Why Greece is a Big Fat Slow White Swan

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?

Michael Mauboussin Tips From Great Investors [Pt.2]

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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.