'A White Swan Death Spiral' — 'The Black Swan' Author Nassim Taleb Warns US Faces 2008 Like Crash
Regardless of the color, Nassim Taleb is calling a swan a swan.
Taleb, perhaps best known for his 2007 book "The Black Swan," is renewing his public concern about the state of the economy.
A black swan is defined by Oxford Languages as "an unpredictable or unforeseen event." Taleb defined the concept a bit further, saying a black swan has three properties.
To qualify, the event needs to 1) be an outlier, 2) produce extreme impact and 3) even though it's an outlier, explanations after the event occurs make the event appear predictable in hindsight.
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But Taleb's assessment of the current market is so dour that he sees things predictably ending in crisis, saying, "A debt spiral is like a death spiral" and "We need something to come in from the outside, or maybe some kind of miracle." Not only is the U.S. national debt currently over $34 trillion, but it's also become more expensive to pay interest on that debt in part because of the high interest rates set by the Federal Reserve to combat recent inflation.
Taleb doubled down on his earlier October comments where he voiced concern saying, "The risk is right in front of us. If you see a fragile bridge, you know it's going to collapse at some point."
Of course, investors heeding his advice at the time would have missed out on a massive market rally, sending the S&P 500 up about 20% from its October lows in a month.
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Michael Burry, who's best known for his bet against markets into the 2008 subprime mortgage crisis and his depiction in the movie "The Big Short," also jumped the gun in January 2023 by issuing a one-word post on X: "sell" only to admit his error with a later post saying he was "wrong to say sell."
Not everyone who's made a name for themselves with well-timed bets against the market is sounding the alarm on the issue.
Steve Eisman, a portfolio manager for Neuberger Berman Group and also a star character from "The Big Short," recently shared in an interview that he's now "more long-oriented" and actually "very blissful" regarding his broad market outlook.
Perhaps the adage of "time in the market beats timing the market" will remain true, but for those concerned about risks, there are a multitude of hedging options available. One of these includes owning a black swan fund named Universa Investments that Taleb acts as an adviser for. The fund returned 3,612% return in March 2020 during the peak of coronavirus fears.
Investors will have to hope Eisman doesn't apologize for his optimistic call as markets are faced with many risks, including possible renewed inflation, a spike in unemployment, increased geopolitical escalation or perhaps another black swan event.
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