YouSaid · the spoken record

Scott Patterson

lines on the record: 52
first: 2023-06-09
most recent: 2023-06-09
sittings or episodes: 1
sources: podcast

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“Yeah, sure, they can find it on Amazon. I have a website, Scott Pattersonbooks.com, and you can find me on Twitter at Patterson Scott.”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“Existed, the disaster wouldn't have been as bad. But at the same time, it's hard to say they weren't really doing anything technically illegal. They were just creating these instruments that other parties happily sold them and they made a lot of money on it. But you never know. I mean, regulators can be unpredictable. That's for sure.”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“I guess you never know. I mean, one thing you got to remember with Universe is they're protecting investors against these calamitous events, including pension funds. So it's not just like they're pirates that are raping and pillaging and making money on other people's misery. They're actually helping their clients, which includes pensioners and retirees. That said, you never know what regulators are going to do. I've never heard of any threat because they're just, you know, they're trading on open markets. It's very transparent stuff. I would say if you look back at what happened in the global financial crisis, there were firms that created brand new trading strategies and derivatives that were expressly designed to benefit from a blow up in the housing market. It was entirely new. You know, several of the big money center banks created these things, these swaps. And if those had”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“To pay up when their trades are successful, that the system just completely collapses, which would just be bad for everybody. But we're talking about back to caveman days.”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“Just let it all collapse. And that partly comes from they have a very negative view of intervention of governments, libertarian views, especially Mark. So they kind of see everything that government does is just going to make things worse. So it's created this system where the financial markets are just sort of floating on all this free money. It can't last. The natural order is eventually going to impose itself. no matter what the Fed is going to try to do, it's just going to roll right over it. So he's expecting and he's recently written that the system is sitting on a time bomb that's going to explode. He won't predict when because he doesn't predict timing things. He think he keep going for years, but he does expect it to blow up catastrophically and that'll be good for universes. I think they talk about one of their main risks is that the banks aren't around.”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“I also think that the perpetrators were totally left off the hook. And these were people who were easily found, like, you know, people who were running some of these big housing companies, people in the banks that were trading doing these strategies that lost billions and their managers either were willingly or just oblivious. There should have been, I agree with Taleb hit a debate with Larry Summers in 2014 or 2015 at a conference and Larry Summers was one of the architects of the bailout. The Obama administration and he was defending it. He was saying, you know, we've improved capital standards for the banks. They're safer now. And Cleb was like, yeah, but the problem is still there and Summers is like, well, what are you for? Tilev says, I'm for punishment. So I agree with them on some of those things. It's a very harsh view to say.”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“Fitznagel and Teleb have both been predicting a complete systemic collapse in the financial system for decades. And we came very close in 2008 and 2009. And yeah, we were bailed out by Congress and the Fed. So their view was very, very extreme view, my opinion, was no bailouts, let the banks fail if you can stop the bleeding now, but the patient is still sick and we'll just be sick until we face the reckoning and it's just the longer we wait, the worse it's going to get. I totally disagree that the government shouldn't have done what they did back then because, I mean, we were looking at general electric failing. We were looking at the entire economy collapsing and the hundreds of millions of people being put out of work around the world. So I think that what was done was smart and necessary.”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“I don't consider myself able to solve that particular conundrum I see upsides and downsides. I also think that, you know, as I say in the book, I think the GMO genie is out of the bottle already. So we're rolling the dice on that one, see how it goes. Hopefully it's not as bad as Tilevin as co-authors say.”