Over the last 2 months, colleagues and friends have been asking me why I am so confident of the stock market to commit almost all my savings. The theme is always the same.

Countries around the world are shut, but why is the market down just a little bit?

This market is irrational. Why don’t others realize that it should fall more?

Why did you buy these stocks? Isn’t COVID19 hurting them?

To answer those questions once and for all, I’ve come up with an analogy. I hope to encourage you to think clearly about intrinsic value. Hopefully, this is the last COVID19 related post I am going to write about.

Let’s start off with numbers that are easy to work with. Suppose you earn an annual salary of $100,000. Also, let us suppose that currently, bank fixed deposit rates are 10%.