While easily grasped, the above adage is not as easily respected. Rather, investors have a tendency to herd into what has performed well in the past.  And in today's financial world where asset class correlations are tied remarkably tight and the monetary powers that be are remarkably loose, this is an ominous contradiction.  In fact, the argument can be made that this contradiction threatens (and perhaps already has) to recast the liquidity driven mania days that coalesced with increasing intensity from 2003-2007.  Buy equities, real estate, commodities, or art because their future fortunes are perpetually inevitably rosy!?  The herd seems to think so…

Not exactly against the idea of asset classes rising in unison, central bankers have been playing the role of the insane plumber threatening to throw the kitchen sink onto the heads of those contemplating flushing their investment losses down the pipes. Willingly oblivious to the fact that excessive risk taking and regulatory neglect helped spawn the financial crisis, the contradictions astonish: In order to rectify the financial crisis central banks must adopt zero bound interest rates and quantitative easing policies, banks must lend money more freely, investors must take on more risk, and regulators must embark upon another prolonged period of nothingness. If fiction these events would make for an enthralling albeit utterly ridiculous read. But as reality, the acts of central bankers and policy makers are, well, just sad.
 
As for Mr. Central Banker – Ben Bernanke – rather than heap scorn on his many failings he has actually been heralded by many as a hero.  So what if Bernanke missed forecasting any part of the crisis beforehand and he simply followed Greenspan's unsound post-bubble bailout script with unbridled fanaticism.  We are told that because he was academically acquainted with the Great Depression Bernanke was best prepared to deal with the financial crisis and that his unique steps to unlock markets are the reason why economic ‘recovery' is afoot.  Bernanke has greeted his semi-hero status by offering a small nod, recently stating: 

"History is full of examples in which the policy responses to financial crises have been slow and inadequate, often resulting ultimately in greater economic damage and increased fiscal costs. In this episode, by contrast, policymakers in the United States and around the globe responded with speed and force to arrest a rapidly deteriorating and dangerous situation."

History is also replete with examples of how overzealous central bankers have printed their currency into oblivion and caused untold damage to the economy and financial markets, but we digress.