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“And complexity and potential systemic breakdown and ruin problems for the human race. That's what we know and what you're doing has some of these properties. And we think that you should consider it. And the GMO people say, well, you're going to condemn millions of people to death and starvation if we don't pursue these GMOs. It's debatable because when you look at real issues of starvation and hunger around the world, it's not the production of food that's the problem. the distribution of the food that's the problem there's plenty of food being grown it's you have war zones conflict areas becomes very hard to get food to these people i mean china china has a huge overproduction of food that if it was distributed it would solve the world's hunger problem so anyway it's a debate i'd never really had a strong view on gmos until i you know in i read this paper i”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, it's a very daunting barrier. So I guess that if these risks are real, then I can see why that would be something that, so in Europe, there are regulations against things that are seen as potentially systemically risky. GMOs are a lot less widely used in Europe. Even China didn't allow GMOs in their food system. But plenty of others in America have been very open to GMOs. And it's worth thinking about I can't, I'm, you know, I'm not a genetic biologist or molecular biologist. And that's an interesting thing because they address that issue in their paper in the precautionary principle is that experts will say, well, you're not an expert, so you don't get an opinion on this. And they say, well, we're not experts in the specific thing that you're doing, but we are experts in risk.”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“That you would apply the precautionary principle to. And the precautionary principle is not he did not make that up. It's been around for decades widely applied in Europe, but not so much in the US. And the idea behind it is that if something does pose potential systemic risk to the human race, the people proposing that we do this thing have to prove that it doesn't have that risk. So the onus is on the people doing it. And in this case, it would be on the GMO community. They are widely dismissive of such concerns. It's an interesting debate. I just present it as, you know, they outlined it in the paper. And I know the GMO people are very angry about it.”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“Terms of a systemic risk that he's worried about. So one area that he's expressed a lot of concern about over the years is GMOs, genetically modified organisms. And he and some others wrote a paper about that seven or eight years ago called the Precautionary Principle. And this is something I delve into the book, about that paper, that it's an interesting analysis because they sort of use this GMO issue as a way to create a model for looking at potential systemic risk. So it's got to be something that is interconnected with other systems, food systems obviously with GMOs, something that can spread rapidly, something that has global effect, global impact. So those are the kinds of things that he's looking for.”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“I asked him about AI recently, and obviously everybody's talking about it and people within the AI community are kind of freaked out. I came across the studies. It was a survey of AI programmers, I think from 2022 or 2021. And one of the questions was, what is the risk that AI could lead to the extinction of the human race? And 10% of those surveyed said that was a risk, which seems like a really high number. But Nassim said he is not that concerned about AI. I haven't talked in depth about it, but he said it has local benefits. And to him, that's a code word for not systemic, that it might have little areas where it causes some harm, but doesn't spread throughout the system. And that's always something that he's, you know, looking for in terms of...”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“With the 2020 COVID bet, it seemed like a risk worth taking, you know, when you look at it in respective, I think it was $20 to $30 million that he spent on these derivative contracts that ended up giving a return of more than $2 billion. So, yeah, that seems like a pretty good trade to make. Not a lot of people did it, though.”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“Explosive upside strategy when they're already employing. I mean, who knows? Mark says they don't do it. I believe what he says. There are others who, you know, like Ackman, who try to take advantage of the situations, it's some ways that a gut trade, like they just feel something's going to happen and now's a good time to trade. And that's what Ackman does, right? I mean, he's also very good investor in companies. He understands, you know, what companies are good or bad. He, again, like many others sort of models himself on Warren Buffett. So he's looking for value. But he also makes these big bets. He did the same thing in the global financial crisis, or he bet against some companies that are exposed to the housing market. But there have been other times in these, you know, we don't even hear about them where he's probably made similar bets and lost all his money. And that's what happens with these trades is if the big event doesn't happen, you make no money. You lose your entire bet.”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, Spitzenagel would say that he never speculates. So there have been, you know, I mentioned Arab Brown earlier, another thing he told me was that when he looks at the strategy, he doesn't see a way that it could perform as well as it does without dialing up that risk. You know, Mark says, Aaron doesn't understand the strategy. How could he? They're a black box in a way. Like, you know, we don't really know exactly what they're doing. We just know what the returns are, which are quite phenomenal. But yeah, he denies that. He denies that they dial up, you know, try to make the bet bigger when they see something looming on the horizon. Because their basic perspective is you just can't predict it. There's no telling when it's going to hit if you keep doing that, you're going to lose money for your clients over time. And he sees that as a losing strategy. It's also hard to imagine a more aggressive strategy than you.”