Today, I’d like to START A NEW VIDEO SERIES on discussing the important topic of ManagingBlack Swan Events In Personal Finance.
So, the Torah is rich with stories and lessons, including in the area of personal finance.
One area that I think about form time to time is the story Noach, and the Great Flood, which was a once in history event, but should serve as a reminder that large and devastating catastrophes do occur.
In modern times, these types of rare, unpredictable occurrences are known as “Black Swan” events. Statistically they are referred to as a “tail risk,” which means an extreme, unexpected loss due to events that lie far outside normal expectations. Even though the probability of the exact same type of Black Swan occurring again is unlikely, there are various types of these catastrophic events that have occurred in the financial markets over the past few decades. Some of these include:
- The Oil Embargo and 1970s energy crisis: Which caused a market sell-off starting October 1973 and its impact lasted well into 1974 of 48% of its value.
- Black Monday: On October 19, 1987, the Dow Jones Industrial Average experienced its largest single-day percentage decline in history, falling 22.6%.
- Dot-com Bubble Burst: Where the late 1990s saw a massive influx of investment into the tech sector. The NASDAQ, lost a staggering 80% of its value from its peak in March 2000 to its trough in October 2002.
- September 11 Attacks: On the World Trade Center and the Pentagon triggered a halt to the U.S. financial system and saw a markets loss of over $1.4 trillion in value within a week.
- Global Financial Crisis: The 2008-2009 financial crisis was caused by the collapse of the U.S. housing market due to risky subprime mortgages. The S&P 500 lost nearly 57% which wiped out more than $10 trillion in global stock value. The real estate market took years to recover.
- And the COVID-19 Pandemic: In 2020, the Covid pandemic triggered unprecedented economic shutdowns around the world, causing the S&P 500 to fall over 30% from February to March 2020, one of the fastest declines into a bear market in history.
While the these global market events are classic examples of “Black Swans,” individuals can also experience personal versions that are equally rare and disruptive to their finances.
In my next video I will cover some examples of life altering events that can impact your finances and what families can do about it.