We, humans, are instinctively drawn to stories, be it in life or in markets. This episode is about the latter. Ben Hunt is the creator of Epsilon Theory and is one of the most unique voices in BS filled world of finance. His writing is miles away from the beaten path and is absolutely thought-provoking.
His unique perspectives just make you think about investing in a whole new light. Us common investors, we are largely speaking, marks in a con. We are constantly conned into believing narratives by talking heads, pundits, the sell side, and others. As the unwitting marks that we are, over a period of time, we become conditioned to the prevailing narratives in the markets and invest our money based on that.
This episode was a slap in the face because it wasn’t a grand revelation but rather pointed out the damn obvious – we are suckers for good stories. We common investors rarely have the gumption to question the motivations behind the dominant narratives and we deservedly get slaughtered like pigs.
In this damn insightful episode, Ben Hunt talks to Jesse Felder about how today’s markets are driven by words and narratives. He gives the example of the Federal Reserve’s forward guidance and Mario Draghi’s now infamous “whatever it takes” speech. These are essentially just statements from the powers that be with very little policy action.
And these words alone, isolated from policy action, had a drastic impact on the markets. Kinda seems counter-intuitive doesn’t it, to believe that words alone can have such a profound impact on the markets? I personally think that the fact that it is so obvious is why people are oblivious to the power of narratives.
Dr. Hunt in this marathon episode talks in great details as to why narratives work and why do we keep falling from them. This is a must listen, twice over.