"Picking up pennies/nickels/dimes/quarters in front of a steamroller” means steadily making investments for a small return, only to be eventually crushed (by a financial crash or a “steamroller"). The saying “picking up pennies in front of a steamroller” has frequently been credited to Nassim Nicholas Taleb’s book The Black Swan (2007) and associated with the “Taleb distribution,” but the saying predates the book.
“Picking up pennies in front of a steamroller” has been cited in print since at least 1998, “picking up dimes in front of a steamroller” has been cited in print since at least 1999 and “picking up nickels in front of a steamroller” has been cited in print since at least 2002. The nickel ("picking up nickels in front of a steamroller") has become most frequently used in the saying, over the other coins.
Wikipedia: Taleb distribution
In economics and finance, a Taleb distribution is a term coined by U.K. economists/journalists Martin Wolf and John Kay to describe a returns profile that appears at times deceptively low-risk with steady returns, but experiences periodically catastrophic drawdowns. It does not describe a statistical probability distribution, and does not have an associated mathematical formula. The term is meant to refer to an investment returns profile in which there is a high probability of a small gain, and a small probability of a very large loss, which more than outweighs the gains. In these situations the expected value is (very much) less than zero, but this fact is camouflaged by the appearance of low risk and steady returns. It is a combination of kurtosis risk and skewness risk: overall returns are dominated by extreme events (kurtosis), which are to the downside (skew). The corresponding situation is also known as the peso problem.
If done consciously, with one’s own capital or openly disclosed to investors, this is a risky strategy, but appeals to some: one will want to exit the trade before the rare event happens. This occurs for instance in a speculative bubble, where one purchases an asset in the expectation that it will likely go up, but may plummet, and hopes to sell the asset before the bubble bursts.
This has also been referred to as “picking up pennies in front of a steamroller”.
Volume 162, Issues 1-4
“We are afraid that in the future, making money in the auto insurance business will be like picking up pennies in front of a steamroller — dangerous and not significantly rewarding,” they wrote in Leucadia’s annual report.
Microsoft rising ... and other tales of Silicon Valley
By Theodore Gyle Lewis
Los Alamitos, CA: IEEE Computer Society
There are many in industry who still agree with former Apple exec Jean Louis Gassee’s description of doing a deal with Microsoft, “partnering with Microsoft is like picking up dimes in front of a steamroller.” You pick up a little change in the short term, but you’re going to get squashed sooner than later.
Intelligent information from the edge
By Randy Rodman with Don Logay
Irvine, CA: Entrepreneur Press
Someone once said that front-running program trades is like picking up dimes in front of a steamroller.
Posted by Pabst on 07-27-02 02:19 AM:
Re: Crash of 1987…
“Selling premium is like picking up nickels in front of a steamroller”
CRT (The world’s dominant option’s MM’s during the 80’s)
Trading and Exchanges:
Market microstructure for practitioners
By Larry Harris
New York, NY: Oxford University Press
Dealing and Steamrollers
High-frequency dealing is a bit like picking up pennies in front of a steamroller. Sometimes you get in and out quickly, and profit a little. Sometimes you miss an opportunity or you pass because you have no safe opportunity. However, if you are not very careful, you get caught and lose everything!
Hedge Funds for Dummies
By Ann C. Logue
Hoboken, NJ: Wiley
This is why some folks describe scalping as “picking up nickels in front of a steamroller.”
The Motley Fool
American Capital: The Private-Equity Steamroller
By Stephen Ellis
February 16, 2007
To quote Jerry Lee Lewis, “Great balls of fire!” This was one smokin’ hot quarter for American Capital Strategies (Nasdaq: ACAS ) , and the steamroller isn’t letting up anytime soon. The middle-market lender and alternative-asset manager is forecasting a strong 2007, no doubt leaving Income Investor subscribers dancing in the streets. Far from picking up nickels in front of a steamroller, these investors are in the driver’s seat.
Why is the carry trade so dangerous?
By Cris Sholto Heaton
Aug 24, 2007
But the counterpoint to these small, steady returns is the possibility of a very large, very sudden loss. The biggest risk is generally that the exchange rate moves against you – the higher-interest rate currency rapidly devalues, reducing the value of your assets relative to your borrowing. That’s why these trades are often described as “picking up nickels in front of a steamroller”
The Motley Fool
By Morgan Housel
October 3, 2007
Those who insisted on leveraging a slim-profit game ended up losing control over what little edge they had, and they ended up turning a once lucrative investment strategy into no less than picking up pennies in front of a steamroller.
New York (NY) Times
VW, a laughing stock
Published: Tuesday, October 28, 2008
But VW’s limited free float made that a risky bet - akin to picking up pennies in front of a steamroller.
Trading Regime Analysis:
The probability of volatility
By Murray Gunn
Hoboken, NJ: Wiley
The analogy that people like to use with regard to option sellers, and indeed any strategy that sells volatility, is that it is “like picking up pennies in front of a steamroller”. Most of the time you will pick up the pennies with no problem at all, but take your mind off the job at hand and not manage your risk appropriately then SPLAT, you get flattened.
How the Banks Captured the Government
Wednesday, April 22, 2009
Regulators, legislators, and academics almost all assumed that the managers of these banks knew what they were doing. In retrospect, they didn’t. AIG’s Financial Products division, for instance, made $2.5 billion in pretax profits in 2005, largely by selling underpriced insurance on complex, poorly understood securities. Often described as “picking up nickels in front of a steamroller,” this strategy is profitable in ordinary years, and catastrophic in bad ones.
The Little Book of Big Dividends:
A Safe Formula for Guaranteed Returns
By Charles B. Carlson
Hoboken, NJ: Wiley
Wall Streeters have an expression for this investor mentality. They call it “picking up nickels in front of a steamroller.” You can make a few extra bucks, but if something goes wrong, you will be crushed.
New York (NY) Times
The State of Conservatism
By CHRISTOPHER CALDWELL
Published: October 21, 2010
The expression “picking up nickels in front of a steamroller” has been used to describe a lot of the gambles taken by A.I.G. and other companies on the eve of the financial crisis. It describes the president’s agenda equally well.
Finding Spare Change in Bond ETF Option
Trader risks steamroller crush to pick up a dime of premium
May 19, 2011, 10:38 am EDT | By Chris McKhann, optionMONSTER
The position collects the $0.10 premium but risks much more if the TLT continues to fall sharply. The probability of that happening is low, but it is the reason that some call this type of strategy “picking up nickels in front of a steamroller.”
New York City • Banking/Finance/Insurance • (0) Comments • Saturday, July 23, 2011 • Permalink