[Rebel Pirate]

The term Black Swan was popularized by Nassim Nicholas Taleb (NNT), a finance professor, writer, and former Wall Street trader. Taleb wrote about the idea of a Black Swan event in a 2007 book prior to the events of the 2008 financial crisis. Taleb argued that because Black Swan events are impossible to predict due to their extreme rarity yet have catastrophic consequences, it is important for people to always assume a Black Swan event is a possibility, whatever it may be, and to plan accordingly.

Taleb describes a Black Swan as an event that 1) is beyond normal expectations that is so rare that even the possibility that it might occur is unknown, 2) has a catastrophic impact when it does occur, and 3) is explained in hindsight as if it were actually predictable.

I hasten to add that the catastrophic nature of the event must be experienced by all of a society or at least a large portion of the population. I would also argue that for an event to be a true Black Swan it must precipitate some lasting change for society, in an attempt by society to protect itself from a recurrence.

I was chatting with some west coast friends last night and brought up the number of Black Swans we have seen in our life time. My list would include:
The Rodney King riots - a Black Swan mainly (only?) for the greater LA area (1992)
The terrorist attacks of 9/11 (2001)
The housing market collapse and ensuing financial meltdown (2008)
The COVID-19 pandemic (2020)

Would you add any others to the list?

[Boomer]

As Gutenberg was to the printed word, Samuel Morse was to trading.

Morse did not miss a beat—or should I say a key.

In 1837, Morse opened a telegraph demonstration on Wall Street. He charged 25 cents to see his invention.

Brokers were all over Morse’s newfangled machine.

Traders had been around for quite a while before then. In 1792 the Buttonwood Agreement was written by a group that had been trading securities under a Buttonwood tree on Wall Street. (Huh? I thought Buttonwood was a village in TV. I did not even know it was a tree. )

It might be interesting to look at the history of trading to see parallels with major events.

(Uh oh, my posts this morning are making me sound like I am giving homework assignments. I think I better find something else to do. )

Mrs. Boomer

[Rapscallion St Croix]

The blown pass interference call committed by the Rams against the Saints.

[Rebel Pirate]

Originally Posted by Rapscallion St Croix

The blown pass interference call committed by the Rams against the Saints.

Well, there you go...the world will never be the same!

[Rebel Pirate]

Originally Posted by Boomer

As Gutenberg was to the printed word, Samuel Morse was to trading.

Morse did not miss a beat—or should I say a key.

In 1837, Morse opened a telegraph demonstration on Wall Street. He charged 25 cents to see his invention.

Brokers were all over Morse’s newfangled machine.

Traders had been around for quite a while before then. In 1792 the Buttonwood Agreement was written by a group that had been trading securities under a Buttonwood tree on Wall Street. (Huh? I thought Buttonwood was a village in TV. I did not even know it was a tree. )

It might be interesting to look at the history of trading to see parallels with major events.

(Uh oh, my posts this morning are making me sound like I am giving homework assignments. I think I better find something else to do. )

Mrs. Boomer

My bad for not being more clear. I was curious if anyone believes there have been any other Black Swans during their lifetime?

[John_W]

I think the 1968 riots after M L King assassination was far more national than the Rodney King riots, those were mostly an LA thing.

[Rebel Pirate]

Originally Posted by John_W

I think the 1968 riots after M L King assassination was far more national than the Rodney King riots, those were mostly an LA thing.

You're absolutely right...the MLK assassination riots were definitely more national.

But we are all individually - at least partly - the sum of our personal experiences. At the time of the riots following MLK assassination I was living in my (fairly small) home town that was little affected. On the other hand, I lived in LA during the Rodney King riots. I got to see that Black Swan up close and personal. And it did forever change my outlook regarding personal preparedness for unforeseen events.

[Luv2Bretired]

Originally Posted by John_W

I think the 1968 riots after M L King assassination was far more national than the Rodney King riots, those were mostly an LA thing.

I agree. I was in the Maryland Army National Guard and we were called to active duty for about ten days at the Fifth Regiment Armory in downtown Baltimore. I could tell some stories about that experience but I will not.

Although it happened a couple years before I was born I would suggest the Japanese bombing of Pearl Harbor. Fortunately the A-bomb was developed and used ending the war before possibly millions more were killed in battle.

Kennedy’s assassination is another big one.

St Helena’s erupting, the Alaskan earthquake and AIDS come to mind as well.

[Boomer]

Originally Posted by Rebel Pirate

My bad for not being more clear. I was curious if anyone believes there have been any other Black Swans during their lifetime?

I know. But I could not help it. I am, alas, the Queen of the Segue when it comes to conversation. On TOTV. Or in person.

Your question just happened to start my wheels turning this morning. It caught my interest.

And, btw, I must sincerely compliment you for having a really classy way of telling me I jumped the track.

