Merrill Lynch’s Recent Losses Exceed YEARS of Prior Gains

Found on Naked Capitalism, a short Financial Times article that should greatly interest those who plan to make long-term investments (or short-term gambles?), or those interested in how the recent (unabated) losses look on a chart of profits over the past few years/decades.

This is interesting to me for a couple of related reasons:  I have long believed, mildly, that the major dips in the market make relying on steady (‘regular’) gains in investment makes investing a prayer for calm waters.  Not to say positioning yourself to benefit from large vicissitudes in the market is not risky however it requires putting far less capital at play.  I’ve been putting this into practice somewhat, however I don’t have the fortitude or the liquid funds that I can apply to anything more than an occasional gamble.

The second, related reason is that I just finished reading The Black Swan by Nassim Nicholas Talib (not an affiliate link, so feel free to click even if you hate this blog) about 60 minutes ago.  I’ll try to assemble a cogent review after digesting some of the information further, however Merrill’s example certainly adds force to Talib’s philosophical views.

With the exposure to loss that is now quickly becoming apparent, and evident across the financial industry as a whole, I really wonder why we tend to believe that each financial catastrophe should be looked at like a product of innumerable, not-to-be-repeated errors, rather than innumerable unmeasured or unknown factors (or the one mistake of not acknowledging our limits in knowledge).

NOTE: I want to stress that I don’t believe The Black Swan is an investment guide in any useful way as I believe many do, but a very autobiographical philosophy book that discusses the role of statistics in our world and its lack of relevance to a large number of domains in which statistically modeled is relied upon.

… and the cow goes moo