Black Swans of 2011 ?

Joy Pathak

Swaptionz
PRAGMATIC CAPITALISM THE BLACK SWANS OF 2011


US Congress Blocks Bernanke’s QE3
As we move into the second half of 2011, politicians and pundits increasingly succeed in putting the Fed in the hot seat for having been the critical enabler of the US housing debacle and resulting bank bailout and public debt catastrophe. Meanwhile, the too-big-to-fail banks are back in deep trouble again as their troubled mortgage portfolios once again threaten their solvency. The Fed’s Bernanke rallies the FOMC to indicate a strong new expansion of monetary policy to once again bail out the troubled banks and/or local governments. Emboldened by the political and popular winds blow- ing, however, a Ron Paul led challenge of the Fed’s authority sees the Congress blocking the Fed’s authority to expand its balance sheet, and sets up an eventual challenge of the Fed’s dual employment/inflation mandate.

Apple Buys Facebook
What do you do when you want domination of the electronic and mobile device consumer market and have no significant presence in social networking? Oh, and a war chest of a mere USD 51 billion? You buy Facebook, the mother lode of (yet to be monetised) social networks. Facebook is worth USD 43 billion, according to sharespost.com. In interviews, Apple CEO Steve Jobs has explained that Apple was in talks with Facebook about partnership opportunities, but that the talks ultimately produced nothing. Facebook was after “onerous terms that we could not agree to”, according to Jobs. At the Web 2.0 Summit Facebook founder Mark Zuckerberg called for Apple to ease its ap- proach to connecting Ping with Facebook, and said that Apple had to “get on the bus”. Steve Jobs might get on the bus indeed and buy Facebook outright. It makes perfect sense; Facebook doesn’t compete against Apple and it ‘faces up’ to Google, which Jobs loves since Google has become his new number one enemy. It’s a deal made in heaven… The gigantic 500+ million Facebook user base could be integrated across Apple’s consumer products and services – every Facebook user automati- cally has an iTunes Store account and FaceTime chat is integrated into Facebook chat. That’s a lot of iOS devices.

US Dollar Index Tops 100
The economic growth trajectory in most areas of the world appears healthy for a time in 2011 – at least outside of Europe and Japan. But then trouble occurs in China, where its new 12th five-year plan aimed at increasing consumption fails to function as hoped. With the Chinese industrial base growing more slowly or not at all as a result of the policy shift, the satellite countries dependent on Chinese demand see their economies facing a rough adjustment. This puts global risk appetite in a tail spin, and with the Japanese economy struggling and the Eurozone in disarray, the US dollar suddenly doesn’t look as bad as it did previously. This is especially the case since the market was massively short of the currency at the beginning of the year. The unwinding of these positions pushes the USD index 25% higher to over 100 late in the third quarter of 2011.


There are several more...
 
Apples not going to buy facebook. Unless Steve Jobs dies, Tim Cook leaves, and someone clueless becomes CEO. Apple has been relying on content and consumer devices to derive immediate revenue. They have always been prudent and strategic with acquisitions. The day they buy facebook is the day I become an apple bear and short them with abandon.

A more realistic, but nonetheless unlikely and black swanish acquisition is Apple buying Netflix. Grey swan acquisition: Pandora.

But then again, Steve Jobs dying and Tim Cook leaving would be a black swan event...
 
To be honest, Apple buying Facebook is not comparable to the impact that the Dollar Index or the Fed can have on the general economy.

The Dollar Index rose because of euro.If you look at the way the index is calculated you will realise that the euro accounts for like 40% of the total. In other words, other currencies are almost of no value compared to euro.

The dollar will appreciate because nobody is willing to invest in EU,at least at the moment, however i dont see a great future for the greenback. The rising importance of the Chinese Yuan and massive US Government's debt will inevitably shift investors' attentions towards other markets.

Fed's monetary policy is almost of no use. After 100 years of economic researches and studies the only way they have got to "restore" the economy is injecting more liquidity in the market.

This is medieval economics, the only difference is that a few decades ago it was called "Printing Money" nowadays "Quantitative Easing"
 
The funny thing about the great financial collapse/crisis is that they really aren't caused by "Black Swans". Indeed, there are always few serious people who are able to analyze the situation correctly each time, before the crashes.
"Black Swan" is a catchy concept, but it seems the issue in the financial markets aren't that there are black swans people don't want to think about, it's that most folks are seeing rosy swans all over and don't believe analysis that tell them their bubble's going to burst.
Rosy/Pink Swans everywhere are more dangerous than rare or non-existent Black Swans.
 
