What Do You Think?
about fundamentals just as we feel
psychologicals and act
technicals. Each of us has an identical triune cognitive structure. That is, we have three distinct brains. Our newest brain is the Neocortex or the Rational brain. It is how we think about the markets. We like to think. We also like to think that we know a lot. Fundamental stories are how we explain why stocks do whatever they are doing.Fundamentals are “So Good.”
Fundamentals sound like good, solid and, (for sure) true facts. Some financial service firms tout themselves as very sage and they advise us that: “The fundamentals never change
.” In reality of course, fundamentals are always changing. Fundamentals are really just market stories. It might be more accurate to call these market stories "Transient Investment Themes." Everyone likes a good story, particularly a stock story and the more colorful the story, the better!Coffee, Tea or Meme?
Good morning investors. What are you having, coffee or tea? You are almost certainly going to have some memes! And, what are memes? Well, the study of idea propagation is called Memetics. A meme, like its informational kin, a gene, is transmitted from one person to another. But a meme is a unit of information rather than a genetic code. Every idea or meme goes through a lifecycle (See the Market Semiotics Memetics Model below) from anomaly
to becoming passe
and then possibly recycling
up again. Take Madonna: She went from being an unknown “Desperately Seeking Susan” to “Getting into the Gap” to becoming passe
and even camp and has now recycled yet again on a World Tour. Deflation, inflation, oil and every idea (fundamental) in Financial Culture are no different. Everything has its phases and its time…. We cognitive investors make it so!So Many Stock Stories
While there are thousands of stock stories, there can only be a handful of headlines. Financial culture effectively distills all the stories into something like the top ten hits. And those headline hits become what is known as the news. The real news may be that investors only really need to know one or two things. Or, put another way, investors need to recognize the few stories that the other investors think
is important. What is the story?Market Reader
We would all like to read the mind of the market. We want to be mind readers. We can be. But only if we can read the minds of those who are trying to understand the market. Keep it simple and play the main meme of the market. What is the story?Remember the Meme
We are smart guys. We know a lot….certainly more than the next guy! But maybe we only need to know one thing at a time? Or know less (be cognitively simpler) and understand more. What is the story? What is the meme? Inflation is the main market meme. Remember that meme and both your hard and your paper assets will perform accordingly. May the Minyan Meme march on! Remember the Meme.
No positions in stocks mentioned.
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