|Putting History in Perspective:|
1.) In my political science class on Warfare i learned that in the years and months going into World War I, there was PEACE in Europe---very few if any suspected it would happen---and when war did initially break out, the consensus, mainstream perspective was that the war would not last long. Then, kabooom, it was the deadliest war in history (at that time), ever, by its end, so large in scale that it is known as the Great War, and very few thought that mankind could ever degenerate into a second war. Uh oh, it did and we had WWII. If you don't believe me, listen to some of these lectures: http://podcast.ucsd.edu/podcasts/default.aspx?PodcastId=716&v=0. Taleb also calls the Great War the "mother of all Black Swans".
2.) Going into the Great Depression was the boom times of the roaring 20's, and very few suspected that there would be a complete reversal from wealth to dearth. Then it happened, and those very few who saw it coming made millions (adjusted for inflation/price differentials to compare with today, they probably made the equivalent of billions, in real terms), like my favorite trader ever, Jesse Livermore.
3.) So do you see the analogy I am drawing? Few expected WWI to happen, and it did, then few believed it would happen again, then it did, with WWII. Look at the Great Depression---few expected it to happen, and it did, then few now believe that it will or could happen again, so we're calling this period we're in the Great Recession, scrambling to PRESERVE whatever is left of the financial system that was left after hundreds of bankruptcies (large and small banks), instead of fixing root, systemic problems like the diminishing productivity and manufacturing base in the U.S.
I know this chart is from WIKIPEDIA so it may lack the credence of being from some formal econ journal, but check it out. It shows a REPETITION of the same exact pattern going into the first Great Depression, with the fricken finance industry taking a larger and larger share of GDP, finally peaking off and crashing when there was a liquidity squeeze due to overspeculation. This is the reason why today's U.S. government and now the public/news media has the "too big to fail" mantra/meme stuck in their minds/language---it's because the financial industry, particularly the megabanks, WERE in fact too big to fail going into 2007-2008, and are still too-big, if anything, they're even bigger now due to lots of names going bankrupt (wachovia, lehman, bear sterns, washington mutual, merril lynch, countrywide) and consolidating through buyouts.
when you make a mistake in a trade, do not get mad, get OUT!
the market can stay irrational longer than i can pay rent.
in America, you trade stock market, in Soviet Russia, stock market trades YOU!