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“Start kind of looking around for places to juice the returns, they see some interesting derivative strategies that are attractive and are being pitched by Wall Street. They get into those, they start selling a lot of options to Universa to get those nice day-to-day returns. So, you know, I don't know if it's effective with hedge funds, as Naseeme says, but I certainly think with banks, when you have systemic risk and the too big to fail issue, it's certainly something worth exploring is some kind of either a clawback mandated and banks charter that if the bank fails, the top managers will give up X percent of their salaries from the previous five years or something like that.”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“Survive that obviously they didn't, but you know, the bankers are not on the hook for that. So it seemed we contrast that with hedge funds, which often the partners of the hedge funds do have a significant amount of their own wealth in those strategies. And that constrains the risk they take. I don't really know. I mean, I see a lot of hedge funds blow up. So I think that sometimes the greed side of the spectrum overcomes the fear side a lot. you know, they just either don't understand the risk or they just are sort of captivated by the potential returns that they can make. I think a lot of times they sort of back themselves into corners by, you know, sometimes hedge funds will have a good couple years and then a lot of money flows in. And that becomes a lot harder to manage. And there's just not a lot of good places. So a strategy that might have worked well for 100 million, not so well with two or three billion.”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“Accounts are on the hook and will be required to help repay investors or clients. And he thinks probably rightly that if that were the case, they wouldn't be taking all these crazy risks because they're basically socializing risk to the rest of the country by saying if I can take all these crazy bets year after year, I get a big bonus. Yeah, eventually it may blow up. By then I've got my private yacht and island in the Caymans and I'm fine. And I think that, you know, right now people are looking at these regional banks that are collapsing from like Silicon Valley Bank and thinking the same thing like, you know, these managers, either they didn't understand the risks they were taking or they made the gamble that it was worth it to hopefully get through any short-term volatility that they could get.”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I think Nassim really developed that idea after 2008 when all of these very highly paid managers of banks and hedge funds, mainly banks, I think is what he was looking at, lost all the money and yet walked away with millions and millions and pay packages and were bailed out by the government. One person he likes to really focus on is Rob Rubin, who was chairman of Citigroup through the 2000s. And he got, I think $100 million from Citigroup, and yet that bank collapsed and required billions and billions and bailouts. And Naseeme says that happens because these managers don't have so-called skin in the game, which to him would mean if the bank collapses, the managers are on the hook for that personally. Their own bank”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“So, somebody who I also read a lot was George Soros' books. And he definitely does not believe in rational investors. He thinks that markets are driven by all sorts of strange factors that are sort of interconnected. And he would say Amazon, it wasn't rational, but there was sort of this self-fulfilling prophecy in what happened to that stock because the stock price goes up. The company can use that high stock price to buy other companies, compensate managers who”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“Of the day, because everybody is sort of rationally pricing in their expectations of where stocks are going to go or whatever commodities. And I thought that was crazy. I just sort of coming at it from a completely different perspective, having, you know, reading novels and stuff, I thought people are completely irrational. They don't behave in sane manners all the time. And now you're talking about financial markets where it's people's livelihoods that are at stake. And I looked at markets and I see fear and greed and fear and greed these when you think rational that's not, you know, so yeah, lots of times the market is acting pretty normally, but when Amazon is going to the moon, everybody piles in. It makes no money for years and years. Is that rational, you know, because stock prices are supposed to be for projections of future earnings for investors? Amazon made no money for years and years.”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“Yeah. Well, Naseeme's thinking is books. They've had a big influence on me for a long time. I came into writing about finance as a, you know, I had a master's degree in English. I studied anthropology, had not studied economics or economic theory, but I started writing about finance in the late 1990s and started reading more about the theories behind it, the efficient market hypothesis, which you talked about. And these are sort of predicated on this idea of the rational man that's sort of goes back to Adam Smith, that economies are based on people acting in their self-interest rationally, and you get this sort of optimal economy when everybody's doing that. And then this was taken by finance professors and applied to the market. So the market itself is always optimally efficient every second.”