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Truth is the Ultimate Black Swan

Truth is the Ultimate Black Swan

Truth is the ultimate black swan. All other black swans are a myth. Financial websites are littered with articles written by people trying to predict the next black swan event that will usher in the implosion of the global Bubble of Everything, even though, by definition, a black swan is as unpredictable an event as Jeffrey Epstein’s suicide should have been. In reality, truth is the ultimate black swan because though financial truth remains hidden from the masses, it is always there, and no one can predict the exact timing of when the public will awaken from the stupor of delusion created by the world’s political, academic, and banking leaders to embrace the truth. The realization of the truth about sham economic conditions, labeled by the ignorant as “robust”, built on the fragile foundation of relentless Central Banker creation of trillions upon trillions of fiat currencies out of thin air, is the only true unpredictable event. The eventual collapse of the Bubble of Everything, as was the onset of the 2008 global financial crisis, certainly is predictable. 

What will be the trigger point at which truth implodes the Bubble of Everything? Will the trigger point be realization of the truth by 5%, 8%, or 20% of the population? Recent anthropological studies conducted with birds illustrated that when birds were able to observe another bird solving a puzzle box to receive a reward of a hidden mealworm, they increased their puzzle solving skills  by 14% a day versus a control group that was not provided with a “teacher” bird. At this rate, except for the small percentage of birds in the observation group that were simply incapable of learning by observation, nearly all birds in the observation group would have been able to solve the puzzle box and receive their reward of a hidden mealworm within a week’s time.

 …click on the above link to read the rest of the article…

Waiting For The Black Swan

Waiting For The Black Swan

War with Iran would be the beginning of the end

Two more tankers were attacked near the Strait of Hormuz on Thursday morning  (6/13/19) in the Gulf of Oman, and if hostilities advance we could be facing a ‘black swan’ event. One that changes everything, and divides the world into ‘before’ and ‘after’ periods.

A lot of us are waiting for ‘something’ to happen. We know that there are too many unsustainable trends and practices running and we fall into the “let’s just rip the Band-Aid off” camp.   Some, like myself, have lost faith in the political leadership and institutions and doubt they retain any capacity to attend to anything more than their own selfish interests, let alone manage the difficult tasks ahead rooted as they are in systems theory and managing complexity.

So, let’s get on with it already.  Bring it on.  Black swans are welcome to those who feel a swift kick to the behind is sometimes needed to begin setting things straight.

Like many, I am also conflicted because I also know that getting onto a new path will be disruptive and probably quite economically and financially painful for everyone, myself included.  Hoping for ‘something to break’ and hoping nothing breaks hang in an uneasy balance.

Luckily, my hopes and wishes have nothing to do with what’s going to happen, or when.  I might as well be performing a secret hand ritual before the TV in my living room to ensure that my team’s basketball free-throw goes in.  The dry tinder of the next bonfire was laid down over many years and decades and it will catch fire when it does, no matter how much denial or how many superstitious practices we employ.

 …click on the above link to read the rest of the article…

All That’s Missing Is a Black Swan

All That’s Missing Is a Black Swan

“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”
– Ludwig von Mises

The Federal Reserve chart above only goes back to 1970, but its message is clear, nevertheless. The velocity of money has dropped below that which was necessary to maintain a productive economy in 2009 and has never recovered.

The velocity of money can be defined as, “the rate at which money circulates or is exchanged in an economy in a given period.” It’s generally measured as a ratio of gross national product (GNP) to a country’s total money supply.

No money turnover… no economy.

But, if that’s so – if the chart is correct and the money turnover is by far the lowest since 1970 – why did the economy recover after 2010 and why are we in a bull market? Surely, the quantitative easing programme initiated by the Fed corrected the problem and happy days are here again.

Well, actually, neither of those commonly-held assumptions is correct. Quantitative easing didn’t pump money back into the failing economy and, more to the point, it wasn’t intended to. Most of the money that was created through quantitative easing never actually hit the streets.

