Submitted by Taps Coogan on the 31st of March 2020 to The Sounding Line.
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Legendary trader, risk analyst, and author, Nassim Taleb, recently spoke with Bloomberg News about the ongoing Coronavirus outbreak and the trillions of dollars of bailout money that is being showered on financial institutions and corporations, many of whom have spent more on debt-financed stock buybacks in recent years than they are now receiving in government grants and subsidized loans.
Some excerpts from Nassim Taleb:
“Of course (a pandemic) was preventable and we’ve know since January 26th, when we issued our (travel) warning that, effectively, you should kill it in the egg if you can and act very quickly. And of course, people ignored it, except perhaps just a tiny bit the Trump Administration by closing travel from China… It was not a ‘black swan.’ It was a ‘white swan’ and I am so irritated when people say it’s a black swan. We have had black swans. September 11th was definitely a black swan. This was a white swan and it’s no excuse for companies and corporations not to be prepared for that and definitely no excuse for governments not to be prepared for something like this.”
“I don’t understand this false dichotomy. Separating the economy from the virus is extremely foolish because it’s not like you have two different parallel universes. Having something spread like this is very damaging to the economy… If we had taken the hit (to the economy)… in January, we wouldn’t be here today. The problem we have today is too much connectivity. They did not want to spend pennies in January. Now they are going to spend trillions. And if you delay more, we are going to spend more. We don’t know much about this disease… therefore we should be extra cautious. This trade-off (between the virus and the economy) is a fake trade-off.”
“Bailouts, by definition, have a problem… They are not bailing you out. They are not bailing out the listeners here. They are bailing out investors in corporations. And who are they bailing out? Those who did not have a buffer. Not having a buffer is irresponsible whether you are a corporation or an investor. Mother nature, or God, whatever your theology, made us with two kidneys… Why two kidneys, you have huge extra capacity? Because you made need it one day. It’s the equivalent of having cash on hand rather than debt. So, …the system favors the companies that spend their cash instead of keeping it in reserve.. to buy their stock and… borrow over those that have a cautious attitude. And now we are bailing out those that made that mistake. We should bail out employees, citizens, not corporations who made these mistakes…”
“The worst thing you can do with insurance is to try to time it. You have to have your insurance at all times… I don’t time my car insurance. I don’t time my home insurance and I wouldn’t buy a house if I couldn’t insure it.”
There is more to the interview, so enjoy it above.
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