Black Swans for 2015

What “out of the left field” event would you predict for 2015? Black Swan has listed the known knowns in his 2015 Outlook thread, so this thread is for the more speculative threats. The threat should be something that no one is thinking about much (it’s a black swan, not a white one); but a plausible one (it’s a swan, not bigfoot.)

My #1 - unexpected inflation. That would upset a ton of apple carts. Let’s say, it is caused by too much QE in a robust economy that Fed fails to take into account, but aided and abetted by supply-side shortages or higher demand for commonly used goods and services, for some unpredictable reason. (Basically inverse of the current oil glut.)

Fed would be caught flat-footed and forced to raise rates, tanking all inflated assets including most stocks.

EDIT: Perhaps this should be in Water Cooler, it is too speculative to qualify as an Investment thread.

I don’t know if you can say unexpected inflation when some really large part of the market has been saying we’re going to have rampant inflation for the last several years (and been wrong). That’s a real risk but it doesn’t seem unexpected.

^ True. 90% of the people posting here said back in 2008 when Bernanke was lowering rates all the way to 0 that hyperinflation was months away. The few that mentioned disinflation and the hardships of deleveraging were ridiculed. M1, M2 and M3 were frequently used terms around here by the nerds. Chart after chart was being posted with colorful lines and scary headings.

Moral of the story, don’t put too much weight on what people post on a message board, even a financial analyst site like this one.

My long shot risks to 2015 (not really black swans as per the definition of such, but I get what you’re asking). #1 - A massive cluster f*uck in auto loans. Origination dying as lenders get spooked by huge negative equity positions due to low interest 96 month financing BS. Sends the auto industry into a nose dive. #2 - Open warfare, Russia vs. someone #3 - Chinese financial crisis due to real estate sector #4 - Some big natural disaster is bound to happen #5 - Comet discovered on collision path with Earth within a decade.

I don’t think inflation is much of a concern this year. On the whole, commodities have crashed this year which should temper many consumer price rises. Also, Europe is still a near complete sh*t show and real wage growth is still tepid.

My list:

  1. war, Putin starts acting like a crazy bear and starts rawring at people

  2. probably limited impact outside of financials, but Canada’s housing market finally crashes (I’ve been waiting for this for 3 years, maybe 2015 is my year to be right)

  3. krazykanuck or CvM begins run for US president

^ You were born in the US?

No. I’d need to get the law changed. Arnold Schwarzenegger and I can team up to get it done. “krazykanuck: the first non-citizen; I’m not as crazy as the last 3 presidents.” I kind of like the ring of that.

The collapse of North Korea and reunification of the Korean Peninsula

The conditions are hardly the same though. Think about where the economy was in 2008, S&P 500 level, unemployment, etc. We have come a long way, baby.

You cannot call it a Black Swan, but I do sense a spread of benign (in the sense that not many people will die every time) ISIS inspired acts of violence in the West.

It is already happening. Look at the 2 idiots in Canada, this asshole hostage-taker in Australia, these fools in France that crashed cars in Christmas markets screaming “Allah is great”. Not to mention the reported plots to capture people on the streets and behead them.

I am really concerned that this is a new age for islamic terrorism. Western secret services have been mostly (still Madrid and London happened) successful after 9/11 in keeping major attacks.

But now the threat is coming from the scum of society. Yesterday’s high school drop-outs that had to suck d!cks under bridges to pay for their crack are now converting to ISIS-ish Islam in dreams of beheading people.

You can secure aircrafts and public transportation but you can’t prepare for 2 indoctrinated retards running around with kitchen knives in say, a supermarket.

Anyways. Mark my words. We are increasingly going to witness some fucked up shit. Tension, suspicion and insecurity are going to rise.

I was going to say #3. Also, Chinese financial crisis due to the shadow banking sector (whether it be peer lending or the banks themselves). That stuff appears very unstable judging by interbank offering rates and the like.

And the autoloans piece has been getting a lot of press with the subprime market. All the journalists say how much it is growing and oh my god subprime borrowers caused the last crisis. But they pick the lowest level of originations during the crisis to calculate the growth, if you look before the crisis its basically level. So not sure if the autoindustry is a black swan, but perhaps the prime and near-prime industry is since all the attention is on subprime.

You could say this about the Street as well. A lot of funds went long inflation and got hammered, especially when their prized commodity oil plummeted this quarter.

I’m not saying we are going to see a massive wave of defaults. I’m saying people aren’t going to be able to buy new cars when they are $10k underwater and want a 10 year loan to pay it off. The auto industry has been fueled over the last few years by ridiculous lending practices. Those practice’s may end and GM, Ford and Toyota won’t be selling many cars as a result. I don’t see how you cab keep these sale volumes up unless you loosen lending further. Its more bad news for the car makers than the auto lenders (as I doubt folks will default and lose their wheels).

I think the term Black Swan needs to be reviewed. Black Swan events are for items/events believed to have ZERO chance of ever happening. All items listed on here have the possibility of happening therefore risk can be priced. Think along the lines of the sun always rises from the east.

  1. (black swan) Syriza winning the Greek election and eventually causing the dissolution of the Eurozone could be a problem.

  2. (not a real black swan) Inflated housing markets in Australia and at least some of the truly overpriced parts of Canada (Vancouver, Calgary) get hammered due to commodity market decline. not sure about Toronto due to limited impact and benefit of oil price and CAD declines. Civeo, announced today that is expects 40% occupancy in its Canadian and Australian properties by early- to mid- 2015, which currently stands at 75% and 55% respectively. that’s a major reduction in employment so Canada West RE may be in trouble.

  3. (not a real black swan) Putin takes full control of Southern Ukraine b/c why not?

  4. (black swan) Starting in 2015 but may take a couple years. Coalition forces push ISIL out of Iraq. ISIL and other rebels consolidate in Syria and push hard against Assad. Russia’s support for Assad is reduced and Assad is tried/killed. Syria devolves into chaos and UN/Coalition forces take control to prevent ISIL control of Syria. Syria becomes the new Iraq and Coalition forces help build Syrian army but it never takes. perpetual occupation is necessary.

As the saying goes…not every dark cloud is a hurricane.

Deflation. The Fed has been clear about reducing its balance sheet and will probably unload it over the next year/s. However, with potentially slowing China, strengthening dollar, and falling oil, it’s possible that the Fed won’t be quick enough to act in the opposite direction.

It always looks obvious in hindsight. Dow hit an all time high in Oct 2007 and oil hit an all time high in the summer of 2008.

My black swan event for 2015: No Asian airplanes crashing.

^ I hope this one DOES happen.