Can the Da Vinci code help us unlock the secrets of the markets? I'm not talking about the content of the book, more its popularity. The world loves conspiracy theories and it is a huge business. Why do they love them? Because the human mind wants to embellish and create storylines around random events. Is this starting to sound familiar?

The problem with most bullish thinking is that it lacks a conspiratorial element. How much more interesting it is to consider that what we see is just a facade and that there are agents of various different types undermining the fabric of civilisation. The spec-list has been presented with a few conspiracy theories in its time such as the deliberate manipulation of government economic numbers or undermining of the moral fabric of civilisation by assorted minority groups.

In this light, Abelson and his ilk might be seen as conspiracy theorists, titillating the public with thoughts that something in the woodwork is rotten. And our minds seem all too willing to go along with it.

Roger Arnold replies:

The equity bulls have an entire economic system that caters to bullish conspiracy theories and realities. Capitalism as an economic system may be considered a conspiracy theory; i.e. Gordon Gekko's "Greed is Good". The Greenspan/Bernanke Put may be viewed as a bullish conspiracy to steal from future generations a la moral hazard. The drift the Chair speaks of so fondly may be considered to be the reflection of that moral hazard. How many bears to do you see in the media? In a capitalist system the collective voice must be bullish and even Pollyana-ish by design. Advertisers do not pay for reality, they pay for promotion. That's why the bears have so few outlets are left frustrated; the bulls have conspired against them and reality itself. A big deal was made last week about the Dow record. But nobody mentioned that that was only in nominal terms. In real terms the Dow is now 17% below its record high — but that doesn't sell. And speaking of that upward drift in real terms, and keeping survivorship bias in mind, equities have for the most part kept up with inflation / dollar depreciation for most of the past 100 years, but not much better. So, by and large being invested broadly in US equities ensures that your wealth grows with the cost of living. But that's about it. But that's ok! Because the cost of not investing is that you sink like a rock! So, the key to wealth is not simply to save and invest; at best all that can do is keep you afloat. You must specialize and excel. That's the key to the capitalist system.


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