Don't Be A Turkey


Want to see what a turkey looks like?


21% of all US Dollars were printed in 2020.

Nassim Taleb discusses the idea of a turkey in his book Fooled By Randomness. To summarize:

You have a turkey that's fed by a butcher for a 1000 days. Every day that passes, confirms to the turkey that the butcher loves turkeys.

Each passing day brings more confidence to that statement. The turkey gets fatter and fatter in the meantime.

When the turkey is at peak comfort. It gets butchered.

It's a surprise to the turkey, but not for the butcher. The idea is to not end up as a turkey. Who's a turkey? Bankers.


Here's a current case study:

Janet Yellen is the new Treasury Secretary in Joe Biden's administration. Her views are old fashioned. A bad thing for a non-innovative economy.

Her decisions will have big impact on asset prices over-time. It's worth taking a look at her resume:

  • Economics professor for over 20 years from 1985 to 2006.
  • Chair of the Federal Reserve from 2014 to 2018
  • Vice-Chair from 2010 to 2014.
  • The first woman to head the Federal Reserve


She might be qualified, but her views scare me:

Inflation

"Yellen has been an outspoken advocate for using the powers of the Federal Reserve to reduce unemployment, and has seemed more willing than other economists to risk slightly higher inflation to accomplish this goal."


Bubbles

Yellen talking about the housing bubble from a 2005 speech:

"could be large enough to feel like a good-sized bump in the road, but the economy would likely be able to absorb the shock."


Financial Crisis

In a 2017 interview:

“Don't expect to see another financial crisis in our lifetime.”


Her being the new Treasury Secretary reminds me of the turkey story.

America will get Fed up and it'll be a surprise when they're butchered.

I say this every time I stress about the economy:

It doesn't help to stress over the macro-economy.


It's true. But the root of my stress comes from owning bank shares.

My returns on banks are to the point where I'm thinking to sell. I don't like the thought of being invested in turkeys.

How can you avoid betting on turkeys? The guy behind Yellen has the answer: