The Ingredients of a World Class B-Filter

Amar Pandit , CFA , CFP

I got an overwhelming response to my last Nano “The Bullshit Filter” and everyone was curious to know how to identify the believable Bullshit. They felt that unbelievable Bullshit can be identified easily but believable ones are the tough ones (add to that our mind plays games with us too). You would be shocked to know how many Ponzi schemes are successful. People still fall for this “Double your money in 6 months, or How a Mumbai girl became a Billionaire?

I know that you might not fall for this type but there are other believable bullshit theories/stories we all might fall for. It is not just about Investing but also affects Not Investing and just waiting.

Some examples of Believable B first:

  1. Options are safest and can protect your money. We use a complex options strategy (that you will not understand) to make money in all markets. We follow Warren Buffett’s first rule “Never Lose Money” and Second “Never Forget the First Rule.”
  2. Use Stop Losses (Who cares when stop Losses do not work when markets tank).
  3. Gold is the Safest investment (Never mind it did not deliver any return from 1981-2000 rather negative returns and even from 2011 to 2019).
  4. I will protect you when the markets go down and then take you right in before the markets go up.
  5. Why were you in the market before Coronavirus? I was out. Classic Market Timing (never mind he is still out, and we have seen this even with Billionaire Investors who got it wrong but are humble enough to admit it). Some of the jokers that we see and hear LIE. Yes, LIE and they LIE so convincingly that Benjamin Graham – (Warren Buffet’s mentor) will come out from his grave.
  6. The markets are going to crash so RUN. The worst is coming. Really where should everyone go and hide? These idiots say “Wolf, Wolf” 100 times and one time the wolf comes. Their track record is so pathetic that books are written that you will do better on a Heads/Tails Test.
  7. I have built a strategy that on BACK TESTING survives all MARKETS.
  8. Just Wait for the Right Time.

I can go on for 10 more pages and welcome you to share your experiences too.

Now that we know some of these statements or comments, first ask some simple questions.

  1. Who is this person and her/his background? I am not saying you have to trust a PhD or a CFA charter holder only but rather what’s her/his understanding of the subject/domain?
  2. What’s her/his profession and motivation? Is she/he a journalist who has to sensationalize and get more eyeballs or is she/he someone who will benefit from market manipulation or get you to give him/her your business by plugging fear in your mind?
  3. Where did she/he get her/his prediction from? What was the source of the prediction? If she arrived at this independently, how did she arrive at this prediction? If markets are going to fall, there is nothing new about it. Markets do only 3 things. 70% of the times they are up and 30% of the times they are down. Sometimes the markets are flat. Like markets fell at the start of the year in February- March 2020, they bounced back later. Dire Predictions however cause you to panic or do something.

Now just think carefully of what I am about to say.

Who is really making these predictions and coming out with such stuff?

Have you ever heard Warren Buffett, or any of the world’s best investors making predictions?

Who is really making these predictions then?

Majority of these folks are one of the following:

  • Market Manipulators
  •  Journalists: Eyeballs and More readers/viewers for them
  • People who want to get your business at any cost (Playing on your Greed/Fear)
  • Some Insurance Folks who say that markets will crash but insurance is safe
  • Experts in Spreading Rumours and Professional Gossipers (in the film industry they are called as critics)
  • Scamsters – who claim to double, triple your money and now audaciously want to make you a billionaire

So first identify the bullshitters and you can easily identify their believable bullshit.

Close your eyes and call Tails 3 times. Do this 10 times. Chances are you will get a Hat Trick several times. Will you now bet your Life on the next TAILS? None of us would.

Similarly, you cannot rely on Predictions to drive your financial life.

Follow a simple formula of P + SI + B + A = Your Happiest Financial Life

  • Plan
  • Save and Invest Well
  • Behave
  • Avoid Costly Mistakes (One of them is to Avoid Bullshitters in your Life.)
Disclaimer: The examples in this post are limited to “Investing” B-Filter only. However, some of the principles used to identify B in investing can be applied to other parts of life too.