:13 | 2443182 AssFire
AssFire's picture

ORI

 

I am sure your bable makes sense...well, maybe in India?

1) Shamelessness: your continued spam link  (if people weren't confused enough already)

Sat, 05/19/2012 - 11:45 | 2443219 Oh regional Indian
Oh regional Indian's picture

Plagiarist fucktard. You are a non-entity in my universe.

We can pass gently by or exchange un-necessary un-pleasantaries.

Now fuck off, no POV of your own, at least I fucking say someething original, whether to your clearly Lowest Common Denominator tastes or not.

Plagiarist piece of crap.

Your handle and picture is clearly apropos.

ori

Sat, 05/19/2012 - 14:23 | 2443491 CharlieSDT
CharlieSDT's picture

I like your comments here, but your blog is almost always super lame, dude.

Sat, 05/19/2012 - 16:51 | 2443723 Cathartes Aura
Cathartes Aura's picture

oh ho, *snap*

Sun, 05/20/2012 - 00:33 | 2444446 Oh regional Indian
Oh regional Indian's picture

It's not a one size fits all world Charlie.

And as it turns out, I happen to like some of the stuff you have on your blog. That is just the way it rolls.

Aside from your misogynism, we turn out to have some things we feel similarly about.

It's all good.

ori

Sat, 05/19/2012 - 13:04 | 2443378 greyghost
greyghost's picture

sadly i have had this mafia feeling about my goverment for about 15 years now. i can't tell the mob from my goverment anymore. are there support groups out there for people like me?

Sat, 05/19/2012 - 19:29 | 2443916 WhiteNight123129
WhiteNight123129's picture

Oh Regional Indian, and all other bloggers on that site, you know what is going on, and have the will to change things. This is what is needed to rebuild from the ground up. A nation which knows its disease can rebuild, I watch Europe ( I was born there and I leave outside OECD) and they do not know what is happening to them. America has to rebuild itself or the entire West is toast. Please do it, if only for the sake of America. But if you do not lead the rest of us are toast in other western nations. 

Sat, 05/19/2012 - 10:29 | 2443118 Aziz
Aziz's picture

I've had a few conversations with Taleb recently and as far as I can tell Taleb understands that the final cleansing Wall Street collapse is coming if this madness does not stop. 

Sat, 05/19/2012 - 10:42 | 2443130 illyia
illyia's picture

Not a bad thing for the madness to stop, Aziz. But then I am not sure that it does.

Back when Mr Reagan was playing BFF with Mr Gorbi I debated the term "communist" versus "mafia" with a much lauded scholar. He insisted that USSR was many things, but not a mafia. Maybe it had a mafia, but it was not a mafia. After many hours and brandies I believe I won that argument. (He would disagree.)

Today I see a mafia global faux government, or as Christopher Story put it: A New Underworld Order. It is obvious, as is Dimon's craftiness: all the trappings and games. From corp/gov to China.

What everyone appears to be overlooking is that the bosses have a common interest. They may well be finding a way to work together to keep the revenue streams running into their pockets. This factor changes the very idea of patriotic nationalism into a simple propaganda: needed only to keep the J6P sheeple busy and productive.

There is just no end in sight... collapse maybe, but the mafia rematerialises - just as does Putin.

Sat, 05/19/2012 - 11:26 | 2443197 Escapeclaws
Escapeclaws's picture

Faux governments indeed! I've been thinking that the US is a faux democracy for some time--of course I realize that technically it is a republic and not a strict democracy per se. Nevertheless, when we say a country is democratic we generally mean that the people have a voice in how the country is run, as opposed to a totalitarian regime.  Hence, faux democracy which suggests that de facto it is not a democracy even though most people think it still is. The expression "faux government" doesn't work for me because governments can be totalitarian or democratic. To govern just means to rule.

I hope people can become more tuned into this phrase faux democracy--which is probably too subtle to sink in for most due big media's efforts to prevent that kind of awareness as we descend into an Orwellian dystopia.

What we see now are people selling out the Bill of Rights and the Constitution for thirty pieces of silver. What's worse is that they feel so clever in doing so.

Sat, 05/19/2012 - 13:37 | 2443417 illyia
illyia's picture

Faux democracy is fine with me - Faux meaning false. Faux government? I stand corrected.

gov·ern·ment noun
1.
the political direction and control exercised over the actions of the members, citizens, or inhabitants of communities, societies, and states; direction of the affairs of a state, community, etc.; political administration: Government is necessary to the existence of civilized society. 2.
the form or system of rule by which a state, community, etc., is governed: monarchical government; episcopal government. 3.
the governing body of persons in a state, community, etc.; administration. 4.
a branch or service of the supreme authority of a state or nation, taken as representing the whole: a dam built by the government. 5.
(in some parliamentary systems, as that of the United Kingdom)
a.
the particular group of persons forming the cabinet at any given time: The Prime Minister has formed a new government. b.
the parliament along with the cabinet: The government has fallen.   http://dictionary.reference.com/browse/government?s=t
Sat, 05/19/2012 - 23:21 | 2444339 reader2010
reader2010's picture

Princeton's Prof Shedon Wolin calls it the Inverted Totalitarianism.

