Known Knowns, Known Unknowns, Unknown Unknowns

“ [T]here are known knowns; there are things we know we know.

We also know there are known unknowns; that is to say we know there are some things we do not know.

But there are also unknown unknowns – the ones we don’t know we don’t know. ”

—Former United States Secretary of Defense Donald Rumsfeld talking about the lack of evidence that Iraq supplied weapons of mass destruction to terrorist groups.

I recently read an article in the Business Times by R Sivanithy, Senior Correspondent using Donald Rumsfeld’s analogy to describe the current business environment in relation to the stock market.

It prompted me to think about how the recent global events in Europe, Africa and Japan and its potential impact on the business mood across Asia.  This year started off very positively after a strong 2010 rebounding from the GFC. I had high hopes and announced it to my team in January that we are into year 2 into a 7 year boom cycle. There were speed humps along the way, Europe’s sovereign debt crisis were winds that blew hot and cold. The potential property bubbles in China, Hong Kong and Singapore are a constant threat of popping and sending huge groups of personal finances into ruins but in all 3 countries the government has stepped in with easing measures to ensure a slow deflation instead of a sudden pop. Then in March came the “black swans” unpredictable events – bloody revolutions in Africa and Middle East and the Japanese triple whammies of earthquake, tsunami and nuclear threat that shook the world, literally.

At this juncture, the end of Q1 of 2011, here are my thoughts. Disclaimer: I am no economist, just a lay man with considered opinions.

Known Knowns

Japan will rebuild, the “must do, indomitable” J-spirit will be even stronger in solidarity in the face of calamity. Most experts predict a dip in Q2 followed by a hockey stick upswing in Q3 as the Japanese government start releasing billions of US dollars of rebuilding funds.

The US economy is on track for recovery. All economic indicators are positive – unemployment numbers are down, corporate profits are back and improving. The US economy is a major influence on Asia, if it continues to do well, Asia will continue to prosper.

The Singapore, Hong Kong, China economics have weathered and recovered from the GFC well, all these economies are robust and for the foreseeable future no major hurdles in the way of continued future growth.

Known Unknowns

Japan’s Q2 dip is a known, but how low will it dip before it gets better? Will the recovery benefit only certain verticals like construction companies and construction materials suppliers?

The nuclear plants in Fukushima seemed to be under control and conditions seems to be improving day by day, that I guess is a known but the unknown is how will the leakage impact the environment beyond the 50km radius zone?

Unknown Unknowns

Any black swans coming our way? More devastating natural disasters? The perfect man made storm of financial calamity (stock market crashes? sovereign debt defaults on a massive scale? )? Steve Jobs or Warren Buffett leaving us?

So, what in your opinion are the known knowns, known unknowns and unknown unknowns? Please share your thoughts!

Photo courtesy of Black Swan Movie


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