To back up a bit, in 1999, the Fed, then under Alan Greenspan, convinced the US government, then under President Bill Clinton, to repeal the Glass Steagall Act, an act created in 1933 to assure that banks would never again recklessly create loans to the public that could never be repaid.

 …click on the above link to read the rest of the article…

Black Swan Watch: China Has Added Over $50 TRILLION in Financial Assets Since 2014

Black Swan Watch: China Has Added Over $50 TRILLION in Financial Assets Since 2014

The biggest black swan facing the financial system is China.

China has been the primary driver of growth for the global economy since the 2008 Crisis. Despite only accounting for 15% of global GDP, China accounts for 25%-30% of GDP growth.

Put simply, from an economic perspective,  if China catches cold, the world gets sick…  and if China goes into a coma…

Which is why anyone paying attention should be truly horrified by the latest round of data from China’s economy.

In December, China’s Manufacturing PMI came in below 50, signaling a contraction is underway.

This is a massive deal because this was an OFFICIAL data point, meaning one that China had heavily massaged to look better than reality.

Let me explain…

Over the last 30 years China’s economic data has ALWAYS overstated growth. The reason for this is very simple: if you are an economic minister/ government employee who lives in a regime in which leadership will have you jailed or executed for missing your numbers, the numbers are ALWAYS great.

Indeed, this is an open secret in China, to the degree that former First Vice Premiere of China, Li Keqiang, admitted to the US ambassador to China that ALL Chinese data, outside of electricity consumption, railroad cargo, and bank lending is for “reference only.”

With that in mind, we have to ask… how horrific is the situation in China’s financial system that even the heavily massaged data is showing a contraction is underway?

Think “systemic risk” bad.

I’ve already outlined how China is sitting atop 15% of all junk debt in the global financial system, resulting in the country’s “bad debt” to GDP ratio exceeding 80% (a first in history).

However, it now appears that even that assessment was too rosy.

…click on the above link to read the rest of the article…

Nassim Taleb Explains How The Global Economy Is More Fragile Today Than In 2007

In what was incredibly appropriate timing given the ‘shocktober’ market blowup, Bloomberg News invited “Black Swan” author Nassim Taleb to its set on Halloween for a discussion about the increasingly fragile market ecosystem in which we all reside, and the mounting risks that, Taleb believes, could soon ignite another financial crisis that will be even more severe than what we saw in 2008.

Taleb, dressed up as “black swan man”, wasted little time in explaining how the global economy is becoming increasingly vulnerable to a global debt crisis, how the global quantitative easing did nothing to fix the underlying problem of too much debt – instead it exacerbated it – and how the inevitable reckoning might play out in markets once the long-dreaded “inflection point” finally arrives.

Taleb

Taleb began the interview by describing how the global aggregate debt burden has only climbed since the crisis. And while this debt is no longer dangerously concentrated in a single sector, like, say, the housing market, it doesn’t change the fact that the overall credit risk in the system has been amplified. And while central banks have for years managed to impose metastability in global markets, as they transition from a period of low interest rates back to “neutral”, the destructive forces that they long suppressed will surge back to the surface.

Just like he did in the run-up to the 2008 crash, Taleb isn’t trying to forecast the next crash; he’s only trying to explain how the global economy has become “more fragile today” than it was in 2007.

“You put novocaine on cancer, and what happens? The patient is going to look better, he’s going to feel better, but at some point, you pay a higher price.”

…click on the above link to read the rest of the article…

Hard Assets Alliance: The Role Of Gold (And Silver)

Hard Assets Alliance: The Role Of Gold (And Silver)

An update on the case for holding precious metals

Longtime PeakProsperity.com readers know that the Hard Assets Alliance is this website’s officially-endorsed gold & silver bullion dealer (the list of reasons why can be read here).

Given the painful slog over recent years for precious metals investors, we thought it was high time to bring them back on the program to offer an update on the fundamental reasons for continuing to own bullion.

