In a world that has become increasingly savvy about understanding and measuring all kinds of risks, investors often ignore what may be the biggest risk of all -- geopolitics.
Big mistake, says Harvard University history professor Niall Ferguson.
In a recent lecture to Merrill Lynch executives and clients, he contends that when forecasters analyze financial and economic risks, they tend to ignore geopolitical ones. And when they do consider politics, investors usually stick to what they can personally recall.
"We need to go further back than living memory to understand the predicament in which we currently find ourselves," said Ferguson, according to a transcript of his lecture.
That "predicament" relates to the similarities between today's era of globalization and that of roughly 1880-1914, when the powers of global communications and swift transport were first harnessed to link the world economically. That ended with the June 28, 1914, assassination in Sarajevo of Austrian Archduke Franz Ferdinand and the onset of World War I.
Then, as now, fears of inflation were negligible. The difference in yields on corporate and emerging-market bonds and those on benchmark government securities was shrinking. Commodity prices, especially for energy -- then it was coal, today oil -- were rising rapidly.
Other parallels, notes George Magnus, senior economic adviser at UBS Investment Bank, include deregulated and integrated global capital markets, expanding international trade, strong foreign-direct investment flows and the search for new markets.
As for geopolitics, the first era of globalization was marked by "a dominant but financially overstretched global power, rival powers that defined themselves only in opposition to the dominant power, new regional powers with global aspirations, the Great Game in Central Asia, a proliferation of 'failed states' and state-sponsored armed groups," Magnus said. Then the global power was Britain, and now it is the United States. Sound familiar?
Add in anti-Western armed groups -- in the 19th century, they followed the teachings of Karl Marx, today Osama bin Laden -- and "there is a striking resemblance between what is happening now and what was happening 100 years ago," Ferguson said.
Of course, parallels go only so far and no one says investors should dive under the bed. Still, in the years preceding the First World War, investors ignored the brewing threats. The well-oiled global economy had fostered a "sense of exaggerated security," Ferguson said.
The first mention of the possibility of a war the Harvard academic could find in the financial press was an article in the London Times of July 22, 1914.
That was just seven days before the Austro-Hungarian artillery began bombarding Belgrade and less than two weeks before Britain declared war against Germany.
Major European financial markets closed for the rest of the year.
"Everybody thinks the biggest financial crisis was the  Wall Street crash and its aftermath," Ferguson said. "But 1914 was far, far worse . . . if they had allowed the markets to reopen, there would have been a complete wipeout."
So what is today's investor to do? "Gold would be the best thing to have as a long-term store of value," says Eoin Treacy, a strategist at Fullermoney.com, a global strategy and investment trends service. Strategists also say that commodities should perform well, along with investments that enable investors to bet on increased volatility. Stocks could do poorly, because a crisis could rattle consumer confidence and economic growth.
To be sure, there have been some improvements in the past 100 years. There are more democracies, warfare is waning and many economists think policymakers have learned from past mistakes.
Even so, Ferguson said, "Globalization could end in our time, not with a whimper but with a bang." The hard part, he acknowledges, is designing "a perfect portfolio for coping with the outbreak of World War III."