The Stock Market Asylum

It was an architectural disaster from the start. The Narrenturm (Fool's Tower)* opened in Vienna in 1784. Nothing worked in the round building. The heating system only functioned in theory, and the drainage pipes lacked the slope to actually drain off the waste. All the patient rooms of the “Imperial-Royal Insane Asylum of Vienna” faced outward. The “golden Viennese heart” took advantage of this to go “madman watching” on Sundays. Curiosity abounded. Eventually, the brick grooves of the two lower floors had to be plastered over to prevent climbing the outer wall. 

Sometimes the financial stock market is like a fool’s tower. Then you can hardly escape the impression that madmen are at work here. Emotions and daily news lead to violent price jumps. Economic, interest rate and geopolitical data trigger price fever curves. Orderly chaos reigns on the stock exchanges. And sometimes fashion trends can be observed: Currently, it is precisely the monthly inflation figures that are eagerly awaited. In the 1990s, traders primarily focused on the money supply. 

In the long term, the business model counts 

No one on the trading floor can escape these constant ups and downs. Everyone gets caught up in the frenzy. Today's economic figures are forgotten tomorrow and revised the day after. Sometimes the figures even flip signs. Accurate forecasts therefore seem impossible.

By his own admission, legendary investor Warren Buffett has not made a single decision based on economic predictions. His quote at the 2015 Berkshire Hathaway shareholder meeting was particularly harsh: “We think any company that has an economist, you know, certainly has one employee too many.”     

Buffett's point was that, in the long term, it is the quality of the business model and the current share price that matter. No one can foresee the future, and the complexity of the economy makes forecasting and chance indistinguishable. In any case, gurus and good friends should not influence investment decisions. When it comes to one's own assets, professional expertise and the courage of personal conviction are required.

*The Fool's Tower was incorporated into the Natural History Museum in 2012 as a pathological-anatomical display collection. Since 2020, one can visit the worldwide unique collection in a new, modern form.