First, the voters decided.

And then 'The Decider' decided.

And now you have to decide...what next?

Is it the world that Ed Yardeni sees:

 "I don't think the economy's 'landing.' I think the economy's doing great... It's better than Goldilocks quite honestly. This is the greatest global boom of all time."

Or is it the world we see from the Daily Reckoning's various command posts around the world?

We have been exploring the link between cause and effect...between decisions and their aftermath...between truth and consequences. The greater the distance, we conclude...and the less the decider suffers from his own decisions...the worse the results.

At least...in theory.

This may seem like another Daily Reckoning rant...but it's an important one. When you make an investment, dear reader, what you're concerned with is what is really going on. If you're right - that is, if you see reality correctly - you will be successful. If you are wrong, you will fail.

This is true, of course, in all things...not just investments. If a plumber fails to understand his pipes, his work will be a mess. If a writer doesn't understand the sense of his words, his oeuvre will be nonsense. If a husband misperceives the virtue or intentions of his bride, the marriage is likely to be troubled. Being a success in life is a matter of correctly understanding what is going on - or just being dumb and lucky. Since we can't count on being lucky - it is completely out of our control - we have to do the best we can to understand reality and make the most of it.

In private life, the connection between 'the decider' and 'the results' is usually very close. A man decides to step off the curb; if he fails to recognize what is really going on in the street in front of him, he may get hit by a cross-town bus. Likewise, when you make your investments, you get what you've got coming.

But public life is a bit different. Just read a commentary by our favorite columnist, Thomas Friedman. Hardly a week goes by that the columnist fails to flog his readers - we should do this...we should do that. But the 'we' in Friedman's column is a greasy kind of 'we.'

Friedman's exhortations are expected to stir the masses to action. They are supposed to write letters to the congressional representatives; they are supposed to organize themselves for political campaign; and they are supposed to vote...but for whom? For the meddlers, of course!

For the 'we' extends not just to private citizens voluntarily wasting their time and making fools of themselves, but also to our government which - using the police power of the nation state - is meant to undertake all manner of lamebrain programs - including, most recently, the war in Iraq. So Friedman can advocate his projects day and night, knowing that he will neither have to pay for them, nor suffer from them.

In Friedman's particular case, the man is immune to most of the damage done to the lumpen 'we'. He is probably America's richest hack - having first married into a billionaire family, and then made a fortune on his insipid books and columns. Increases in taxes or the price of gasoline are merely a nuisance to the man. And when he urges the Pentagon to send more troops to some distant hellhole, you can be sure that Thomas L. Friedman will not be among them.

But we are not writing today to criticize the New York Times' columnist, or to offer any more 'we told you so's' on the Iraq war. The war, of course, is a disaster in every sense...and to everybody except Islamic terrorists, who can hardly believe their luck.

No, today we're writing about your investments. After all, the Daily Reckoning is a financial service, of sorts. And the service we offer is aggravating readers into thinking more deeply about the real world around them.

So what is the 'reality' of the markets? The reality is that most stocks are very expensive...and that the correction that began in January 2000 was never permitted to become the MAJOR correction that the market needed. The force of a correction is equal and opposite to the deception that preceded it; you've heard us say that before. The whopper market of 1982 to 2000 took prices up 11 times. Our guess is that a huge correction is still waiting to express itself.

Another big reality is that market sentiment is cyclical. Investors are NOT ALWAYS bullish. And they're NOT ALWAYS bearish. Instead, they tend to go back and forth in long, long cycles that last a couple of decades in each direction. So, if investors were very discouraged and bearish in '82
- remember, that is when Business Week magazine announced the "End of Equities" - it will probably be in 2022 or so that the next major trough of despair is reached. And if that is so, you should expect a slow, agonizing and frustrating tumble of expectations for the next 16 years.

On top of these NORMAL realities are the EXTRAORDINARY realities of 2006 - China, Iraq, Iran, North Korea, commodities, trade deficits...and the big one, the explosion of U.S. dollar-based credits. It is very difficult to say what any of these realities actually mean. The world has never, ever seen anything like them before.

What we believe they insinuate is an increase in RISK. You know, not Rumsfeld's known unknowns, but the things we do not know we don't know. Among the many things we do not know we do not know are some things we are bound to learn. Our guess is that the instruction will be more costly than investors are now prepared for. Risk is under-priced, in our view.

*** One of the measures by which risk is under-priced is gold. We don't know what unknown will reach out of nowhere and grab us by the collar. But we hope to have at least a Krugerrand or two in our pocket when it does.

Yesterday, the price of gold shot up more than 18 dollars. What reality did the gold market see? Fanatics in Iran...Democrats in Washington...a lame duck in the White House...? We don't know.

GoldCorp, meanwhile, told the world that it expects the price of gold to reach $850 within two years. And who knows?

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