By Kris Sayce – Port Phillip Publishing (Australia) –
For most of the past eight years, analysts, commentators and experts have spent a great deal of their time looking for the next ‘Black Swan’ event.
If you’re not familiar with the term, a ‘Black Swan’ event is an unpredictable event, which happens without warning.
By definition, then, because a ‘Black Swan’ event is unpredictable, you can’t predict it. That hasn’t stopped folks trying to do so, though.
However, just because a ‘Black Swan’ event is unpredictable, it doesn’t mean you shouldn’t try to predict rare and uncommon events.
We argue that even if your predictions are wrong or poorly timed, the fact that you’re looking for rare events means that you should be prepared for adverse conditions.
Of course, we deal mainly with matters concerning financial markets. But the same applies in life in general.
Getting run over by a bus is a rare event. It may not be so rare if folks didn’t look before they crossed the road.
This is an important point. It can be argued that looking for a rare event may in fact help prevent a rare event from happening.
You look before crossing the road — therefore you don’t step in front of the bus.
You recognise stock prices are high — therefore you don’t buy them, perpetuating an existing stock market boom.
When you stop looking before you cross, and when you stop recognising that stock prices are high…that’s when trouble strikes.
With all that said — even though we’ve said that ‘Black Swan’ events are unpredictable — do you think that’s going to stop us predicting an event that few (if any) appear to be expecting?
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