For those who are interested in reading books on investors & investing, Scott Patterson is a familiar name thanks to his mega bestseller, ‘The Quants’. Now Katie Martin of the FT says that he’s back with a really interesting book on a specific, niche type of investor: “Bragging rights start kicking in when investors do well, or at least cling on, when markets are under stress. But rock-star status is reserved for a clique who have made storm-chasing in stocks and bonds in to something between an art and a science, and an extraordinarily lucrative one at that. They are the subject of Chaos Kings, a new book by Scott Patterson, who casts an engaging and accessible light on what makes these oddball savants tick, and how they make fortunes from disaster.”
The star of the book is a legendary investor who has also written a few bestselling books “Much of the book reads like an examination of the life and times of the author and former trader Nassim Nicholas Taleb — a divisive character who combines a fierce intellect, genuinely useful insights and a concern for the wellbeing of mankind with a frequently obnoxious public persona, especially online.”
The fundamental proposition of the book is that conventional investing – which focuses on investing in stocks and bonds issued by sound companies – is misguided and that more money can be made by focusing on tail risks is both interesting and intriguing enough for a lot of people to want to read this book:“The Chaos Kings believe traditional asset managers building portfolios out of stocks and generally safer bonds in the hope they will balance each other out are doing savers a disservice by failing to deal with big, ugly shocks…
Some believe it is possible to predict disasters that mere mortals consider to be random. When is a black swan a grey swan or a dragon king? What about false positives? Is expensive tail-risk hedging actually worth the bother or does it amount to buying elaborate lottery tickets? One person’s “logarithmic objective function to maximize geometric returns” is another’s bullshit.”
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