Originally Posted by
BlackPeter
Interesting lecture - thanks for sharing.
Good to know, however that John has as well only some understanding (well, more than me) about a quite small part of a very complex system following chaos theory.
What he - I think - does not want to see is that human history is not driven by the reality (the small bit of the system I was talking about) he is describing, but by the "incoherent mental formations" he mentioned.
Large parts of human history have been driven by religions and religious conflicts and by ideas and stories about nationhood. Many security prices are driven by stories, and more often than not these stories have no link into reality. Markets don't assess securities according to their earnings potential, but according to their value in a story the individual buyer likes or believes.
A kilogram of gold does not earn me a cent of earnings over time (unless i sell it), and still it has long term a growing price. A Bitcoin does not even look good and has no earnings potential, and it still might have a higher value than the gold I can at least touch. Gold is as well a good example to show that this incoherent value does not necessarily disappear over time.
I think this is the problem of all analysts - we can argue about valuing securities until the cows come home, but what really matters is what another irrational individual is prepared to pay for it. Impossible to predict.
I understand that at Martin Luther's times rich roman catholic individuals paid huge sums of money to receive so called indulgence letters issued by the holy church, promising them forgiveness of their sins for paying money. Just another sort of security supposed to make sure they have a pleasant afterlife and sit close to the creator at the dining table. Would people be these days as stupid? Of course, they are - they are still happy to pay huge amounts of money for something which is - in a system of coherent thinking - absolutely worthless and senseless: Cryptocurrencies, unrealistic valued growth shares, anything where markets pay for a story not linked into reality - and yes, some are still paying money to lying preachers as well.
Johns problem is that he wants to bring everything back to the coherent rules ... and considers the reminder as anomality. It is not. Humans are not made for rationality and happy to value senseless lies. Nobody though found yet a method to predict the irrational valueing behaviour.
Value based on incoherent thinking is not following any coherent rules - which means that nobody is able to predict the future of markets or, to be more specific - the future price of securities. Oops, didn't Ben Graham tell us already that nobody can predict them ... I think this is true not just for an individual security, but as well for the sum of all securities (the market).
I think that John's view of what is going to happen is as good as anybody else's view, but still - a good reminder that the next crash might come (I am sure, it will) - and that it might be the big one (well, for our life times, anyway).