The funny thing about the great financial collapse/crisis is that they really aren't caused by "Black Swans". Indeed, there are always few serious people who are able to analyze the situation correctly each time, before the crashes.

People like Peter Schiff (among others) were explaining what was going to happen to the housing market a year or two before the subprime debacle. Each time he came on the air his prognoses were airily dismissed.

At the present time the US economy is in seriously bad shape, with all sorts of structural problems. There's no "recovery" in the pipeline -- except maybe in some narrow statistical sense designed to pull wool before people's eyes. So no, these are not "black swans."
 
People like Peter Schiff (among others) were explaining what was going to happen to the housing market a year or two before the subprime debacle. Each time he came on the air his prognoses were airily dismissed.

At the present time the US economy is in seriously bad shape, with all sorts of structural problems. There's no "recovery" in the pipeline -- except maybe in some narrow statistical sense designed to pull wool before people's eyes. So no, these are not "black swans."

Peter Schiff is definitely an outspoken critic of spending oriented economy. In many respects, I agree with him. More important, I respect the fact that he holds his opinion in front of deride. In '05/'06 everyone was laughing in his face ...
 

Joy Pathak

Swaptionz
But has anyone read the "BLANK SWAN" by Elie Ayache?

I never said I believe in black swans or probable or improbable events. ;)

Elie presents a good criticism against black or white swans from the few reviews I have read. I have unfortunately not read it in detail.

Is it a book you recommend?
 

Yike Lu

Finder of biased coins.
The original Black Swan was.... an actual swan which happened to be black. The point is that nobody even knew they EXISTED. Not highly improbable, but wholly UNCONCEIVED OF. Hence, if we are even thinking about events as described above, no matter how improbable they are, they are not Black Swans.

A meteor hitting the Earth is not even a close analogy. We can calculate leading order probabilities of such an event based on e.g. astronomical estimates. There was no evidence even pointing to the existence of black swans - the part of the probability distribution which would have defined them was completely unknown to the general public.

Even if I were to take your definition of "improbable event", the fact that such events as you presented are being published in a somewhat well read site means that they were probable enough to merit discussion. The Black Swan moniker only serves to increase readership, but in the end it's still a mislabeling.

To wit... this was posted in the comments section of the article
"Getting sick of the term ‘black swan’ being misused. A economic black swan is an unknown, unknown or a very well kept secret that no one suspected that has a massive impact on the status quo. So a forecaster coming up with a list is a contraduction in terms. An example of a black swan could be that someone develops a process to extract the 1 part per million of gold in sea water, that costs $100 US an oz. In other words an almost limitless, cheap supply of gold that no one can ring fence."
 

Joy Pathak

Swaptionz
The original Black Swan was.... an actual swan which happened to be black. The point is that nobody even knew they EXISTED. Not highly improbable, but wholly UNCONCEIVED OF. Hence, if we are even thinking about events as described above, no matter how improbable they are, they are not Black Swans.

A meteor hitting the Earth is not even a close analogy. We can calculate leading order probabilities of such an event based on e.g. astronomical estimates. There was no evidence even pointing to the existence of black swans - the part of the probability distribution which would have defined them was completely unknown to the general public.

Even if I were to take your definition of "improbable event", the fact that such events as you presented are being published in a somewhat well read site means that they were probable enough to merit discussion. The Black Swan moniker only serves to increase readership, but in the end it's still a mislabeling.

To wit... this was posted in the comments section of the article
"Getting sick of the term ‘black swan’ being misused. A economic black swan is an unknown, unknown or a very well kept secret that no one suspected that has a massive impact on the status quo. So a forecaster coming up with a list is a contraduction in terms. An example of a black swan could be that someone develops a process to extract the 1 part per million of gold in sea water, that costs $100 US an oz. In other words an almost limitless, cheap supply of gold that no one can ring fence."

You're right.I got mixed up in this whole concept of "black swans" that I forgot it's true meaning.
 
Apples not going to buy facebook. Unless Steve Jobs dies, Tim Cook leaves, and someone clueless becomes CEO. Apple has been relying on content and consumer devices to derive immediate revenue. They have always been prudent and strategic with acquisitions. The day they buy facebook is the day I become an apple bear and short them with abandon.

A more realistic, but nonetheless unlikely and black swanish acquisition is Apple buying Netflix. Grey swan acquisition: Pandora.

But then again, Steve Jobs dying and Tim Cook leaving would be a black swan event...

Yup, you guys are right, Apple buying netflix is, at least now, most definitely not a Black swan in the strict sense.

Gleacher Co. analyst says Apple should buy Netflix | New Mexico Business Weekly
 
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