And yet instead of doom and gloom, some of us have increased our net worth since 2014/15 in a FALLING market.

Why? How?

1) Selection. Safaricom in 2020 vs 2014. KK 2019 (buyout) vs 2014. Also adjust for bonuses
2) Dividends. Look at what Scan will pay! Or Saf has paid. Or Williamson and Kapchorua since 2014/15.
3) Commission/trading costs to get in/out of positions.

If one bought duds like Mumias, KQ, HAFR, ARM then...

The problem with fundamental analysis as practised the world over is that goal posts keep changing as if on whim (Elliotticians have studied this, due to uncertainity the herd will explain a way a market move by rationalizing a myriad of reasons to befit the ensuing environment) .

Just at about the time Safaricom results were posted and repeated my call for Safaricom share to fall, I was told that that scenario (fall in price) would not happen because the stellar results would push the share price higher. That hasn't happened!

Now, with the reality that the share is actually flounding, we get a new reason (* a rationalization) that the share is falling due to foreigners who fear a depreciating shilling.

These are conflicting causality for market dynamics. At what point did the stellar performance stop being a factor in the direction of the market before the depreciating shilling took over?

The thing with fundamental analysis is that the practioners use a lot of technical jargon which makes it sound quiet attractive and noble to the herd. True, there are very sharp economic minds trying to figure the direction of the markets. But, and this is key, all that effort is useless in the face of reality. this bear market is proving the futility of relying on news to forecast a market.

If market direction depended on fundamentals then the Professors and PHD holders in economics would be outperforming the market at every turn. Studies have proven this not to be the case. The reason for this is that there is a distinction between economics and finance. Causality in economics (supply and demand leading to equilibrium prices) is quite distinct from causality in finance (mass psychology due to subconscious impulses).

In short, in economics you rely on your neocortex to make rational decisions eg you would buy more of an item at a lowered price than when the price is higher. On the other hand, in Finance decisions are made from the subconscious pre-rational part of the brain (the limbic system). Thus, for example, animals in the wild herd to increase their chances of survival in case of an attack by a predator. This behaviour is caused by uncertainity (key) thus the need to derive safety in numbers.

During evolution of the human brain(I hear some say they don't believe in evolution, ) the limbic system was retained as an important part.


link

It is the limbic system that takes part when you are trading in financial instruments. For one, there is no tangible utility one derives from holding financial instruments unlike say buying bread. In the financial arena people behave differently from when they are in economic arena. For example, when a share price is falling you will find that there are fewer holders. Yet when the share price is rising the number of people who want to buy at ever higher prices increases exponentially.

In the Financial arena there is uncertainity (no one knows the direction of the market) thus the only way for participants to feel some level of safety is to seek people of similar opinion. Yes, they herd because they assume the crowd knows best.

The interesting thing with herding is that those who do it actually have no knowledge that they herd. It is afterall a subconscious thing! So when fundamental practioners give one reason or another for a market move, what they are actually doing is rationalizing the reason for the move after the move. Your limbic system is fast and will impell the neocortex to procure a very rational reason for what the subconscious has effectively 'decided' upon. And this is what they do day in day out.

For more on this subject read:

The Triune Brain in Evolution: Role in Paleocerebral Functions by P.D. Maclean

as well the Socionomics books by Robert Prechter.

A house on 1 acre along Thika Highway vs a house in Buruburu bought in 1990 [assuming one paid the same] is very different in 2020.
I like to use "London" as an example. The prices of properties in the UK (in aggregate) have seen a log since 2014 vs LONDON (city) which has seen prices RISE. So land and house owners in London aren't feeling the pain of the "aggregate"

Perhaps someone has the info but how was the NSE 20 Index calculated in 2014/15?

The weighting of each constituent?

As an example, KQ was still at 12-ish?
Same KQ closed at 1.25-ish given there was a 1:4 consolidation. That's 10%.

Compare to Safaricom (and include dividends).

So a portfolio with ONLY Safaricom. 100% Saf. Nothing else. This would have handily beaten the NSE 20 Index.

Let's tie this with Elliott Waves:
People herding in the Financial arena create patterns that repeat on regular intervals. This repetitive behaviour is what creates predictability in the markets. This predictable repetitive behaviour is what creates patterns that Ralph Nelson Elliott set out to painstakingly journal and he succeeded in doing so. In short, mass psychology produce patterns that repeat in a predictable fashion according to Elliott Waves.