How often are you actually right?
Well, it seems we simple humans believe we are right way more often than we actually are.
So much so, there is a term coined the “Illusory truth effect” where we have a tendency to believe false information to be correct after repeated exposure.
So if you say the same thing over and over in your head to yourself, guess what? You start to believe it.
After almost 30 years working in investment markets, I have learned to be very cautious in listening to what I believe. As I really have been wrong many more times than right…..as my wife keeps reminding me.
Instead, I have learned to listen to the market, because the market is never wrong. But at this point in history, unlike any time before, I really think the market is WRONG.
I can confidently say this because the market is no longer a “market” in any meaningful sense. So much intervention for so long has turned it into something else.
Flash back to the GFC, when on the 15th of September 2008, Lehman Brothers files for Chapter 11 bankruptcy protection. What was about to follow was the collapse of the entire Western Banking system.
But thankfully in their wisdom, Central Banks around the world decided they would do “what ever it takes” (Thank you Mario Draghi-President of the European Central Bank) and turn on those printing presses and print baby print.
The global quantitative easing and bond buying by Reserve Banks around the world absolutely saved the financial system from collapse at that time, however it was only ever meant to be an emergency measure.
And 10 years later just as it looked like things were going to start moving back to normal levels, we get sent a gift from Wuhan and BOOM, the party is back on.
All this free money and government support of businesses that would normally have been left to fail reminds me of one of my favourite quotes:
“Capitalism without bankruptcy is like Christianity without hell”
And so here we are today. Money was printed and mailed out to every single household to spend. And so spend they did. And now that spending has created a bunch of inflation.
So whilst the doomsayers are calling for interest rates of 8%-10% to return, and warning of an impending depression, I have a sense that Reserve Banks will do “what ever it takes”, to keep us out of hell.