“The Black Swan: The Impact of the Highly Improbable”

 


Nassim Taleb published “The Black Swan: The Impact of the Highly Improbable” at arguably the perfect time — in April 2007, about six months before the worst financial crisis since the Great Depression.

The book argues that rare, high-impact events make it incredibly difficult to forecast the future. 

That the global economy crashed due to leveraged bets on a risky part of the U.S. housing market could be described as a classic black-swan event.

Nicholas Colas  crunched the numbers on the stock market’s return since the publication of that book. The S&P 500 SPX has compounded at a 10.2% total return basis, which he says is pretty much the same as its historical average.

That’s a period that includes what Colas calls a classic black-swan event, the 2020 pandemic.

Colas does note that black swans are not always negative.

He cited data showing that only 1% to 2% of stocks created all the value in equity markets between 1990 and 2020.

He offers a few lessons for investors. One is that negative black-swan events happen often enough to make them a part of an investment process. This leads to fixed-income allocations to protect against drawdowns. 

He says positive black-swan stocks cluster in the technology sector.

Steve Goldstein MarketWatch 4 July 2024

https://www.marketwatch.com/story/for-all-the-fear-of-black-swans-the-stock-market-is-acting-roughly-the-same-ebd409e6


The Austrian Black Swan 

https://englundmacro.blogspot.com/2015/03/the-austrian-black-swan-claims-its.html


Nicholas Nassim Taleb, The Black Swan

https://englundmacro.blogspot.com/2020/07/nicholas-nassim-taleb-black-swan-mauldin.html


The stock market is ignoring ‘white swan’ events Roubini warns

Financial crises are more like hurricanes: they are the predictable result of built-up economic and financial vulnerabilities and policy mistakes.

https://englundmacro.blogspot.com/2020/02/the-stock-market-is-ignoring-these.html




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