Not afraid of euro, but US gives me the jitters: Nassim Taleb

MONTREAL: Nassim Taleb, author of The Black Swan, said he favours investing in Europe over the US even with the possible breakup of the single European currency in part because of the euro area's superior deficit situation.

Europe's lack of a centralised government is another reason it's preferable to invest in the region, said Taleb, a professor of risk engineering at New York University whose 2007 best-selling book argued that history is littered with rare events that can't be predicted by trends.

A breakup of the euro "is not a big deal", Taleb said on Tuesday at an event in Montreal hosted by the Alternative Investment Management Association. "When they break it up, there will be a lot of fun currencies. This is why I am not afraid of Europe, or investing in Europe. I'm afraid of the United States."

The budget deficit as a proportion of gross domestic product in the US amounted to 8.2% at the end of 2011, government figures show. That's twice the 4.1% ratio for the euro-region countries, according to data compiled by Bloomberg.

"Of course, Europe has its problems, but it's in much better shape than the United States," Taleb said. He voiced similar concerns about US prospects at a conference in Tokyo in September.

Rising interest rates would make things worse for the US, said Taleb, a principal at hedge fund Universa Investments LP who also serves as an adviser to the International Monetary Fund. "We have zero interest rates," Taleb said. "If interest rates go up in the United States, you can imagine what the deficit would be. Europe is like someone who is ill but is conscious of it. In the United States, we are ill, but we don't know it. We don't talk about it."

Europe's lack of a centralised government works in its favour, he said.