Thats perfectly fine. Something tells me that we play in different sandboxes anyways I have zero passion with regards to the topic, but I do have an opinion. This business is all about dealing with randomness, both quantitatively and emotionally. Just like in poker, the best you can do is skew the odds by playing the right cards, but you should always be aware that shit happens and nobody can predict what's next in the deck. Anyone who does not understand (or refuses to accept) that random events can not be foreseen has no business managing risk in a professional setting. Humans have trouble accepting that most things in life can't be predicted and that most of the events are completely out of our control. Thats why we invent gods and conspiracy theories, follow gurus and otherwise act as if outcomes are pre-determined by someone or something.
You mean like in a head-to-head match in hold-'em, where you draw a 9-2 offsuit, and opponent draws pair of aces. Flop shows an ace, 9, 9. You got the trips, he's got the ace boat. Then the turn flops a 2. You got the 9 boat, but don't know he's got the ace boat. Only one chance left. The river flops the 9, and BAM, you sank his ace battleship with the 9 quad. Yeah, shit does happen like that. Do we call that a black swan random event, or a "statistical anomaly"?
You can call it whatever you want, as long as you accept that it's random and you have to be prepared for it. Don't forget that life is far more complex than a deck of cards - so think of it as 3D poker with 10 decks played against Dr Evil and Dr Doolittle at the same time
Although the recent sell-off looks similar to previous corrections, but if you dive deeper into the internals of the market, it doesn't. It's clear that the speculative positions in EV, batteries, solar, alternative energy & all the high flying (New paradigm companies which will change the world in the future) is unwinding and as apparently, the bag holders are retail who are buying the dip in those companies (After buying up the last one tenth of those stocks explosive rally). Looking at Energy, Banks, Financial Services, etc...They are seeing strong inflows. Basically the market is embracing for higher yields, so all those highly leveraged companies (Heavy on R&D & spending) will get hit hard because funding becomes more expensive & they don't have enough cash flows to support themselves, so eventually they will have to slow down on R&D spending, i.e. ambitious plans will have to slow down. Even if the Fed keeps rates low for 2 years, it doesn't matter, those companies are high risk borrowers, they can't access money at 1%-3% anymore. Besides that, large tech companies are also being adjusted for reality. Reality that they will not grow in the next 3-5 years like they did in the past decade. Retail are also heavily into those tech names (assuming those are very safe names to be in, like Amazon, Facebook, Apple, Google, etc...). Those became the blue chips of the new generation of investors. In my opinion, the Fed will step in to depress rates, but this won't help much as inflation already started to find it's way to the economy, so real rates will stay elevated. Money don't want risk anymore, at least in the medium term, this is why safer bets in Energy, Financials & Banks, Utilities & Food are being played now.
Agreed. All throughout late 2019,people were forecasting a recession based on economics. The "recession" ended up happening, but for a different reason. That doesn't make them correct. (I'll admit, I was one of those forecasting recession in late 2019). However, there could have been people with the foresight to see that Covid was going to become a worldwide problem even when it was still a "Wuhan problem," but that is something different entirely.
Exactly what I've been saying about blackjack and drawing a 20, and losing when the dealer gets 21. The reason why it's easy to identify as a "statistical anomaly" is because blackjack is a CLOSED SYSTEM. Even if a statistical anomaly happened in the markets, it would be hard to identify as such because it is not a closed system.
Seems like Fed is saying higher rates (secondary bond market) are a healthy sign. I wouldn't expect them to keep rates lower just for fun. Only if it helps them meet their 2% inflation target.
We will get more insight on 17-Mar in the next FOMC meeting. Higher bond rates do not induce or start inflation, they influence borrowing & funding rates and also affect equity risk premiums. The Fed should be concerned about higher bond rates for sure, how they are going to deal with it, that's the question. I don't think ignoring it is an option.
I'm not sure if corona was a black swan but I know this: I saw the President of China, Xi Jinping go live on national state TV in Jan 20, saying China had a problem. Effectively admitting in a country with heavy censorship and surveillance that the Chinese government had lost control with regards to the virus. If that wasn't a signal of things to come, I don't know what is. There were a bunch of other things but that one stood out.