Black Swans, Grey Rhinos and The Long Cycle of History

A look ahead for 2026 written on January 3^rd 2026.

1. Black Swans, Grey Rhinos and The Long Cycle of History: If 2025 can be summed up in one word, the word I choose is “awaken”. Awaken in the sense that a large population in the global village has finally woken to a reality that the promissory notes given to them by the ruling elites would not be honored. For the most part of my working life I was able to function because the prevailing environment was “Thy Word is Thy Bond”. I also witnessed first hand a gradual deterioration of integrity with a passing of the baton through generational changes. 

For 2026 my choice of words is “春” as in the season “Spring”  the passing of a period of cold and darkness into a season of early budding and life. “Spring” in English could also mean a coil under pressure ready to decompress in force. Depending on the individual circumstances, both may be applicable. For the majority of people, the future cannot be predicted with certainty, however, my Christian world view says” there is nothing new under the sun”.  So for pure academic interest, allow me to highlight a few signs that will mark what is to come.

(i)  Black Swans - A "Black Swan event" is a rare, unpredictable event with massive consequences, like a financial crash or major war, that people rationalize after the fact. What happened in Geo-politics and economics in 2025 and to happen in 2026 and beyond are but a continuation of well known frictions that are decades in the making. Allow me to post a cartoon I created back in October 2022.  (Fig. 1)

- the burning Dollar, China, Russia, Iran, North Korea, Venezuela, Afghanistan and Islamic Terrorism, what else is new.  It has always been beyond Uncle Sam’s band width to take on a handful of nations that would not bend the knee to the Empire. Sadly it took 7 years and a doubling of debt burden ($17 trillion to be exact) for the elites in US to learn they can never win by playing checkers with masters of the game of Go. For those readers who do not play board games, (Fig. 2) is a simplistic view of the level of sophistication between Checkers, Chess, Chinese Chess and Go.

It is a tragedy to have Checker level players running a big country.

(ii) Grey Rhinos - A "grey rhino" is a metaphor for a highly probable, high-impact threat that is often ignored despite obvious warning signs. Second only to Geo-politics and economics, is the impact of AI on the economy and employment. Jensen Huang CEO of Nvidia used a 5 layer cake as an analogy to represent the artificial intelligence ecosystem. (Fig. 3).

As a major beneficiary of the AI investment boom in US we need to take Huang’s narrow focus with a pinch of salt. For the past 70 years, educators have horned the pathway in the complexity of human learning with Benjamin Bloom’s learning model. (Fig. 4).

What we currently have in both US and China in terms of AI is but at the initial levels of machine learning when compared with human intelligence. AI is only at the primordial level of recognition, memory, recollection and repetition, albeit, at a traveling speed of electrons in a 4-nanometer pathway. To that we then add algorithmic enhanced regression, decision trees, grouping, classification and mimic images and languages. What the Big 5 within the Magnificent 7 in US is doing has more to build a rent seeking monopoly than true intelligence development. Are we surprised that DeepSeek only takes $6 million to train rather than hundreds of millions for Large Language Models in the US. Why go through the entire Cyber Space for answers when a survey of 8 to 10 web sites can already provide a good enough answer for majority of questions. Was it beyond comprehension in the MIT report that 95% of generative AI pilots failed to show measurable profit & loss (P&L) impact within six months, with only 5% scaling successfully, despite billions invested in AI experiments. The US AI bubble will burst and with it a deflation of asset prices and credit contraction beyond known financial history. The first sign already appeared when Blue Owl Capital pulled its equity funding for a $10 billion Michigan facility in collaboration with Oracle and OpenAI. (Fig. 5).

Across the Pacific, small yet significant steps have been taken by China in robotics and AI application from coal mining in Shanxi (Fig. 6)

to Xiao Mi dark factory for smartphones in Beijing. (Fig. 7) that are giving China a competitive cost advantage by leaps and bounds.

Coming back to Bloom’s Taxonomy, application is a critical third level of learning towards the ultimate objective of creativity.

(iii) The Long Cycle of History - In a financialized economy, civilian research are only rewarded if the research results in actionable trades. So what you read whether in MSM or stockbroker’s report are all instruments to create a narrative and momentum driven trading environment. Charlie Munger said "The big money is not in the buying and selling, but in the waiting". Warren Buffet reinforces this idea by saying, "The stock market is designed to transfer money from the active to the patient". (Fig. 8).

I would suggest we all take shelter from the day to day background news and noise pollution and look back at the Long cycle of History.  A good indicator is to take a look at the long credit cycle represented by an interest rate graph of the US 10 Year Treasury (Fig. 9).

60 Years ago in 1964, we are about to enter a cycle of heightened inflation towards a default of Bretton Woods in 1971. This time round, the reverse will happen and Bretton Woods 2.0 will be reestablished. Human nature is such that no one wants to buy gold at $1,500 an ounce in 2019 but would queue up in front of bullion dealers when the price hit $4,500.

2. Asset Class Performance 2025.

For 2025, various asset class performance as follows(Fig. 10):

Silver (+142.56%); Gold (+62.5%); Uranium (+46.7%); Copper (+41.75%); Russian Rubble (+40.7%); Hang Seng Index (+30.61%); Shenzhen Index (+28.51%); Nasdaq (+20.34%); SP500 (16.64%); Euro (+14.4%); DJI (+13.38%); CNY (+4.38%); JPY (+0.55%); Bitcoin (-9.71%), Brent Oil (-19.68%).

Allow me to flag some short term red alerts that everyone should take note.

(a) The US financial system is out of cash despite the Fed already pumped $101 billion by Dec 30. It was only announced that from December 12, the Fed would buy $40 billion per month and the Fed cannot predict just 3 weeks out. (Fig. 11)

(b) The US Treasury can only fresh fund Treasury issues through synthetic demand via derivatives driven basis trade and SOFR volume (Inter-bank Overnight Lending) continued to increase crowding out commercial funding needs. (Fig. 12)

(c) Emergency Funding Arrangements (“REPO”) are tapped repeatedly in December even on Christmas and New Year’s Eve because of liquidity squeeze.(Fig. 13)

(d) There is apprehension amongst banks operating in the US. As at December 31, 2025, some $105 billion surplus liquidity are parked by some banks with the Fed using the Reverse Repo Facility despite a higher yield offered by SOFR. There are other banks in need which could not obtain overnight funding despite offering collateral of Treasury or Agency Notes. (Fig. 14).

My friends be on guard and stay safe.

Ecclesiastes 3:1  To everything there is a season, A time for every purpose under heaven: 

Ecclesiastes 1:9  That which has been is what will be, That which is done is what will be done, And there is nothing new under the sun. 10  Is there anything of which it may be said, "See, this is new"? It has already been in ancient times before us.