This week, Chris sits down with HAA executive Ed D’Agostino to discuss the role of gold (and silver) in an investment portfolio during the age of bitcoin and endless central bank liquidity:

As for what’s next for prices, in terms of supply, I think that the sector, in many ways, has a self-correcting aspect to it. If producers can’t produce and make any profit — and that’s really where they’re at now in the silver mining sector — eventually that situation will correct. Mines will shut down, and the price will go up. We’re seeing something similar to that in oil right now.

But then when you introduce the short position on the COMEX, things become more nefarious. In the US, the government has, in my opinion, beaten gold out of the collective consciousness of the American citizenship. So because of that, Americans tend to be very under-invested or under-exposed to gold.

My general sense is I think we’ll kind of keep grinding sideways as we’ve been for a while until a trigger event happens — and then you’ll see the real value of holding gold in your portfolio. During a black swan event, gold tends to hold up quite well whereas other more conventional investments — like equites which have all the headlines these days — will struggle.

…click on the above link to read the rest of the article…

Forget About Catalonia And Brexit, The Next European Black Swan Could Be Transylvania

Over the past 100 years, the borders in Central and Eastern Europe have been redrawn time and time again, often leaving groups of people separated from their home country by new borders. Although land often changed hands relatively peacefully, suddenly finding one-selves as an ethnic minority in a new country was bound to lead to tension and resentment.

Transylvania
Walle1886 / Pixabay

While these resentments may reveal real disenfranchisement of ethnic minorities in Central Europe, politicians, especially populist figures, have seized on the outsider narratives inherent in the diaspora experience.

As the April 2018 election approaches in Hungary, Prime Minister Viktor Orban has been reaching out to the Hungarian minority in Romania, drawing criticism from Romanian leaders, while his supporters insist he is trying to lend his support Hungarians everywhere.

Rooted in History

Tensions between Romania and Hungary can be traced back to World War I and the Treaty of Trianon.

Although the Treaty of Trianon ended hostilities between the Allied Powers and the Kingdom of Hungary, the peace came at a great price to the Austro-Hungarian successor state. Hungary lost 2/3rd of its population and territory, leaving the former imperial hub landlocked in the heart of Central Europe. Most of its territory was ceded to Yugoslavia, Czechoslovakia, and Romania, as well as Austria, Italy, and Poland. Romania was granted the entire region of Transylvania, where an estimated 1.3 million ethnic Hungarians reside, making Hungarians Romania’s largest minority.

The loss of such a large chunk of territory and population would certainly leave its mark on national memory. Recently in Hungary, politicians have been revitalizing this narrative.

Magyarorszag 1920.png
By derivative work: CoolKoon (talk)
Hungary1910-1920.png: The original uploader was Fz22 at English Wikipedia
(Original text: fz22 (talk)) – Hungary1910-1920.png, CC BY-SA 3.0, Link

…click on the above link to read the rest of the article…

Consumption Exhaustion

Consumption Exhaustion

When people use the word catalyst to describe an event that may prick the stock market bubble, they usually discuss something singular, unexpected and potentially shocking. The term “black swan” is frequently invoked to describe such an event. In reality, while such an incident may turn the market around and be the “catalyst” in investors minds, the true catalysts are the major economic and valuation issues that we have discussed in numerous articles.

Most recently, in 22 Troublesome Facts, 720Global outlined factors that are most concerning to us as investors. As a supplement, we elaborate on a few of those topics and build a compelling case for what may be a catalyst for market and economic problems in the months ahead.

Debt Burden

Debt serves as a regulator of economic growth and is the focus of ill-advised fiscal and monetary policy. It is no coincidence that no matter what economic topic we explore, debt is usually a central theme. Illustrated in the chart below is the actual trajectory of total U.S. debt outstanding (black) through March 2017 and a calculated parabolic curve (red). The parabolic curve uses 1951 as a starting point and a quarterly 1.82% compounding factor to create the best statistical fit to the actual debt curve. If we start with the $434 billion of debt outstanding on December 1951 and grow it by 1.82% each quarterthereafter, the result is the gray line. If debt outstanding continues to follow this parabolic curve, it will exceed $60 trillion by the first quarter of 2020, or nine quarters from now.

