Irrationality

If you study business and people’s behavior, the odds are that you won’t be fooled…

A business outlook will give you a perspective of how things work, and behavior will teach you how the economy works and markets respond to people’s reactions.

Running the world can be a total disaster. Insane… we are not ruled by some emperor, secret society, president, or bank. In part, we are run by propaganda. But, we are run mainly by the randomness of those bold enough to make the blunt. 

Human pace… mind-time speed… emotions pace the world, and competitive reactions, like animals protecting their field. However, these random walks of the human race will eventually make higher moves in society and markets.

The things we let happen will be the things that end up controlling us…

Bubbles

To be a great investor, you can earn money by learning how business works or make money through people’s foolishness.

Bubbles occur because people trade overpriced assets as if there always will be a next buyer.

Most of the time, they are right… eventually, they can be madly wrong.

Source: Aswath Damodaran.

When there’s no buyer or liquidity, we face a meltdown.

As a group, we are more buyers than sellers; that’s why credit bubbles are created.

It can catch you at stocks, home prices, cars, tulips, crypto, and every asset.

“The world is not driven by greed. It’s driven by envy.” – Charlie Munger 

Total madness is thinking that buying enables one to sell for a profit. Not always.

What do experts say…

When the rate cuts after Great U.S. Bubbles… 6 months after…12…18… we are trying to connect the dots.

However, not far from Wall Street, bankers seem not to care enough…

  • Deutsche Bank forecasted 2023 S&P500 at 4500;
  • JP Morgan forecasted 2023 S&P500 at 4200;
  • Credit Suisse forecasted 2023 S&P500 4050;
  • UBS forecasted 2023 S&P500 3900;
  • BNP Paribas forecasted 2023 S&P500 3400;
  • however, GMO’s Jeremy Grantham said it may visit 3200…

…in case you don’t have a magic ball… what could you do?

Value

Being first is a great advantage, especially if you are a value investor.

If you study business, not stocks, you’ll become a better investor.

If you study stocks…you won’t be a better businessman.

Stocks are generally overvalued… but still, people buy…

We know that most people are speculators that happen to be attracted to easy money in the stock market. Meanwhile, investors will invest in businesses. Same thing? We like to question it.

If Value is out of fashion, we keep playing the classics. No one cares.

Learn to think like a business person. See business, not stock data.

Prices can be so independent of an underlying reality.

Exposition

The average businessman and investor briefly think about asset allocation management. 

That’s why they concentrate their money and assets and suffer the ends of an irrational market/asset prices devaluation “surprisingly” happen to occur.

Keep walking the path.

Stay tuned.

Regards,

Marcelo Marini

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