I agree with zdreg as well. I mean the Dow is off 20% already. Who here hasn't been thinking about the lousy banking/housing situation (the XLF off nearly 50% at this point), lousy dollar, stagflation worries, energy prices for quite some time? The VIX is up 50% from the low. To repeat the first sentence, the Dow is off 20% already. Put into the context of the average bear market being about 30% declines off the top lasting 14 months.... Given that we are already at 20%/7months, I think it is rather late to be talking about any of the aforementioned issues "shocking anyone". I guess what I am saying is that market has been building these issues and uncertainties into stock prices for quite some time now. I think the true unlikely event would be the quick resolution of the events above. A crash in oil prices, housing or finance quickly stabilizing, a large rise in the dollar. Anything like this and the market would go gangbusters. Considering the week we had, I don't see a soul talking about this.
Bunch of "WORRY WARTS". I thought ET was about ELITE TRADERS. What me worry? What happened to that saying? Traders are supposed to trade what they see not what they think. PS: i also get excited when jack hershey speaks. What a putz that injected that. How many years now have they been spreading the alixir and still have gone no where? Do not worry about your money, i will put it to good use. ..
Large impact: check Hard to predict: check Rare event beyond the real of normal expectations: check Explain which criteria isn't fulfilled?
9/11 was a black swan. 9/11 was likely to take place. The existence of black swans was *certain*, and that was by definition a "Black Swan". A black swan is not something that is unlikely. It is something that is incorrectly *perceived* to be unlikely or impossible by the majority of people. Also it's not a matter of logic, it's one of semantics. You and zdreg are using a definition of Black Swan that is not the definition used in Taleb's books. So zdreg is not just wrong in his definition, he and you were wrong to call it logic 101 - it's semantics 101.
I'm link challenged, sorry. Here is a version of that chart with an additional annotation. I feel these times are unique in trading history (At least the last 50 years of my experience) but as you can see there is a symmetry exhibited by what I anticipate. The axis is OCT07 and I peg the beginning of this series of actions as JUN 06 when the quant era ended. When some looking back is done, 2008 may be regarded as the year of the black swan. Dealing wholistically is the only way to deal with high velocity trading (making money). There is a lot of critical thinking that surrounds trading what you see (and what your ATS deals with that is quicker than human vision) The black swan represents different things to diffiernt people. For Taleb types it is the result of seeing things inductively (see also bighog phase I (before plan)and phase II (inductive plan)). But what about how the thinking goes for non inductive thinkers? How is a Black Swan viewed? Their business plans and trading plan strategies, being non inductive place the market operating point at a place that is determined by all other possibilities having been elimnated (the null hypothesis test for the operating point that emerges). A tic tack toe board illustrates how the present black swan is evolving on a non induction basis for those who operate outside of the Taleb handicap of using induction. At any time the market operating point is in the center of the tic tck toe board. Cell 5 using conventional numbering. Where will the next point be where the choices are1, 2, 3, 4, 6, 7, 8, or 9. The most likely, by induction would be 2, 4, 6, and 8, the even ones s expected. Those requiring a compound shift are: 1, 3, 7, and 9. also four in number but required a two dimensional change. Non induction, however doesn't work this way. The critical thinking of non induction requires a non probabalistic logic. Certainty of knowing prior to the movement is a requirement. On any sudoku square there is always the moment when, on a non probabalistic basis, a number can be lettered into a cell with certainty. All other cells have numbers and only one number is left. For me the black swan has a permanent location on the VENN board of market operating points. I have a complete board as part of my trading plan. My tic tack toe board moves around my VENN board. So sometimes the tic tack toe board has black Swan in a perimeter cell right next to the operating point at that time. Now is one of those times for the overview fractal of our economy and markets. Now we are moving on the VENN universe from better times to worse times. We see the talking heads are way behind the beat. The unaware do not deal with such things. My locus is in the future just to the right of the present. I trade in the present and that is where I see what timely things are required in behavior, the only place where behavior takes place. What I watch most in trading is how the near term future closes off all the adjacent cells surrounding the current operating point. Most often getting to an odd cell is two steps taken by going to an even cell first. The axes of the board are used to get to the corners, in other words. Ultimately, a lot of "what wasn't that" happens as the sequence of closing the open possibilities (there are never very many to conside(of the 8 around the perimeter) because of the past history of the movement of the T T T board has closed off a lot of the overlapping prior cells under the T T T board. Knowing this is an edge over other traders who do not think (But just See). So when the T T T board moves and a BS is in the perimeter, the BS will only occur when all other perimeter cells are closed off by overt testing of their possibility and they are eliminated. We are there now and doing that process. Th OP sees this clearly. Over the years, the business planning has suggested to not participate in black swans. But times have changed at long last with the advent of having degrees of freedom on the T T T boards for all of the fractals surrounding the trading fractal. So trading black swans now represents the the max opportunity on high money velocity trading. For example, look at microcosms like FOMC announcements past and some of the larger daily moves recently (27Feb07). For FOMC when only the large DJ contract was available pulls 900 points in 1 1/2 hour per contract was an exciting event and could be like a mini swan of dark color. Any time there is cascading of price (it happened on 27FEB, for example) it is a really nice feeling of being effective and efficient. Jagging along minute by minute as 300 points is a swing and there are three consecutive swings to get 900 points per contract. Black Swans, through anticipation by non induction, are so dynamic that on the trading fractal (with a neutral bias) they represent many trades and in both directions largely due to market rules for booked trades which creates repeated cascades. Trading days are often defined in public terms as good and bad days and often this is just a bias type statement where good is long and bad is short. Trading a stock (exit for profit at 22 in late am, buying back at 1 pm midday, and selling on close at 16) was, in fact, a black swan day for the stock based on bad news (it was wrongly founded) then good news (the correction was made). A person is either a victim of black swans (See the scardy cat allusions and Taleb's reason for quitting)) or an exploiter of black swans (See my 31 advance posts on ragingbull for the 22, 11, 16 trade). Exploiting 27FEB07 was T T T board trading on the 5 minute chart (Somewhat under 100 points per contract on the ES) considering it a microcosm using the Balck Swan definition profferred.
There's tons: -A 4 sigma down day in FXI....China could have a sudden massive down day around or post Olympics. Non linear dynamics at work. -The U.S dollar could face a speculative attack -EEM as a whole could suddenly get hammered, as global interest rates rise to combat negative real interest rates/political pressure over food prices. -Collapse of European commercial real estate -The volatility/range in interest rates could far exceed expectations... -Saudi reserves are found to be completely different from estimates, either positively or negatively BTW, none of what Jack Hershey said made any sense. It sounds like some dude on LSD talking about astrology.
Global world entities have set up various economies for a very big fall (Bilderberg group meetings in 2002 tasked and created the CDO/CMA concept which was floated out to the financial word as a great plan...."enticed" over leveraging was the true motive as described by some of their own members). There WILL be some major financial blowouts coming down the pipe in the next 12 to 24 months BY DESIGN that may be described as black swans. Created cyclical major asset devaluations and takeovers (banks, financial institutions, real estate, energy infrastructure/access, desired corporate technologies/companies) as manipulated by global wealth entities are always excessively painful to many.....so get your black swan squeaky toy ready.....this is going to be one hell of a bath! :eek:
EEM is not a place to be, I mentioned this a a couple of weeks ago, many still think thats the place to put money, however that trade in my opinion is over, with the US in a recession other countries will soon follow, now is the time to be pulling money out of emerging market not adding new positions.