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“Them for a long time about how does seem kind of landmark to, but mainly Nassim with his books and analysis of typical Wall Street risk management strategies is, you know, Quant's risk managers typically, they focus on the day-to-day. And they think that if you manage those day-to-day risks, well, position the portfolio optimally for those day-to-day ups and downs, that's what you really need to care about. And you might spend a little time thinking about the Black Swan, the crash, but those are really largely seen as unmanageable. What can you do? These things are crazy. You can't really think about that too much. Whereas, you know, what Aaron said is what Naseem showed is that's really all you need to care about is those the big drawdowns. If you can get through those, then you'll be okay. Because if you can't, you're dead and you're off looking for a new job.”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“That matters. You don't need to trade around the little 5-10% wobbles. You just need to protect yourself against the 40% or 50% downturn. And Mark has an interesting way of describing why those big downturns are so bad for long-term performance portfolio. So say you have $100, the market goes down 50%. You have lost $50, you now have $50. To get back to where you were to $100, you have to go up 100%. So down 50%, you need to get back even, you need to go up 100%. So that's why you don't want to have that. It'll take years sometimes to curl out of that hole. And that's what Universe tries to do is protect the investors from the big drawdowns, the little wobbles. The market will work itself through that stuff. And that's kind of what Naseem, you know, I was talking to a risk manager, Aaron Brown, who's known.”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“Strategy would do. And that is in contrast to other risk management strategies, like the most popular strategy is so-called 60-40, which is 60% in stocks, 40% in bonds, which has performed terribly in the past few years. I think 2022 is the worst period on record or in many recent years for that strategy. It had worked okay in other years, though. The bond portfolio bonds go up when stocks go down typically. So you've got a hedge there. But what Spitzengel will say is you're giving up a lot of upside potential in stocks when you do that, when you just have 60% of stocks, 40% of bonds, you're missing out on a massive potential upside. And the market, you know, historically goes up. It has these really rough patches, and that's the strategy is to when you have the rough patch, protect yourself.”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, absolutely. Risk management, it's entirely different from, you know, people try to look at the strategy and say, well, it's not making money all these years, and that's no good for investors. They are not speculators. They're not making bets on the direction of the market. They have a risk management strategy that is aimed to preserve the capital of their investors to the maximum extent that they possibly can. I think that it is one area that confuses people about their strategy, because if you, yes, they have actually done a lot better if you just put money in a universe of fund, you would have done pretty good. But that's not what they tell people to do. Their own investors, their strategy is that you clients put in about 3% of their capital into the Universa Fund, and then the rest optimally in the S&P 500. They can do whatever they want with that other 97%, obviously. But what they do is they just use that as sort of a proxy for the investment in this universe.”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“Had audited annual returns through 2019 of over 100%, which is kind of insane because some of those years they lost money. But when you have a gain of 4,000%, which was after actually after that audit, that kind of makes up for a lot of the down years.”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“And that's just been the way. So Spitzenagel in the past few years, he's been analyzing various strategies that are popular with hedge funds, like some money in SP 500, some money in gold, some money in Swiss francs, bonds, looked at all sorts of permutations of these strategies. None of them over the period that he was looking at, I think since like 2008, has beaten a simple investment in the S&P 500, except Universa.”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“Number of investors who've been able to beat the SP 500 over the years. Warren Buffett in 2007, he made a bet against hedge funds over the next 10 years. He bet that the S&P 500 would outperform this basket of hedge funds over the next decade. And I kind of thought at the time like, wow, that's, you know, hedge funds that had actually been doing really well. Many had actually beaten the market in recent years. It was a pretty steady time post.com bubble. Buffett was right. In that 10 years, The only year that hedge funds did better than the SP 500 was 2008 and the S&P ended up gaining something like, I forget the exact numbers, but 140% compared to 36 or 37% for hedge funds. And these are hedge funds, they're getting paid millions of dollars. They're getting rich off fees, and they can't be what your aunt Molly is going to do if she puts her money in a Vanguard.”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“And that's something crazy happens. They're like, oh, well, you know, we couldn't see that coming. You know, who could see a pandemic? But the point of Taleb and Sitzenagel is you kind of always have to be worried about that. You never know when it's going to come. A black swan is totally unpredictable and this seems definition of as and can happen very rapidly. You just had no idea this is going to happen. So I think the idea is just to try to avoid taking too much risk. Certainly do not use leverage or borrowed money. You know, there's a lot of people out there that are day traders that become day traders with the pandemic. People were staying home, had nothing to do. And, you know, like all of these sports better started getting dabbling in day trading. I mean, I may sound, you know, like a grumpy guss or something, but to me, I think it's just a huge mistake to try to day trade. The record shows that nobody is any good at that. I could count on a single hand.”