Everyone loves the circus because it takes us away from reality into the sphere of fantasy.
Each day CNBC, Bloomberg, Fox Business, and other business channels broadcast a virtual circus for all of us to see. The various “talking heads” are there not to help investors become better informed, but rather to render certainty about the future.
These pundits usually exude so much confidence that we are inclined to believe their predictions even when they’re entirely fictitious.
People don’t want an endless stream of facts and figures; they want solutions. This opens the door for predictors, forecasters, and yes, even charlatans.
Uncertainty is a Catalyst
The real financial world overflows with uncertainty, but we don’t like it. Yet, uncertainty is at the core of science. Uncertainty is a catalyst for both progress and prosperity.
When you think about it, things that are certain, planned, or known are what we want. Yet, life is mostly uncertain, unplanned, and unknown.
Studies show that the dominant financial fears of Americans are unplanned emergencies and unexpected health issues/expenses. These are the opposite of the narratives that dominate the financial programs on TV.
The Impact of Media
During much of the past 12 months, the financial media has been obsessed with the trials and tribulations of COVID-19 and how this might impact investments. Despite their daily admonitions about the catastrophes lurking around the corner, markets avoided that fate.
Now, with the financial markets just a bit off all-time highs, the media focus has shifted again to “bubbles.” All the talk about bubbles seize the imagination and overwhelm our sensibilities.
It might be worth remembering, however, that we have only had three stock market bubbles in the past 95 years: 1929 of course; 1968; and 2000.
The all-knowing, certainty-filled financial commentators try to push investors to panic, a response that is always wrong.
The key it seems is to shift away from our “default setting” to borrow a phrase from David Foster Wallace and remember our purpose for investing in the first place.
Instead of focusing mostly on the risk of investing in stocks, we should realize this risk is significantly out-stripped over time by the risk of not investing in stocks. The best way to deal with uncertainty is to recognize reality. Start there.