Conclusion
Complex systems develop when a multitude of forces come together at the same time. Market price movements are the result of the confluence of thousands of buyers and sellers - each with their own goals, time frames, psychological biases, and interpretations of the facts.
It is easy to look at the markets and feel like they're too complicated for the average person to decipher. But pundits, market professionals, and scholars have not done much better than "average people" at interpreting the facts. Before accepting someone else's explanation of what's going on in a given situation, ask yourself these three questions:
- What are the primary elements of this thing?
- Does this explanation make any sense?
- Is there another explanation that works just as well?
Michael Burry noted, “Nothing obviates risk like informed common sense.”
If someone is telling you things that don't seem to stand up to the tests of basic common sense, scrutinize their underlying assumptions. The first step to analyzing anything is understanding the building blocks of it. Markets are groups of people. If you want to understand the markets, start by thinking about the people in them.