Data Courtesy: Federal Reserve

Many economists point to the stability of debt service costs as a reason to ignore the parabolic debt chart. Despite rising debt loads, falling interest rates have served as a ballast allowing more debt accumulation at little incremental cost. While that may have worked in the past, near zero interest rates makes it nearly impossible to continue enjoying the benefits of falling interest rates going forward.

…click on the above link to read the rest of the article…

When A “Black Swan” Will No Longer Do: China Warns Beware The “Gray Rhino”

When A “Black Swan” Will No Longer Do: China Warns Beware The “Gray Rhino”

Early this morning, we discussed the unexpected tumble in the Chinese small-cap stock index, the ChiNext, will plunged by over 5%…

… as a result of growing concerns that a new round of deleveraging is about to be imposed by Beijing following the conclusion of China’s 5th National Financial Work Conference (NFWC), which was attended by president Xi Jinping, and set the agenda for critical financial reforms over the coming years. As the People’s Daily noted on Monday:

The meeting, presided over by President Xi Jinping, was held against the backdrop of growing enterprise debt, an overheating real estate market, and overcapacity in such sectors as low-end manufacturing.

Furthermore, the commentary touched on the recent OECD finding that the debt of non-financial enterprises in China reached 170% of its GDP in 2016, and warned that “in its 2017 China Financial Stability Report released early this month, China’s central bank, People’s Bank of China, pointed to “the risk of bubbles” emerging in some parts of the country. The report notes that housing loans comprised a quarter of all loans, and accounted for 44.8% of all new lending since the start of this year.”

Perhaps the biggest outcome from the weekend Conference was the creation of a financial “super-regultor” meant to tackle the growing threat of a financial crisis, and among its broad conclusions were  i) To make finance better serve the real economy; ii) To contain financial risks; and iii) To deepen financial reforms. The proposed reforms are the result of the unprecedented increase in overall Chinese debt, which while promoting growth – in this case China’s latest 6.9% GDP print – is also leading to a relentless buildup of risks. And while until now Chinese regulators had homed in on financial-sector excesses, the latest probe – Bloomberg notes – is now widening to debt in the broader economy, “a shift that prompted a sell-off in domestic stocks.”

…click on the above link to read the rest of the article…

America, the Waning Days


Frederick Carl Frieseke Girl In Blue Arranging Flowers 1915
Potential earthquakes and black swans are right ahead of us. What else is new? On April 16, Turkey has a referendum to decide whether Erdogan will become de facto supreme ruler. What happens if he loses the referendum is completely unclear, undiscussed even, but it’s obvious a loss would have the country shake on its already shaky foundations.

The Turkish economy is in horrible shape and Erdogan’s post-coup firings (hundreds of thousands) and jailings (tens of thousands) have made large parts of society unattended. The biggest of which may well be the army; you can’t fire large numbers of officers and pilots and expect to retain the same strike effectiveness.

Erdogan’s ongoing war on the Kurds is also turning against him, or at least internationally. Both Russia and the US acknowledge the important role Kurdish forces play in the battle against ISIS, and they’re not going to turn against them. So while Turkey demands a major role in neighboring Syria, it has essentially been put off-side, or benched.

Russia maintains (some of) its boycotts of Turkish products ($260 million worth of tomatoes) that were the result of Erdogan downing a Russian jet in late 2015, and the refuses to deliver arch-enemy Gülen, despite Michael Flynn’s best efforts. This means, by the way, that the country simply hasn’t provided irrefutable proof of the man’s role in the coup (if it was ever a real coup).

If Erdogan cannot come up a winner on Sunday, he would lose a lot of face. And he might lose more than that. Of course one must question if it’s even a option that the Turkish people vote NO, and that that would subsequently be announced as the referendum result. He controls just about anything in the country already; why not this too, by right or by might?!

