It’s official. We’re now in unprecedented markets – in at least one commodities sector.
Economists from the University of Illinois recently declared a state of emergency. The two professors – Scott Irwin and Todd Hubbs – noted in an industry publication: “The inescapable conclusion is that [this recent big event] is of truly historic dimensions and what has transpired in [this part of America] can be labelled in good faith a ‘black swan’ event.”
I’ll tell you all the details in a moment.
But first, let’s go over why black swans are a big deal.
A black swan is an event that comes as a surprise and has a major effect. Black swans are hard to predict, and they tend to dominate headlines and captivate the world when they unfold.
Think the Arab oil embargoes in the 1970s and the subprime mortgage collapse in 2008.
Celebrated author and risk analyst Nassim Taleb showed how black swan events can be immensely profitable. Markets don’t expect black swans, so they usually don’t price them into economic models.