Getting the story right

and overcoming the monster

https://www.pricevaluepartners.com/getting-the-story-right/

“After nourishment, shelter and companionship, stories are the thing we need most in the world.”

• Philip Pullman.

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In the early 1980s, BBC2 used to screen horror double bills late on Saturday nights. The one that made the most impression on this correspondent was a double feature comprising ‘Night of the Demon’ and ‘The Ghoul’.

‘The Ghoul’ was a so-so British affair starring Peter Cushing and it was a film, in colour, we were looking forward to seeing. We watched ‘Night of the Demon’ (in black and white, to boot) out of a sense of weary obligation, and because it happened to be broadcast first.

Of course, it turned out to be a classic. It’s a Jacques Tourneur-directed adaptation of an M. R. James short story, ‘Casting the runes’. A psychologist, John Holden, investigates a wealthy Satanist and threatens to expose him. The devil-worshipper, Julian Carswell, turns the tables on his pursuer and predicts that he will die within three days. Initially sceptical, Holden grows increasingly disturbed as the deadline looms..

‘Night of the Demon’ in turn inspired in this correspondent a love of the works of M. R. James, probably Britain’s finest writer of ghost stories.

‘Night of the Demon’ is also a good example of one of ‘The Seven Basic Plots’, Christopher Booker’s wide-ranging analysis of stories, and why we tell them. It’s an example of the first type of narrative, ‘Overcoming the monster’, in which the hero fights an almost insuperable enemy and ultimately saves his community from the forces of evil. The other basic plots: ‘Rags to riches’; ‘The quest’; ‘Voyage and return’; ‘Comedy’; ‘Tragedy’ and ‘Rebirth’.

How you frame the current investment situation is down to you. We think pretty much any of Booker’s templates can be made to work. We quite like ‘Overcoming the monster’, in which the monster is what G. Edward Griffin called “The Creature of Jekyll Island” (namely, the US Federal Reserve and, by extension, all of the major central banks). Or you could adopt ‘Rags to riches’ on behalf of your own portfolio story. Or ‘The quest’ (for enhanced wealth, or simple capital preservation). Or ‘Voyage and return’. Or ‘Comedy’ or ‘Rebirth’. Let’s hope it isn’t ‘Tragedy’.

But it’s impossible to follow the investment markets without coming across narratives. As human beings we are drawn to stories like moths to a flame. The problem is that most narratives reported by the financial media, perhaps even all of them, are false.

Thomas Schuster of the Institute for Communication and Media Studies at Leipzig University has written the definitive critique of the financial media when it comes to the creation of false narratives and fostering irrationality. Bear Schuster’s words in mind the next time you read a market report:

“The media select, they interpret, they emotionalize and they create facts.. The media not only reduce reality by lowering information density. They focus reality by accumulating information where “actually” none exists.. A typical stock market report looks like this: Stock X increased because.. Index Y crashed due to.. Prices Z continue to rise after.. Most of these explanations are post-hoc rationalizations.. An artificial logic is created, based on a simplistic understanding of the markets, which implies that there are simple explanations for most price movements; that price movements follow rules which then lead to systematic patterns; and of course that the news disseminated by the media decisively contribute to the emergence of price movements.” (Source: Meta-Communication and Market Dynamics; Reflexive Interactions of Financial Markets and the Mass Media.)

Our friend, the asset manager Tony Deden in Zurich, has written of the psychological and emotional spiral that comes from being tossed and turned on the waves of the financial news cycle:

“Daily, my mail box is full of emails, many of which come from well-meaning friends. “Have you seen this article ?” or “Do you know this guru ?” I follow the links as I frantically go from thenewyorktimes.com to financialarmageddon.com and everywhere in between. “The dollar will rebound”, “Gold is another bubble”, “Buy bonds”, “Sell bonds”, “Pork bellies are undervalued,” and so on. I pretend to read some of these writings just so that I can make up something to say should they follow up the email with a telephone call. In an enduring quest for understanding and picking kernels of knowledge, I find myself surrounded in an epochal – and mad – battle of the optimists versus the pessimists.

“Honestly, there are intractable and momentous problems which should be the cause of considerable pessimism. But when it comes to action with other people’s money – particularly the irreplaceable kind – merely on account of the free advice of a well-known guru who writes for the-world-is-coming-to-an-end.com is complete madness. To follow the advice of an analyst working for a bank that can’t even manage its own balance sheet and who is intentionally or accidentally divorced from reality, is madness squared.”

Just because narratives exist does not mean we should automatically consume them. A particularly popular recent market narrative has it that because AI is going to eat everybody’s lunch, AI companies can justify pretty much any public valuation ascribed to them.

But narratives die hard.

Another popular narrative among financial journalists is the idea that central bankers know what they are doing. This can be glimpsed in the lionisation of Alan Greenspan, the Fed chairman who died in June, despite the fact that he turned his back on gold, and never saw an interest rate he wasn’t willing to cut whenever Wall Street wanted him to.

The ‘Common Knowledge’ narrative today has it that central bankers don’t just know what they’re doing but are omnipotent in the doing of it – they don’t just have our backs, they also have the power to support the markets if the markets ever question the efficacy of their monetary policy.

