Mental Models: COVID-19 Stock Market Rallies: #53

Global economy has stalled in early 2020 due to COVID-19 and governments have provided stimuli. The stock market has rallied; SMP is up from the bottom which is the most dramatic rise of the market EVER! CONCERN: exuberance in the market does not take into account the return to normal, as there is a new normal, which is still unknown. Narratives fill the gaps of unknown reality, and the narratives are less reliable than ever before, since analogies are made in the context of experience. Many business will be gone, or have take on significant indebtedness. Largely what has driven the stock market to rally is corporations borrowing at low interest rates, then buying more expensive equity. TWO trillion $ of equity expansion! “Punctuated Equilibrium” by Stephen J. Gould explain the evolution of ecological system of the stock market and the global business system. In the current business world the environmental shifts in business have created a ‘disequilibrium’ due to breaks in business and lifestyle. This alteration in business ecological system is looking for ‘Equilibrium’, which is not likely to occur very soon, and possibly not without a vaccine for COVID-19! Stay safe and healthy out there! For more on best investing strategies, avoiding bias and learning about your brain BUY 5 star reviewed “Understanding Behavioral Bia$” on Amazon - link here: http://amzn.to/2XHtsOE Links: Robinhood to track individual investors on individual stocks. https://robinhood.com/us/en/ Punctuated Equilibrium by Stephen J. Gould. https://www.hup.harvard.edu/catalog.php?isbn=9780674024441 Peppered moth of UK. https://www.bbc.com/news/science-environment-36424768 Have you heard ‘Mental Models: Reflexivity: #20’ by Mental Models Podcast | Behavioral Finance https://soundcloud.com/user-682136294/mental-models-reflexivity-20