Must see video,

http://knowledge.wharton.upenn.edu/article.cfm?articleid=2755

Taleb: “The map into this terrain is quite difficult to follow. You have to avoid having things fail too late. You have to avoid debt because debt makes the system more fragile. You have to increase redundancies in some spaces. You have to avoid optimization. That is quite critical for someone who is doing finance to understand because it goes counter to everything you learn in portfolio theory…. I have always been very skeptical of any form of optimization. In the black swan world, optimization isn’t possible. The best you can achieve is a reduction in fragility and greater robustness. You may have heuristics, but not an optimization rule. I hope the message will finally get across because I haven’t succeeded yet. People talk about black swans but they don’t talk about robustness, which is the real lesson of the black swans.

Evolution works not with bailouts — there are no bailouts in nature — but with competition and natural selection. So you need to have some stressors and to use stressors to strengthen the system. We have not been stressed enough about the oil crisis, and it has led to a horrible situation in which the U.S. government is playing a hypocritical role driven by humanitarian forces in Libya, but at the same time supporting the Saudi royal family, essentially one tribe running a place — even giving its name to it. It is the most unstable place and the most backward of regimes in the world — all in the name of oil security.

We did not have a recovery. What we had is massive reliance on the printing press for more money. Did your tax base improve? No. Otherwise you wouldn’t have $1.3 trillion in expenses. So we are fooling ourselves with numbers….

You are eventually going to pay back this fake growth — [which is] sort of like Madoff style growth. Is it growth? Well, it looked like growth but it’s not really growth if you discount it by the probability that you have to pay it back.”

(knowledge@wharton)

Full transcript,

taleb

“Over there, that’s Creighton University,” Daub continues, “and that lovely red brick building is the D.J. Sokol Arena.” The tidy 2,500-seat gymnasium for women’s basketball and volleyball is named for Sokol’s late son, who died of Hodgkin’s disease in 1999, a few weeks after graduating from high school. “And Dave isn’t even a Creighton alum; he’s UNO”—University of Nebraska at Omaha—”and one of their big supporters, too,” Daub says. “The man puts his money where his mouth is, that’s for darn sure.”

Putting his money behind personal convictions of a different sort has now landed Sokol in deep trouble. Until Mar. 30, he was widely seen as heir apparent to 80-year-old Warren E. Buffett, Berkshire’s chief executive officer and the prophet of heartland common sense. That day, Buffett made headlines by announcing that Sokol, 54, would resign from Berkshire. On Wednesday, Apr. 27, Berkshire’s audit committee again electrified the financial world. In a scathing 18-page report, it accused Sokol of violating company standards by misleading Berkshire about his personal stake in Lubrizol (LZ), a chemical manufacturer he recommended to Buffett as a takeover target. The committee stopped short of concluding that Sokol committed insider trading under federal law when he bought Lubrizol shares worth $10 million in January and then pitched the company to Buffett. But the company signaled that the former corporate star is now on his own, and Berkshire will cooperate “with any government investigations relating to this matter.” The Securities and Exchange Commission is investigating, although a spokeswoman declined to comment. (Businessweek)

http://www.businessweek.com/magazine/content/11_19/b4227050988120.htm

The Chinese market was down another 1.3% today. We are trading same levels as mid March. This is somewhat strange, considering they are supposed to drive the world forward. Renewed rumours about new measures for the May weekend coming up drove the index lower. It is trapped in a rather big formation.

Greed is good. Sokol’s lawyer accusing Buffet. The soapopera has just begun. Letter to Buffet below,

I am profoundly disappointed that the Audit Committee of Berkshire Hathaway would authorize the issuance of its report to the public without the care and decency to ask even a single question of Mr. Sokol. Mr. Sokol had been associated with the Berkshire Hathaway companies for 11 years. During this time, his indefatigable efforts helped create enormous value for the Berkshire shareholders. He deserved better. While I take issue with much of the Committee’s report, I briefly make the following points. If the Audit Committee had asked, it would have learned that:

Mr. Sokol had been studying Lubrizol for personal investment since the summer of 2010; such investments are specifically allowed by his employment agreement.

Mr. Buffett was told twice, not once, about Mr. Sokol’s ownership of Lubrizol stock before Mr. Buffett engaged in any discussions with Lubrizol.

Contrary to the Audit Committee’s statement, Mr. Sokol’s Lubrizol shares were not acquired pursuant to a “100,000 limit order.” Rather, they were purchased as a result of several limit orders, over a period of days, at specified prices, for the day only, in order to acquire the stock at low prices. At that time, Mr. Sokol had no reason to anticipate that Mr. Buffett would have any interest whatsoever in Lubrizol.

I have known Mr. Sokol and have represented his companies in business litigation since the mid 1980s. I know him to be a man of uncommon rectitude and probity. He would not, and did not, trade improperly, nor did he violate any fair reading of the Berkshire Hathaway policies. (Dow Jones Newswire)

Here we go again. Another day, another Usd collapse. Eur soon 1.5. Oil “stubbornly” high, silver gold both up. Inflation hedges all up, although Bernanke was not really bothered by the inflation. He is focusing on the great job creation, which is not that impressive at all.

So far exporters in Europe have been able to pass on and hedge the weak Usd, but at some stage, the renewal of the hedges will have to be made on much lower levels. The export driven Sweden for example, is highly dependend on the exporters. The SEK vs Usd is down some 25% since last summer, and almost 35% since the top in 2009. These are major moves for currency dependent exporters, and will be very hard to pass on, going forward, especially, if the economy doesn’t pick up that much. There are many other countries with similar “problems”.

Down we go. Usd is falling of a cliff. Although SPX made new highs yesterday, it was totally offset by the Usd fall. All in all, SPX is barely up on the year adjusted for the Usd. So the great returns on the SPX this year, are only good for some….

http://www.bloomberg.com/news/2011-04-28/dollar-index-drops-to-lowest-since-2008-on-fed-pledge-stocks-oil-advance.html

Another no, no, no, but yes situation. Apparently Sokol, according to BH’s audit committee, has violated several company rules. Amazing to see greed from the elite unfolding again.

“Former Berkshire Hathaway executive David Sokol intended to deceive the company in the way he disclosed his interest in Lubrizol Corp and violated Delaware law in the way he behaved, the company’s audit committee concluded in a scathing report.” (Reuters)

http://www.reuters.com/article/2011/04/27/us-berkshire-idUSTRE73Q7SI20110427

Don’t get fooled, todays up move is totally offset by the Usd detoriation. Chicken or the egg?

While the chairman was on air, people sold Vix again. All back to normal, zero rates, no volume melt up and DXY collapsing accompanied by the Vix.