Read this today …I think investors stuffed in the short and nearvterm.
The fallacy of global crises
Humans like to believe that global shocks happen with some degree of order or predictability. But that, Ferguson said, is a fallacy.
In fact, rather than being evenly spread throughout history, like a bell curve, disasters tend to happen non-linearly and all at once, he said.
“The distributions in history really aren’t normal, particularly when it comes to things like wars and financial crises or, for that matter, pandemics,” said Ferguson.
“You start with a plague — or something we don’t see very often, a really large global pandemic — which kills millions of people and disrupts the economy in all kinds of ways. Then you hit it with a big monetary and fiscal policy shock. And then you add the geopolitical shock.”
That miscalculation leads humans to be overly optimistic and, ultimately, unprepared to handle major crises, he said.
“In their heads, the world is kind of a bunch of averages, and there aren’t likely to be really bad outcomes. This leads people ... to be somewhat overoptimistic,” he said.
As an example, Ferguson said he surveyed attendees at Ambrosetti — a forum in Italy attended by political leaders and the business elite — and found low single-digit percentages expect to see a decline in investment in Italy over the coming months.
“This is a country that’s heading towards a recession,” he said.
https://www.cnbc.com/2022/09/02/1970...investors.html