Normalcy Bias, also known as Normality Bias. What is it?
Like the picture says, we're all idiots when it comes to predicting the future. I've been wrong many times in the past on what I thought was going to happen, but my mistake has always been ignoring my gut instinct, because markets in general do not function in the way we think they should. In fact, they rarely do.
We expect markets to give us the fair value of something, but the times that this actually occurs is extremely rare. Why? Because markets are not rational, and they cannot be rationalized. Yet, normalcy bias is like a parasite, tricking us every single damn time.
Well... this time it's probably going to be the ruin for a lot of people, but Especially in the USA. why? because the US dollar is too strong, and Americans have been lulled into believing that their economy is doing well because prices of goods, services, real estate etc are not going up as fast as they are in other countries. This disparity between the value of the US dollar when compared to most other currencies is extremely dangerous for Americans who are not prepared for mass inflation.
Many Americans, some who are very smart people and are considered experts in the field of predicting markets, are under the impression that the US learned it's lesson in 2008 and are in a much better place in 2019. Bullshit. The rest of the world are racing to the bottom to devalue their currencies, always pushing inflation forward ahead of domestic markets so that the value of goods and services are lagging behind and slightly undervalued. At least, that's the theory behind this race to the bottom. The US can't afford to win that race, otherwise faith in the US Dollar dies and investors flee in droves.
So, what's the point of mulling over Normalcy Bias? Easy; we are about to experience the biggest paradigm shift since the Great depression in the 1930's, possibly even since the western world has controlled the seas and dominated world markets. It's been a good run, maybe too good. As a global civilization we have become far too complacent.
But history is starting to rhyme. The rise against bankers in 1930's Germany turned into a rise against the Jews. Guess what the narrative is with Trump supporters today? How about Democratic voters? There is a problem in America, and the rest of the world, but we have yet to place the blame squarely on anyone's shoulders yet. Germany also blamed immigrants, in fact that was the beginning, and eventually as things got worse and people got more desperate they started noticing that some people were doing really well while other's starved. You know the rest, it's basic history for most high schools.
When I was a kid, I could never imagine that anyone in their right might would ever wear a swastika on their arm, or wave a nazi flag, least of all in the USA. But its happened, and continues to happen. The immigrants will be contained, abused, tortured and mistreated, but things will still get worse economically in the US, and as they do get worse the blame will keep shifting to more and more specific targets. Will the Jews take the blame again, simply because they take care of each other instead of being selfish? Or, will it be Chinese Americans this time?
It doesn't matter who, because we are all humans with the capacity to suffer at the hands of tyrants, so thinking that any group of people are more deserving is foolish. The reason why the US and the world are heading towards this paradigm shift stares back at all of us in the mirror, but we would rather someone else take the blame and the consequences. It's what Christianity is entirely based on, after all.
But I'm done rambling for now. I just wanted to drive the point home that just because things have been a certain way for your lifetime, doesn't mean they will continue to be that way for the rest of your life. The US golden age started after the great depression, and it appears that this golden age will end on the same note that it started. People will once again have to learn what they actually need to spend money on, and be capable of resisting frivilous purchases; and I can talk because I'm not exempt here. I blow money on useless garbage as much as the next idiot.
My gut instinct tells me we're falling off a cliff right now on a global scale, but because we're so high up the ground below is still so far away. There will reach a point when the ground starts taking shape below us, and that's when everyone will panic. Once this happens, you won't be getting your money out of the stock market, and if you're depending on the money that others might owe you you are even more screwed. Either we are in control of our well being, or someone else is, and when the sky starts falling you will be on your own, and even worse if there are others who depend on you they will be screwed too.
Thanks for reading. shares and comments are always welcome. Be safe.