Off Topic

Why Greece is a Big Fat Slow White Swan

If you’ve read Nassim Taleb (or this blog, since we mention him fairly often), then you’re probably familiar with the concept of the “black swan.” It’s a way of thinking about the “unlikely” events that no one thinks will happen – but they do, and far more often than we’d like. It’s the Black Monday crash of 1987 or the May 2010 Flash Crash – and if you aren’t prepared for the Black Swan, you’re probably going to get into trouble eventually (think Long-Term Capital Management…).

Which leads us to today’s headlines about Greek banks closing and missed debt payments and the rest – leaving global markets plunging (the new ‘plunging is down -1% to -2%).  But it isn’t just today; this uncertainty is toying with other markets as well. Which all begs the question…. Is this Greek drama a black swan event? Or more like the Austin Powers Steamroller?

The financial press sure acts like a Greek exit from the Euro is a black swan-type event. But can anyone really say these events are unexpected anymore? This doesn’t really resemble Taleb’s black swan… this is more of a slow, fat white swan that everyone has seen coming for years. It’s been a slow motion car wreck, analyzed and discussed ad nauseum for years. We’ve been unsure about how close it is (even though debt payment schedules are there for all to see), how big it will be, and so forth – but there has been no doubting it is there and it is a problem.

Just how long have we been wringing our hands over this mess?  This timeline of the Greek debt mess starts back in December of 2009 and the first Geek bailout was announced over 5 years ago … Can anyone really be surprised by what comes out of Greece anymore (or Europe for that matter)?

We can’t think of any analogy more fitting than that steamroller scene from Austin Powers. Sometimes losses are caused by unexpected events (or at least, not-widely-expected-events), but this time around the causes are right there for all to see. We can’t say for certain what the future holds, but we do know that we’d much rather face it armed with a plan, solid risk management practices, and a portion of our portfolio that can prosper even when the steamroller hits.

Weekend Reads: The Future of Equities

We asked traders about the future of equities – (Futures Magazine)

How To Prepare For a Lower Rate Environment – (All Star Charts)

Drawdowns happen…get used to it – (Abnormal Returns)

MFA Recap: There’s no Crumpets at the Four Seasons – (Attain Alternatives Blog)

Just For Fun:

13 Practical Ideas That Have Helped Me Make Better Decisions – (Farnam Street)

Why everyone is so keen to agree new trade deals – (The Economist)

A Brief History Of Gay Rights At The Supreme Court – (Five Thirty Eight)

Scientific Retractions are on the Rise, and That May Be a Good Thing – (Priceconomics)

Weekend Reads: Closing Time

CLOSING TIME STORIES FROM CHICAGO’S FAMED TRADING FLOOR – (Crains Chicago)

An All-Charleston Significant Digits for Friday, June 19, 2015 – (Five Thirty Eight)

Jamie Dimon Says He’s Unsure If Elizabeth Warren Understands Global Banking System – (Bloomberg)

Gov. Ige signs bill setting 100 percent renewable energy goal for state (Hawaii News)

Donor demographics: old white guys edition, part I – (Open Secrets)

Just for Fun:

Putting a Price Tag on the Stress of Having a Child – (Five Thirty Eight)

Is ‘Chelsea Dagger’ a good song? – (Redeye Chicago)

Polar Bears Are Now Eating Dolphins – (Bloomberg)

C-section births linked to long term child health problems – (CBS News)

Waiting for the Conservative Jon Stewart – (The Atlantic)

Alternative Links: What Type of Protection?

Alternatives:

Using Alternatives to Boost Returns and Increase Diversification – (Wealth Management)

Three-Way Model – (Meb Faber)

Alternative Investors are Asking the Wrong Questions – (Wealth Management)

What’s Your Market Correction Playbook? – (Barrons)

Managed Futures Risk and Reward – (Automated Trader)

Mutual Funds:

Seeking More Clarity on Derivatives in Mutual Funds – (Wall Street Journal)

Futures:

To Solve Liquidity Drought, Investors Try to be Future(s) Perfect – (Money Beat)

 

Alternative Links: Marijuana and Climate Change

Managed Futures:

Should You Invest in Managed Futures? – (U.S. News)

“Algorithm aversion” and managed futures – (Lakewood Views)

Managed Futures Pinnacle Awards – (CME Group)

Alternatives:

‘Alternative’ Investments: Marijuana and Climate Change – (Barrons)

Strategy:

Using Maximum Drawdowns to Capture Tail Risk – (Wesley Gray & Jack Vogel)

Does Volatility Targeting In Managed Futures Add Value For Fund Managers, Investors? – (FIN Alternatives)

Hedge Funds:

Why Hedge Funds Continue to Grow Despite Numerous Challenges – (Institutional Investor)