Now that the Pentagon tales UFO's seriously it’s perhaps appropriate to consider some more mundane aspects of the phenomenon — namely, what it means for markets. UFO data will probably remain murky and unresolved, but if UFOs of alien origin become somewhat more likely (starting, to be clear, from a low base rate), which prices will change?
Or, to put the question in market terms: Where is the alpha in Alpha Centauri?
To consider one concrete scenario, suppose that the federal government fulfills its legislative promise to release all classified information about UFOs this summer, and several senators hold a press conference and announce that alien origin cannot be ruled out as a hypothesis. This hardly seems impossible.
My first prediction is that most market prices won’t move very much. In the short run, VIX might rise, because some traders might wonder if there is more than meets the eye to this announcement. But as investors realize that senators really are puzzled, and there are no little green men locked up in a facility somewhere, VIX would probably return to normal levels.
If aliens really are among us, they do not seem determined to influence the course of worldly events. They have neither destroyed us nor saved us, with say a cure for cancer or world peace or a proof of Goldbach'sconjecture. Their vehicles, if indeed it is vehicles we are observing, dart away when approached by Navy pilots. Even if you took the extreme view that one million of them are living under the ocean — would that affect Wall Street expectations for the number of iPhones sold next year? Maybe it would increase demand for a fly-by camera option.
More plausibly, if the unidentified flying objects are of alien origin, they are unmanned drone probes with advanced software, programmed to observe and stay away when approached — much like how drones on our planet record nature shows for David Attenborough.
If you know you are being watched, what exactly do you wish to buy more of? I would bet on defense stocks to rise, whether or not there is much we can do to defend ourselves against this alien presence.
Of course investors could not be sure that these alien drone probes will merely observe us forever. They might be observing with the purpose of rendering judgment. If they are offended by our militaristic tendencies, the quality of our TV shows and our inability to adopt the cosmopolitan values of “Star Trek” over the next 30 years, maybe they will zap us into oblivion. But that kind of systematic risk is hard to insure against. After such an act of obliteration, neither gold nor Bitcoin will do you any good.