We Are Not In A Bubble

1929, 1987, 2000, 2008, 2020!

As you might have guessed already, the dates indicate the years in which the world experienced global financial crises. To be precise, in these years the stock markets were in crisis. However, we generally reject the term ‘crisis’, but rather see them as inevitable and necessary corrections – or as the ideal moments to buy and hold stocks for a lifetime.

Let us just take a look at the media coverage of the Corona-Crisis. Instead of reporting the numbers of healed patients, numbers of newly infected people are constantly in the focus of the media, although these recovering patients are greatly outnumbering the people falling ill due to COVID-19. Whether these people were ill in the first place remains another secret. What is clear, however, is that fear is a much stronger emotion than greed.

Greed and fear are the two determining factors of the capital markets. Our analytical premise is to calculate the interplay between optimism (or greed) and pessimism (or fear), which works really well-using Fibonacci-numbers. With this objective and purely mathematical approach, it is possible to contain the emotions of greed and fear and has the chance to make rational and sound investment decisions.

However, many avoid just that, since fear is a great tactical tool, which is why many view the stock market as a mysterious and uncontrollable creature. Left alone in front of the computer, the lonely investor awaits the big crash. We call those people “Crash-Prophets”, who are constantly conjuring up the collapse of the capital markets. They desperately defend that their main assets and asset classes would shield one’s personal wealth from such a crash.

The boogeyman, in this case, is neither the plague nor cholera, but currency reform, inflation, deflation, and bank crash. Often, we have the impression that a lot of people cannot differentiate between inflation/deflation and flatulence. Some analyze stocks in its smallest detail and expose scandals that turn out to be none.

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Barry Glassman 2 weeks ago Member's comment

Good read, thanks.

Philip Hopf 2 weeks ago Author's comment

Thank you for your feedback.

Edward Simon 2 weeks ago Member's comment

If I were pitching to a group of VCs, these are certainly the graphs I would use. If you overlay the rate of innovation on your charts do you get a similar picture?

Philip Hopf 2 weeks ago Author's comment

Thank you for your feedback.

Productivity has increased in many sectors during the pandemic. This is an interesting read regarding remote workings impact on call centers: www.economist.com/.../does-working-from-home-make-employees-more-productive

Technology will likely drive general productivity and innovation further. A chart for general innovation growth is sadly not too reliable in the longer term.