…click on the above link to read the rest of the article…

The Real Dangers Behind The Syrian Crisis Are Economic

The Real Dangers Behind The Syrian Crisis Are Economic

Back in 2010/2011 when I was still writing under the pen-name Giordano Bruno, I warned extensively about the dangers of any destabilization in the nation of Syria, long before the real troubles began. In an article titled Migration Of The Black Swans, I pointed out that due to Syria’s unique set of alliances and economic relationships the country was a “keystone” for disruption in the Middle East and that a “revolution” (or civil war) was imminent. Syria, I warned, represented the first domino in a chain of dominoes that could lead to widespread regional warfare and draw in major powers like the U.S. and Russia.

That said, my position has always been that the next “world war” would not be a nuclear war, but primarily an economic war. Meaning, I believed and still believe it is far more useful for establishment elites to use the East as a foil to bring down certain parts of the West with economic weapons, such as the dumping of the U.S. dollar. The chaos this would cause in global markets and the panic that would ensue among the general public would provide perfect cover for the introduction of what the globalists call the “great financial reset.” The term “reset” is essentially code for the total centralization of all fiscal and monetary management of the world’s economies under one institution, most likely the IMF. This would culminate in the destruction of the dollar’s world reserve status, its replacement being the IMF’s Special Drawing Rights basket currency system.

Eventually, the SDR basket system would act as a stepping stone towards a single global currency system, and its final form and function would probably be entirely digital. This would give the globalists TOTAL push-button control over even the smallest aspects of normal trade. The amount of power they would gain from a single centralized digital currency system would be endless.

…click on the above link to read the rest of the article…

Why the fight for GMO labeling is (possibly) over

Why the fight for GMO labeling is (possibly) over

Ever since it became clear that Vermont’s law for mandatory labeling of foods containing genetically engineered ingredients would actually go into force this summer, the big question has been how many food companies would choose to label their products and how many would choose simply not to sell in Vermont.

There is a third choice which purveyor of canned fruits and vegetables, Del Monte Foods, announced recently. The company will eliminate all genetically engineered ingredients from its foods, obviating the need for special labeling. This won’t be too difficult since there are very few genetically engineered fruits and vegetables.

While the Vermont law is huge victory for the proponents of labels, the U.S. Congress could still pre-empt state labeling laws, something it failed to do earlier this year. But as more and more of the public demands to know which products have so-called genetically modified organisms or GMOs in them and as the number of products on grocery shelves with non-GMO verified labels increases, growers and processors may have no choice but to acquiesce. They may be forced by circumstances either to label their products (or automatically be suspected of trying to hide something for not doing so) or to eliminate GMO crops and ingredients for fear of losing customers regardless of what happens in Congress or in other states.

Nassim Nicholas Taleb, author of The Black Swan and other books on risk, explains why this is so in a draft chapter of an upcoming book called Skin in the Game. His investigation begins with why nearly every packaged drink in the United States is labeled certified kosher.

 

…click on the above link to read the rest of the article…

Austria Just Announced A 54% Haircut Of Senior Creditors In First “Bail In” Under New European Rules

Austria Just Announced A 54% Haircut Of Senior Creditors In First “Bail In” Under New European Rules

Just over a year ago, a black swan landed in the middle of Europe, when in what was then dubbed a “Spectacular Development” In Austria, the “bad bank” of failed Hypo Alpe Adria – the Heta Asset Resolution AG – itself went from good to bad, with its creditors forced into an involuntary “bail-in” following the “discovery” of a $8.5 billion capital hole in its balance sheet primarily related to ongoing deterioration in central and eastern European economies.

Austria had previously nationalized Heta’s predecessor Hypo Alpe-Adria-Bank International six years ago after it nearly collapsed under the bad loans it ran up when it grew rapidly in the former Yugoslavia. Having burnt through €5.5 euros of taxpayers’ money to prop up Hypo Alpe, Finance Minister Hans Joerg Schelling ended support in March 2015, triggering the FMA’s takeover.

