Postcards: Grey Swans for 2024 and the Week Ahead

What's the difference between a Grey Swan and a Black Swan? We'll explore that question and dig into a busy week of data. Let's put it all into Republic Speak.

Dear Fellow Expat:

Yesterday, I discussed “Grey Swans” – but didn’t quite define the term.

I received a few questions, so let me break this down.

You’ve probably heard the term “Black Swan” before.

This refers to an “infrequent and unexpected event” that severely impacts financial markets.

Author and financial expert Dr. Nassim Nicholas Taleb coined the term in a book by the same name. He argues that black swans are characterized by unpredictability and that we wonder how we missed these events in hindsight.

Experts have difficulty foreseeing these events based on historical data or traditional forecasting models. As a result, they often catch the market by surprise.  

Examples include the 9/11 attacks, the COVID-19 pandemic, and the 2008 Great Financial Crisis.

Now, most people falsely equate Black Swans with Grey ones. So, I stress that when you hear people saying, “These events could be black swans,” – they’re not discussing black swans – which aren’t genuinely foreseeable by the markets.

A…