“Instead of looking for opportunities to invest in real products, Wall Street awaits the minutes of each Federal Open Market Committee meeting with bated breath, hoping that QE3 and QE4 are just around the corner.”

–          Ron Paul

There have been bouts of risk aversion over the last few years – some sustained, most not; but all unquestionably due.

We understand that the final arbiter is price, regardless of what the fundamentals suggest about an investment or underlying economy. But it’s hard to maintain such necessary agnosticism when the news is so consistently bad.

And therein lays the problem – consistency.

One might instead use the term “mindless recitation,” but the steady — consistent — dose of ‘bad’ has rarely spooked investors (those still playing, anyway). Sure, a confluence of ‘bad’ has served to ruffle feathers periodically, but, ultimately, the markets continue chugging along because we always know ‘just how bad’ or ‘just how good.’ For as long as everyone knows what’s going on, the cause for worry is diminished. Why? Because investors rationalize their above average, selective stock-picking ability and fabricate a false sense of security (trading bias) which, in a self-reinforcing sort of way, creates the apparent absence of uncertainty.

Bringing the black swan concept into this, analysts have sought to uncover potential risks that would bring on massive shocks to the markets; it’s become a well-tred path to popularity and influence in the investment world since 2008. But, by definition, predicting a black swan event is impossible.

As we move further and further away from the credit crisis of 2008, and as we are further desensitized to the words ‘bad’ and ‘worse’ by government and central bank officials’ action, investors seek out risky investments because they have not found a black swan (and, because of the low interest rate background, nothing else pays.)

To Read More CLICK HERE