I just read this timely article "The Perils of Overconfidence" in which a Wall Street sophist once again tells us that predicting the future is a fool's errand (scroll down past all the bullshit to the bottom of the article). Apparently trying to avoid being ass raped by Wall Street for the fifth time in a row, is the *new* overconfidence. This "no one can predict the future" bullshit is exactly the mentality engendered by "Fooled by Randomness" (aka. the Black Swan Event), as described in the original post below. I say it's timely, because from a contrarian standpoint, this is also the type of mindset we should expect Wall Street to adopt at a critical juncture when facing overwhelming (and highly obvious) risk. Let's be clear, Wall Street greedbots have to believe the Black Swan theory in order to keep their eye on the prize, which is the end of year bonus. That is their overriding incentive, because after all, hedge funds are just call options - heads they win and score a big bonus - tails they underperform the market/crash the fund, and walk away.
For those of us "home gamers", the timeline and incentives are slightly different when it comes to catastrophe avoidance. My timeline is through retirement, and my incentive is to protect my savings in the event of job loss, and thereby avoid having to feed my kids dog food.
Black Swan Theory = Plausible Deniability = Willful Ignorance = Overconfidence
More importantly, the best investment advice ever given, didn't come from philosopher Bertrand Russell it came from investor William J O'Neil who said (paraphrasing) - the key is not to figure out what is going to happen, the key is to understand what already has happened. With respect to the illusion-formerly-known-as the economy, it's already off the fucking cliff, supported merely by debt. And as the latest inconvenient data indicates and the Baltic Dry Index corroborates, the vector is down. Getting back to the perils of overconfidence, nothing comes close to Wall Street's greed-addled faith that Central Bank liquidity programs can substitute for a self-sustaining economy - forever. For three years Central Banks have forced the market's Risk On/Off mode to the "On" position - so far, so good. The operative (and fatal) assumption is that they alone control the switch...
Original Post: "Brown Swan Event" [12/19/2011]
Every time the markets have crashed these recent past times ('97, '98, '00, '01, '02, '07,'08...), the self-nominated "experts" at large scratch their heads and say "No one saw that coming". Therefore, based on the current level of complacency, I highly suspect that will be the case again this time, so we may as well get a jump on things and consider what types of excuses will emanate from the Idiocracy.
The End of the World Only Comes Once and You Can't Make Any Money Off of It