Episode 40: Scott Patterson: Chaos Kings: How Wall Street Traders Make Billions in the New Age of Crisis
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Scott Patterson is the author of the New York Times best-selling book The Quants and Dark Pools and a staff reporter for The Wall Street Journal, where has written about hedge funds, high-speed trading, Warren Buffett, the global mining industry, the Jan. 6, 2021 investigation, and climate change. A winner of the Loeb Breaking News Award, Scott has made frequent appearances in the media, including on CNBC, The Daily Show, and Fresh Air.
His work has also appeared in the New York Times, Rolling Stone and Mother Earth News. He has a masters of arts degree from James Madison University. He lives in Alexandria, Virginia with his wife and son.
Today, we focus on his newest book Chaos Kings: How Wall Street Traders Make Billions in the New Age of Crisis. It is a fascinating deep dive into the world of billion-dollar traders and high-stakes crisis predictors who strive to turn extreme events into financial windfalls.
Today,
1. Scott shared the genesis of his book "Chaos Kings: How Wall Street Traders Make Billions in the New Age of Crisis," and introduced some of the fascinating characters that readers can get to know.
2. We talked about the increasing focus on chaos, crisis, and market crashes, with Scott highlighting some of the most distressing financial moments of the past 30-40 years and how the individuals in his book profited from them.
3. Scott shed light on a unique aspect of options as explained by Nassim Taleb, one of his book's main characters: their non-linearity. He likened this to fire insurance that triples in value if your home burns down, illustrating how outsized profits can be made during times of chaos.
4. We delved into the concepts of 'Black Swans' and 'Dragon Kings' that feature in his book.
5. We discussed how traditional risk metrics like Value at Risk (VaR), often fail during crisis situations. Scott explained the belief that past events do not accurately predict future correlations during extreme circumstances.
6. We then shifted gears and Scott shared his thoughts about the interconnectedness of financial markets, climate change, and long-term, generational risk.
7. In a lighter moment, Scott spoke about the high number of his characters who ride fast cars or motorcycles, jokingly questioning if there's a hidden correlation worth noting.
8. Last, but not least, we talk about value investing, and Warren Buffett who Scott has covered as a reporter for many years.
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IMPORTANT: As a reminder, the remarks in this interview represent the views, opinions, and experiences of the participants and are based upon information they believe to be reliable; however, neither my firm nor I have independently verified all such remarks. The content of this podcast is for general, informational purposes, and so are the opinions of a member of a registered investment adviser and guests of the show. This podcast does not constitute a recommendation to buy or sell any specific security or financial instruments or provide investment advice or service. Past performance is not indicative of future results.