[Rebel Pirate]

Originally Posted by Boomer

I know. But I could not help it. I am, alas, the Queen of the Segue when it comes to conversation. On TOTV. Or in person.

Your question just happened to start my wheels turning this morning. It caught my interest.

And, btw, I must sincerely compliment you for having a really classy way of telling me I jumped the track.

Since NNT was a finance guy, he really focused on the financial nature of Black Swans. Even though I'm a finance guy as well, I tend to look at Black Swans more through the lens of the culture write large.

But, having said that I'm intrigued by your foresight regarding the 2008 meltdown. The only financial prognosticators I know of who was really beating the drums well before 2008, and was backing it up with insightful analysis, was Jim Jubak. I wish I could/would have listened!

But, I'm interested now in your financial/business forecast for the economy as we emerge from the great virus. Do you see a depression? I think the impact on the economy right now rivals the worst post-war recessions, and may rival the depression. The overall impact of course depends on how long this lasts.

If we're ready to emerge from our cocoons in another month it won't be that bad. If we get subsequent waves of the COVID monster and our lockdowns last a year...that could be real ugly.

Any predictions?

[Koapaka]

I would add both the fall of the USSR and the Fukushima nuclear plant event caused by the Tsunami to the list personally, but then I look at events from a retired military viewpoint.

[John_W]

Originally Posted by Koapaka

I would add both the fall of the USSR and the Fukushima nuclear plant event caused by the Tsunami to the list personally, but then I look at events from a retired military viewpoint.

Did you see the HBO mini-series last year on Chernobyl, if not, it's a must see. Great job and it was scary.

[Rebel Pirate]

Originally Posted by Koapaka

I would add both the fall of the USSR and the Fukushima nuclear plant event caused by the Tsunami to the list personally, but then I look at events from a retired military viewpoint.

I share the same view point having spent 34 years in uniform. I absolutely agree with the implosion of the USSR! But the tsunami inundating the Fukushima nuclear reactor seemed to have little (no?) impact on the US except for short-lived concerns in the Pacific Northwest re radioactive waste and the global concerns for the efficacy of nuclear power generation, which seem to have been forgotten.

[Koapaka]

Must admit, Chernobyl slipped this old, feeble mind, and I would CERTAINLY agree that it rates....I think the thing about Fukushima was up until that incident, we all thought Nuclear Energy was safe...never realizing or imagining that forces of nature could change that on a dime. WE thought we had planned for EVERYTHING, realizing quickly we had forces we had not considered.

[Boomer]

Hello, again, Rebel Pirate,

Whoops.

You must have been writing your response just as I was editing out my comments on what I could not believe nobody else could see coming with 2008 — and my stuff about seeing 2019 as yet another house of cards.

Sometimes I like to talk about the market. I am nothing special. I am not a forecaster. I am not in finance or econ. But I sure could see 2008 coming. To this day, I still cannot comprehend the total lack of common sense that got us into that mess.

Remember drive-by appraisals and reeling in unqualified mortgages, to sell fast in the backdoor secondary market. The interest rate got so low that people were using their houses like uncorked piggy banks, borrowing up to the hilt, a lot of it for wants not needs.

How was it not obvious to anyone paying attention? Obvious answer, I guess, is that mostly nobody wanted to see it.

You asked if I had any predictions about where the economy will go. Of course not, nor would I pretend to. No market predictions possible — no matter how analytical some claim to be.

I have no idea what to think about the big economic picture — although I do have a couple of thoughts on what I think might happen with individual investors. But that is not really forecasting — just thinking about what could happen.

Small investors might be skittish for a long time and if they are investing, many will be more aware of building and maintaining a moat of cash around their stocks. But maybe not. We sure can be a nation of amnesiacs.

As far as the small investor goes, I think there could be more of a willingness to be responsible for learning about how to handle investments on their own. Some might take a good hard look and rethink paying advisors who get a percentage of the total investment, whether the market is up or down. Some will realize that nobody can know what is around the corner. Like Buffett said, “Beware of geeks bearing formulas.”

Owning boring, stodgy, individual stocks that pay a sustainable dividend might become more popular. Maybe investors will stop expecting a rocket ride and just be happy to find dividends that are paying them to wait.

But that is just my guess about the little picture.

Now, please bear with me while I throw in a little story that is analogous to how I see the big picture:

Hercules, a hero from Greek mythology, had to perform many tasks. One of those tasks was to slay the hydra.

The hydra had many heads so cutting off the heads seemed like the logical solution.

The problem was that every time Hercules cut off a head, two would grow back in its place. Two heads became four — four, eight. On and on it went. It took a while, but Hercules finally figured out what to do and killed the monster.

What we have on our hands now is a hydra-headed monster. Where is Hercules when we need him.

Boomer