We are not much given to whistling, even in the dark. But on occasion, we do like to talk about bells. Bell curves, to be precise.

In 20 minutes, we are scheduled to explain our investment theory to a group of Frenchmen and we intend to try out our curved bells for you first, dear reader, before dazzling the frogs.

An example might help. Let us take nature...events in nature. How are they distributed? Well, if you plot the temperature in Paris, with the degrees laid out on the horizontal axis and the frequency (that is, the number of days) piled up on the vertical axis, you will see that they form what statisticians have christened a bell curve. In the middle, where the days that are, say, 60 or 70 degrees are displayed, there will be a lot of them. Out on one end, you will find very few days that are below -20 degrees. And on the other will be very few that are more than 100 degrees Fahrenheit.

Then, if you count the number of days when the average temperature was around 50 degrees, you might find that in a typical year there were 100 days.

So, the odds that any particular day will be 50 degrees are about 100 in 365. And the odds that any particular day is, say, 100 might be only 1 in 365.

Human beings are not calculating machines, but flesh and blood. Their calculations tend to be extremely prejudiced by recent experience. If the last two weeks brought the temperature to 100 degrees every day, they are inclined to rate the odds of another 100-degree day fairly high. And in a sense, they are right. Tomorrows tend to be like todays - especially when it comes to weather, where seasons and climate patterns persist over weeks and months at a stretch.

But human calculations are also affected by many other psychological factors. People want to be accepted by their peers, so they try to bring their own estimates into sync with everyone else. They try not to have opinions that make them seem too "kooky" or "far out."

And, they fail to look either far enough ahead or far enough behind them to form a realistic view of what the weather is really likely to be. After a long, hot summer, most people anticipate even more of the long, hot days, even though the odds greatly increase that the days will now get cooler in a hurry.

In the investment markets, these misperceptions are amplified by the sticky fact that almost no one has any idea what he is talking about. It is one thing for the lump to register the temperature; it is quite another for him to understand the minutiae of the telecom business...or any other business, for that matter. Instead, he tends to believe whatever the papers are saying.

To make matters much worse for the poor fellow, he has an entire industry - Wall Street - adding to the distortions in his perception, in order to separate him from his money. What Wall Street strategist ever looked the facts clearly in the eye and told his customers what was really going on? Almost none. Wall Street is paid to tell the lumps that stocks always go up in the long run. How then can they form a useful opinion of their own on what is likely to happen to any individual stock? They are bound to overrate the odds that the stock they have in hand really will go up.

All of these factors make the calculations bend like a mountain road. So, instead of believing that the odds of a 100-degree day are 100 in 365, the lump comes to believe the current shibboleth, such as, "it is always this hot," "housing always goes up," "hold stocks forever."

He puts the odds of hot days at 200 in 365.

Here at The Daily Reckoning, we don't pretend to forecast the weather any more than the stocks. But we can count. And right now, we see a lot of miscalculation among the lumps. And that means a lot of opportunity.

*** Gold hit the bid yesterday. The price of the metal fell $20, which puts it below our $600 price target.

Will you make money by buying gold now? We don't know. In fact, we are hardly sure that the near-term trend is up since commodities are falling. And commodities are not alone. Bond yields, too, are falling. Housing is falling. It's beginning to look a lot like deflation to us. And that will not send gold soaring...yet.

Still, when gold finally does soar, and it will, we will be happy to have bought it at a bargain. The yellow metal may go down, but it won't go away.

Bill Bonner is the President of Agora Publishing.  For more on Bill Bonner, visit The Daily Reckoning.