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“Play it safe, and you can't do a universal strategy. That's just, you know, as I was saying earlier, it's just so hard to replicate that. But historical record shows that really the safest investment that you can make over the long run is a very simple strategy. You invest in the S&P 500 and you hold on to it over the long run. You will get hits, but you're not going to blow up. And that's where hedge funds and other derivatives traders make mistakes and blow up. They literally lose all their money in these events. We saw some catastrophic blow-ups in 2020 very quickly. These firms can lose all their money in a day because they were not positioning themselves to be able to weather the extreme events. They were making very risky bets that were based predicated on things happening day to day as they normally do.”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“Through the financial system. Now, there were some people who did see that, who, you know, people like profiled and Michael Lewis's book, The Big Short, who actually were aware. So it kind of depends on who you are, if something is predictable or not. For most people, I think it was a black swan. So in terms of how to protect yourself, it's pretty tricky, you know, and it's something that I sort of endlessly went over with my editor was, you know, on this book was tell people how they can protect themselves from black swans. It's not easy. So it's hard for, especially everyday investors, what I would say is you have to be, if you're going to be investing, you have to be humble. You have to be aware of the potential for big drawdowns and try to not take positions that are vulnerable to those kind of events. So I would say don't invest in a bunch of risky startups.”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, it's definitely sort of there's a frustration to it to defining what a black swan is. I know that Nassim feels the frustration because it's, you know, I remember a debate that he was having with somebody who was challenging his conception of black swans. And he said, look, it depends on where you stand. Was 9-11 a black swan for the terrorist? No, because they could see it coming. Was it a black swan for the pilot? Yes. So there are some complexities around it. And people endlessly debate, was the global financial crisis. A black swan teleb would say, no, it was a gray swan, as you said, something that he had predicted. He had, you know, he was on record as predicting the failure of some of the big mortgage lenders like Fannie Mae. I don't know if he had predicted quite the collapse that we saw because you would have to really know how thoroughly these derivatives have been spread.”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“Mainly increased plane travel. So you saw this outbreak in Wuhan, China, maybe in previous outbreaks it could have been contained, but China is a very interconnected society. People travel a lot. Before the lockdown in Wuhan had been implemented, 5 million people had left the region. So it spread very quickly despite efforts obviously to contain it. It was uncontained and it spread throughout the globe. That pandemic caused the global economy to cease essentially just seize up and stop. And you know, we're still feeling the ramifications of that through inflation and issues with the supply chain that are getting worked through. But that's, you know, those are two examples of how increased complexity, interconnections in society is leading to more fragility and financial risk.”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“Is more interconnected than ever. And I think the 2008 was a perfect example of that. You thought one part of the world economy, the U.S. housing market, declined, which was not expected. You've not seen any global financial crisis. The financial system was all connected through these derivatives. I don't know if people remember, you know, endless stories about credit default swaps and collateralized debt obligations and how they're all bundled together and all the banks had bought them and they had sold them to pension funds. So through complex interrelationships in the financial system, they sort of blip in one part of the economy triggers sort of these explosions all throughout it. that threaten to take down the entire economy. When you think about COVID-19, that was something that it definitely was global. But we haven't seen anything like that in such a long time. And something that Teleb and others have been warning about is that the risk of a pandemic spreading in ways that they'd never done before is higher than ever because of global interconnectivity through”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, there's a couple reasons why he thinks that. It's all really interesting. Some of it comes back to complexity theory, which he really started reading a lot about in the 2000s, and he got to know some very prominent complexity theorists. And it's hard to say what complexity theory is. You know, it's got multiple definitions, but it's basically the study of the interconnections of various properties and phenomena and economies and risk systems and financial markets. And part of the idea is that as systems become more complex, more interconnected, they can become more fragile as one part of the system breaks down. It sort of ramifies