Next plunge: black swan

Black swan author Nassim Taleb says the world debt problem is worse now than at the height of the credit crunch and investors should ditch equities and US Treasuries and back hard assets.

In an interview with Bloomberg, which you can see here, the New York University professor who made his name predicting the credit crunch, says that governments have failed to learn the lessons of the banking crisis, allowing the debt problem to morph into a new and more ‘vicious’ form.

‘I had detected fragility in the banking system and it is still there and we need to do something about it,’ he said. ‘We have had a couple of years since the meltdown and the risks have increased and taken a much more vicious form.’

He warns that economists and investors are continuing to espouse theories not backed by empirical evidence, such as the pricing of assets and risk, and says the globalisation has made events less predictable as the world has become more inter-connected.

Taleb brands the government bailouts of the financial system and the transfer of debt from the private to the public sector as a fast-track to increasing moral hazard and is scathing about the profits made by the banks over the past year.

‘Look at all of the money they made with our backing- it is like they spat in our faces,’ he said. ‘’We have a lower tax base than two years ago because less people are in work than two years ago and are now depending on economic forecasting by governments. Obama is forecasting a deficit of $4-7 trillion depending on the parameters you use but a small glitch can mean the deficit for the next 10 years swells to $20 trillion.’

He points out that Greece was forecasting debt to GDP of 3%, which has since risen to 14% and counting.

‘The same thing will happen to the US- typical government underestimating,’ he says.

This man and his Black Swan are getting in the way of the facts. Hard assets have NOT been a sure fix for volatility and this great man's hedge fund took gas in the last black swan event last week. He can't walk on water - yet. I suspect we will get a major correction into the fall, but No one know where to go to be sure of survival in a major sell off. His revised book is a little thin and an obviously a promotional event in search of bucks. What a shock. Best, Islander.

The man's specialty is PR, he coined a word-idea for the popular press and frankly, i am tired of this silly black swan. the idea of black swan makes it so special that "no one sees it coming" etc. fact is, all these things are seen, it is just a matter of what event will change perception, enough so that denial of what will be, becomes Oh my gosh, here it is, and everyone else is beginning to see it too. trae the charts with an eye on fundamentals, because the fundamentals are a terrible timing tool.