bhc investment

Predictions 2010

2010-02-05T07:58:00.001Z

In 2010 we at bhc investment believe:

the xxx will xxx; and
xxx will xxx.

----- bhc perspective -----

Buy Call 2010-01-25

2010-01-25T10:08:00.005Z

Long position entered at xxx.xxx for xxx.

----- bhc perspective -----

bhc perspective is a paid subscription.
You will get continued, full access to our upcoming posts, which will be non-mainstream and quite often contrary to the general market views.
Our investment philosophy is unique, time-tested, and based on thorough research, analyses, continued testing and re-testing, and infusion of new ideas and framework when appropriate, such as The Black Swan theory, The Theory of Reflexivity, etc. We were one of the few who recognised George Soros' theory before the financial crisis of 2008 unfolded. In addition, we predicted that both Robert Prechter and Glenn Neely will be proven wrong in their bearish calls on Gold and their predictions of Deflation. Furthermore, we predicted the Unofficial Weak Dollar Policy by the Bernanke Fed way before the mainstream caught up with the idea.
Subscribers can post questions to us and expect our prompt responses.
We will tell you exactly what positions we plan to take and where and where we will take them.
bhc investment is about understanding the macro economy and financial markets of our times, rather than the micro. We see the big picture before the mainstream does, while they tend to play catch up with us after an investment theme has become a general knowledge.
Typically our paid subscribers are those who have a working capital of at least $100,000 USD and know how to enter and exit positions in the futures markets including major indices, commodities, and currencies.

bhc perspective

2010-01-22T09:48:00.005Z

You will not get the usual mainstream stuff from us.
And we are no longer free!

S&P 500

2010-01-19T09:45:00.003Z

Added to our short at 1136.00.

Chanos: China is Heading for A Big Crash

2010-01-18T09:49:00.012Z

In the world of investment, I am skeptical soul; I am always skeptical about what I read and heard. When someone is building the biggest, the highest, or the longest, I tend to first look at the matter as a contrarian [1]. I don't believe or buy into hype. When people are trying to tell me how much money and easy money they have made from the property market in China, I see worries -- I see herds who are doing the same sort of things as it happens over and over again in human history. When the Indian Central Bank was buying Gold, I prefer to ask myself if it meant we were at a seasonal peak. When Warren Buffett was buying into Burlington Northern Santa Fe and called it his "all-in wager" on the economic future of the U.S. [2], I felt a sense of shiver down the back of my spine -- what if the world's most celebrated investor of all time was wrong?

I prefer to look for an investment thesis and investment ideas that can stand the test of time, steer myself away from confirmation bias, and think, analyse, and research in a framework with integrity. If I called something a bubble, and I said it had popped, I will not expect it to recover anytime soon and making a new high. If it does, it will invalidate my believe that it had popped or my believe that it was indeed a bubble. Integrity. Our thinking must be robust and exhibit its integrity over time.

Proving something right doesn't really make it right. Proving something wrong is much more significant. I often tell people of this: we human first thought the world was flat, later round, then oval, now it's none of these. Each time we prove our previous believe wrong we get closer to the truth, not necessary the real truth, but it is speticism and the disproving of something that enable us to acquire new knowledge.

... similarly, the speculator George Soros, when making a financial bet, keeps looking for instances that would prove his initial theory wrong. This, perhaps, is true self-confidence: the ability to look at the world without the need to find signs that stroke one's ego.
Nassim Nicholas Taleb, The Black Swan

China is heading for a big crash

James S. Chanos built one of the largest fortunes on Wall Street by foreseeing the collapse of Enron and other highflying companies whose stories were too good to be true.

Now Mr. Chanos, a wealthy hedge fund investor, is working to bust the myth of the biggest conglomerate of all: China Inc.

Born in 1958, of Greek origins, he was schooled at Wylie E. Groves High School and Yale, where he graduated in 1980. In business, he developed an investment strategy based on intensive research into stocks (as long as months), searching for fundamental and large market failures in valuation: typically under-estimated or previously un-reported failings in the business or market of a stock followed by committing to a (usually large) short-position which he is willing to hold for long period of time - almost the mirror image of Warren Buffet's reputed "fundamentals+long stay" investment strategy. Because of this model, his investments function more like those of a whistle-blower than most typical investments. Examples of this include short-selling companies such as Baldwin-United, Drexel Burnham, and more recently, the notorious Enron Corporation.

