The theory of chaos is relatively new. It was postulated for the first time in 1960.

http://www.imho.com/grae/chaos/chaos.html

My definition of chaos is this:

"a relatively small change in input may produce a relatively large change in output."

The development of chaos always but always follows the circular patterns indicated above. There is no beginning and there is no end. There is no predictability.

As my regular readers may know and/or remember I have always taken the position that the natural state of this world is chaos.

Because man exists chaos is the natural state of the world. At times we may be fooled into thinking that events are both logical and orderly; it occurs when chaos is minimized.

My entire life has been spent with the world in a state of intensified and chaotic chaos (pun intended).

What else do you call a market crash?

The Dow Jones industrials has recovered its previous high of 2001.

The NASDAQ has recovered only about 40% of its previous high and many NASDAQ stocks remain in the tank.

You might call it the flight from speculation to relative certainty; chaos theory at work!

When it comes to the stock markets both chaos and randomness are supreme; if that were not so why can't anyone but anyone predict the markets outlook with any certainty (sure includes me in spades)?

Chaos is the natural state of the world for the simple reason that mankind is mad, dumb, irrational, emotional and warrior aggressive.

There are two mankind's; the evil and the good but that is NOT the subject of this article. Save that for later with no threat of it ever going away or being outdated. The history of man (written and pictured ) is the history of that conflict.

That conflict dominates this world here and now. Hate and evil never but never gives up because their satisfaction is in their dominance and their torture of mankind. Happiness to the evil is in being evil (Gore to the right).

If there is a universal truth in my life it is that mankind talks too much; too damn much (fatso Kennedy to the left and Gore the bore to the right).

Every big mouth is emphasized by the media. They blow up everything beyond the limits of truth or reasonableness. They repeat the same story until we are sick of it. The bigger the mouth the bigger the media coverage.

Most media (but not all) emphasize the negative when the Republicans are in power and the positive when the Democrats are in power. These are the negative days.

Major, major mistakes in economic and financial policy are being made right now:

• The refusal to lower euro interest rates any more by the European Central Bank.

• The refusal to cut taxes in the European community.

• Keeping the Euro at 1.20 or higher.

• Keeping Sterling at 1.74 or higher.

• The  world acceptance of the humongous trade deficit with China.

• The American Treasury position that China is not illegally pegging its currency at below market levels.

• The Japanese refusal to cut taxes.

• Americans staying in Iraq.

• Flooding the world with liquidity by all the central banks.

• Allowing the housing boom in the U.S.A., the U.K. and  Europe to go berserk in price and levels.

• Immigration policies here, there and everywhere.

• Mob dominance and control (France and the U. S. A).

After the disaster of Katrina do you doubt that governments are both incompetent and stupid. I don't, never have, never will.

Would I be fully invested right now? Am I fully invested right now?

Not on your life.

One more time: caution is the better part of valor. DONT REPEAT THE MISTAKE OF 2001.