June 1, 2014
The June 2014 issue of The Credit Strategist is now available - “Man Plans and God Laughs” If you are not already a subscriber, be sure to subscribe today!
|Financial markets are complex systems. Complex systems generally exhibit four defining qualities: diversity of agents, connectedness, interdependence, and adaptive behavior. They experience feedback loops that lead to exponential rather than linear change. When such systems experience long periods of suppressed volatility, they tend to build up dangerous pressures under the surface. As a result, they become susceptible to unexpected large-scale events that can cause disproportionate damage because the environment is unprepared for them. And the longer it takes for a system to experience volatility, the worse harm the breakout of instability is likely to cause. This is the situation we are now facing although the veneer of stability renders that thought very difficult for most people to comprehend…..Continue Reading||Man Plans God Laughs
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