He rose to fame in the 1980s as a "short" - a short seller who had a knack of spotting stocks that he thought to be overvalued. After working as an analyst in several firms, he founded Kynikos (Greek for "cynic") in 1985 as a firm specializing in short selling. A critical position taken at Kynikos was his shorting of Enron.

In October 2000, Chanos started research into the valuation of Enron Corporation. He examined their use of mark to model (cousin to mark-to-market) accounting, which, in Chanos' experience, results in management overstating earnings, as well as what appeared to be a worryingly low (6-7%) return on capital investment. Enron stock declined from $90 in August 2000 to a low of $1 in January 2001. Over this period, Chanos was a short seller of Enron during 2001, increasing his short position as more information surfaced. Kynikos profited greatly and Chanos himself became somewhat of a celebrity as a consequence of his early awareness of Enron's problems.

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China is, afterall, an export economy. It should have and could have developed a domestic consumption economy during the boom time, but it didn't. Recent rally in the S&P as well as Shanghai, in my view, is nothing more than some sort of LIQUIDITY DRIVEN STUPIDITY... Therefore, I am going against the consensus here: S&P 500 will fall, so is China. Enough said.

-- bhc investment, 7 August 2009

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References:

Food for Thought

2010-01-12T14:37:00.003Z

Malcolm Borthwick, Editor, Middle East Business Report, BBC World, Dubai:

Dubai is a city of superlatives, where everything has to be the biggest and the boldest. But like many of the world's past tallest buildings, Burj Dubai was planned and built during the boom years, and finished during a property crash. The Empire State Building was completed during the Great Depression in the 1930s and the Petronas Towers in Malaysia during the 1990s Asian financial crisis.

Mohamed Abdul Hadi is one local investor who made millions out of Burj Dubai long before the building was completed. "In 2007 we bought three floors on Burj Dubai," he told the BBC. "The first investor paid 2,500 UAE dirhams ($680; £420) per square foot. We bought at AED 3,500 and one year later we sold at around AED 5,000. Look at the profit, where else can you have this but Dubai? And with no taxes."

Taxes are always an important factor to the distortion of the investment landscape. With no Capital Gain Tax to pay and reckless monetary credit expansion, it's only a matter of time before "asset prices" are hyperinflated artificially. Is debt, not wealth stupid!

To think that commodity prices are driven by speculators is quite simply outrageous. Capital Gain Tax imposed on investment in commodities is still one of the highest in the industry, ranging from 40 to 60%! One day when your friends, accountants, lawyers, etc all tell you to buy Gold or Crude and you pay no taxes on your gain, that's the time to sell your lots to them!

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Reference:

Burj Dubai sets records and makes profits

Frozen Britain

2010-01-08T10:14:00.003Z

I was driving down to London and Surrey from Yorkshire during Christmas Day. It was quite an experience I will never forget. It's been snowing heavily the few days before. The scene was white and very, very quiet -- as you would expect on Christmas Day: no trucks, hardly any car at all. I was listening to Radio 1, it was Greg James on it. People phoning in; children phoning in -- shouting Merry Christmas! I had a break at a service station for about an hour. The whole journey took me more than 3 hours before I reached a friend's house, which I stayed for 2 nights before lodging in another old friend's until after New Year's Day. I came back to Yorkshire on the 2nd, driving non-stop all the way and it took me just over 3 hours. Looking back at it and watching the news in the last few days made me felt extremely lucky. I didn't quite know how I did it, but I did. My journey down and up was as trouble-free as it can be, but many weren't that lucky.

The UK has suffered its coldest night of the winter so far with temperatures plummeting to -22.3C (-8.1F) in Sutherland in the Highlands. Overnight temperatures of -10C (14F) were widespread, leaving commuters again battling icy roads and pavements amid "stretched" road salt supplies. Many schools remain shut, with rail and air travel again hit by delays. Fresh snow is falling in eastern England.