Ben Hunt of Perscient happens to look at the financial markets through the lens of game theory. From his perspective,

“..public markets today are essentially hollow, as what passes for volume and liquidity is primarily machines talking to other machines for portfolio “positioning” or ephemeral arbitrage rather than the human expression of a desire to own a fractional ownership share of a real-world company. I believe that today’s public market price levels primarily reflect the greatest monetary policy accommodation in human history rather than the real-world prospects of real-world companies. I believe that the political risks to both capital market structure and international trade (which are the twin engines of global growth, period, end of story) have not been this great since the 1930’s. Simply put, I believe we are being played like fiddles.”

To put it another way, everyone knows that everyone knows that central bank policy drives the financial markets. This is today’s dominant narrative. At some point that narrative will change – narratives are like fashions and they can’t last forever. But until the narrative does change, and no matter how frustrated we may all feel at the dominance of that narrative, we are forced to play the hand we’re dealt.

The alternative is simply to pack up our toys and go home – i.e. liquidate everything we own and shelter in cash.

So we know the game is fixed. The pragmatic solution is to play the game anyway, even though our fickle and unstable referee has a tendency to change the rules whenever he feels like it.

We happen to believe, quite strongly, that a multi-asset strategy incorporating value stocks, the opportunistic use of systematic trend-following funds, and real assets, notably the monetary metals and commodity companies, is likely to prove robust in the face of today’s dominant narrative of omniscient and omnipotent central bankers. Nassim Nicholas Taleb might even call it “antifragile”. Perhaps perversely, one of the best ways of preparing for an uncertain future is not to have an over-riding vision of the future in the first place.

Unconstrained value stocks are perhaps the best way to retain ‘skin in the game’ in the global stock markets. They give us market exposure without embracing unnaturally high levels of risk. But it’s important to ignore the conventional indices and benchmarks. The US, for example, accounts for over 72% of the MSCI World Equity Index, and the US stock market isn’t cheap. If you don’t need to have this degree of US market exposure, don’t.

Uncorrelated funds or absolute return funds – in our world, systematic trend-following funds – offer the potential to generate attractive returns over the medium term whilst, ideally, strictly limiting the downside risk – because these funds aren’t likely to be highly correlated with either the stock or bond markets.

Real assets, notably the monetary metals, gold and silver, offer us protection not just against future inflation, but against rising credit, counterparty, banking and systemic risks.

We agree with Ben Hunt: we are all being played like violins. But being conscious that “the fix is in” does not mean that the situation will necessarily change for the better – or, for that matter, for the worse – any time soon. We remain highly confident that the multi-asset approach we use is as good an investment process as any in the face of rising global risks and diminishing market yields. But there is one question that neither we nor anyone else alive can answer with any certainty: when ? When does the game revert to being one with normal and unchanging rules ? How long will be stuck in this Alice-through-the-looking-glass world of surreal financial markets ?

The author Mark Haddon once suggested that stories exist because flawed people do bad things. There’s undoubtedly some truth to that. But when asked why he wrote, he also said something quite revealing: that when we read great authors like Jane Austen or Charles Dickens, those long-dead writers get to live again in their readers’ heads. He chooses to write, in part, because he likes the idea of living again, after his death, in the minds of other people. Writing, for him, is a form of time travel that persists in spite of human mortality.

We are all, each of us, the heroes of our own personal stories. How we and our investments fare is clearly influenced by external forces over which we have little or no control – central bank policy, inflation / deflation, the banking system, the world economy, war in Ukraine and in Iran, China.. But there is a limit to which we can blame exogenous forces for our own fates. The destiny and the investment performance of our portfolios is ultimately down to us.

Perhaps the most influential investment advice we have so far come across was something we encountered roughly 25 years ago. It was in Peter L. Bernstein’s biography of risk, ‘Against the Gods’. It was a quote by the Swiss mathematician and physicist Daniel Bernoulli:

“The practical utility of any gain in portfolio value inversely relates to the size of the portfolio.”

In plainer English, the more you have, the less you need. More specifically, the more you have, the less risk you need to take.

From first contact with this recommendation, we went on to develop a specific investment focus on absolute return investing. For anyone with savings, the most important thing is not to lose those savings. Rule Number One: don’t lose money. Rule Number Two: see Rule Number One.

Investing without risking too much capital today is no mean feat. But it certainly makes for a challenging game. Not to say a terrific story.

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As you may know, we also manage bespoke investment portfolios for private clients internationally. We would be delighted to help you too. Because of the current heightened market volatility we are offering a completely free financial review, with no strings attached, to see if our value-oriented approach might benefit your portfolio – with no obligation at all:

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Tim Price is co-manager of the VT Price Value Portfolio and author of ‘Investing through the Looking Glass: a rational guide to irrational financial markets’. You can access a full archive of these weekly investment commentaries here. You can listen to our regular ‘State of the Markets’ podcasts, with Paul Rodriguez of ThinkTrading.com, here. Email us: info@pricevaluepartners.com.

Price Value Partners manage investment portfolios for private clients. We also manage the VT Price Value Portfolio, an unconstrained global fund investing in Benjamin Graham-style value stocks and real assets, and also in systematic trend-following funds. The fund was “Highly commended” in Investment Week’s 2026 Fund Manager of the Year Awards.