Bullshift and Misguided Beliefs

John De Goey, a financial advisor and portfolio manager with Designed Securities, and long-time commentator on the financial services industry, was a keynote speaker at The Money Show recently held at the Metro Toronto Convention Centre. Author of the book ‘Bullshift – How optimism bias threatens your finances’ (Dundurn Press, Toronto, 2023) and host of […]

Clipped on from https://findependencehub.com/bullshift-and-misguided-beliefs/

Financial Independence Hub, , https://findependencehub.com/bullshift-and-misguided-beliefs/

John De Goey, a financial advisor and portfolio manager with Designed Securities, and long-time commentator on the financial services industry, was a keynote speaker at The Money Show recently held at the Metro Toronto Convention Centre.

Author of the book ‘ Bullshift – How optimism bias threatens your finances’ (Dundurn Press, Toronto, 2023) and host of the popular podcast Make Better Wealth Decisions, De Goey delivered a presentation called Bullshift and Misguided Beliefs.

‘Bullshift,’ the term De Goey has coined, refers to his view about how the financial services industry makes people feel bullish in order to do the industry’s bidding. To make his point, he noted full-page ads appearing in such publications as The Globe and Mail; one of them ran under the headline ‘Be bullish.’

As for misguided beliefs, De Goey says there is ample evidence that Canadian mutual fund registrants believe things which are patently untrue. To illustrate the latter, he referred to Brandolini’s Law.

Alberto Brandolini was an Italian programmer who developed the term in 2013 and his rule goes like this: The amount of energy required to refute BS is an order of magnitude bigger than what was needed to produce it in the first place. Or, put another way, it compares the considerable effort needed to debunk misinformation to the relative ease in creating that misinformation.

American writer and humourist Mark Twain had a take on this at a much earlier time, and De Goey cited that. Said Twain: “It’s easier to fool people than to convince them that they have been fooled.” The point beyond all this, said De Goey, is that people must unlearn what they think they already know. No easy task.

His presentation at The Money Show covered a number of topics including:

• The difference between misinformation (an honest mistake) and disinformation (saying something that is deliberately false), and how to unlearn the latter and think for yourself.
• How behavioural economics and social psychology affect your investing decisions.
• How the industry uses motivated reasoning and tribalism as opposed to critical thinking and evidence.
• Why 90% of our financial decisions are based on emotions, not logical thinking.
• Why governments and financial advisors like optimism over realism.

De Goey, always a student of history, observed that the market is 30% more expensive now than it was in 1929 just before the stock-market crash that led to the Great Depression. He mentioned the Smoot-Hawley tariffs of 1930 and their catastrophic impact on the U.S. economy, not to mention worldwide economy, and compared this to today’s on-and-off tariffs coming out of the Trump White House. He also noted recent credit downgrades and their effect on the U.S., and, of course, the very real pain of the tariffs which he believes will be much worse in the fourth quarter of 2025. What’s more, De Goey says this will be accompanied by higher inflation.

Bear market looming?

De Goey said the current bull market is “taking its final bow” and the bear market is “waiting in the wings.” In fact, he warned that gains made over the past six years could be entirely wiped out in the next four years if the historical regression to the mean for CAPE occurs. For those who are retired or nearing retirement, this would be devastating news indeed.

One of De Goey’s pet peeves – ‘optimism bias’ – refers to a) people thinking the good times will continue despite blatant warning signs, and b) the very human sentiment that bad things happen but only to other people. Not true, says De Goey. The trouble, he says, is that optimism can sometimes put you in trouble.

Normally, a presentation about money, economics and investing doesn’t get into wisdom imparted by such luminaries as Mark Twain, but De Goey didn’t stop there. He also took a page from Carl Sagan, notably, his 1997 book ‘The Demon-Haunted World. Said Sagan: “If we’ve been bamboozled long enough, we tend to reject any evidence of the bamboozle. We’re no longer interested in finding out the truth. The bamboozle has captured us. It’s simply too painful to acknowledge, even to ourselves, that we’ve been taken. Once you give a charlatan power over you, you almost never get it back.”

As far as behavioural economics and social psychology are concerned, De Goey referred to studies done on everything from obedience, conformity and cognitive dissonance to what he called “collective stupidity.” This form of groupthink, herd mentality – call it what you want – is what makes people act irrationally with their money and assets.

Misguided beliefs of some financial advisors

De Goey then launched into the meat of his presentation – a paper called The Misguided Beliefs of Financial Advisors published in 2016. In a nutshell, it involved an extensive study which found that financial advisors, at least on the mutual fund side of things, chase past performance, don’t pay attention to product cost paid by their customers, and run concentrated positions. De Goey said these three things are not supported by evidence.

Finally, towards the end of his presentation, he said no one can reliably predict the future but we can look at evidence and change our behaviour accordingly. Unfortunately, people are susceptible to emotions and often make decisions based on that alone. To make matters worse, because of the enormous impact from social media and the online world, we have never been exposed to such a degree of misinformation and disinformation as exists now.

According to De Goey, here is some of the evidence staring us in the face at this particular time:

• The Cyclically Adjusted Price Earnings is currently over 38 (and has hovered around 35 for over half a decade). This is the second highest it’s ever been.
• The Buffett Indicator (Total market cap/ GDP) is around 215%, making it the highest reading in history.
• The accumulated U.S. debt stands at over $37 trillion which is not only the highest ever, but the highest compared to GDP in peacetime. One consequence of this is that credit downgrades may continue into the foreseeable future. Another is that the gap between short rates and long rates is widening.
• The real pain of tariffs is still ahead as stockpiled inventories are used up, and central banks ease rates to prop up the economy.
• Stagflation seems probable and inflation inevitable.

All in all, this does not bode well for our investing future. De Goey says we have to recognize the current reality, unlearn disinformation, and start thinking for ourselves. How do we do that? He offered five key bits of advice.

1. Focus on facts and don’t let false repetition persuade you otherwise.
2. Look for trusted sources of information in order to avoid ‘bullshift.’
3. Accept that the current administration in the White House is the most corrupt in U.S. history and in the future we should expect only chaos.
4. For existing advisors, we need them to de-bunk old traditional beliefs and teach them to use critical thinking so they can better assess the world.
5. For new advisors, we can use ‘pre-bunking’ to circumvent Brandolini because it’s always easier to pre-bunk earlier than de-bunk later.

De Goey concluded by reiterating his message about advisors selling mutual funds; they suffer from misguided beliefs and believe things that are simply untrue. He said these false beliefs are contrary to all the evidence out there about proper portfolio construction and management. Worse still, the industry – this includes lobby groups, regulators and educators – has known about this problem for nearly a decade and done nothing to correct it.

John De Goey, CIM, CFP, FP Canada™ Fellow, is a Portfolio Manager with Toronto-based Designed Wealth Management. He is the author of three books on the financial industry: The Professional Financial Advisor, Standup to the Financial Services Industry and most recently, Bullshift.  You can find John’s personal website here.