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References:

Most Popular 20/10/09 - 16/12/09

2009-12-30T08:19:00.007Z

Recent Most Popular Posts,
with Quick Comments

Gross: Now Betting on Deflation

Gross bought long-term US Treasury after we suggested to sell into strength. I am fan of Gross, but betting on Deflation is really something I can never agree with.

Gheit: Oil Prices are not Moving with Fundamentals

Gheit is putting too much focus on the short-term trend and volatility while missing the big picture -- Crude remains in a secular bull market. The world is running out of cheap energy. Crude and Natural Gas will become more expensive and must be more expensive for Green to fly. The world is desperate for a new productive capacity to put it back on the growth track. Higher energy prices are good for the world's economy. I know this might seem hard to understand by the mainstream.

The Worlds Greatest Money Maker: Evan Davis meets Warren Buffett

Another video about Warren Buffett.

Saluzzi: This is a Bull Trap!

Market commentary by Saluzzi.

Aristotle's Good Money

This is good, and reminds readers of what money really is.

Prechter: Bear Market Rally Is Over, Stocks Headed For New Lows

Prechter of Elliott Wave International talking about the big secular bear market in stocks. This is one thing that Prechter and I have in common.

Hardcore Profits: Episode 1
Hardcore Profits: Episode 2

Videos about the porn industry.

Gartman Playing Catch Up

Flip-flop Gartman playing catch up with what we have been saying for years. With the recent rally in the USD, Gartman is back on the Dollar bull camp. Argh...

Pickens: Energy, Energy, Energy

Boone Pickens talks energy.

Whitney: Haven't been This Bearish in a Year!

Whitney expect double-dip recession.

The Black Swan

The Black Swan theory, thought-provoking and I highly recommend it.

Unofficial Fed Policy
Unofficial Fed Policy, Part II

Jim Rickards code breaking Fed's talks. Clever guy!

Bunning: Your Time as Fed Chairman Has been a Failure

Bunning is great, one of not so many who understands what's going on.

Lords, Billionaires and the Russian Connection

Corruption done legally, if you know where and how to shop.

The Unemployment Game Show

US unemployment, the real truth.

Crude Oil

Inflation vs Deflation.

The Broken Window Fallacy

Lew Rockwell of the Austrian School tells the Broken Window Fallacy. I am a fan!

Rogers: Recovery? What Recovery?

Government robbing Peter to pay Paul. Best wishes to you and your family Jim.

1 Stone, 3 Down 1 to Go

2009-12-28T10:13:00.013Z

I am in the south of England visiting some old friends. Will not be back until after New Year. I am spending my holiday here reading, playing with kids, walking, and reading Belle de Jour -- yes, that secret diary of a London call girl that was quite a hit years ago. (Planned to read up more of Nassim Taleb's before I came.) I knew it but was not intrigued to read it until a couple of days ago after learning the real identify of Belle -- Dr Brooke Magnanti. I thought she's beautiful, a great writer, honest, witty, and courageous. I respect her and have nothing against what she did, which was legal and she paid her taxes. I certainly enjoyed her writing. Sorry Taleb, Belle has occupied a bigger slice of my reading times during this Christmas and New Year break. Also, I found myself debating on the topics of sociology and government regulations on marriages and family structures. Though I was educated to be a hard scientist, increasingly I found myself more interested in complex sciences such as economics, psychology, politics, and sociology these years. I am getting old, I heard my mind.

As 2009 is about to come to its end, is time to review what we said earlier this year, what we have got right, and what have we learned -- meaning not gotten quite right, yet.

“In 2009 we at bhc investment believe the US markets will continue be trapped in a bear market. While mainstream and even a number of legendary fund managers are forecasting a massive rally, we at bhc investment continue to believe the Dow will close below 8,000 by the end of the year. The US Treasury market will peak within 2009, Gold will continue its rise amid volatility, and Crude Oil will bottom out.”
9 January 2009

We set out to hit 4 birds with 1 stone. 3 of which already hit:

US Treasury has been experiencing significant selling pressures of late, causing some steep increases in long-term interest rates -- you see, the Fed can manipulate but even the Fed will have difficulties to stem the tide! Now the talks of Inflation among so-called experts is back, just as we predicted.
Gold is comfortably above the 1,000 mark, causing some big-name Deflationists to flip their forecasts, just as we predicted.
Crude bottomed out indeed, with some big-name investment banks now predicting the energy commodity to reach 80 or even breaking the 100 mark.

