Everyone Has A Story - And They're All Wrong
It's dangerous for investors to believe in stories.
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One of the defining characteristics of human beings is our ability to tell stories.
Stories help explain the world around us. Help make sense of events that are beyond our understanding and allow us to imagine possibilities that have not yet come to pass.
We need stories. We crave them. Without them, we feel nervous, untethered, anxious.
It’s been this way for thousands of years.
According to Greek legend, Apollo, the son of Zeus, master of Olympus, rode a chariot pulled by fiery horses across the sky every day to bring light to the world.
This story was a way for the Greeks to explain the daily cycle of the sun and to give meaning to the passage of time.
It was a way to imagine something that was beyond their understanding and to create a narrative that made sense of the world around them.
But a certain sub-species of humans known as “investors,” really need stories.
And when they can’t find one - or the right one - they miss out.
Coming into this week, investors had long been struggling to find a story that could explain how we could break out of this recent range.
They wracked their brains trying to figure out what the catalyst would be, and most agreed, there just wasn’t one.
Then the market broke out and left them behind.
These were the same investors who, after the market hit the lows in October, convinced themselves that the market was about to start a new down leg.
That was the story they chose to believe.
If you had told them that over the next six months housing stocks (and big cap tech) would lead the market higher they would would have scoffed, “how could housing lead the market higher?”
Interest rates were rising, people were getting laid off, and housing prices were elevated.
That’s not a story that allows for housing stocks to rally.
And so, they missed out.
It wasn’t a problem for the Greek farmer to set his daily schedule based upon Apollo’s duties, no matter how spurious the tale, because it tracked with the facts; the sun did indeed move across the sky like clockwork every day.
But what about his neighbor, the one who worried that Zeus’s kid might skip a day? Or that one of his horses might break a leg. Or that that badass chariot of fire might occasionally have to go into the shop for service.
If that farmer began revising his planting schedule because of what he thought could happen, instead of what’s happening in front of him every day, it could lead to disastrous consequences.
Stories are dangerous for investors to believe in because they not only convince us of we think will happen, but what we think can’t happen.
For more on this, check out the quick hit I did on the ‘Morning Show.’
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It should go without saying - but I’ll say it anyway - all opinions expressed in The Lund Loop are my own personal opinions and don’t reflect the views of my employer, any associated entities, or other organizations I’m associated with.
Nothing written, expressed, or implied here should be looked at as investment advice or an admonition to buy, sell, or trade any security or financial instrument. As always, do your own diligence.