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'Black Swan' Author Denies Role in Market Meltdown

CNBC.com
Wednesday, 12 May 2010 | 2:32 PM ET

"Black Swan" author Naseem Taleb told CNBC he had no knowledge of a trade that may have caused last week's stock market meltdown even though he advises the hedge fund that is believed to have made it.

The Black Swan Returns
Insight on the bearish options bets that initially sparked the thousand point decline on the Dow, with Nassim Taleb, "The Black Swan" author.

According to the Wall Street Journal, a hedge fund named Universa Investments made a $7.5 million options bet last Thursday afternoon that the S&P 500 Index would plunge to 800 by June. Regulators are examining whether that trade may have triggered the mysterious drop of nearly 1,000 points in the Dow Jones Industrial Average.

Taleb said in an intereview that he advises Universa but does not have specific knowledge of the firm's strategy. Taleb rose to prominence with his "Black Swan" book in 2007 that laid out the circumstances leading to the collapse of the financial system.

"I am in general a risk adviser to Universa," he said. "I don't know their positions, I'm not involved in trading."

Earlier in the interview Taleb said the next black swan—or extremely rare event—event could come from global debt.

"The debt that we may incur may be a lot larger than the five or six trillion that they are projecting for the next 10 years. It may be considerably larger," he said. "The black swan problem comes from people making forecasts that are extremely fragile."

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