BBRG: Mr. Spock Explains the Market’s Mood Swings

Stock Market’s Wild Mood Swings Can Be Explained by Mr. Spock
Think of the “Star Trek” character and the calm punctuated by fits of euphoria and bouts of despair will be easier to understand.
Bloomberg, June 22, 2020




No wonder the public thinks Mr. Market is dangerously bi-polar. They do not want to hear abstract academic theory: that markets are probabilistic mechanisms, collectively allocating capital by incorporating imperfect information about an inherently unknowable future. Discounted cash flow models and the efficient assimilation of market information reflected in price leaves them cold.

What they want is a simple, easy-to-understand explanation. I have discovered a way for them to better understand Mr. Market. All it took was to reveal his true name. Gentle readers, I share this previously unknown moniker with you now:

Mr. Market’s true name? Mr. Spock.

A short explanation for the non-Trekkies: Spock is the science officer and 2nd in command aboard the starship U.S.S. Enterprise;1 He was born to a Human mother and a Vulcan father.2 The Star Trek Universe portrays Humans as emotional, unpredictable and irrational (in other words, accurately). Vulcans are an ancient civilization, whose history of violence and emotion brought them to the brink of self-destruction, which was avoided only when the entire species embraced a radical control of their emotions.

Raised on planet Vulcan, Spock fully embraces the Vulcan philosophy of logic. 3 But since he is half human, he struggles balancing between logic and those emotions. Once you accept that Mr. Market is Mr. Spock, the raging disconnect between the economy and equity prices disappears. Consider the following . . .


Complete column is here.



1. Spock also served as a Captain, Admiral in Starfleet, and Federation ambassador.

2. Due to this mixed species heritage Spock had to be removed from Amanda’s body and raised in a test tube for two months, during which time Vulcan scientists made subtle chemical adjustments to the fetus to ensure its survival. The fetus was returned to Amanda’s body to complete the human gestation period, then put in an incubator for four months to complete the Vulcan gestation period. He is the first such mixed race child to survive.

3. If you want to learn the history of Vulcan philosophy, begin with Surak, “the most important philosopher in the history of the planet Vulcan.”




I originally published this at Bloomberg, June 22, 2020. All of my Bloomberg columns can be found here and here




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