through the system and hits the rest. So the whole, you know, you pluck one piece of the spider web and the whole thing comes down. So that's kind of the core of it is that the global economy and the financial system”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“Of the universe, you know, they're so far out of the realm of statistical probability that you can't even really calculate it. So that's when he really got this lesson on how the normal parameters and probabilities that Wall Street uses to measure the risk and potential profit of various strategies was just totally off. At the time, he wasn't really sure what was going on, but it definitely intrigued him. So he continued to research it, pursue these trades. He ended up in the 90s writing a sort of technical book about trading derivatives that explained his pursuit of trying to understand why this stuff happened. And then in 1999, he launched Empirica with Spitzenagel. But it always comes back to Black Monday for him. He just constantly brings that up and says it was the greatest trading day of his life. And it, you know, made him rich.”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“Shell shocked. Nassim's positions are doing pretty good. He's looking around and saying, well, you know, he didn't really know why the time was so chaotic. People didn't even know why the market had crashed so much. So that was Black Monday, but his positions didn't really take off until the following day when the Federal Reserve infused billions of dollars into the financial system and it had this weird effect on the contracts that Nassim owned that they went parabolic, which means like up like a rocket. So, you know, he told me about how he was looking at his positions and he was saying stuff he bought for 50 cents, calling to the floor broker saying, sell for 300. And the broker would call him back and say, sold for 350, sell for 400, sold for 450. And it went on, on like that. And this was a move that is just not calculable in these contracts. It shouldn't have existed in the...”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“One place he became known as the Bobby Fisher of Options, an homage to the famous chess player. And then in 1987, he found himself at first Boston on the trading floor in Midtown Manhattan. He had been dabbling in options and other derivative contracts. And one thing he started doing was buying these really cheap positions on options on euro dollars. I'm sure your listeners don't want to know what those are, but like futures contracts on euro dollars and he had built up this big position on these euro dollar contracts. Very cheap contracts. So Black Monday comes along in October 1987. Everybody gets wiped out. They're on the floor. This is a scenide in the book. People are just crying and freaking out. His boss is sitting there at his desk begging the numbers to stop moving. And everybody.”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, Taleb was born in Lebanon and he was growing up in Beirut when the war broke out there in the 80s. So, you know, he had sort of an up close look at how a normal world can suddenly deteriorate into total chaos and war. He moved away in his teens and studied business in France for a while. Then he came to America and went to American universities. He weren't in business school. I was one place he attended and it was there that he learned about options, he told me. And he really grew, I mean, it's kind of weird to think about it, but he really grew fascinated by these things that I think to most people would just seem really boring. But he looked at him and he thought there are strange properties to these options that a lot of people don't really understand. So then he started trading on Wall Street, working for various firms, trading options. He was really good at it.”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“Things are really bad for everybody else. He's got all this dry powder and he goes in and, you know, gets these great deals. And Spitzenagel actually sees himself sort of like a value investor. These options are, he believes, they're dirt cheap, underpriced, he thinks, according to the risk. And, you know, he's buying them. Normally they expire worthless. They're junk, but sometimes it's a gold mine.”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“Your listeners tried to do that either. So, and it's also why this isn't a strategy for everyday investors. If everyday investors tried to replicate this, they would over the long run probably lose money because it's, you know, you have to keep rolling over the trade and more than likely than not, people who think they're going to do this. They're going to end up spending money for six months or a year and think like this is stupid. I'm losing all this money. I'm not making anything. And that's what you have to overcome that instinct. You have to keep doing it. Waiting for, you know, it could be years when it finally happens. You make a ton of money when everybody else is losing that has multiple benefits because you suddenly got this infusion of cash when everyone around you is losing cash and the market's down and you can buy when there's blood literally when there's blowing streets. It's a sort of a buffet-like strategy in some ways. He waits till...”