Earlier today, I admitted to agreeing with Karl Marx about one thing. Don't tell anybody, but I also agree with George Soros on one thing, i.e., that economics has been crippled by a dependency on quantitative methods.
A few years ago, a brilliant mathematician named Nassim Nicholas Taleb, who has the warmth of a Brillo-pad, wrote "The Black Swan." He believes that highly improbable events do take place. The common characteristics include (1) the event is completely unexpected, (2) after it begins, it is worse than it looks then, and (3) everybody will agree afterwards that it was all foreseeable.
Today, Taleb is an advisor to a European fund that has just announced that another Black Swan event is about to occur. The humor is that they use math to support their prediction. By definition, if it can be predicted, it is not a Black Swan event. Besides, I think George Soros is right that such predictions, depending on math, are inherently untrustworthy.
If the European Union comes apart, if the U.S. defaults on its debt, and if we really need QE3, then we could have a really ugly market collapse, and we'll just call it a Black Swan event. But, I'm not losing any sleep over all this.
