Red Herring, Red Swan

Red Herring

With headlines proclaiming the worst day for the stock market in 2017, you might think the market has plummeted in a bout of panic-selling.  This is a red herring.  The S&P 500 hasn’t been down more than 1% in over 100 days.  Of course we’re going to have another 1% down day some time, but the real story is the lack of big down days rather than breaking this streak.  I’m sure some poor souls are reaching out to their brokers to ask what they should do.  CNBC is shaking the tree with the noise around this ridiculous headline and brokers are happy to collect the commissions that fall into their laps.

Red Swan

The concept of Black Swans has been bastardized almost beyond recognition.  Nicholas Taleb put forth the idea of a Black Swan event being something outside the realm of normal expectation making a significant impact that people would later find justification/explanation for.  Today, lazy pundits point to any surprise as a Black Swan whether it fits the original definition or not.  Experts prefer to blame an imagined Black Swan than admit they were just wrong about something.

I won’t go so far as to call the election of Donald Trump a Black Swan.  After all, we do have a history of electing the wealthy, the eccentric, and the famous, just not usually all at once.  I could stoop low and call it an orange swan, but that feels like a cheap shot.  Trump’s election wasn’t far enough outside the realm of possibility to dub it a swan (of any color), but it certainly made an impact and we are seeing experts come out of the woodwork to try to craft a narrative to fit the outcome.

Now there is an FBI investigation into just how involved Russia was in our election.  If you want real information on this story, you have to read beyond the headlines.  This is actually kind of a challenge in today’s world of 140 character data dumps, but understand that no one is going to publish a story with the headline of “They Didn’t Find Anything” or “FBI Needs More Time”.  The headlines for this story are damning, but the articles themselves are shockingly tame.

It’s like a grade school fight where two kids talk trash, but when they are surrounded by their bloodthirsty peers only a couple of half-hearted punches are thrown.  The crowd goes home unsatisfied while the suddenly reluctant fighters are relieved it’s over.

I don’t think the FBI is going to find anything concrete linking the White House to the Russians, but if they did would we call that a Red Swan?

Photo by Thomas Rousing Photography