 

http://en.wikipedia.org/wiki/Inverted_totalitarianism

 

Or you may also listen to late George Carlin's observations too.

 

http://youtu.be/acLW1vFO-2Q

 

Sat, 05/19/2012 - 13:10 | 2443387 greyghost
greyghost's picture

don't you love how mr. gorbi has moved right into the western economy...what with his charity/think tank.......? but than again, i think it is based in that communist stronghold on the left bank san francisco. maybe he should write a book about how he "found" his heart in san fran..cisco!

Sat, 05/19/2012 - 10:48 | 2443141 Rainman
Rainman's picture

Mathematically speaking, the madness cannot stop until the collapse arrives. As long as the music keeps playing the dance will continue.

Sat, 05/19/2012 - 11:18 | 2443198 Extremist Tan
Extremist Tan's picture

And the markets can remain irrational longer than we can stay solvent.

Sat, 05/19/2012 - 12:26 | 2443302 francis_sawyer
francis_sawyer's picture

I'll bet anyone on this board an ASE that I can keep stacking longer than the market can remain irrational...

Now ~ that said, I'm not sure I can OUTLIVE the market remaining irrational, but that's a different argument...

Sat, 05/19/2012 - 19:03 | 2443876 SoCalBusted
SoCalBusted's picture

+1 on the avatar as well as the comment

Sat, 05/19/2012 - 11:30 | 2443210 El Oregonian
El Oregonian's picture

Ah, but the realized epic failure of the Facebook IPO, the Record seems to have its first skip. I wonder how long it will be before the scratches are so bad that the music becomes annoying to listen to?

Sat, 05/19/2012 - 21:51 | 2444098 UP Forester
UP Forester's picture

News Flash:  Nassim Taleb, author of Black Swan and other apocalyptic books, has lost faith in the current economic system, and sees an imminent collapse based on his theories coming to fruition.

In More Important News, Dianne Summers has died....

Sat, 05/19/2012 - 23:53 | 2444396 Demonoid
Demonoid's picture

Umm.

That's Donna Summer.

Sun, 05/20/2012 - 07:40 | 2444800 TheFourthStooge-ing
TheFourthStooge-ing's picture

UP Forester said:

News Flash:  Nassim Taleb, author of Black Swan and other apocalyptic books, has lost faith in the current economic system, and sees an imminent collapse based on his theories coming to fruition.

In More Important News, Dianne Summers has died....

+1 for not knowing it was Donna Summer. There's no need to clutter one's mind with celebrity news.

 

Sat, 05/19/2012 - 10:48 | 2443143 Bluntly Put
Bluntly Put's picture

There are those who believe the "market" is bigger than any individual, cartel or government, i.e. it simply cannot be contained forever. Then there are those who worship at the altar of collectivism, who think that either the powers that be can manipulate things endlessly or the elite control the destiny of everyone.

It makes one wonder why the human mind reduces problems into 2 opposing sides, on:off, true:false, black:white. Perhaps it is some built in limitation for our own ability to reason or a function of reasoning itself lending to the thought that in times of unreasonableness, the most likely culprit of the irrationality is our own irrational thinking veiled in what we like to call "reason".

Sat, 05/19/2012 - 11:04 | 2443172 Blankman
Blankman's picture

BP - I am summarizing your paragraph:

 

We are not as smart as we think we are.

Sat, 05/19/2012 - 11:09 | 2443178 MsCreant
MsCreant's picture

Some scholars believe that dichotomies are a product of how this culture "structures" our minds (call it western culture). There are other cultures that have a tendency to divide everything up into threes, not twos. Sun, moon, stars. Earth, sea, sky. This structures their thinking/reality/mind/culture in ways that at first blush are really hard to get our western minds around. It opens up possibilities that are not as easily generated in our way of knowing.

Stolen from old structuralist thinkers (anthropology/philosophy) from the early 20th century. 

Sat, 05/19/2012 - 11:12 | 2443185 DanDaley
DanDaley's picture

You forgot good/bad/ugly -and I think we all know who falls into which of those categories.

Sat, 05/19/2012 - 16:01 | 2443639 RockyRacoon
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Splitting the difference between two opinions doesn't get one to the truth, it just gets us a third opinion.....  Bill Moyers

Sat, 05/19/2012 - 19:06 | 2443881 RECISION
RECISION's picture

MsCreant... Rocky... Cognitive Dissonance... gosh there are a lot of old faces popping up again suddenly.

Do the sharks smell blood in the water...?

