Maris Research

Insights into Risk: Taleb and Tyson

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Events that devastate the majority financially greatly enrich the few who bet on non-linear dynamics.

I see the same question in forums, threads, articles and emails: what can I do to protect myself and my family from whatever lies ahead?

Given the uncertainties and extremes that are so evident, recognizing risk is a useful first step, a recognition that is very much out of fashion. If we glance at the charts of margin debt (loans taken against one’s stock portfolio) which is at record highs, and short interest (bets that stocks will drop) which is at record lows, it seems the primary risk on investors’ minds is FOMO (fear of missing out) of all the fat, juicy guaranteed gains just ahead.

For the few still asking about the source of risk, the general answer takes one of two paths: inflation leading to hyper-inflation or a deflationary collapse of defaults and popping asset bubbles.

It’s easy to find pundits arguing for one or the other, but do we have the initial conditions, variables and functions we need to solve this problem and get a clear answer, inflation or deflation?

Consider two variables that are rarely visible in pundits’ arguments:

1) What will benefit

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