Amar Pandit , CFA , CFP


Francis Barlow’s illustration of the fable, 1687

Image Source- Wikipedia

Do you remember the story (in Aesop’s fables) of the boy who cried wolf wolf?

I believe you do as it’s one of the most popular ones among children, parents, and storytellers. The story is about a shepherd boy who repeatedly fools villagers into thinking that a wolf is attacking their sheep. Nevertheless, let’s quickly jog our memory a bit.

Once upon a time (a story has to begin with these words), there was a shepherd boy who took his flock of sheep to graze on the nearby hill. He had pretty much nothing to do the whole day. He was bored. That’s why one day he came up with an idea. He cried ‘Wolf…Wolf!’ The villagers came to his rescue but to their shock, they found no wolf. The boy laughed. The villagers gave him a warning and left. Again after a few days, he cried out, ‘Wolf…Wolf!’ The villagers came running again only to find out the boy had fooled them again. The boy kept laughing. The angry villagers told him that the next time he cries for help, they would not come.

A few days later, the boy actually spots a wolf. He cried out aloud ‘Wolf…Wolf!’ But no one comes. He kept crying, ‘Wolf…Wolf!’ But alas! No one came to rescue his sheep or him. The boy returned home crying. From that day onwards the boy promised to never lie again.

The moral of the story is – this is how liars are rewarded; even if they tell the truth no one believes them.

Now for a change in cast of characters before a twist in the story…

Boy – Forecasters/Experts and the Media who scream wolf… wolf!

Sheep – Us

Wolf – Crisis

Do you see a connection here?

In the real-world, forecasters (and financial media aka the financial porn networks) keep screaming about the next crisis…Today it is about a recession or some geopolitical crisis…Tomorrow it is something else…There are plenty of things to get people to worry about – earnings, profit margins, China, inflation, oil prices, debt ceiling, interest rates, consumer spending, the new world order (and a zillion other things ) not to forget the big daddy of all – recession…These boys thus keep screaming their version of wolf…wolf!

As you know however, there is no wolf that shows up – one that will eat up your stock market investments…And even when it shows up once in several years or decades or centuries, the stock market eventually continues its march upwards (after a period of temporary decline). But guess what…unlike the story, most people (including us) continue to believe these intelligent liars aka boys.


Because we are bored, and we need some excitement. Don’t we?

What better than believing the nonsense of some wolf lurking around the corner. It’s even become a business model in itself. The media needs to keep churning stories and thus they need to create these boys (forecasters/experts) and their wolves (crisis).

But let’s first define what a real wolf is…rather what a real crisis is.

Webster defines crisis as follows – the turning point for better or worse in an acute disease or fever…a paroxysmal attack of pain, distress, or disordered function…an emotionally significant event or radical change of status in a person’s life…

Example – COVID-19, Spanish Flu, The World Wars…

Another definition is as follows – an unstable or crucial time or state of affairs in which a decisive change is pending…

A financial crisis…the nation’s energy crisis.

How many such events have you seen in the last 23 years?

Maybe 2…

The biggest one being COVID-19…Even in this biggest one, what happened as far as the stock markets are concerned…After a sharp drawdown, the stock markets went up significantly…But more importantly, in a real crisis like this, did we worry about the stock market, or did we worry about the lives and safety of people? Most if not, all were worried about the lives of other people (including their family, friends, colleagues, community and their own).

At a personal level a real crisis can also be about a life-threatening illness, the death of a loved one and other such important things…

If someone is in the midst of such a personal crisis, do you think the person would worry about the next 20% correction in the stock market…The reality is no one cares about the stock market during a real crisis.

Do you think you will be worried about the stock market during a real crisis?

Just like there is Fake News…these are Fake Crises…Figments of the boy’s (wolf wolf) imaginations…

Remember Y2K…How about Brexit…

In the last several weeks, we saw a showdown around the US debt ceiling…We were made to believe that the US will default on its debt. But we all knew how this was going to end… And once this fake crisis ended, the boys were ready with their next ones…

Something will always be sold as a crisis. We are made to believe that the stock markets are going to tank…In fact, these fake ones are simply sales pitches for unnecessary activity…for you to sell your precious ownership of world class companies to other people at throw away prices.

In reality, the stock market usually goes up! There is nothing the stock market hasn’t overcome…

A once in a lifetime crisis such as COVID-19…The Global Financial Crisis…World Wars and expensive military conflicts…The Great Depression…

Would you still believe the boys (and girls) who scream wolf…wolf?