So, instead of “riding the wave” (linear), I’d look for what’s forgotten.
What frightens me is that I completely understand what you said there. You painted a picture in my mind and I know what you’re looking for.
Just… also be wary of the fundamental analysis too. Calculated Intrinsic value also is part of a moving set of fields and is itself missing variables, while being used “as if” it were a solid background upon which short term happenings take place upon.
But… you know this already, don’t you
P/E (which is our current ‘best’ estimate of health) is predicated upon an “growth assumption”. PEG (Price/Earnings/Growth) is an expansion of P/E which makes the assumption explicit.
This works right now because the markets themselves use this as their “background field” — like points in a block universe.
But what if needs were put into the equations of intrinsic value?
What is the need of a society for that company’s product or service?
You might also like : https://en.wikipedia.org/wiki/Adaptive_market_hypothesis which combines traditional investing strategies with random walk hypothesis to come up with a strategy that combines rational and behavioral elements.
If I remember right, it was george soros who was the largest promoter of modifying market strategies to include behavior metrics in the 1990s, which I *think* is also related to EI (Emotional Intelligence) as a metric, but this is all from memory so I’m not 100% certain.
Ah! Here. The two main giants of investing philosophies. Buffet vs Soros.
I love seeing how you are thinking rationally through “What is the best way to predict the market / how to choose stocks / how to measure / what is important”.
It’s a pleasure because you have a keen mind that has an amazing amount of background knowledge from physics, and you are taking these skills and transferring them into a field that has ALSO transferred your same set of skills, but which started from a much different basis historically.
Well, I know Soros talks about “false trends”. You have to look at least 18-24 months out and then see what are current false trends.
Once you have a solid sense of the markets in 18-24 months, use the false trends to your advantage, as they won’t affect things in 24 months.
An example is the upswing in the US markets. Some are a true growth, such as those which started from the economic recovery from 2009. Those trends are simply a return of the market to its prior course, thanks to intervention by the Obama administration, which prevented a full crash.
But, since Trump, there are false trends that are solely based on MAGA thinking — thousands of investors flooding the market with their hopes and dreams of “quick riches”.
So, what is the true trend and what is the false?
Going further back in time, is even the corrected course in 2009 the true trend?
What if you plotted civilizations over 800 yrs?
Dow theory is the basis of technical analysis is what I should have said.