Friday, June 24, 2016



The term Black Swans was introduced by Nassim Nicholas Taleb whose credentials as a market trader and writer are impressive. A Black Swan event is "an event or occurrence that deviates beyond what is normally expected of a situation and is extremely difficult to predict" and that has an outlier effect on the financial markets. 

The author is a contributor to Seeking Alpha and this was published June 21, before the Brexit vote. He presents these three Black Swans:

Black Swan One:

Approval by UK voters to Brexit. This was unexpected and already came to pass this morning although the article was written and published June 21, three days ago. Results are grand-scale declines in markets and the loss in value measuring billions of dollars.

Black Swan Two:

Evidence of mosquito-transmitted Zika virus in the US. This is almost a certainty, but largely ignored by most of us because, unless we are pregnant or expecting to become so, the virus has no impact on us. The human, economic and public health impact of this event will be much larger than anyone thinks today.

Black Swan Three:

No candidate will win the necessary Electoral College majority to become President. All Gary Johnson, the Libertarian Party candidate needs to do is win one state, New Mexico, that has elected him governor twice. That might put the majority out of reach for Clinton and Trump.

Then things get muddy. What if...the rules are in place for this to happen:

Should nobody win the Electoral College, the Senate will choose the Vice-President; a Vice-President who will become President until the House chooses a President by a majority vote (with each state casting a single vote). Imagine if Trump's or Clinton's Vice-Presidential candidate ended up President of the United States (depends on how the Senate swings this fall) because a faction in the House decides to vote for Gary Johnson (and continues to do so in subsequent votes), ensuring that neither Clinton nor Trump becomes President.

Keep worrying!

No comments:

Post a Comment