Investing Unknowns.

From my perspective, the markets are currently living in a time of “known unknowns.” That is we know that there are certain things that will play out in a way we don't exactly know, but we feel comfortable that we can handle any eventuality. In the stock market there is always a whole list of things like this. We don't know, for instance, what the comings corporate earnings will be. But we're comfortable, that they will fall within an anticipated range. Next week we will get the latest number on the Gross Domestic Product, we don't know exactly what that will be, but current estimates are that it will be about the same as the last estimate, a 2.1% growth rate. And we are comfortable with that. Same with interest rates, also announced next week. We're comfortable that they will remain about where they are. And so it goes throughout the financial world right now. We think we know what lies ahead, and we're reasonably assured that it will be a smooth ride ahead.

Back in the 1950s two American Psychologists developed the concept of Known-Unknowns and Unknown-Unknowns. Meaning that there are things that we don't know and are fairly comfortable with that, and things we don't know that we don't know.

The concept was introduced to the public by a former Secretary of Defense Donald Rumsfeld, when he used it to explain a strategy in the Iraq war.

I believe that we are transitioning from a time of “known unknowns” in a new time of “unknown unknowns.”  And that this is likely to have a profound effect on the financial markets.

Let me explain.

From my perspective the markets are currently living in a time of “known unknowns.” That is, we know that there are certain things that will play out in a way we don't exactly know. But we feel comfortable that we can handle the possible eventualities.

In the stock market, there is always a whole list of things like this. We don't know, for instance, what the comings corporate earnings will be. But we're comfortable, that they will fall within an anticipated range.

Next week we will get the latest number on the Gross Domestic Product, we don't know exactly what that will be, but current estimates are that it will be about the same as the last estimate, a 2.1% growth rate. And we are comfortable with that.

Same with interest rates, also announced next week. We're comfortable that they will remain about where they are.

And so it goes throughout the financial world right now. We think we know what lies ahead, and we're reasonably assured that it will be a smooth ride ahead.

But the world that lies outside Broad and Wall, the geopolitical world is nothing like that. Here uncertainty abounds. And it's not just that we don't know what's likely to occur among a group of variables. We don't even know the full ramifications of those variables.

Lets take a look at the most recent of these " unknown-unknowns” the Coronavirus. On Monday political leaders were telling us that the spread of the virus was under control. That 250 cases had been reported mainly in China, and that all was well.

By Tuesday those same political leaders once again reported that all was well. But the number of cases reported rose to  400, up from just 250 the day before.

And suspected cases have spread from Wuhan Province  to 5 other provinces in China in addition to South Korea, Thailand, Japan, and possibly Mexico, and Washington State.

This is the very definition of an unknown event, with an unknown outcome.

Another political unknown is unfolding right now in the nation's capital. It is the Senate Trial of President Donald Trump.

The US House of Representatives has impeached the President. Now most would classify this as a known. All of the pundits have already voiced their opinion that President Trump will not receive the 2/3rds vote needed to convict. That he will be acquitted. And the odds are that is true.

However, this exercise has the potential to uncover further malfeasance, not performed by Trump, that could really topple the apple cart. The prime candidate for this kind of “unknown” is Hunter Biden, who's relationship with Ukrainian Oil Company Barisma Holdings is certainly unseemly, if not downright illegal.

Bring Hunter Biden as a witness before the Senate, and this trial goes down into an entirely new direction.

Finally we have the ever volatile Middle East. Home of the ongoing belligerents of: Iran, Iraq, Syria, Israel and Saudi Arabia. Just to name a few.

The latest move by the US to take out General Soleimani has passed so far. But who knows for how long this truce will last?

Add to this list such hot spots as North Korea, Hong Kong, and the continued troubles at our Southern Border, and you can well see that it is currently a world full of unknown/unknowns.

Problems that we cannot anticipate, and for which the Investment Markets currently do not have on their radar…

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