Surprise No. 7: There will be four market influencing black swan events in 2013.
As I have observed, there is a growing frequency of black swans around the world, and 2013 will be no exception -- climate change and technological disruptions play a significant role on the financial markets this year:
1. Another major drought lies ahead. Droughts in the U.S., Brazil and Russia have a knock-off impact on much higher commodity and food prices, experiencing a greater-than-5% rise in 2013. A 5%-plus rise in food prices further adversely impacts the consumer's purchasing power.
2. A coronal mass ejection. The sun emits solar flares (or coronal mass ejections) that penetrate the Earth's atmosphere and initially wipe out most GPS systems, disrupt numerous communications systems, electronic devices and power grids all over the world. Electricity is lost in several regions of the world for weeks. A mini panic ensues, as concerns about broader damage emerge.3. More flash crashes. A series of mini flash crashes occur in the first six months of the year. One such flash causes a major bank to lose close to $2 billion. In part to raise revenue and in part to curb market volatility and to halt the proliferation of high-frequency trading, a securities transaction tax is instituted by year-end. 4. A cyberattack. The U.S. experiences a major cyberattack on the power grid or other key infrastructure target. The source of the attack is not detected. Cybersecurity stocks soar, while the overall market experiences a 3%-4% drop. Strategy: Buy Sourcefire (FIRE) and Palo Alto Networks (PANW).
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