The Fog of War

By -

It seems to me the mass of humanity seems wisest only when disaster has recently struck. After the dot-com crash, everyone – and I mean everyone – clucked their tongues, shook their heads, and took on a bemused grin at the silly souls of 1999 who bid worthless stocks up to heaven. "What were they thinking? How could they believe those p/e's? I never would have done that!"

But then a new bubble started – the housing bubble. And it all made sense at the time. They aren't making any more land, after all, are they? And housing prices have never gone down. Interest rates are really low, and you've got a lot of first-time homeowners coming on the scene. I mean, it all makes sense.

So the the entire financial world is pushed to the brink (and only Lehman was allowed its own natural death; everyone else was artificially saved), and here again, everyone gets Instantly Wise. It's so obvious now how fraudulent and inflated it was, isn't it? Of course.

But we're in fog-land again. From Jim Cramer on up, everyone has figured out that it's silly to ignore the obvious reasons the market is going up. Don't fight the Fed, right? I mean, the writing's on the wall! Bernanke has made it crystal clear. It all makes so much sense.

And yet, whenever the next big fall comes – whether it's next week, next year, or five years hence – the Instantly Wise will wonder how on earth we could have deluded ourselves. How could we have missed the fact the Chinese were about to pull the rug out from under us? How could we have assumed hyperinflation wouldn't take place? What were we thinking?

Wait, we're not there yet. We aren't in Wise mode. We're again in the bubble, and only a fool isn't taking advantage of it. Enjoy the ride.