As I have studied and followed the markets over the years, I am on the lookout for simple concepts that reminds me of the illusion of "value". This picture is particularly valuable. Markets go up on nothing more than echo chambers and liquidity inflows. So stock markets mostly go up. As depicted by the Escher drawing, they go up in fits and starts, resting on new levels of "value" where fear takes over. Analysts then come and say, market is cheap at 21 x earnings. Or expensive on another number. It all seems more like theater and alchemy than reason. Tech shares go up on the hope that you get a hold of the one in five hundred stocks like AMZN. In other words, a lottery ticket. The number of shares traded on a daily basis is something like 4 billion shares. That number is bothersome. We learn that 80% of the stocks are owned by a very small number of people, who mostly don't trade and instead park their money collecting dividends in a very tax efficient and favorable way. The trading that firms who are hired by these long term share holders, is to enhance the returns of these stock owners. Firms that sell calls on their stock holdings, or more aggressively selling puts on indexes. Is all the trading volume a game between computers? In 1910 one dollar was worth one dollar. Today a USD is worth a dime. In the next few years it will be worth a nickel. But we are continually told that inflation is very low. I wonder why there is a disconnect between what the statistics and markets say, and what the average person experiences? How does this affect everyday trading? Does the stock market, in dollar terms, just reflect comparative wealth and not absolute wealth. Not just within a country, but among countries? How is this reflected in Forex Exchange? Is seems to me that trading is either for poor people that are gambling, or the very elite thinkers that all the money flows to. And investing is for the people with the money that can sit patiently with very large time frames, collect dividends, and add to returns with strategies around their core holdings.
EVERYTHING and I mean EVERYTHING that the rich does, EVERY strategy that the rich employs to "play" the market, you can do it too, just on a smaller scale. There are NUMEROUS stories of people with very average wealth died multi-millionaire and who have accumulated their wealth from very modest savings doing EXACTLY the same thing as the rich does. There are numerous books written teaching people with modest means how to protect and grow their savings. And in fact, if you put your money in a mutual fund, the portfolio manager employs also EXACTLY the same investment strategies as those "firms hired by those long term shareholders" with options and other derivatives so they achieve quite nice returns. And on the other hand, just because you are rich, you are NOT guaranteed to always stay that way. Numerous movie stars, athletes, children of rich businessmen (including Donald Trump), successful stock traders, lottery winners, people who possessed vast amount of wealth, lot more than you and me, have all declared bankruptcies and even become penniless with some even losing their lives all because they have mismanaged their investment, invested in the wrong venture, did not manage their venture well or over-invested or a combination of all. Today's investment industry is a lot better regulated than the one in the 1910's or 20's when there was no transparency, no monitoring on insider trading, no uptick rule and etc., so it's quite "egalitarian" between the rich and the poor. All you have to do is manage your wealth, no matter how small, and you will do well. Buy and hold to collect dividends is NOT the only way to accumulate wealth; it's just ONE of the many effective investment strategies. This is the same among all countries. Today's GBP is NOT the same as GBP in the 1910's for example because all countries have abandoned the gold standard and instead is operating in fiat money. Since everybody is operating on the same premise then there is no difference internationally. And since everything is based on fiat money, there is no net effect on anything.
Yes, but think about what this means. Imagine the cost of a barrel of oil in 1910. Back then it was plentiful in terms of reserves. The key is that people couldn't extract it, and there was "no market use" for it. And yet, adjusted for inflation it would have cost in todays dollars like $5000 a barrel. Today, by fiat money, it is worth comparatively far less. And yet, there is way less of it in the ground, but far more of it above ground. This seems like squaring the circle, if you believe the pseudo-science that free markets price to equilibrium based on supply/demand. In fact, what it seems like to me that in commodities, it is not the supply side that matters, it is the demand side that drives prices, down! Yet every Wednesday, everyone hangs on the inventory numbers. You can argue that the price of oil should be both $10 a barrel, and $200 a barrel. It is all very confusing.
The Market is a Too bad Escher didn't use pretty girls in swimwear in the up/down stairs instead of soldiers [or are those monks?]. Then the market analogy would be complete.
i would like to see one but with more skin showing. someone with photoshop skills could create that image.
I like this one, which would be almost like exactly how markets move. BTW, I am still unsure which one in the picture could be you or me yet.