The Nature of Events

BarroMetrics Views: The Nature of Events

One of the most useful things I learnt from Pete Steidlmayer is to label events as being either ‘expected’, ‘unexpected’ or ‘surprise’ events.

  • Expected events are ‘fundamentals’ accurately assessed by market participants that result in trading range markets. 
  • Surprise events are random events that move price away from value. At the ‘expiration’ of the event, price returns to value. 
  • Unexpected events are ‘fundamentals’ inaccurately assessed by market participants. ‘Value’ moves away from price. Price eventually catches up with value, and with hindsight we come to see that a new trend has begun. 

Two events are on the horizon that have the capacity to move markets: Ukraine and FACTA.

All eyes are focused on the Ukraine.  Many fear contagion (see pdf attached from John Mauldin’s excellent free newsletter, “Outside the Box‘). I see it as a surprise event. It is unlikely that the US or EU will do much should Russia invade Ukraine. That event for me is not ‘if Russia will invade’, but ‘when’. After some volatility, I expect markets to return to normal.

FACTA, on the other  hand, is not on the radar. But, its effects are being already felt. For example, see the attached pdf about Cathay’s US pilots. In FACTA, I provided some views on FACTA’s possible effect on the US. If those events come to pass, then I expect history to show that FACTA was the black swan event that showed that even the FED is subject to economic laws.

Needless to say I rate FACTA as an ‘unexpected event’


Outside the Box


Cathay Pilots

2 thoughts on “The Nature of Events”

  1. Hi Ray, I have been revisiting your past blogs.
    There is a lot of really good ,informative articles. Nuggets of Gold.
    BUT… One thing is missing from that era!
    Dame Ana comments! Hope she is alive and well.
    Best wishes to her.
    cheers Baz

  2. Hi Baz

    The Dame is now a Vicountess.

    Her interests are now other than trading. But, she still posts a rare comment from time to time.

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