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Alternative Market Briefing

Double Black Swans

Tuesday, March 10, 2020

Matthias Knab, Opalesque:

A comment from Ian Hamilton, Chairman, Scotstone:

The Corona Virus has put the world on hold with investors behaving like people fighting over toilet rolls.

But was it unexpected?

In 2007 Nassim Taleb, in his book "Black Swan" warned of such an event:

"as we travel more on this planet, epidemics will be more acute-we will have a germ population dominated by a few numbers and the successful killer will spread vastly more effectively."

He ends this paragraph with the following sentence:

"I see the risks of a very strange acute virus spreading throughout the planet."
Page 317

It has just been a matter of time for this to become true as we have witnessed the past two months.

As a frequent international air traveller, I have often returned home with illnesses picked up on flights. Modern technology luckily provides alternatives such as video conferencing etc. Tricky for board meetings particularly if one is chairing the meetings. Also, Regulators have strict requirements on having at least one person in the jurisdiction. Let's hope they take into consideration the current situation.

Currently I have put all international travel on hold. It is not because I am sixty-seven and possibly in the high-risk category for the infection. That is not my main reason. My main reason is being in being placed in self isolation in a foreign country.

The second Black Swan event is the oil price spat between Russia and Saudi Arabia.

Is it short term or will it reach an amicable solution?

One must bear in mind that this is not necessarily only a consequence of Corona Virus. Saudi is an ally of the USA and much favoured by Donald Trump.

Russia is smarting under the sanctions imposed by the USA. This is an opportunity to hit back at the USA. It will put out of business the shale oil producers as well as the fracking proposals.

Donald Trump now has oil sludge on his face. He is a big supporter of the fossil fuel industry in the USA. Going to be difficult to wipe this off in the election year.

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