But first, the water actually disappears from the usual shoreline, leaving land where there should be sea.

If you are on the shore and see that happen, the correct response is to run for high ground. Tragically, though, people often rush toward this new and unusual sight. It's hard to blame them; we humans are drawn to the unknown. This impulse explains much of our progress, but it has costs, too.

Right now, the stock market is in the land-where-there-should-be-sea phase. What we don't know is when the wave is coming. Maybe there's time to venture out and see what treasure was hidden beneath the waves... or maybe not. Prudence would suggest that we go searching for treasure on higher ground.

This is an age-old investor conundrum. How do you balance risk and reward? You have clues, but you can't be certain of what is coming, or when it will arrive, or what it will look like. You know you need positive returns, but you also need to avoid major losses. The answers are never easy. You take your chances, no matter what you do. Today we'll see what some of my favorite market wizards see on the horizon.

When Every Lot Is Odd

One sign the water may soon rush out of stocks, indicating tsunami, is the amount of money rushing in. My friend Doug Kass recently shared this staggering chart. It shows the inflows to stock funds since November exceed the total inflows of the last 12 years. Doug helpfully pointed out that one of the legendary Bob Farrell's rules is that "individuals buy most of the top and buy the least at the bottom."