Friday Sept 18 2020
Fooled by Randomness
Nassim Nicholas Taleb advocates a ‘black swan robust society’. This means a society that can withstand difficult to predict events. His metaphor of a Black Swan is an unexpected or difficult to imagine event. For centuries it was believed all swans were white, until a black swan was discovered in Australia.
The Covid Pandemic has been a Black Swan Event. Yet in retrospect, perhaps society was clinging to rear view mirror ideas of how to get things done. Did we really need airplanes crammed with passengers leaving major airports every ninety seconds? Apparently we did not.
Entire industries are facing a top to bottom re-make or possibly the oss of large segments.
Exxon and Chevron are partnering with the Rocky Mountain Institute to track methane emissions in the Permian Basin. The industry has come under criticism for flaring excess natural gas. Most major international energy firms like BP are already looking away from carbon fuels to wind and solar. In ten years Exxon has gone from the most valuable company on earth to being ejected from the Dow Industrials. Hello Black Swan. Event.
Natural gas inventories swelled to 3.6 trillion cubic feet last week above analyst expectations (another unexpected event). As a result natural gas futures collapsed 9.9 percent in one day to $2.042.
Emerging markets have been the source of carbon fuel demand. But last quarter India’s GDP dropped 39 from a year earlier. No wonder demand is faltering.
Energy service continues to contract losing over 100,000 jobs. Only 326% of S & P energy firms are now in bullish posture.
The FED has spent billions buying bonds to shore up the stock market. That money has found its way into tech and pharmaceutical shares. The NASD registered a new high. But the percent of NASD stocks in bullish position is only 55%, and falling Again this speaks to narrowing breadth of leadership with IPOs like Snowflake skewing the results.
The fate of entire industries remains unknown. Six months into the pandemic, America’s offices sit half empty. Airline traffic is only 30% of what it was a year ago. Airline execs were in Washington this week asking for $25 billion to keep workers employed. As noted that is a small numer compared to a $1.5 Trillion rescue. But with Zoom and Webex dominating the new conversation, airlines look a lot like the horse and buggy industry circa 1905.
Hotels are doing no better with airline travel reduced. Governor Abbott is allowing more restaurants and bars to have larger patronage. But expectations are still that many such firms will not survive.
The big winner is Amazon now planning hundreds of new distribution centers. Brick and mortar retail continues to shrink.
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