Conventional Wisdom in the Financial Markets

    Everyone has a movie or two that nearly the whole world has seen, but they haven’t. For Bagholder, one of those movies was The Matrix. He saw no need to watch a fictional tale about how we are all mindless slaves when actual day-to-day reality already made that point perfectly clear. Another movie everyone has watched, which Bag passed on, was The Titanic. As someone versed in history, Bag saw no point in watching a movie, when he knew ahead of time, how it would end. With about 25 years having passed since those films were at theatres, Bag decided to watch both to see what the fuss was about. The two films couldn’t be more different, and yet, ironically, they are both allegories with the same underlying moral lesson.

   Weighing in at over 52,000 tons, much of it steel, the Titanic was universally believed to be unsinkable. That conventional wisdom is what got people on the boat, and the crew to sail her through icy waters at maximum speed. But nowhere were the dangers of the “unsinkable” mindset more obvious than the moments immediately after the iceberg was hit. There was a definite lag between that moment and the realization in people’s minds that something was wrong. The band kept playing, the drinks kept flowing, and everything seemed, normal. Passengers should have been flocking to the lifeboats immediately. Instead, the crew had to order people onto them. Many of those lifeboats went into the water less than half full. Sure, by the time they were loading the last few, people were killing each other to get on, but it was too late. Those still aboard were victims, trapped there by the conventional wisdom that the Titanic was unsinkable.

While The Titanic demonstrates how conventional wisdom is little more than a cognitive trap, the Matrix shows that the ruling class set the trap. In The Matrix, an AI-generated computer code decides what each one of us eats, sees, thinks, feels, and does. In short, the computer code creates our reality. The only significant difference between the fictional world of The Matrix and our reality is the ruling class uses an unrelenting barrage of propaganda-laden narratives in place of a hardwired AI code. And make no mistake, our whole reality is narrative….. All of it …. And paradoxically, the crazier the narrative, the more easily we are taken in. You know, … like ... “52,000 tons of mostly steel, but yeah, she’s unsinkable.” 

Using narratives to control the masses is nothing new.  Centuries ago, when society was ruled by kings, asking any peasant what makes the king, the king - would get you a response along the lines of “royal blood or divine right.”  Of course, those things are not real and only exist as some made-up narrative designed to keep the populace in check.  We are all slaves to narrative, without exception. Diamond engagement rings are a perfect modern-day example. In what world does it make sense that the best way for a man to profess his love for a woman is to present her with a polished rock mounted on top of a refined metal ring? There is no logic in that, yet we almost all do it because societal-driven narratives, demand it.

Narratives permeate every aspect of our lives, defining our reality and providing a template for the conventional wisdom that controls our behavior. Civil society is nothing more than a collection of these narratives stacked on top of one another, like legos. Each piece supports the ones around it until the structure itself is so massive that the lies each individual Lego was founded upon, become completely forgotten. Examples include: America - land of the free, man-made climate change, the food pyramid, Billy has two mommies, safe and effective vaccines, renewable energy, etc…. These are all current-day reality-defining societal narratives entirely based on lies. But hey, if you believe any of these things are grounded in science and logic, Bag has a bridge in New York he would like to sell you, and you can even keep the tolls.

   There is no place where societal narratives and the conventional wisdom they produce are more dangerous than the financial markets. As detailed in Bag’s most widely viewed article to date (Creating Generational Wealth), Conventional wisdom in the investment markets is a Matrix-like scheme designed to get 99.9% of people on one side of a trade, while the financial elite (.1%) are on the other. And then, when the conventional wisdom gets ruptured - or, in keeping with the theme of this article, hits an iceberg, the 99.9% will gradually recognize the cognitive trap of “conventional wisdom” has landed them on the wrong side of the trade. As they move to the other side, the wealth of the .1% who were already there, gets multiplied.

   The consensus in the investment markets today, is near universal. Everyone believes US Treasuries are the safest investment on the planet; real estate prices only go up, and if held for the long term, your best returns will be in the stock market. It becomes easy to see these universal mindsets for the cognitive traps they are once the premise is accepted that conventional wisdom is a creation of the financial elite.  Consider the moments in the Titanic movie just after the ship runs into the iceberg. Almost nobody recognized the gravity of that moment for what it was, not even the captain. Everything seemed normal. This is precisely where we are in the financial markets today. The iceberg, known better as sharply rising interest rates, has already been hit.

    The last time US markets encountered interest rates rising this far and this fast was in the 1970s. That was the worst decade on record for both stock and bond markets - even worse than the 1930’s. The stock market peaked in 1969, and the bond market in 1971. The smart money at the time immediately recognized the rising interest rates for the iceberg it was. They bought seats on the Gold and Silver lifeboat in that 1969-1971 two-year window and made 20-40x their money by 1980. The public was not so fortunate as they were trapped by the prevailing conventional wisdom at the time, which kept them losing money the whole decade in the “nifty fifty” stocks and “ultra-safe” government bonds.

It is a well-known fact that sharply rising interest rates go hand-in-hand with Inflation, which, in turn, brings higher food prices. Unless you are a farmer producing more food than you can eat, It is nearly impossible to capitalize on that fact.  If, however, you were an Elite, maniacal, well-informed Controligarch who knew rising rates were here to stay,  US farmland would make an ideal investment to leverage the rising food prices. It just so happens that Bill Gates is the single biggest owner of Farmland in the country, almost all of which has been purchased in the last three years. Ask yourself, is Gates buying farmland because he wants to spend his golden years tilling the soil with his loved ones? Or is this a guy who recognizes that the iceberg of sharply rising rates will drive food prices through the roof?

Bagholder, like a priest passing out wafers, has been distributing red pills to readers of this column for years. We will close today’s article with yet another. The underlying message in The Matrix and the Titanic couldn’t be clearer.  Conventional wisdom, isn’t wisdom at all. It is a cleverly built Cognitive cage designed by our rulers to control and limit our behavior. When the realization was spreading aboard the Titanic that she was going to sink, the exits for the masses on the lower decks were not only locked, but they were ordered to remain locked. The elite deciding to keep those exits sealed perfectly illustrates who they are. They don’t give a shit about you and I. When you see Uber-wealthy Controligarchs like Bill Gates buying up US farmland, that should be all the red pill you need to recognize the exits are being sealed at this very moment.