WARNING: If you're looking for a blog about the recent freaky movie Black Swan, do not read further. This blog has nothing to do with Natalie Portman and ballet.
What in the hell is going on in the world today and for the last few years? Is Chicken Little right, is the world coming to an end and is the sky falling? Is peace not of this world? Will the Dow Jones Industrial Average (DJIA) ever sustain a prolonged rally devoid of "corrections"? Will the Cubs ever win a World Series again? Who knows. Blame it all on the black swan. Read on.
About two years ago when the financial world was in a global meltdown and threatened the economic well being of the planet, I went searching for meaning as to what happened. I didn't seek out the Dalai Lama for reasons why. Nor did I write a letter to Oprah for the answers. Serendipitously, I was given a book to read by a financial wonk friend of mine. He guardedly told me this may help me deal with, as he put it, "the obfuscation of the moment." But he added don't try to understand it all because that's impossible. He added colloquially, "just roll with it". The book was The Black Swan by Nassim Nicholas Taleb. The book is 305 pages. After two years of labor, I'm on page 210. It's a rather tough read.
According to Taleb's interpretation, "a black swan or swans is and are events that are hugely important, rare and unpredictable and inexplicable only after the fact." Black swans can have good and bad personalities. The financial catastrophe of 2008 still reverberating around the world today is an example of a bad "black swan event." 911 is another bad "black swan event." The destructively bad black swans come like a thief in the night rape and pillage and leave detritus behind for all left standing to clean up. But the good and beneficial black swans are equally powerful. Taleb writes, "The computer, the internet and the laser were unplanned, unpredicted and unappreciated upon their discovery...they were consequential. They too were black swans." Seems like there are alot of black swans flying around out there these days. Staring to think they aren't that rare anymore. Everything around the planet is so connected. China sneezes and Wall Street heads for the ER.
The devastatingly sad earthquake/tsunami/nuclear plant tragic trifecta in Japan and the current Mideast people's revolution are the most current "black swan events" that are reverberating not only in those directly effected regions but in global markets around the world. The ongoing events in Japan and the Mideast will have huge influences on history, another tenet of the black swan theory.
The upside of the black swan phenomenon is summed up in one phrase "and this too shall pass." Take the financial markets for instance. Since the markets crashed to a new low of 6,469 on March 6, 2009, representing a 54% drop from a 2007 high of 14,164, the DJIA closed this past weekend at 12,220. In fact, the Dow's gain this past week was the highest since last July...even in midst of all the worldly chaos the Dow moves north. Since the March low, the DJIA has almost doubled it's value in two years of recovery. What's astounding are both the DJIA and the SP500 indeces are ascending monthly in a culture of a continuous litany of bad and sometimes good black swan worldly events.
So for you market watchers out there, "just roll with it" as my friend advised me. Nothing you can do about it the vicissitudes of daily life anyway and enjoy the ride of life where black swans are part of the fabric of life.
As Taleb concludes, "Imagine, a speck of dust next to a planet a billion times the size of the earth. The speck of dust represents the odds in favor of you being born: the huge planet would be the odds against it. So stop sweating the small stuff. Don't be like the ingrate who got a castle as a present and worried about the mildew in the bathroom. Stop looking the gift horse in the mouth - remember that you are a Black Swan."
No comments:
Post a Comment