An informative article in Bloomberg is summarized here:
Investors are moving together as a herd, investing in stocks, commidities, & emerging markets and risking a replay of last year, when they all plunged the most since World War II. The herd mentality threatens to leave investors with no refuge amid signs that the worst U.S. recession since 1958 isn’t abating.
Harry Markowitz, who won the Nobel Prize for economics in 1990 for his work on portfolio theory, says that last year’s collapse reinforces his view that even the most unlikely outcomes are possible in any year.
“The thundering herd is still with us,” said Markowitz, a professor of finance at the Rady School of Management at the University of California, San Diego. “Nature draws into a bushel basket full of returns and finds a next return every year, and I believe there’s another 1929 somewhere in that bushel basket. 2008 was not a refutation, it was a confirmation.”
My Notes: Understanding of risk, uncerainty, probability are critical for the long term success of traders. Please do read as much as you can on these subjects.