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“For these kinds of options that few others want to buy. So I think that's part of it. They have a sort of first mover advantage. You know, I think also there are other strategies that they employ that lower their cost. Because basically, at the end of the day, this strategy lives and dies on the cost of entering these trades. The clients give them the money. They go out, they build the portfolios of these far out-of-the-money options, put options. The cheaper you can do that, the longer you can last. The cheaper it is for your clients. So one thing they do is they actually sell options that are more near the money to the current price of the stock. That they think are more accurately priced or they might actually be able to make a profit on those trades. So that helps bring down the cost structure of the strategy. That's a thing that I would obviously have no idea how to do. I wouldn't recommend”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“Wish I knew then I'd launch my own tailhedge fund. I've talked to Mark about this a lot. What is it that they do? And he says it's trial and error. We've been doing this for decades. We really know the market. We know what we're doing. Since they've been around so long, they're known on the street as a firm that will do these trades that hardly anybody else normally wants. Their trades are bets on a one-month decline in the S&P 500 of 20%, which is kind of crazy, you know, because that doesn't happen very often, obviously, but they enter those trades time and again, and the counterparties, the firm selling those trades, just see that as steady revenue. You know, yeah, these nuts over here, they're betting on this thing that we know is not going to happen. That's millions in our pockets. So they have developed these relationships with the counterparties and the brokers on Wall Street that they're sort of like a market maker.”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“Getting a little crazy. The September 2008 collapse of Lehman Brothers, Fannie Mae, Freddie Mac, AIG, you know, all those things blew up. And all of a sudden University was making massive gains, you know, 100% of their portfolio up 100%. So that got them a lot of attention. I was the reporter who first broke the news about the returns. Actually, I broke the news of Universe's launch in 2007 and also that Nassim had shut his hedge fund down in 2004. So I've known them for a long time and I've been following their performance for a long time. And they remain controversial. But, you know, they created an entirely new investing strategy and how many people can say that.”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“Early 2008 making his pitch, and nobody wanted it. Nobody wanted to invest in Universa, despite all the signs that we were seeing a lot of volatility. And the reason for that is the returns of a hedge fund like Universa are very lumpy. And for normal investors, that's not good. Modern portfolio theory really likes trading strategies that have steady returns, low volatility. You kind of know what you're going to get. Universa, you lose money year after year. And then you make a billion dollars. But to most investors, pension funds, whoever they were pitching it to, they didn't like it. It was a line item for them. It was a loss of losing millions of dollars a year. It's hard to justify that to the board of these funds, something so weird. It was just completely unique. Then around mid-2008, things started.”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“They didn't invest in commodities. They only did one thing. They entered positions that would have this explosive upside risk in major downturns. The trouble with the strategy is that when things are normal, it loses a little bit of money every day or every month. So you can go through these fallow periods where you're not really making a lot. It can be tough emotionally to go through that. So they did very well in 2000, 2001 during the dot-com blow-up, but then things settled down when Greenspan lowered interest rates, volatility went down. And Naseem just got very frustrated with this day-to-day bleeding, as they call it. You know, it sounds kind of painful. It's emotionally challenging to go through that. So he ended up deciding to shut the hedge fund down. He thought it was bad for his health. Mark thought he was crazy because he really believed”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so as you said, the strategy got its start in 1999 with the launch of Empirica. And Mark and Nassim, they met each other at New York University. They'd both been sort of dabbling in these strategies where you buy derivative contracts and you buy them very cheaply. And then when the chaos hits, you benefit a lot. So Mark had done that. Nassim had done that through some of the big dust ups in the 1990s, like the Asian flu. They had both benefited from that. So when they met, they kind of, it was a great meeting of the minds of two people who were discovering similar attributes in the market that these investments could be got into very cheaply and they had these explosive returns. So they launched Empirica, and it really was the first so-called tail risk hedge fund ever created. It wasn't designed to invest in the stock market.”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT
“They were able to trade earlier than others very cheaply and get into these positions that ended up making billions of dollars. So these were very profitable trading strategies because of the nature of the risk that happens and the cheapness with which you can enter these trades can create these explosive returns. And that's how Mert Snagel explains his strategy, which is explosive upside return. You can buy something for a derivative, an option contract, say, for 40 cents, and when the volatility really hits the fan, you can sell it for $60. And that's something that they have done. So it shows you how, that's a crazy, you know, sort of out of this world game that can be made on these trades.”
2023-06-09 · We Study Billionaires · TIP558: How Ackman & Taleb Profited Billions During Market Crashes w/ Scott Patterson · IDENTIFIED FROM THE TRANSCRIPT