Forrest Gump meets Nassim Taleb
Rocky and Trophy Wife went shopping at CVS/Pharmacy last night. While Trophy Wife picked up some nail polish, Rocky headed to the “90%-off Valentines Day Candy” Department, where he bought several heart-shaped Whitman’s Samplers. When they arrived home, Rocky handed a box of the chocolates to Trophy Wife, and told her that he loved her.
Unamused, Trophy Wife remarked that Forrest Gump never said that “Life is like a box of expired chocolates.”
Rocky countered that the expiration sticker read “May, 2009.”
After examining the Whitman Sampler ad (see below), Rocky observed that his (discounted) chocolate price is unchanged from 1942 . In 1942, the Dow Jones Industrial Average’s index level was 150. He wondered aloud whether he should go long more chocolate and short the Dow Jones (as an arbitrage).
After biting into a stale caramel, Rocky decided it was a bad trade: the Whitman’s price was a black swan — (or more precisely, a black chocolate.) The right trade: Nibble at more stocks, and throw out those chocolates!