So perversely, while generating a "cash-plus" return seems like an easy objective with cash rates so close to zero as makes no difference, it in fact carries abnormally high risks, because we inhabit an abnormally high risk environment. Europe's ludicrous stress tests notwithstanding, banks are not riskless, cash is not riskless, ostensibly high quality debt is not riskless - we would cite both credit and inflation risk as meaningful long term threats - and equity markets are dancing to a tune that we for one cannot hear. Gillian Tett is surely right. Economics alone is no guide, because the current 'long emergency' requires a nuanced appreciation of wider cultural and political affairs. Bichler and Nitzan also suggest that investors are making fundamentally bad judgments by taking their cue from current statistics - what has gone before, what used to work - rather than being rationally predictive, and trying to assess what lies ahead, at a time when the market environment is radically different from any other in living memory. Cash; currency; credit risk; bank risk; deflation now; inflation later; what happens to wealth and society as a whole when levels of personal and sovereign indebtedness, internationally, have reached the point of no return. Buttonwood in 'The Economist' this week concludes its assessment of bonds, deficits and currencies with four stark words. Something has to give.

David Fuller's view Perhaps it's an age thing. After 45 years in the financial industry, I do not feel that "we inhabit an abnormally high-risk environment". I will leave it to readers to decide whether this is due to experience or a desensitised response system.

Of course there are plenty of serious risks out there, but this is certainly not a new problem. Was there ever a time when the world was not extremely risky? I do not think so.

Fortunately, risk is never evenly distributed on a geographic basis. The same can be said for markets. Our task is to assess risk in its various forms and reposition ourselves on safer terrain. We also need to avoid the lure of crowd think. In markets, history shows us that when the crowd's perception of risk is greatest, the opportunities for contrarian thinkers are actually among the best. Conversely, when everyone has total confidence in an asset class, the risk is very high.

As to Tim Prices' title words, repeated at the end of the paragraph above, my reply is: 'And thus it always was.' It is in the nature of people to drive markets to extremes, creating a situation where 'Something has to give'. The process is called reversion to the mean.

When I reread FM3, May 1984, before posting it in Comment of the Day last Friday, I was reminded of the opposite extreme in terms of long-dated government bond yields back then. Paul Volker's big squeeze was still underway in 1984 and people were fleeing yields of 13.5% for US Treasury Bonds, which we now know were a fabulous bargain for long-term investors. Less than a month ago, bond buyers bid US 10-year Treasuries below 3%, seemingly without a qualm. Is this not equally foolish?