Tuesday, June 26, 2012

Ray Dalio: The Phat Tail Outcome (ZeroHedge)

I have a lot of time for Mr. Dalio.  He has a rather unique perspective and has had some significant success with his Bridgewater funds.  Here he is floating the idea the the Phat Tail is a significant possibility - the Phat Tail being - that outlier event - that event beyond the scope of typical planning horizons - the event that has exceptionally low probability - but when they occur - they have possibly catastrophic consequences.  Black Swan.  2008 is considered such an event.  the decline in the markets represented a 21 point standard deviation from the norm.  There are those that believe the upcoming 'correction' or 'liquidation' or 'deflation' - will dwarf 2008.  Watching and learning.  Trading on.

Ray Dalio: Don't Assume That Germany Will Bail Europe Out; Consider The "Fat Tail" A Significant Possibility

Tyler Durden's picture

Lately, more and more professional investment "advisors" and newsletter recommendations boil down to just one catalyst: wait for either Germany, the ECB or the Fed to step in, as usual, and bail the world out, because, well, they have to, and any additional thought is rendered moot as fundamental analysis is meaningless under central planning (plus it is actually more work than just repeating the same stuff over and over while charging $29.95/month for it). Of course, when these same snakeoil salesmen are asked the simple question: what if said bailout does not happen, or if it happens late (for the purposes of this exercise let's assume one is not a central bank that can print its own money, have an infinite balance sheet, and can afford to be wrong almost into perpetuity), they give a blank stare, start mumbling something and walk away, especially if one mentions Lehman brothers and the simple detail that, oh, it failed. Which is why if Ray Dalio, head of the world's largest hedge fund, is correct, it may time to summarily fire and stop subscribing to each and every broken record Oracle whose template is "X will bailout Y" for the simple reason that it is wrong.

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