Also, with securities markets best modelled as a random walk plus drift, I don't know that stock portfolio performance is really indicative of anything at all to do with intelligence. It's a random variable, per JonLaw's results.
The lesson I learned was "don't short the market during a major QE session."
So, it was pretty non-random.
![[Linked Image from hussmanfunds.com]](http://www.hussmanfunds.com/wmc/wmc130415e.jpg)
An important lesson. But, then, QE was an unprecedented response to a black swan event.
They weren't reacting to a "black swan" event.
In fact, the collapse of the credit/housing bubble was as far from a "black swan" event as you can get.
When you stuff a financial system chock full of credit that has no business existing in the first place, what you get is what happened.
I mean the dot-com bust just happened. It wasn't like everyone hadn't just lived through a boom and bust.
It was a standard-issue mania, panic, and crash. Classic "white swan".
I'm going to say yes and no.
You don't get any disagreement from me about over-extension of credit being obviously problematic. When price is so radically disconnected from fundamentals, it's only a matter of time until a correction occurs. So yes, that's as plain vanilla as theory goes.
But where I would argue a black swan occurred was in the speed of transmission of losses due to an unprecedented, and largely misunderstood, interconnectedness of assets across classes and geographies. While I'll concede that it was actually an endogenous shock, I'd suggest that it still qualifies as a black swan due to the disconnect between expectations and reality on the propagation of the collapse. That was truly unforeseen.
Either way, we're taking this thread pretty far afield.
