What Doesn't Have To Make Sense

Not everything makes sense - an understatement to be sure. But not everything has to make sense. Let's look at some items that frequently don't and, indeed, don't have to make sense.

People's emotions top the list. Sometimes emotions flow smoothly from logic. For example, when we react sadly, both inwardly and outwardly, to the death of a loved one, our feelings make a lot of sense. The facts call for such emotions. If we didn't have some form of these emotions, it would be odd. 

But emotions don't always flow smoothly from logic.

If you're married, you may know what I'm talking about. From the male point of view, a woman's emotions can be a bit mysterious. If there's logic mixed in there - and I'm not saying there isn't - the connection typically escapes me. 

A more extreme example might be what we've come to call "EDPs" - emotionally disturbed people. We've got 'em by the hundreds (thousands?) in New York City. If you know any EMT or cops, you likely have heard stories of encounters with such folks. There's no logic behind their extreme emotional outbursts - at least none that anyone I know has fathomed.

This disconnect between emotions and logic or intellect lies behind a great deal of work put forth by philosophers and theologians, going all the way back to the Greeks. With their awareness of human thinking and behavior, the Greeks were able to see how emotions can cause people to make bad choices, to use current phraseology. That's why they spent so much time promoting the mind's ability to see things as they really are, as well as the importance of doing so.

These days, sadly, too many of us have lost the desire, never mind the ability, to see things as they really are. Relativism has massively infected our thinking, therefore our way of seeing the world. Relativism has especially dominated many (if not most) people's thinking (or lack thereof) when it comes to ethics. Morality no longer has an objective reference. What's right is what's right for me. What's wrong is what's wrong for me.  

This world view, or as the German philosophers labeled it, weltanschauung, has arguably led to the radical divisions that exist between groups of people. For example, it's hard to get along when I think killing pre-born babies is murder and you think it's a perfectly acceptable choice for a woman with a so-called "unwanted" pregnancy. And there are many, many more such disagreements sourced in the prevalence (some might call it a plague) of Relativism.

What about markets?

There's a theory that says markets are rational. Over time the price of an item settles on some sort of reality-based value. The easiest example is a "value" approach to investing. When you analyze a company's balance sheet and see that the "fundamentals" show the company is worth more than the current market price, you buy; for the opposite, you sell. This may be oversimplifying matters, but I think it's basically correct. And with this view, you would most likely believe that, while it might take longer than you'd prefer, the price of your item will eventually migrate towards your evaluation of some standard of "real" worth - again, based on fundamentals.

Now, if we concede that this view has merit, we still have to explain why it does take a long time for price to made sense. Without offering a host of academic papers devoted to explaining this, may I suggest that emotions play a role, perhaps a major role, in why the price makes no sense for so long?

Of course, there's also a school of thought that price reflects human emotions, rather than any real logic. If that's true, the price only makes sense if we accept that it makes no sense - or something like that.

Why bring all this up? 

In the first examples, the basic point would be that there are certain circumstances or items where things don't have to make sense. In the example of married men and women, that might be where the guy doesn't obsess on the idea that the woman's emotional response or reaction makes no sense. First of all, it could possibly be that the woman's explanation does indeed make a lot of sense, but guy's just can't see it. But even if it doesn't make sense, banging your head against a wall will leave you with a huge headache or worse over time. Best to just switch gears and think it really doesn't have to make sense.

Even the EDPs - emotionally disturbed persons - might be seen in this light. They feel what they feel. Whether it makes sense or not doesn't really matter. Of course, we have a right to control their behavior, in the case where that threatens others. But as far as changing their emotions, it's above the typical everyday rational person's pay grade.

As for markets, let's use this current Bear Market as a for instance. Bears come after Bulls have irrationally bid up the price of things way, way beyond any rational level. So in a sense, prices falling to earth could be considered a perfectly sensible process. Then again, true Bear Markets don't simply correct. Human emotions get involved and with that prices will fall far, far below any so-called reasonable level. So while the Bear may have started out with an aura of sensibility about it, a true Bear Market devolves into a far-from sensible state of affairs.

At the risk of oversimplifying, maybe it's best to just accept the fact that markets don't have to make sense. Whatever you think, they likely won't.