The 1 bird our stone hasn't hit -- the Dow is yet to sell down to 8,000. That certainly makes our strategy for 2010 a lot easier.

Happy New Year!

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References:

Japanese Yen

2009-12-20T22:50:00.003Z

Took profit off remaining position @ 1.1150 last Friday.

Rogers: Recovery? What Recovery?

2009-12-16T10:26:00.004Z

America's Problems
Getting Worse, Not Better

James Beeland Rogers, Jr. (born October 19, 1942) [1] is an expatriate American investor and financial commentator based in Singapore. He was a co-founder of the Quantum Fund, and is a college professor, author, economic commentator, and creator of the Rogers International Commodities Index (RICI). He considers himself a fellow traveler of the Austrian School of economics.

Government robbing Peter to pay Paul.
-- Jim Rogers

Recovery? What Recovery? [2]

The U.S. government is making mistakes that could mean the end of its empire.
All they did was moving money from here to there. The problem is not solved. It's getting worse, not better.
Don't believe the official figures.
Government robbing Peter to pay Paul.
Politicians are making problems worse.
You can't solve a debt and consumption problem with even more debt and consumption!
Can't solve credit crisis by creating more credit.
We must let the market to take its course; let companies fail.
Better to take the pain and move on.
U.S. following Japanese model.
Greenspan and Bernanke worst central bankers in U.S. history.
Crisis caused by regulators not lack of regulation.

In a very real sense, the bailout money is money confiscated from YOU and me through the hidden forces of monetary inflation, which allow them to move losses from private to public accounts. This creates a terrible morale hazard, and is not solving the root of the problem at all. The debt is still there within the system. And it will impede recovery without a new productive capacity that can absorb it. There simply isn't any on the horizon!
-- bhc investment, 13 September 2009 [3]

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References:

The Broken Window Fallacy

2009-12-14T23:30:00.002Z

A short while ago, some regions of the UK were hit by heavy rains resulting in severe flooding. One of my friends saw the news on TV and immediately said that should be good for the economy -- it should stimulate economic activities and growth. I immediately responded saying that's a Broken Windows Fallacy. As a metallurgist, she didn't get the idea. Without sounding like an economist, I attempted to explain to her in some laymen terms. Since then I have been wanting to make a post on this topic here. Allow me to share with you this video by Lew Rockwell of the Austrian School.

If you think Obama and his economic team really know how to solve our problems, think again.

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References:

Crude Oil

2009-12-13T22:20:00.004Z

"Deflation won't be Tolerated.

We will Print All the Money Needed

to Invite Inflation!"

Last year I predicted that Inflation will stay in the long run but will peak before the U.S. unemployment reached 8%. Since making that prediction, we had lightened up our positions in Crude and Natural Gas, while adding our positions in Sugar and Gold. That went pretty well to a certain extent, but I must say I was somewhat overwhelmed by how far and fast the Inflation trade faded as financial participants began to deleverage at a global scale. Roubini was out warning us of a Global Deflation -- how scary was that? -- which I didn't buy into, of course. We were down right across the board at some point while we were away for holiday. Had the Deflation scenario been played out, had Gold been traded down to $600 or $200 as some experts had predicted and called for, I would have been proven wrong. I stuck to my gun and I was right. The Inflation trade began to make a U-turn after the global deleveraging; Gold made several headline news worldwide as it broke new highs several times this year while some agricultural commodities such as Cocoa and Sugar had some fantastic runs. Deflation? What Deflation? I can see a number of experts began to flip-flop their predictions.

