Bikers, Bonds And Black Swans

A “black swan” event occurred at a gathering of outlaw bikers on Sunday, May 17 in Waco, Texas.  According to news stories a fight broke out between several motorcycle gangs at the Twin Peaks restaurant.  At least nine bikers are dead, another 17 were injured, and perhaps as many as 170 were detained or jailed.

OUTLAW BIKERS:  They are more likely to trade gunfire than bonds, but consider the similarities:

• ANIMOSITY: Rival biker gangs, the Bandidos and the Cossacks, met at the restaurant on Sunday to discuss issues such as territory, licensing fees, and drug revenues.
• TERRITORY: Control of their territory is vital to their status and drug revenues.
• READY TO EXPLODE: Those two gangs have been enemies for decades.  They have a violent history and much accumulated bitterness.  It was a biker and drug fueled bomb ready to explode.
• A TINY SPARK: The disagreement started over something simple, probably a parking space.  It escalated into a brawl that involved fists, feet, clubs, chains, knives, and guns.

THE BOND MARKET:

• ANIMOSITY: Rival monetary authorities often fight and disagree.  How will the Greek government pay back the EU and German banks?  Bankers in Cyprus warned insiders but stripped private accounts in Cyprus in 2013.  How will sovereign governments in Europe, the US, the UK, and Japan repay $100’s of Trillions in debt?
• Central bankers and politicians demand that they operate “the only game in town” – do it their way or no way.  Controlling their territory is vital to their status and revenues.
• READY TO EXPLODE: Violence will erupt if bankers or government officials admit the answer to the $100 Trillion payback question might be, “no way, and never.”  Will more banker “suicides” be required?
• A TINY SPARK: Under the right circumstances the disaster can begin from almost anything and escalate with a life of its own, such as the financial crash in 2008, ultimately ending in death, destruction, prison, and irreversible changes in the lives of many.

BLACK SWANS:  A financial “black swan” is an unexpected event that has a huge impact when conditions are unstable.

• ANIMOSITY AND TERRITORY: It can be initiated by events such as an assassination, military confrontation, storm, bond default (Greece, Ukraine, or Venezuela perhaps), derivative crisis, revaluation of sovereign debt, Chinese declaration that they hold more gold than the US supposedly holds, bond market sell-off, or whatever.
• READY TO EXPLODE: The conditions to create a major crisis exist in both geopolitical “hot spots” and the global financial system.  Many will proclaim that the debt, bond, and currency bubbles are primed and ready for the inevitable crash.
• A TINY SPARK: All the necessary ingredients for disaster were present in Waco, and exist now in the global financial system and the current political squabbles in Ukraine, the Middle-East, and the South China Sea.

The consequences of a biker brawl, a fight between bankers and debtors, or a confrontation between major powers in Ukraine, Iraq, or the South China Sea will be life changing and irreversible.

If it can happen, it will eventually happen, which is why people buy insurance.  Do you have “black swan” insurance regarding your financial exposure to fiat currencies and paper assets that might be revalued far lower and quite rapidly?

Death, injuries, prison, and life changing consequences arose from an argument over a parking space.  What might occur in an argument over several $Trillion of dodgy sovereign debt or a territorial fight in the Ukraine, Iraq, or Syria?

Do you own insurance in the form of gold and silver, which have NO COUNTER-PARTY RISK?

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Gary Christenson

The Deviant Investor