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The Stock Market is Not the Economy: Understanding Complex Adaptive Systems
The economy is in trouble with potentially years of hardship ahead, including a negative 14% GDP growth and nearly 15% unemployment./nUsing the stock market as an indicator for the economy is not reliable./nEven with a recession looming, it doesn't necessarily mean one should sell the stock market./nThe stock market operates within a complex adaptive system, much like politics and the economy.
On today’s episode, Clay chats with John Jennings about his new book - The Uncertainty Solution.
John Jennings is President and Chief Strategist of St. Louis Trust & Family Office, which has $12 billion dollars in assets under management. He is also a member of the firm’s Management Committee, on its Board of Directors, and also serves on the Investment, Risk Management, and Trust Committees. John works closely with client families, advising them in all areas of wealth management.
IN THIS EPISODE YOU’LL LEARN:
00:00 - Intro.
01:38 - Why humans are hard-wired to avoid uncertainty.
06:40 - Mental models we can use to invest more intelligently.
10:08 - How humans tend to react when faced with uncertainty.
16:56 - Why we are wired to quickly come to conclusions and tend to confuse correlation with causation.
27:17 - How the improbable is much more probable than we might expect.
32:13 - Why the economy is not directly correlated with the stock market.
47:51 - Where investing falls on Michael Maubbousin’s Skill vs Luck continuum.
1:00:53 - How behavior biases like loss aversion and overconfidence affect our investment decisions.
1:06:14 - How storytelling can trick us into making poor investment decisions.
1:10:13 - What base rates are and understanding base rates can help us make more intelligent decisions.
Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences.
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