As soon as the ordinary people began to catch up with the role of Gold in an environment of competing fiat currency debasement, while some mainstream experts began to realise the Unofficial Weak Dollar policy that we had been talking about, Gold seemed to have made a temporary peak around $1,200 together with the euro. Crude too began to experience some selling pressures. Not only that, long-term US Treasury began to sell down, driving up interest rates at the long end. Stocks right now are yet to follow in a big way. I am not going to speculate on what the markets are going to do in the short-term. I am going to stick to what I believe will work: the long-term Inflation trade. To this end, I am planning to increase my bet in Natural Gas. Therefore, we took profit off our newly added position in Crude last Friday, with an aim to deploy the capital in Natural Gas later.

Newly added Crude position this year:

Long from 68.07
Hedged at 75.00
Unhedged at 70.80
Took profit at 69.80 last Friday
Profit: 5.93

Crude position from last year:

Long from 80.90
Hedged at 75.00
Unhedged at 70.80
Average cost for remaining position: 70.80 (CLZ08)

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References:

Crude Oil

2009-12-11T07:54:00.002Z

Unhedged at 70.80.

Obama: Spend, Spend, Spend

2009-12-09T13:34:00.005Z

Obama urges major new stimulus, jobs spending
By TOM RAUM (AP) – 12 hours ago
WASHINGTON — President Barack Obama called for a major new burst of federal spending Tuesday, perhaps $150 billion or more, aiming to jolt the wobbly economy into a stronger recovery and reduce painfully persistent double-digit unemployment.

“THERE IS NO MEANS OF AVOIDING THE FINAL COLLAPSE OF A BOOM BROUGHT ABOUT BY CREDIT EXPANSION. THE ALTERNATIVE IS ONLY WHETHER THE CRISIS SHOULD COME SOONER AS THE RESULT OF A VOLUNTARY ABANDONMENT OF FURTHER CREDIT EXPANSION OR LATER AS A FINAL AND TOTAL CATASTROPHE OF THE CURRENCY SYSTEM INVOLVED.”

Ludwig von Mises – Austrian Economist (1881-1973)

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Reference:

Obama urges major new stimulus, jobs spending

The Unemployment Game Show

2009-12-08T22:44:00.001Z

S&P 500

2009-12-07T07:32:00.002Z

Short position entered at 1104.50.

Lords, Billionaires and the Russian Connection

2009-12-06T17:00:00.001Z

Dispatches investigates the elusive Russian oligarchs who have been trying to buy up our football teams, newspapers and car companies.

Reporter Antony Barnett examines the relationship between Russia's richest men and Britain's political elite. He discovers that members of the House of Lords are a prized attraction in Moscow.

Bunning: Your Time as Fed Chairman Has been a Failure

2009-12-06T08:45:00.006Z

"Instead of taking that money and lending to consumers and cleaning up their balance sheets, the banks started to pocket record profits and pay out billions of dollars in bonuses. Because you bowed to pressure from the banks and refused to resolve them or force them to clean up their balance sheets and clean out the management, you have created zombie banks that are only enriching their traders and executives. You are repeating the mistakes of Japan in the 1990s on a much larger scale, while sowing the seeds for the next bubble."
-- Jim Bunning, 3 Sep 2009

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Unofficial Fed Policy, Part II

2009-12-05T08:13:00.007Z

Jim Rickards summed up some pretty important points that we at bhc invesment have been telling our readers for years. This interview was done some time ago but was not very well known. I was pretty surprised to learn that CNBC actually allowed it to be broadcasted without much editing. Will provide my response in the coming days.

Kevin Warsh, a member of the Board of Governors of the Fed, said the Fed's job is only half over.
Traditional metrics used to gauge when to raise interest rates. We may look at "asset prices".
What "asset prices"? Well, Gold. High Gold prices means the Dollar is imploding. We are not going to let that happen.
To defend the Dollar, the Fed should have raised interest rates much earlier, not until when Gold is very high.
The Fed needs to debase the Dollar by half in the next 14 years.
The U.S. liabilities are way too big -- about $60 trillion; there are no feasible combination of growth and taxes that can fund that liabilities.
The idea of price stability is non-sense. What they do is to inflate the Dollar and to prop up the banks.
Currency debasement is a very unstable process. The market can get ahead of them as the Dollar collapses rapidly while Gold surging.
Another unannounced, unofficial policy behind the scene: to replace the Dollar with Special Drawing Rights (SDR), issued by the IMF. Is printing money again, nothing behind the new paper.
Triffin Dilemma: Persistent large trade deficit supporting global growth by the nation of Reserve Currency; this eventually bankrupts the nation of Reserve Currency itself!
To preserve global growth while the U.S. debases its currency can only be done with the Dollar loosing the Reserve Currency status to SDR.
This solves the problem of global growth, but a debased currency will mean the U.S. can no longer be the superpower as it used to. For example, it used to be able to fight a war whenever it liked by simply printing money.
We will trash the Dollar, but we will do it in a managed way.
Gold is the enemy of central banks. When you own Gold, you are fighting every central banks in the world. But the market is the market. The Fed is a big player, it can manipulate but not control.