This was the first official proposed “Bail-In” of creditors, one that took place before similar ad hoc balance sheet restructuring would take place in Greece and Portugal in the coming months. Or rather, it wasn’t a fully executed “Bail-In” for the reason that creditors fought it tooth and nail.

And then today, following a decision by the Austrian Banking Regulator, the Finanzmarktaufsicht or Financial Market Authority, Austria officially became the first European country to use a new law under the framework imposed by Bank the European Recovery and Resolution Directive to share losses of a failed bank with senior creditors as it slashed the value of debt owed by Heta Asset Resolution AG. 

The highlights from the announcement:

Today, the Austrian Financial Market Authority (FMA) in its function as the resolution authority pursuant to the Bank Recovery and Resolution Act (BaSAG – Bundesgesetz über die Sanierung und Abwicklung von Banken) has issued the key features for the further steps for the resolution of HETA ASSET RESOLUTION AG. The most significant measures are:

…click on the above link to read the rest of the article…

China Warns Officials: Allow Social Unrest, Lose Your Job

China Warns Officials: Allow Social Unrest, Lose Your Job

To be sure, there are always going to be financial and geopolitical landmines and every once in awhile we – and by “we” we’re referring to the market, or the country, or humanity, or whatever collective you want to choose – are going to step on one on the way to ushering in a black swan event.

But when we look out across markets and across the political landscape it’s difficult to escape the feeling that there are more black swans waiting in the wings – so to speak – than usual. There’s the threat of a dirty bomb being detonated in a crowded Western European urban center for instance. Or the chance that Turkey ends up “accidentally” killing a Russian or Iranian soldier while shelling the Azaz corridor. And how about the possibility that China tries to save its economy by chancing a 30% devaluation of the yuan and inadvertently plunges the world into a crisis far worse than 2008?

The interesting thing to note about the third crisis event listed above is that an economic implosion in China may spawn a black swan far larger than that which would emanate from a crisis in the country’s banking sector and/or a deeper devaluation of the RMB.

As we’ve discussed on multiple occasions of late, China desperately needs to purge its economy of excess capacity. The industrial sector is weighed down by too much debt and too little demand, but an acute overcapacity problem prevents the market from getting anywhere close to clearing. Either Beijing moves quickly to ameliorate this, or else a wave of defaults will ripple through the industrial complex on the way to crippling the country’s banking sector, where NPLs are probably at least five times greater than the official numbers suggest.

…click on the above link to read the rest of the article…

Who’s Anti-American?

– Maryland’s State Song

SamJ’accuse…     Illustration by James Montgomery Flagg

Guilty as Charged

BALTIMORE – Yesterday, one dear reader wrote in to say we were “cynical” and “anti-American.”

Today, we rise to defend our reputation… such as it is. Cynical? Nah… We’d need a big dose of positive thinking and earnest optimism to be cynical. According to the Oxford English Dictionary, people who are cynical are “suspicious,” “doubting,” and “skeptical.”

We’re way beyond that. We’re pretty sure that the system is rigged… and rotten. Elections are exercises in solemn deceit. And the Fed’s management of the economy is a mixture of delusion and self-serving scam. We don’t have much doubt about it. That’s just the way it is.

As for “anti-American,” our accuser needs to clarify the allegation. Is he talking about the Deep State? The empire? Or is he talking about the 50 sovereign states… and the Old Republic? Or the language? The culture? Reality TV… the Kardashians… NASCAR racing… Old Faithful and the mighty Mississip’?

No one can be anti-America; America is too many things to too many people. But if he’s talking about the federales who control half our national output… tie us in knots with Obamacare, National Labor Relations Board rules, and all their other dopey programs… and stomp around the world trying to justify their trillion-dollars-a-year security budget…

…if he’s talking about Hillary, Bernie, The Donald, the Bushes, et al… and all the 535 members of the U.S. Congress… and the 2,783,000 zombies on the U.S. payroll…

…click on the above link to read the rest of the article…

 

Olduvai IV: Courage
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Olduvai II: Exodus
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