The Euclidean Proportion

Euclid’s geometry is a model for everything, including stock markets
The Romans developed the Roman hand abacus. It was the first portable calculating device. It greatly reduced the time needed to perform the basic operations of Roman arithmetic using Roman numerals. However, there was a problem regarding complex multiplications and storing previous calculations. The Hindu (later called as Arabic numerals) number place value system resolved this problem.
How Aryabhata did it with a symbol like zero in the 3rd century BC could be linked to his sense of proportion. Euclid a century later created a subject built on proportion. Geometry is about proportion, a pure science studying symmetry. Euclid’s Elements is the most successful textbook in the history of mathematics. His system of rigorous mathematical proofs remains the basis of mathematics after 23 centuries, classifications and super classifications later. His mathematical proportion rules nature, science, life, economics and markets like nothing else.
The first example of proportion can be seen in the animal kingdom, the larger the size, the smaller the number. Whales, Tigers and insects, the number of animals in one class falls as the size of the animal decreases. There are much more insects compared to tigers, and more tigers compared to whales in the world. The language we use to communicate is also proportional. The most common word in the human language is spoken twice as much as the next most popular word. The frequency keeps decreasing mathematically as the popularity of a certain word decreases. Information that we use as news is also proportional. The number of the most popular news stories, films, or soap operas we watch are proportionally linked to the other news, films and soaps. Population distribution, intra city or inter city is mathematically spread. Wealth allocation is also proportional. The larger portion of the wealth of any society is owned by a smaller percentage of the people in that society.
The World Wide Web is proportional. A study of the web’s structure, reveals that it isn’t the fully interconnected network that we’ve been led to believe. The study suggests that the chance of being able to surf between two randomly chosen pages is less than one in four. Researchers have analyzed 200 million web pages and 1.5 billion hyperlinks. Their results indicate that the web is made up of four distinct components. And however, you may divide or slice the web, based on stock market based websites, based on entertainment links, based on region or religion; you will get the same structure of four components. The number of births or deaths highlights proportion again. The universe till the sub atomic level is connected with the same proportion.
What we thought was mystical; the divine proportion is a part of this large proportion we are talking about here. Seen in pyramids, in prices, in religion, in science, the divine proportion has been espoused by scientists, mathematicians, historians etc. The Fibonacci series is no magic; it’s a statistical series, proportional.
Our misconceptions as human beings are also proportional. What behavioral finance calls as overestimation of skills is nothing but the same proportion at work. 90% of the people rate themselves in the top 10% of their class. Proportion is also the reason we as human beings herd. If we have proportion in behavioral errors then it’s not surprising that we proportionally herd to buy and sell, invariably at the wrong time.
Demand and supply is proportional, reported macro economic data is proportional, market and prices are proportional. Even our favorite and popular tools of market analysis are proportional. Fundamental analysis has a sizeable content on ratios. Don’t be shocked, but it’s true that price/book, prices/sales, prices/earnings are ruled by the same proportion. Technical analysis is also about proportional patterns. Any statistical time series lifeless or with life has a proportion. A random toss of a coin will lead us to the same proportion. Mandelbrot’s clustering and Taleb’s randomness is also proportional.
The proportion in mathematics, gives rise to patterns, symmetrical patterns and natural patterns. The Ulam spiral is a simple method of graphing the prime numbers that reveals a pattern. It was discovered by the mathematician Stanisław Ulam in 1963, while he was doodling on scratch paper at a scientific meeting.
Now that we understand that proportion is nature’s law, we should spend some time comprehending the challenges of proportion. Because it’s ubiquitous, humans don’t give it that importance. A majority of us will also find it tough to believe that everything is mathematically linked. Our day to day life suddenly loses all its complexity. There is so much redundancy in the system, which can never be taken out even if with the greatest depression. We can never come to accept how simple it all is. Humans are unable to see the degree of proportionality i.e. the range of proportions, top down proportionality of everything. Only a few can quantify proportion in a workable model that gives trading or investing signals. It’s strange but we use them every minute of our working day, even when we are sleeping, but still don’t see them.
Proportion was always relative, a ratio. The top market, top decade, top week, top sector or worst stock is all about comparisons, a ratio. There is nothing like absolute proportion. Analyzing anything needs a sense of proportion. We break aspects or parameters to analyze them. Constructing or reconstructing is about proportion, whether it’s architecture, philosophy, culture, markets anything.
Life would be random, if God would throw a dice. He does not have time for doing this. He gave us proportion and ability to think and question. Are all these proportions linked? Whether what Euclid did was a complete model for and of everything? Is it so simple?