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     Mar 11, '14


THE BEAR'S LAIR
The flick of the tail
By Martin Hutchinson

In a piece "Dinosaur tail risks" published on January 27, I discussed the various unlikely things that could go wrong with the world economy, mentioning well into the second page the faint possibility of a global war, since the global geopolitical system appeared as fragile as that governing before 1914.

Well, that didn't take long. While the risk of all-out war is still no



more than modest, it has definitely emerged as a lot more than a "tail" of less than 1% probability that risk managers usually (but wrongly) ignore.

There is a clear lesson here, for investors, bankers and managers. Risks that are in clear view are analyzed to death, can be managed for, and very often don't eventuate. Conversely tail risks, not provided for in conventional risk modeling and not properly analyzed, are far more likely to cause havoc, although naturally we never know which individual risk will rise up and bite us.

More ...

Martin Hutchinson is the author of Great Conservatives (Academica Press, 2005) - details can be found on the website www.greatconservatives.com - and co-author with Professor Kevin Dowd of Alchemists of Loss (Wiley, 2010). Both are now available on Amazon.com, Great Conservatives only in a Kindle edition, Alchemists of Loss in both Kindle and print editions.

(Republished with permission from PrudentBear.com. Copyright 2005-14 David W Tice & Associates.)





 

 

 
 



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