The workings of free capital markets require that in order to overcome investors’ innate aversion to risk, seemingly riskier investments must offer the possibility of higher returns providing “risk premiums.” But when risk aversion is at cyclical lows, risk premiums needn’t be generous; people will invest anyway. Too many people trying to dine at the buffet simultaneously can lead to a disorderly process and skimpy portions. I recommend that you look twice at the cost of admission and – if you do decide to partake – proceed carefully.
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