I would like to start out with a snippet from the 1993 film Schindler’s List.
We were on the roof on Monday, young Lisiek and I and we saw the Herr Commandant come out of the front door and down the steps by the patio right there below us and there on the steps he drew his gun and he shot a woman who was passing by. A woman with a bundle, through the throat, just shot her. Just a woman on her way somewhere, you know, she was no fatter or thinner or slower or faster than anyone else and I couldn't guess what she had done. The more you see of the Herr Commandant, the more you see there are no set rules that you can live by. You can't say to yourself, "If I follow these rules, I will be safe."
For me, nothing captures my feelings toward the stock market better than the above quote. The stock market, in the form of Herr Commandant, has power. It can do things at will. It has its own behavior. But that behavior is no longer something that can be understood. It simply does what it does, without any clear basis in rational thought, and we can either participate as willing collaborators, rationality be damned, or we can stand back in abject puzzlement and horror. I’m kind of in the horror camp.
(more…)