A Little Paranoia Can Be OK

From the 2022 Archives of TGIF 2 Minutes with a few updates…

Record-breaking, big outlier events tend to move the needle to extremes in the economy and stock market. Note the word, “outlier”. Outlier events typically are surprises and are often unlikely. In his beyond excellent book The Psychology of Money* author Morgan Housel lists five events that were outliers over history in the US with world-changing consequences:

  • The Great Depression
  • World War II
  • The dot-com bubble
  • September 11th**
  • The housing crash of the mid-2000’s.

A conclusion could be drawn from the book’s chapter titled, “Surprise!” that surprises are perhaps the most reliable thing going. But the irony of the reliability of surprises is we do not know what the surprise is until after it has unfolded.

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