From a recent interview with Nassim Taleb, author of The Black Swan... "We like models becasue they do not require experience and can be taught by a 33-year old assistant professor. "

Taleb is correct. We do like models. The greatest benefits of life come from struggle within situations of unknowable outcomes, and yet we, stubbornly refusing to recognize this simple truth, strive continuously to redefine existence by fitting ourselves and our lives into controllable models.

Models are important. They help refine our thinking, but they have limitations. They are not reality, but rather a measure of reality which we need to continuously evaluate and re-create.

The concept of a bull market in stocks is comforting. It seems to fit a confusing reality into a tight box, a nameable thing that we can understand, but in reality, we cannot understand it. If we could understand it, then such names would not exist. And if they did exist, they would have no mystique.

There is no mystique surrounding the Boston Red Sox versus the Piedmont Hills High School Baseball Team because the Sox win 1000 out of 1000 games. The outcomes are expected and predictable.

The mystique occurs when the Red Sox lose the world series because of Bill Buckner's error. A model is created, "The Curse of the Bambino." {Actually it was created long before that error, but it took on greater meaning after Buckner's infamous play.} The sentiment runs, "There must be a reason for this seeming strangeness that we can't understand yet by conventional methods. Let us create a model in our own image to explain it."

It's a model, a system that gives us comfort and we believe a certain degree of understanding. That is, of course, until the Red Sox win the whole enchilada, then the model fades into obscurity.

As Eric King is fond of saying, "Every system works until it stops working"

Ultimately most of us are destroyed by our inability to understand what we are doing. We don't pay attention. We buy mutual funds and study to understand the "mutual fund model." We need not worry about things like gold and silver, because they don't fit into our model. We rely on consultants rather than common sense and we do it to our undoing over and over again.

This is how what is happening in the market happens. It has nothing to do with intelligence. (Very smart people are about to lose a lot of money.) It has everything to do with not paying attention, with not making adjustments, with not reexamining models. It comes from not understanding lessons from where you have been and applying them correctly to where you are going.

Moving correctly is about understanding models, but not worshiping them. Life, like baseball, is a game of constant adjustments. Learn this. Do not respect models. Respect wisdom, and if you have not wisdom, start getting it and start looking for people who have it. Get experience.

Stocks are bought and sold because two people have a different model working. One is a seller, one a buyer. When ones model starts working longer and better, people jump from one side to the other. When enough people are on one side, the model is no longer a model but considered a truth. This is when it starts to fail.

Right now the truth is that gold is no longer money and that the Fed will last forever. These models are about to fall apart. The Red Sox are about to win the whole thing.

How come you could understand that eventually the Red Sox would have to win, but you can't understand that gold will have to do the same thing. Gold has a much better and longer track record than the Red Sox.

How strange that people laughed at the Curse of the Bambino, yet they take the Curse of Fiat Currency for real. Strange! Bull