Back to first principles.
In this article I put together the underlying drivers of the economy and the stock market. On top of that, I also demonstrate the difference between stock prices and economic valuation. Finally, I present the non-linear reaction function that explains how a divergence between market price and economic valuation reverts to equilibrium.
If you’re interested in seeing how it all fits together then stick around. You’ll get a better understanding in a few minutes than you’ll get from years of ivy league education and Wall St. experience.
Most of my work involves stepping back, away from the noise and the everyday shambles that is modern day markets with its plethora of entrails observing soothsayers, substance induced mystics and god invoking priesthood (otherwise known as the financial media; market strategists/economists; and asset managers/traders). I do this for one reason: context.
Too often we fail to put all the pieces together into a coherent whole and so continue to use methods of interpretation that are time honored, but consistently wrong because they are too narrowly defined and applied. That seems stupid to me, so here I am, doing it my way.
During the years of research I’ve uncovered stuff, really good stuff. Stuff that works, makes sense … and fits with what happens in the real world. Which is entirely unlike the professional finance industry process - they don’t have one (at least, not at this holistic level) - so any process is a digression from the way that the folks who manage your investments and pensions operate.
This article is just me stopping to collect my thoughts and remind myself of how it all fits together, but I’m also posting it because I don’t think I have put it together in one place for my subscribers before. Here is the building of my contextual framework that gives me a clear understanding of what is actually happening, so that I am not confused in the noisy day to day activity of price gyrations that make most people lose their head.