The efficient market people, who apparently will take their faith with them to the grave, will say we were lucky (GMO closely predicted the order of the below asset class returns), in spite of the one in several hundred thousand odds of being correct. “Preposterous. How can the risky asset underperform cash for 10 years?” you can hear them say. But we would say it was just the normal grinding of regression to the mean. It’s an awfully normal world we inhabit, in the long term. It’s only the short-term zigs and zags that drive us all crazy, and right now we should brace ourselves for some very odd and unpredictable short-term market effects brought on by the recent crisis and the massive governmental response. But the bigger danger is that once again the Fed is playing with fire!