Consider_this

Economy Still in High Risk Mode: Throw Away Crystal Balls and Short-Term Thinking

The theory of Diversification essentially depends on balancing away isolated risks (in individual stock, individual sectors, individual countries, etc) and ultimately trusting in the growth of the complete whole system -- the HUMAN CIVILIZATION stock, if you will.

Of course, if, as a whole, human civilization is growing, then Diversification will show yield.

What I don't understand is, what happens when there's:

1. A systemic risk that's infected the whole system?
2. An increase in social instability, war and crime from a historical LOW?
3. A "peak" in viable market size overall. In essence, Mainly due to demographics (and possibly credit), the short or mid term maximum purchase power of the world has been reached. (Countries or populations with no purchase power doesn't much contribute to this "market size")

I fail to see how Diversification deals with any of these.

If really boils down to whether you believe that we're in any (or all) of the 3 scenarios globally or not. If you do, then you believe in Diversification.

Personally, I feel like since a Black Swan event has occurred. I'm *still* trying to gauge the complete Black Swan outcome.

Would you predict the outcome of a "meteor hitting earth" event using convention data of even the worst volcano eruptions recorded in history?