PSE: Paranoid Schizophrenia Environment – BusinessMirror


“Schizophrenia is a serious mental disorder in your mind that doesn’t match reality. This can lead to a combination of hallucinations and delusions. Paranoid schizophrenia was once a subtype of this disorder, as paranoia is a common occurrence in schizophrenia when a person feels suspicious and suspicious.”

Mental illness is not an illness to be taken lightly. Many decades ago, a close family member suffered from schizophrenia and was hospitalized for treatment. It is a lifelong condition with no cure that occurs due to a combination of genetic and environmental factors.

Nonetheless, the simplified symptoms can help us understand parallels because they can manifest not only in individuals but also in institutions and societies in general. In this case, the comparison with stock market trading and price movement is instructive.

Those born after September 2, 1945 – the end of World War II – and who died before the first Covid lockdown in Italy on March 9, 2020 have never experienced a global mass experience. There weren’t many of those that affected all aspects of human existence – political, social and economic.

The world and each of us has gone through great trauma. Post-Traumatic Stress Disorder (PTSD) is a mental illness triggered by a horrific, potentially life-threatening event that we believe may happen again. Severe stressful life events and trauma can trigger schizophrenia.

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The point is, our collective mental health, whatever you want to call it, is strained, and there is no better example of this than the asset markets.

What are the two most common symptoms of paranoid schizophrenia? delusions and hallucinations. Delusions are false beliefs despite evidence. A hallucination involves seeing, hearing, and even smelling something that isn’t there. Welcome to the financial and wealth markets of 2022, not that the markets haven’t always been crazy, but now it’s even worse

Let’s confine ourselves to the local stock market as it’s complicated enough for our traumatized thinking. Delusions – false beliefs – are always easy to find in PSE. There are several illusions about what factors correlate with PSE price action. First, let’s see a correlation to inflation and economic growth. Restricting the analysis to 2018, although a much longer timeframe still applies, PSE and growth did not move together until both collapsed in 2020. Understandable. Even in 2021, the economy was “booming” – not just because it’s coming from a low base – but the PSE was anemic. The PSE fell in the first and second quarters of 2021.

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Inflation fell significantly from mid-2018 to pre-Covid 2020 and yet the PSE was going nowhere. A solid correlation now exists as inflation has been booming and the PSE is down about 7 percent. For both growth and inflation factors, correlation appears to occur during extreme moves, and even then it is unpredictable. To think otherwise is a delusion.

However, there has been a strong correlation between the USD/PHP exchange rate and the PSE for 25 years. The market is more responsive to peso movement with a beta greater than 1.0, a measure of the volatility of one “security” relative to another.

Hallucinations are like delusions, except hallucinations require more than simple belief to actually “see” something that doesn’t exist. This is what the PSE is famous for. Businesses with no recurring revenue double their price and go up “just like that”. In fact, the strongest and most common stock market hallucination is price action. We see what we want to see in price action.

These hallucinations are like Covid – endemic and contagious. As Wolf Richter describes it, “It’s when everyone hypes everything vigorously, willfully swallowing and not just nibbling on any propaganda or untruth, and vigorously avoiding exposure to any basic reality. For one reason only: to make more money.” Here’s why it matters. “People do it because it works. Trading algorithms are written to replicate it because it works.”

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On September 28, 2002, Warren Buffett said, “The mass hallucinations that gripped global stock markets during the technology boom are coming to an end. Markets are more realistic now.” This month marked the Dow Jones low of 7,500 and even after the crash in early 2009 the Dow never looked back down to 36,000. “Markets are more realistic now than they were during the stock market bubble a few years ago when most investors ignored common sense and started dreaming.”

Billy Joel might be smarter than Buffett. “You may be right, I may be crazy. But you might be looking for a madman.”

email me [email protected] Follow me on Twitter @mangunonmarkets. PSE stock market information and technical analysis provided by AAA Southeast Equities Inc.





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