I didn't buy into Paulson's “Strong Dollar” policy for start -- is a total joke to me.
-- bhc investment, 21 July 2008
We are still within an inflationary recession. The USD has a rally, but is a bear market rally. It is NOT in the interest of the US to have a strong dollar. Paulson's “Strong Dollar” policy is a joke. The US needs to DEBASE its currency to get out of the mess it created.
-- bhc investment, 12 August 2008
While pursuing an unofficial “Weak Dollar” policy, it will tell you it favours a “Strong Dollar”. Stop listening to the Fed!
-- bhc investment, 19 October 2009

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References:

Unofficial Fed Policy

2009-12-04T22:58:00.008Z

“Hyperinflation is not possible in my view, because there is still a great deal of Dollars held by foreign central banks. Fundamentally, we believe the Dollar is no longer the world's reserve currency following the global financial crisis. However, foreign central banks will have a hard time diversifying away from it in the short-term. Therefore, a sudden, dramatic crash is unlikely -- they will prefer to manage the decline in an orderly way, with co-operation with foreign central banks. Should there be a crash in the Dollar due to an event outside of their control, Ben Bernanke will have no choice but to use the very last bullet he has to stem the tide -- raising interest rates. This is probably the only situation where Bernanke will be forced to hike, without consideration of whether or not the jobs market can already stand on its own feet.”
-- bhc investment, 16 Sep 2009
“Gold is the enemy of central banks. Don't expect Gold to be hyperinflated -- it will not happen. Governments hate seeing Gold making too much gains. Be humble with your Gold investment. Gold has been a great performer over almost any asset classes pre- and post-credit crisis and outperforming even Warren Buffett's Berkshire Hataway. We think at some point in the future, it is likely to lag the gains in commodities.”
-- bhc investment, 24 Sep 2009
“The currency markets are pretty buoyant today. Both the Yen and euro are attempting to test resistance lines. The unofficial 'Weak Dollar' policy continues to hold. I am feeling a bit nervous -- the Yen Carry Trade continues to unwind while 'asset prices' continue to gain.”
-- bhc investment, 25 Nov 2009

In my view, the “asset prices” that the Fed is watching is not only Gold, but also US Treasury and stocks.

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References:

Stocks

2009-11-27T07:37:00.004Z

Wow... looks like the price exhaustion that we have been waiting for is arriving. Let's see how many 'experts' who were bullish BEFORE the turn are going to flip!

Now all the experts are talking about the Yen aren't they? What a bunch of herds!

Japanese Yen

2009-11-27T06:24:00.003Z

The Yen is making 14-year high -- yes, what a short squeeze! We are taking 50% of profit off at 1.1606.

Crude Oil

2009-11-27T06:17:00.002Z

We are hedging our entire position in Crude, including the recently added, at 75.00.

The Black Swan

2009-11-25T19:19:00.009Z

These days when I check the traffic to this blog, I found there is a noticeable number of readers who are interested in the Theory of Reflexivity by George Soros. In fact, if you google the keywords "George Soros and The Theory of Reflexivity", bhc investment ranked 5th among the returned hits.

My post at the time was not adding anything new to what's already available about The Theory of Reflexivity in the public domain, but simply putting them together after some personal research into the subject. Soros later came out with a book about his theory and his views on the new paradigm in financial markets following the 2008 financial crisis.

