Tuesday, May 27, 2008

The Black Swan and Trend Following


I've just finished reading two great books: The Black Swan and Trend Following. Though not intentionally, I found these two book resonate with each other fantastically. Nassim Nicholas Taleb with his amazing personal story (we came from related troubled corner of the earth) is founding a good philosophical foundations for the Black Swan thesis. It is appealing mostly due to the practical implementations, mainly in the field of finance and investing. The investment aspect of the book caught me by surprise since I am in the middle of reading a long list of such books. The one I was reading at the moment has the Black Swan all over it. Trend Following actually refers to Taleb's work (handling risk) and to Benoit Mandelbrot which large parts of The Black Swan book are devoted to. To some extent I found the books to be complementary of each other since Taleb does refers to math but gets very fuzzy when getting to details and Michael Covel discuss in some details the practical implementations. The two of them are discussing the big financial events of the last few decades, each with a bit different point of view but with very similar, practical conclusions.

In short, very recommended.

As an appendix I would like to recommend two other books which would be nice to read before starting with the books above:
* Stumbling on Happiness would be a good read before the Black Swan. It is not a very practical book, but it gives a good state of mind of how and why the persons which we where few weeks ago thought the way they did.
* The Complete TurtleTrader: A great story that gives motivation and good background to the Trend Following book. Though Michael Covel wrote Trend Following first, I would recommend reading it before the Trend Following. I would also highly recommend to subscribe to Michael's podcast. The episodes are very short and to the point. Its a nice refreshing listening, especially in case you happen to do the mistake of being in a room with an open TV.

Oh, by the way, I do invest. If you're interested to see how and why you are welcome to my financial blog at Covestor.

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