Bloomberg writes that Pimco, the fund manager, is creating a “tail risk” fund to protect Wall Street against a 15% drop in some market index we are not being told the name of. Tail risk is a term invented by Nassim Nicholas Taleb (n NYU prof.) and publicized in his book “Black Swans”.
I saw black swans in South Africa last summer and have a picture of the birds on my bulletin board to remind me that they exist. (They were first found in Australia; until then all swans were assumed to be white.) Now even the ballet features black swans along with white ones dancing in “Swan Lake”.
Tail risk is bumps in the seemingly long and low tails of a normal curve, which looks like a hat in profile. The tails appear in the brim.
The Newport Beach CA fund group, co-headed by Mohamad El-Erian (who used to run money for Harvard Universtiy before he ran the endowment down 30%), hired a Harvardian to run the new tail risk fund. He is Vineer Bhansali, a PhD in theoretical particle physics (despite quantum mechanics not the same as theoretical wave physics.)
Mr. Taleb forecasts investors will not have the patience to wait for a big payoff because tail risk takes years to appear.
Today is a big news and earnings day with many reports for our paid subscribers which follow. Too many countries to list today.
