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.

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Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, RCM's own estimates of performance based on account managed by advisors on its books, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.