There are two groups of people in the world. One is ignorant and intends to remain that way. One is ignorant and is learning not to be.
Actually, we are all in both of those groups from time to time, switching back and forth. But, unfortunately, there are hard-core members of “Remain Ignorant.” You can easily notice them; they talk a lot, rarely listen and strongly believe that the world is constant.
Ancient Greek philosopher Heraclitus wrote, “The only thing that is constant is change.” Having studied the global asset and financial markets since 1970, I now tend to live from quarter to quarter at most.
People that would prefer not to remain in the comfort zone of ignorance observe changes in real time so that they are not caught off guard. However, the problem of the ignorant is they read headlines and not the details. The now classic tabloid headline “Woman gives birth to mudfish” of 25 years ago has been replaced by people posting five-year- old news stories on social media and no one bothers to look at the date.
In April I wrote that the Philippine stock market was going higher and it is up 10 percent. I also said that the major global markets were in an unsustainable rally that would eventually reverse down and it will, probably when the Dow Jones Industrial Average reaches around 20,000. Then it will rally as it did between 1933 and 1937 when it gained 300 percent.
Change is coming so quickly. In the last three months, Britain voted to leave the European Union and has a new prime minister, the first woman since 1990. A man who no one ever considered for the presidency until eight months before the election now leads the Philippines. Another man who has never held elected office is statistically tied in the polls with a woman who has been running for US president since 2008.
Japan is looking for ways to drop cash money out of helicopters to stimulate its economy, while Germany—one of the strongest economies —is now issuing government bonds at negative interest rates to keep its economy from deteriorating. The total amount of government bonds in the world that have negative yields is now $13 trillion, up from $11.7 trillion just over two weeks ago. That increase is more than the size of the total Russian economy.
The Remain Ignorant people like to see themselves as the progressive thinkers, when, in fact, they are the ones stuck in the past, with ideas that do not work anymore. A gentleman asks me, “Why does ‘XYZ’ company seem to be a favorite among investors although it shows a P/E [Price/Earnings] ratio of negative 1,183, with poor fundamentals?” Ask the “experts,” but, in truth, it’s simple. The investing paradigm and models have changed as the world has changed.
Having lots of credit cards used to be a sign of status. Now it’s a sign of stupidity. What worked yesterday does not work today, and today’s’ ideas will be obsolete tomorrow. Change came and many missed it and they will remain ignorant.
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E-mail me at mangun@gmail.com. Visit my web site at www.mangunonmarkets.com. Follow me on Twitter @mangunonmarkets. PSE stock-market information and technical analysis tools provided by the COL Financial Group Inc.