You can predict a lot that will happen, at least in a general way, by paying attention to what is happening now and what has happened in the past. You can predict how people will act based on what they have already done and what they say they will do. Then there are the totally random events that come out of nowhere and, like a tidal wave, threaten to wipe you out.
All individuals and organizations are at risk of these random events. A story in the Financial Times, “Big US Hedge Funds Hit Hard by Valeant Sell-Off” offers an example. It discusses the huge losses three of the biggest hedge funds, Pershing Square, ValueAct, and Paulson & Co suffered due to a large and rapid fall in Valeant’s share price. It seems all three funds have a very large percentage of their holdings in Valeant.