I haven't read the book yet. Part of the reasons being that I already knew The Theory of Reflexivity before the crisis hit. Another being that Soros was voting for Omaba in the last U.S. presidential election and had been a supporter of BIGGER government and MORE regulations post the greatest financial crisis since the Great Depression -- which had me wondering about his motive. Therefore, I wasn't eager to read what he has to offer in the book.

While I do believe in The Theory of Reflexivity, I was also intrigued by The Black Swan by Nassim Nicholas Taleb. Below is a snippet taken from wikipedia:

Taleb appeared to be vindicated against statisticians in 2008, as he reportedly made a multi-million dollar fortune during the financial crisis of 2007–2008, a crisis which he attributed to the failure of statistical methods in finance. Universa, where Taleb is adviser, made returns of 65% to 115% in October 2008 in its approximately $2 billion “Black Swan Protection Protocol.”
Taleb's financial success coupled with his earlier predictions have seen him catapulted to prominence. He has appeared on numerous magazine covers and television shows to discuss his views. Taleb started being treated as a "rock star" in Davos 2009 in which he had harsh words for bankers.
In an article in The Times, Bryan Appleyard described Taleb as "now the hottest thinker in the world". The Nobel Laureate Daniel Kahneman proposed the inclusion of Taleb's name among the world's top intellectuals, citing "Taleb has changed the way many people think about uncertainty, particularly in the financial markets. His book, The Black Swan, is an original and audacious analysis of the ways in which humans try to make sense of unexpected events."
Approach to models linked to Austrian School
In his criticism of models, Taleb has taken a point of view in line with the Austrian School of economic thought. He opposes top-down knowledge as an academic illusion and believes that price formation obeys an organic process. His paper with Espen Gaarder Haug asserts that option pricing is determined in a "heuristic way" by operators, not by a model, and that models are "lecturing birds on how to fly", except that in the case of options, the birds might listen. In the book "Lecturing Birds on Flying: Can Mathematical Theories Destroy the Financial Markets?" Wiley Publishing (2009), Pablo Triana explores this topic with references to Haug and Taleb and critiques of the Black-Scholes-Merton model.

I bought the book and had been reading it on and off over the last few evenings when I can find the time. It was thought-provoking indeed! Allow me to share with you part of the prologue

Before the discovery of Australia, poeple in the Old world were convinced that all swans were white, an unassailable belief as it seem completely confirmed by empirical evidence. The sighting of the first black swan might have been an interesting surprise for a few ornithologists (and others extremely concerned with the coloring of birds), but that is not where the significance of the story lies. It illustrates a severe limitation to our learning from observations or experience and the fragility of our knowledge. One single observation can invalidate a general statement derived from millennia of confirmatory sightings of millions of white swans. All you need is one single (and, I am told, quite ugly) black bird.
...
I stop and summarize the triplet: rarity, extreme impact, and retrospective (though not prospective) predictability. A small number of Black Swans explain almost everything in our world, from the success of ideas and religions, to the dynamics of historical events, to elements of our own personal lives. ...
...
The central idea of this book concerns our blindness with respect to randomness, particularly the large deviations: Why do we, scientists or nonscientists, hotshots or regular Joes, tend to see the pennies instead of the dollars? Why do we keep focusing on the minutiae, not the possible significant large events, in spite of the obvious evidence of their huge influence? And, if you follow my argument, why does reading the newspaper actually decrease your knowledge of the world?
It is easy to see that life is the cumulative effect of a handful of significant shocks. It is not so hard to identify the role of Black Swans, from your armchair (or bar stool). Go through the following exercise. Look into your own existence. Count the significant events, the technological changes, and the inventions that have taken place in our environment since you were born and compare them to what was expected before their advent. How many of them came on schedule? Look into your own personal life, to your choice of profession, say, or meeting your mate, your exile from your country of origin, the betrayals you faced, your sudden enrichment or impoverishment. How often did these things occur according to plan?
...

The book reminds me of a recent phenomenon -- Susan Boyle, a way too ordinary looking woman from Blackburn, Scotland. She rose to fame after taking part in Britain's Got Talent and had been making news headlines worldwide. The clip of her on YouTube is about to hit 80 million views! Her debut album was out days ago and is already set to be the best selling album in the current decade. A truly Black Swan phenomenon!