SocGen attempts to quantify the biggest Black Swans risks (and hopes) of 2015 (yes, a foolish endeavor since nobody can actually envision what a black swan may be, by its very definition an event that was predicted by no one), it notes that “political and financial risks now outnumber real economy risks.”
So what does SocGen believe are 2015’s black swans?
Here are the “bad” ones, alongside their estimated probability of occurring:
- Ukraine crisis spills over to broader disruption (5%)
- Deflate-thy-neighbor, or systemic EM crisis (10%)
- Lower-than-expected price multipliers (15%)
- Sharp repricing of G4 term premiums (20%)
- UK election leads to Brexit vote (25%), Brexit (10%)
- China hard-landing (30%)
Here are the “unexpected” events that would lead to a favorable outcome (sadly, these never actually occur).
- Higher than expected price multipliers (15%)
- Euro area fast track reform and growth friendly fiscal policies (10%)
And visually:
But, then again, why bother with such trivial exercises, when as Paul Tudor Jones accurately laid out, how the current centrally-planed farce ends is simple – there are three outcomes: Revolution, War and Taxes.
Everything else is just a distraction.