Sat, 05/19/2012 - 21:10 | 2444005 Milestones
Milestones's picture

You resurfaced after a respite yourself. Yea , the sharks are smelling real blood.               Milestones

Sat, 05/19/2012 - 11:39 | 2443215 El Oregonian
El Oregonian's picture

Also, Light/Dark, Good/Evil. We are all given choices. It is what you do with those choices that will determine your outcome.

Sat, 05/19/2012 - 11:46 | 2443224 Bluntly Put
Bluntly Put's picture

Yah, I buy that. But we seem to reduce a set of choices to 2 items perhaps to make the choice simpler. I think mathematics serves that function as we use mathematics to reduce a set of possible choices down to 2 elements from which to ultimately choose.

Sat, 05/19/2012 - 12:18 | 2443285 El Oregonian
El Oregonian's picture

It makes your decision much simpler therefore, much easier. Too many variables  brings paralysis by analysis.

Sat, 05/19/2012 - 15:42 | 2443607 Ropingdown
Ropingdown's picture

If you're using Bayes Networks to assess the probabilities of various paths to an outcome the likelhood of which you wish to estimate, you will not have this "two choices" problem. 

Sat, 05/19/2012 - 11:52 | 2443217 Blankman
Blankman's picture

MC - You said what I was thinking.  Everything in the US is either black or white.  To me this seems like a design in order to limit people from thinking and keep them easier to control.  I think if we try to explore and understand that the world has far more gray area than black and white area we will all get along a little better.  IE...  I called you an asshole for cutting me off in traffic then 10 minutes later I had to cut someone else off in traffic in order to avoid hitting a dog.  In my own little world I can justify me calling you an asshole  because I looked at you and you looked different than what I see in the mirror everyday, however I do not know the circumstances behind why you had to cut in my lane.  Do I ever stop and think that perhaps you cut in my lane to avoid hitting a kid in the street... no.  Gray area.

Sun, 05/20/2012 - 12:50 | 2445227 margaris
margaris's picture

To add "grey" is not the solution, but part of the problem.

You just fill in the empty space between two extremes (black and white).

 

But who defined the extremes for you?

Someone limited your choice to this linear range between two points.

 

A thought experiment of how we could break out of those limitations:

If you take Darkness and Light as the two extremes, you can then make some broader observations: 

  • Where does the light come from? Is it a light source, or does the light seem to come from everywhere?
  • Darkness can't be illuminated by light... Instead you need some existing material that can reflect the light. So immediately we see the need to introduce a material as the third player (bursting out of the dualism) if we want to have a complete definition.
  • Light can be turned on/off. Darkness always stays there, encompassing everything.
  • So there is clearly NO symmetry between those two supposed extremes. They are not diametrically opposed and certainly not balanced in their properties.

 

Conclusion: Every left/right paradigm is an attempt to manipulate you into thinking your choice is limited and/or to have an easy justification to make opposite moves

If you are limited to an opposite move to express your anger, your reaction can always be calculated in advance.

We have much more possible moves than the establishment wants to make us believe...

Right is not the only answer to Left.

And Left is not the only answer to Right.

 

Sat, 05/19/2012 - 13:03 | 2443375 PivotalTrades
PivotalTrades's picture

Of coures they are aware of the risk. However, if you do the math, say the black swan event is a 1 in 20 year event, Jami pulls in 20 million a year for 20 years = 400 million...what does he care if JPM is eventually destroyed. It was the same with LTC, they knew the event was there, they just figured they would make a ton of money before it ocured.

Sat, 05/19/2012 - 15:05 | 2443558 Cathartes Aura
Cathartes Aura's picture

"duality" - organising the mind into oppositional thinking - when combined with hierarchy - organising from top to bottom, or elevating some things over other things - this is the basis of most religious teachings, and certainly used in "governance."

good/bad, FatherSkyGod, Devil below in Hell, man pure, woman temptress, light(white,pure)/dark(brown/black,evil) - and the inevitable pairs of like: logic/emotion, which extrapolates here to "science, math, engineering" good/ all other disciplines, less than, etc. etc.

this is how most of the world organises their thinking currently, although olde skool is eroding slowly, if only for some. . . to be able to think, so observe the world without immediately drawing lines of top to bottom, left to right, this takes awareness of how one's mind was trained to think, and then undoing the imposed rules, not so easy.

I'm no "MBA" etc. like Mr. Taleb - but his statement about Ina Drew getting more monies than John Gotti makes me smile - Gotti "earned" in 80's dollars, which we know are inflating twenty years on, and of course, Gotti wasn't "this lady" which is the tell in his sentence for me.  also, Gotti was top of a hierarchy, Drew was certainly a "lesser" player within her organisation in comparison.

Taleb's history suggests he was a rather favoured male from the start, and while brilliant in this world, he also benefits from living at a time when, culturally, males are elevated over females, in all things.  else why make the distinction "this lady". . .

cultural policing, not much different to the thread with Ina Drew's picture, where most of the commentary centered on her looks, and whether she was "fuckable". . .

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