The Danger of Doomer Porn

I spent much of the summer traveling around, with the highlights including a bunch of random golf, a road trip to Yellowstone with a buddy, and an unexpected week in my home town after a two day trip turned much longer after my car broke down.

Not content to just travel in the summer, I have trips planned to Ottawa (thanks to my wife for finding a ridiculously good airfare deal), Japan, and Colombia over the fall and winter.

Travel is good for the soul. I highly recommend it. In fact, a big part of the reason why I retired early is so I’d have more time to travel. My goal is to spend at least 10 weeks of the year away from home, and I planned my retirement accordingly. I made sure I had the income needed to support my needs with a bunch of travel mixed in there too.

Anyway, this summer I had the pleasure of spending the day with an old friend, someone I hadn’t seen for years. We hung out, put a couple of steaks on the ol’ BBQ, had a few adult beverages, and put the ballgame on TV. Days don’t get much better than that.

Late in the day he was showing me something on YouTube when his algorithm kept suggesting Robert Kiyosaki videos about how the financial world was about to end. Stuff like this:

Which prompted the following conversation:

“Oh wow. Looks like the Rich Dad Poor Dad guy is pretty bearish.”

“Dude you have no idea. He’s predicting some pretty nasty stuff.”

“You don’t actually believe any of that, do you?”

“No. Welllllllll. No. But maybe. You should watch it. It’s pretty compelling.”

So I did. I spent an hour on Kiyosaki’s channel and discovered a world where the Federal Reserve is conspiring to screw over average Americans, 401(k)s (equivalent to our RRSPs) are a scam, and the everything bubble is about to burst.

Wait. How can everything be in a bubble?

Don’t ask. Please, don’t ask.

But here’s the deal. My friend was right — it did sound pretty compelling. The arguments are clear, presented well, and come with dire warnings. If you want to protect your wealth, you’ll listen. If I, someone who knows this stuff pretty well can admit the videos are pretty interesting, then someone without the education and experience I have can easily be sucked in.

If people just watched these videos for the entertainment value, I wouldn’t feel compelled to say anything. But when we combine them with markets having a bad week, suddenly people are ready to start making long-term investment decisions based on protecting their capital.

And that simply won’t do. So here’s why doomer porn is so compelling, and why it’s really dangerous to your long-term wealth.

The appeal of doomer porn

They say the market is driven by two emotions — greed and fear.

I’d agree with that, but I’d argue fear is by far the stronger emotion of the two. Sure, people want to grow their money, but nobody wants to lose what they’ve saved up. Your savings represent years, or even decades of work. Losing that capital is devastating.

That’s a much more powerful emotion than greed.

Doomer porn takes advantage of this quirk in our lizard brains. It attacks our insecurities and makes us imagine all sorts of crazy what-if scenarios. Sure, your money should be fine, but what happens if the dollar is worthless? What happens when the real estate bubble bursts? Knowing your money should be fine is no consolation when the worst happens.

Doomer porn also sounds smarter. I touched on this when I wrote about how Twitter is a net negative. Bulls basically shrug and say “don’t worry, everything is going to be fine” when markets are melting down. We know corrections are part of investing, so we just quietly accept our fate and maybe, if there’s any available, put some cash to work. That’s the correct thing to do, but hot damn does it sound stupid.

In comparison, guys Robert Kiyosaki sounds much smarter. He’s on YouTube, with decent production value, explaining how specific events will impact someone’s portfolio. Sure, these events have pretty much a zero chance of happening, but the average person doesn’t know that. Especially when the narrator predicts them so confidently.

Remember, every downturn looks like an opportunity — in hindsight. Going through them is no fun, even for experienced investors who have been to this rodeo before.

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Doomer porn as a career

There’s another reason why doomer porn exists. It’s a great career path.

My favourite example here is Harry Dent, who has been doing this for year. Dent is the author of the same book about twenty times. Every book is the same — highlighting the bursting of some bubble or some terrible upcoming event that only the author is predicting. These terrible predictions never come true, of course, but that doesn’t stop Mr. Dent.

These books are absolutely hilarious in hindsight. There was no “debt crisis of 2010-12.” No bubble burst in 2017, or 2020 for that matter.

I’ve never read any of these books, but I’m sure Dent follows the same pattern as every other charlatan who gets these predictions wrong. He isn’t wrong, he’s just early. The Federal Reserve, or the GUBMINT, or the banks, or whoever, is keeping the bubble afloat. But don’t worry! It’ll burst sooner or later. And when it does, ol’ Harry will be rich, baby!

Meanwhile, Dent is actually getting rich selling doomer porn, a very lucrative industry.

Garth Turner is my favourite example of this in Canada. He’s been predicting a housing crash for more than 25 years now, starting with The Garth Turner Strategy, his 1997 book which encouraged people to take out a mortgage and invest the proceeds into the market since the “1980s housing boom is over.”

Turner’s record on Canadian real estate is nothing short of extraordinary, actually. He’s been consistently wrong since 1997, relentlessly telling people house prices were about to crash as they did the exact opposite. Anyone who followed Turner’s advice and rented would be undoubtedly poorer.

Was Turner punished for this? Did his professional reputation take a hit? Not really. His blog continues to attract thousands of daily readers, folks who are convinced that Garth wasn’t wrong — he was just early. He’s built a lucrative investment management firm, which has reportedly grown nicely by buying assets from other investment advisors as they retire. The odd guy like me points out he’s a joke, but he rightfully ignores me.

In other words, both Dent and Turner suffered no consequences for being so horribly wrong for so long.

This is why doomer porn will never go away. It’s all upside. The once a decade you’re right, you can take your victory lap. And when you’re wrong, the market is up and people don’t really mind because their investments are higher. Plus, you can just tell everyone the world is going to hell tomorrow.

An optimism bias

As mentioned, doomer porn works because it sounds smart. Optimism doesn’t.

But here’s the tricky part. Having an optimism bias will make you rich, while worrying all about the next crash won’t.

As I write this, North American stock markets are falling because interest rates keep rising. My Twitter feed is full of guys dunking on dividend stocks, saying that they’re about to be in for years of pain as higher interest rates are here to stay.

But I’ve been in this business long enough to remember a year ago when the exact same thing happened. Interest sensitive stocks got crushed in the summer/fall of 2022 as central banks relentlessly hiked rates to tame inflation. The difference between 2022 and 2023 is tech sold off at the same time in 2022 and is faring much better in 2023.

The point is this downturn will too pass. It might not happen next week or next month or even next year, but my portfolio is stuffed with good companies that generate lots of cash flow. They’ll be okay. Even if things get worse before they get better.

It doesn’t sound very smart, but it’s the best way to approach any downturn.

The bottom line

Doomer porn sounds smart. You might think this will ultimately make you richer, but it won’t.

If your favourite bearish market guru is so smart, why does he need to sell you on this doomsday scenario? Why doesn’t he just short the market, watch it implode, and count his riches from some island in the South Pacific somewhere? It’s because he’s not smart and his doomsday prediction isn’t going to happen.

These folks are preying on your fear. It’s a powerful emotion, so it’s easy to fall for their charms. But, ultimately, an optimism bias is what wins out. Downturns are an opportunity. They just don’t seem like it at the time.

If you value your money, cut these guys out of your life. It’s that simple.