‘Known Unknown’ Dangers Are Lurking in the Stock Market

(Before It's News)

Don’t focus on possible black swan events but, instead, the basis for corporate profits

by Tim Clift
Market Watch

As the S&P 500 Index keeps reaching new highs, investor conversations have shifted from how low it might go (October’s topic) to how high the stock market can possibly climb. When people get that excited, it’s time to think about risks.

What could possibly go wrong and arrest this great bull market? Much speculation currently points to the kind of scary, exogenous, low-probability events we call black swans: an Ebola pandemic, say, or a “third world war” due to the Russia/Ukraine conflict or the ISIS threat escalating out of control.

Nevertheless, while these and other black swan events may have the potential to cause catastrophic damage to the markets and society, stock market disasters are much more typically caused by “known unknowns” — the events that have been perking for a while, whose natures are familiar to us and yet whose exact forms and potential dangers remain unclear.

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