The 'X' Factor

Tom Scollon
Chief Editor

I have received much ribbing about this topic.

Let me explain. The ‘X' factor has nothing to do with ‘X' or ‘Y' generations or chromosomes. You may recall from your basic algebra days that ‘X' was the unknown factor that we had to find given other data.

We can apply the same theory to life – there are many unknowns – and if we knew half of them we would probably not get out of bed of a morning!

The ‘X' factor can freak markets and we have seen that with the bird flu virus when it first surfaced as an issue. Like many ‘X' factors, we can learn to accommodate and live with them, even if unhappily. In such cases, after the initial dramatic reaction by markets to the unknown, rationality returns.

‘X' factors are not financial or economic issues, as these are generally known and within the markets' radar screen. For example, we are well aware of the USA ‘twin peaks' – which, in the view of many, are alarmingly high budget and trade deficits. What we don't know is when we may see the market react. Markets don't do it according to the timings as predicted by economists or analysts – markets act in predictably unpredictable ways.

Another characteristic of the ‘X' factor in relation to the markets is that the impact on the markets is short lived. Sadly though, the human impact of shocking ‘X' factors such as terrorism, hurricanes or earthquakes is long lasting and devastating.

I can't tell you what or when the next ‘X' factor is, as that is the nature of the beast. However I can tell you the market will more than likely react, especially if the markets have run too hard. Why? The markets use the ‘X' factor as an excuse – it becomes the whipping boy!

Enjoy the ride

Tom Scollon
Chief Editor