Taleeb’s advice is extremely faulty, at least for long run investing. The black swan event that makes a more fully diversified debt/equity portfolio fail disastrously in the long term (20+ years) has a fairly high likelihood of taking out a short-term US treasury portfolio as well.
More importantly, while it may fare slightly better on average in the event of a complete meltdown in riskier financial markets—short of that, it will almost always do quite a bit worse. If the chances of that meltdown are, say, 10%, we have to weigh insurance value in that scenario (which as Eliezer mentions is hardly perfect) against being many times as well off the other 90% of the time.
Taleeb’s advice is extremely faulty, at least for long run investing. The black swan event that makes a more fully diversified debt/equity portfolio fail disastrously in the long term (20+ years) has a fairly high likelihood of taking out a short-term US treasury portfolio as well.
More importantly, while it may fare slightly better on average in the event of a complete meltdown in riskier financial markets—short of that, it will almost always do quite a bit worse. If the chances of that meltdown are, say, 10%, we have to weigh insurance value in that scenario (which as Eliezer mentions is hardly perfect) against being many times as well off the other 90% of the time.