The irony is that by educating their populaces, Chinese and Middle Eastern autocracies are sowing the seed of their own destruction. Develop a population of smart, educated young people, then fail to give them jobs and opportunities, and you have the makings of a revolution…READ MORE.

My Take: In the article linked above Nicholas Vardy is making the case for a “Black Swan” in China.  (Note: A “Black Swan” is an event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult to predict.) The specific event he’s predicting is the destruction of the old political guard (Communist government) and the instilling of a new form of goverment (some flavor or democracy).  He feels that this is an inevitable outcome of current trends.

I don’t know about the whole 100% notion, but I think Vardy is on to something here.  The questions I have are, how soon will this happen and will it be a sharp break from the past or a slow transition?  If it’s a sharp break, then you will see significant market volatility around the time of the event.  Thus, if you feel a market is overvalued, you’d want to wait until such event occurs and then buy in.  Yet, we don’t really know if such an event will happen next year or in the next decade.  You could be waiting for a while.

Remember, the market hates uncertainty.  Such events that Vardy is discussing are filled with uncertainty.  Upon these events taking place, you will see domestic and international markets dive.  When this occurs, you must have the guts to take a risk and get in when you feel that we’re in the eye of the storm.  Doing so will provide you with the potential to thrive when certainty begins to reform.