The Bigger Perspective

In the spirit of not adding any actual value with regard to content…

I would encourage you to go read this from ZH.

Please understand exactly what this means – the game is completely rigged and you invest at your own risk. Many of you have known this for a long, long time now, and the above changes nothing for you. However, for those of you late to the party, the above is so fundamentally game changing that you will be forced to revaluate your financial positions in their entirety.

All funds are subject to plunder by animals who are more equal than you…


Systemic Instability

Go read this. CHS is a bit of an oracle. I read about half of his new book last night.

As Taleb has explained, the very act of suppressing fluctuations renders systems extremely prone to large-scale disruptions that are viewed as low-probability events, the infamous “black swans.” The key to understanding this rising likelihood of supposedly improbable disruptions is to understand the difference between linear and complex systems. Linear systems lend themselves to causal chains (A causes B which causes C) or probability (the odds of drawing two aces in a game of Blackjack) that can be calibrated with a high degree of accuracy.

Complex systems such as financial markets exhibit fractal or chaotic characteristics that lead to an unpredictability that is prone to disruption by seemingly small events. When volatility and risk (in political terms, dissent) are suppressed by central authorities, the variations that inform an open market (“variation is information”) are lost.

The misrepresentation (and thus the mispricing) of risk and the suppression of everything which doesn’t pander to the Status Quo is a defect not of individuals or specific institutions but of the entire system, including the Federal Reserve, the Treasury and the regulatory “alphabet soup” agencies (SEC, FDIC, etc.).

We all know and understand that as complexity increases, stability decreases. This seems to be a universal chaotic constant. Our economy and subsequent non-free markets will follow this trend.

There is no reason to believe that anything going forward will look like anything that has happened before. There will be a tipping point and we will make a radical turn.