604.685.1096 wealthinfo@zlc.net Client Login Home About Us Wealth Solutions Resources Blog Contact COVID-19 is a Black Swan August 13, 2020ArticlesNo comments In the prologue to his 2010 edition, The Black Swan, Nassim Nicholas Taleb wrote: “What we call here a Black Swan (and capitalize it) is an event with the following three attributes. First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point out its possibility. Second, it carries extreme impact (unlike the bird). Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable.” COVID is a Black Swan. First, it was outside the realm of regular expectations. Sure, Bill Gates expected it. In a 2015 TED talk, Gates said that “if anything kills more than 10 million people in the next few decades, its most likely to be a highly infectious virus rather than a war” (YouTube: “The next outbreak? We’re not ready”). COVID hasn’t killed 10 million people, but investment managers agree its outside regular expectations. Second, COVID has had extreme impact. As I write this, Worldometer has listed worldwide known cases at 20 million and deaths of 750 thousand1, and 93% of the world’s economies are in recession, a new record going back to 1871 (World Economy, 1871-2020, Percent of Economies in Recession, Source: World Bank). And third, I’m sure there are many commentators “concocting explanations” for COVID’s occurrence and “making it explainable and predictable”. Donald Trump called COVID “the Chinese virus” and “Kung Flu” in offensive tweets that carry the risk of stigmatization. As we discovered in 2020, a Black Swan can certainly mess up market expectations in the short run, but the world has faced Black Swan events in the past. The Spanish Flu, also known as the 1918 flu pandemic, preceded an extremely profitable period for investors with Dow Jones Industrial Average increasing by about four times from 1918 to 1928. If this Black Swan has reinforced anything about investing, is that patience and diversification work. Those who kept their portfolios on-plan during this COVID period have generally seen their wealth only modestly affected. KEEP IN TOUCH If you have questions or comments, please feel free to contact any member of the ZLC Wealth service team. • Jon McKinney, Tom Suggitt, or Josh Brown (Portfolio Managers) • Grace Gumban (VP of Administration), or • Lisa Der (Account Manager) We’re here to help in any way we can. Kind regards, -The ZLC Wealth Team 1 https://www.worldometers.info/coronavirus/ DISCLAIMER: This newsletter is solely the work of the author for the purpose to provide information only. Although the author is a registered Investment as a Portfolio Manager at ZLC Wealth Inc. (ZLCWI), this is not an official publication of ZLCWI. The views (including any recommendations) expressed in this newsletter are those of the author alone, and are not necessarily those of ZLC Wealth Inc. The information contained in this newsletter is drawn from sources believed to be reliable, but the accuracy and completeness of the information is not guaranteed, nor in providing it does the author or ZLCWI assume any liability. This information is not to be construed as investment advice. Your own circumstances have been considered properly and that action is taken on the latest available information. 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