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What Investors Think Is The Biggest "Tail Risk" Right Now
What a difference three months makes.
Back in June, before the brief risk flaring of third Greek crisis/bailout suddenly destroyed many traders' summer vacation plans when Tsipras unexpectedly announced a Greferendum at the end of June only to morph into the cabinet he replaced by conceding Greek sovereignty to Germany, the biggest "tail risk" according to Bank of America's global fund manager survey was a "geopolitical crisis, perhaps as a result of the ongoing fallout in the middle east and Ukraine.
Then, in July, after Schauble made it clear that Germany was willing to take a gamble on a "temporary" Grexit, even if it was merely a negotiating bluff, the risk spectrum promptly shifted and the biggest fear became a breakdown of the Eurozone, with geopolitical crisis fading away into the collective algorithmic subconsciousness.
Fast forward one more month to August, when according to the latest, just released survey concerns about both geopolitics and Greece have been largely forgotten, as have Chinese debt defaults, and instead these have been replaced with far more overarching fears about a China recession (made all the more acute after China's devaluation) and an Emerging Market debt crisis. In fact, according to BofA, "2 out of 3 investors think either China recession or EM debt crisis = biggest "tail risks."
Not unexpectedly, not a single investor was perturbed by either of these two headline risks as recently as one month ago, which goes with the territory: after all these are "tail risks", as in previously unxpected developments which suddenly gain abnormal prominence, which "nobody" could have previously anticipated, making them as close to "black swans" as possible in this centrally-planned age. Although "gray swan" may be more appropriate...
It also means that once "they make the list", the factor that will impact the market is none of these, and instead a new tail risk will have to emerge and grab the investing public's attention.
We look forward until the next month's edition of the BofA survey to find out just what the latest and greatest prevailing tail risk "fear" will be. Somehow we doubt it will be "Yellen's just concluded first rate hike in nearly a decade."
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And meanwhile the US stock 'markets' stay within a percent or two of their all time highs.
Rock on.
DavidC
Yeah, but Shemitah?
Pervasive $Dolla$ strength.
Damn Skippy, don't bet against GOD.
Shemita is yiddish for Y2K.
The problem is, if everyone knows about it, it'll be a non-event. In fact, I'm betting it'll go the other way. :) Worst case: October.
I had religious guys pointing the Shemitah out last fall. Guys who don't invest but want to see everyone punished by God.
I did an impromptu survey in an attempt to convince them that they were foolish (for believing this hooplah) and found that only 50% of the time the shemitah year landed on the year that a down cycle occurred; roughly every 4 years there were down cycles in the stock market and economy; of those 4 years, roughly 50% of the time that year would align with the Shemitah year. So we have a 50% chance; however, since the last time it did line up (2008), there's a good chance it won't this time.
My forecast is that in 2017, or just after the elections in 2016, the SHTF and we all get sprayed. I'm assuming:
1. The party controlling the executive branch will change (historically the stock market and economy takes a dump when this happens)
2. The baby boomers are all in retirement mode shedding the little assets they have to protect their retirement (with 50% less Millenials coming along to pick up the slack, unless we start flooding the gates w/ foreigners we're f'd).
3. The markets were never allowed to clear properly from 2008.
4. Because 2017 just looks like one of those numerology numbers that all the nutjobs get excited about.
PLUS....
we're at the top of a market, so by then we should be in the throws of pain squared.
I believe 2017 will be the start of the real 'depression' or is it 'recession'? Doesn't help that they redefined what those words meant over 100 years ago. Used to be recessions were considered worse than depressions, but then someone came along and decided to change the meanings somtime right before the great depression.
Oh and this whole 'raise the minimum wage' is the second act in the 'hide the inflation behind wage increases' game. Unfortunately, Democrats either don't know what they're doing or they know all too well how to play the public. There's also the swine flu, the bird flu, the let's kill all the cows because we have a drought flu... all of these things are to hide the real inflation that occurs when the monetary base increases. And under Sr. Obama, as all good ZH readers know, the money supply *doubled*. And it was already in the trillions.
I've already seen the regular price of iced coffee go up @ my local DD by 20 cents this year (I assume anticipating a wage hike) after it went up about 30 cents two years ago, but amazingly their afternoon deal didn't change.
And $8 for a large meal at McDs. Now who are the suckers in the room?
Carry on.
i never could understand why greece could cause turbulence in the us stawks but china barely even nudges it, if at all
The only thing that moves the market is the FED now. I remember the old scares like bird flu. Which, btw is actually here and denting the turkey supply, but that has nothing to do with easy money so ignore it.
Because with Greece there is a possibility, though slim, that they do not print the money to cover the debt because Greece itself cant make the call to print the money even though they do have physical printing presses in Greece. The failure to print more would lead to a systemic event in the Euro banks as the levered positions backed by Greek debt explode.
With China there is no question whether they will print the money its just a question of how much and when.
The biggest "Tail Risk"??
I'm voting for my ex-wife.
more evidence that few experts can predict or forecast anything useful
Well, that's soothing.
If it's not one thing it's another
-Roseanna Roseannadanna
Yep and I love how all the pessimists are beginning to look like optimists......
Yes, it oft takes the passage of some time for the world to identity reality.
To wit: ALL the stuff happening currently (Non-GAAP v GAAP, HFT, algos, gold 4X and interest rate manipulation, etc.) were mere conspiracy theories some time ago.
Reminds me of the days where you were a fucknutslobbeingcrazyasstinfoilhatter if you said there was a Bilderberg group, or the powerful met at the Bohemian Grove, or that there was a real revolving door between industry and DC, or that there's no difference between the R's and D's ....
And by the time it's come full circle to common knowledge, nobody has remembrances of your prognostications, they only remember that you're crazy.
China is the biggest tail risk right now. They pulled out of the fiat ponzi, selling USTs and buying gold, and now the rest of the world will also fall prey to the fiat ponzi system.
I'll take $USD to Zero for $1T Alex.
http://www.newsmax.com/Finance/StreetTalk/marc-faber-Recession-economy-u...
The biggest tail risk will be what the elites determine will hurt the most people!
not me, my biggest tail risk right now is the wife having a headache. I hedged and bought a Jumbo bottle of aspirin to sneak in her food so Im good.
No global warming????
Be precise!!!! global warming scam
Where is police killing blacks?
black global fund manager's lives matter.
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