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I agree that for global systemic risks like nuclear war or a 5-km wide asteroid slamming into Nebraska, there's nothing you can do, and if it happens in your backyard, your portfolio will probably be the least of your concerns.

But I guess I'm a lumper who tries to fit minimal-parameter models whenever I can, and hence the contagion/complexity example you outline in your first paragraph strikes me as a "global risk", even though it's a highly correlated series of individual events travelling rapidly through a highly-connected world economy (i.e. it's only understandable as a chain of events if you have near-perfect information).

So, as I gaze out over the current American economy, in a climate that I perceive as easy money, too much debt, inflated assets, and massive hedging, I worry about a system where a Monarch flapping its wings on its way down to Vera Cruz can topple an S&P giant located in Houston, which can topple the local real estate market, the whole oil & gas industry, yada, yada, yada...

Except it's more complex and potentially slower than that. People think the economy has already recovered from Sept 11. I doubt that we've even begun to see all the effects yet.

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