Black swan hedging for the masses

By nstollon: Income Investing is made of 3 parts - mitigating significant loss, extracting income, and identifying means for capital growth. We all look at equities through a lot of screens to achieve the above. One approach I have started to incorporate is what is commonly called "black swan" analysis.

By Pater Tenebrarum: Nothing Can Go Wrong In an interesting twist, investors have recently lost interest in betting on so-called "black swans", the term coined by Nassim Taleb to describe unexpected events that prove the market consensus wrong. Although Taleb's definition seems to imply that the "swan" should be completely unexpected, it is our impression that in practice, it describes any development that upsets the consensus view.

The Inflection Point submits: By Tom Henderson, Strategist JBH Capital With the Dow up about 4,600 points from its winter 2009 low of around 6,400, traders need to always be on the lookout for events that may stir volatility and decrease the calm waters that the markets seem to be sailing through currently. One note about these potential black swan events – they often occur when people ar

By Michael J. Ray: The term “Black Swan” was popularized by Nassim Nicholas Taleb who was a Wall Street trader and a finance professor. The definition of the term is an event that is well beyond what one would normally expect given a certain situation and also would be extremely difficult to predict. Needless to say, when applied to the equity markets, the Black Swan event is usually followed by precipitous volatility which can leave an investor’s capital dangerously exposed.

Yesterday on CNBC, Mark Spitznagel, chief investment officer for fund manager Universa Investments L.P., made a scary prediction. He warned that the S&P 500 could lose 40% of its value in the next couple of years. He went on to point out several facts and figures that led to this prediction. He specifically said, "there is a 20% chance of a well-over 40% correction in the S&P 500 within the next few years." CNBC even had viewers voting on this black swan event. So will the S&P 500 drop down to 760?

The world is abuzz yet again - the Arab protests turned revolutions spread like a wildfire across Northern Africa.  Yet what's most surprising about those events is the general failure of anticipate and analyse them.

Tom Malthus submits:Five sigma or "black swan" events have become increasingly more prevalent.