Nassim Taleb: The Bogeyman #IBOVESPA
By David Gotlib (Acertar na Mosca)
Long ago, the bogeyman haunted stories to teach naughty children to fear the dangers of the dark. He wasn’t evil; he just knew that sometimes all it took was a good scare to make people learn.
Have you heard of Nassim Taleb? He is best known for his books, such as The Black Swan and Antifragile, in which he defends the idea that rare and unpredictable events (the “black swans”) have a disproportionate impact on the world.
In this, the bogeyman has something of Nassim Taleb: both recognize that fear of the unexpected keeps us alert and prepared. While the bogeyman scared children to keep them from getting lost in the dark, Taleb shows us that panic in the face of the “black swan” forces us to adopt resilient strategies, transforming chaos into opportunity.
Universa Investments was co-founded in 2007 by Mark Spitznagel, a former options trader and follower of Nassim Taleb who helped shape the fund’s philosophy. Inspired by Taleb’s ideas about black swans and antifragility, Universa has adopted a strategy designed to protect investors against major shocks in financial markets. It does this by buying out-of-the-money options, which are low-cost in stable times but can offer significant returns during severe crises.
Throughout its history, the fund has been known for its ability to excel in times of turbulence. During crises such as the one in 2008 and the collapse of March 2020, Universa has achieved impressive returns while many other funds have suffered heavy losses. These events have reinforced its reputation as a kind of “insurance” against low-probability but devastating events.
After spending many years in oblivion, as the markets have not shown significant declines since 2020, the Universa fund was dormant, as was Taleb – the “bogeyman” was on vacation or perhaps retired. But Monday’s declines made Taleb remembered. Sonali Basak comments on Bloomberg about her interview with the “bogeyman”:
Taleb Calls Nvidia’s Fall “A Hint of Things to Come”
Black Swan author Nassim Taleb warned that the sharp drop in Nvidia’s shares on Monday is just a harbinger of what awaits investors who blindly jumped on Wall Street’s AI-driven stock rally.
Future declines could be two or even three times larger than the 17% drop Nvidia recorded earlier this week, Taleb said. “This is just the beginning,” Taleb said in an interview with Bloomberg News after the market closed on Monday. "The beginning of a reality check. Now people are realizing it's not perfect anymore. There's a little crack in the glass."
DeepSeek's Role in Market Panic
The panic was triggered by fears that American tech giants might not dominate the field of artificial intelligence as expected. The reason? The emergence of DeepSeek, a Chinese startup that demonstrated a cheaper method for developing AI.
Investors interpreted this development as a threat to demand and dependence on Nvidia's advanced chips. Taleb criticized the market euphoria, saying investors were overly focused on a single narrative: that the company's shares would continue to rise as long as it maintained its leadership in the AI sector.
"The pullback on Monday was actually very small, given the risks involved in the industry," he said.
Crash Protection and the Role of Universa Investments
Taleb, in addition to being a writer and mathematician, is a scientific advisor to Universa Investments, a fund specializing in tail-risk hedging, offering a type of insurance to protect portfolios from violent market events.
He is known for making pessimistic predictions, some of which have not come true. In 2023, he warned that many investors were not prepared for an era of higher interest rates. However, the S&P 500 index has risen almost 50% since then, driven by the AI craze.
However, Taleb and Universa do not advocate that investors get out of the market and miss out on these rallies. The fund’s philosophy is to allocate a small portion of the portfolio to protect against unexpected shocks.
He also criticized the fact that many investors are inflating the prices of AI companies without really understanding how the technology works or what their real risks are. He called these companies “gray swans” because markets underestimate the volatility they can face.
The US Debt Warning
In addition to his predictions for Nvidia and the AI sector, Taleb doubled down on his warnings about the unsustainable level of US debt. According to him, there is a risk of inflationary explosion if rising labor costs are combined with aggressive import tariffs. Given this scenario, Taleb stated that the government bond market is not a sensible investment at the moment.
This interview seems to me more like a marketing element for his fund, which has its uses. But I warn investors who decide to invest in this fund: think of it as an insurance premium that is endlessly renewed. I don't know how they manage this idea, because if they buy put options called "dust" - way out of the money - at each expiration that is not exercised, and assuming this process continues, at some point they will run out of cash. Another factor to consider is: for every US$ 1.00 invested, what is the value of the portfolio covered?
Perhaps the most sensible thing for investors who want to protect themselves is to consider two alternatives: to do this protection themselves, buying put options on the S&P 500 with a low premium (and not forgetting to redo them at each expiration); or to follow Mosca – doing my marketing too! Hahaha...
Today, the most important event will not be the decision by the BCB, which should increase the Selic rate by 100 points, nor by the Fed, which will probably do nothing, but rather the results that will be announced after the trading session by Meta, Tesla and Microsoft. The focus will not be so much on the profits of the last half of the year, but on the impact of DeepSeek on their businesses. Will any of them review the huge investments announced for this year?
Technical Analysis
In the post the-end-of-the-story-part-ii I made the following comments about the Ibovespa: “Has the orange wave (2) ended? After reaching a low of 118.4 thousand on the first day of January 2025, it began a recovery that was going well, but has slowed down in recent days (this period is highlighted with a rectangle).”
In a not very clear way, everything indicates that 5 upward waves were formed – I made a surgical adjustment at the end of the red wave (2). With a 1-hour window, it would look like the following graph.
Flight plan: we expect to complete the orange wave 5 of lower degree, then there should be a retracement, indicated by the blue symbol, where a trade can be suggested. The stop loss would be at 122.1 thousand in an orthodox way. Follow Mosca for a possible entrance.
- David, finally a trade in the Brazilian market!
Calm down! For now, we have made a plan, but it needs to be agreed with Corinthians fans. I want to say that I am not very excited for the reasons above.
The S&P500 closed at 6,039, down 0.47%; the USDBRL at R$5,8618, without change; the EURUSD at €1.0411, down 0.16%; and gold at US$2,754, down 0.32%.
Stay tuned!
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This is not an investment recommendation.
About the Author of this Post: David Gotlib has 45 years of experience in investment management. An engineer from Polytechnic School of the University of São Paulo, he was one of the founders of the first Brazilian hedge fund in 1993 (AUM US$ 1 billion). Later, he was Managing Director of Deutsche Bank Asset Management (AUM R$ 2.2 billion) until the company was sold to Bradesco. He is currently the manager of his own investment portfolio and the author of the blog Acertar na Mosca, where, since 2011, he has shared his thoughts on the global economy and the financial market on a daily basis.