I think we’re nearing the time when regulators finally realize that their storytelling won’t save the world. For the past seven years we have been on the receiving end of a constant stream of fairy tales from the Federal Reserve, European Central Bank, China, and Europe’s political leaders. Bob Rife, television interview, Chapter 14. 'Y'know, watching government regulators trying to keep up with the world is my favorite sport.' Morningstar and Lipper will be viewed with nostalgia as a quaint way of categorizing the players in a game that became unplayable. It’s uncomfortable to admit that what you do for a living can be driven for years, maybe decades, by a collective story over which you have no control. But that may well be the only true reality we’re left with these days. I think we’re going to look back with fondness to when the market’s origin story was told by investors arguing about growth versus value instead of central bankers and politicians.

But many investors are having a hard time adjusting to this new reality. Value versus growth versus momentum were the stories investors told themselves from about 1935 through 2009. And then something changed. The stories stopped being told by investors, and started being told by government entities. Central Banks, Presidents and Prime Ministers became more important to markets than the underlying fundamentals of markets themselves, particularly in fixed income. Investors like the story of being a value investor or growth investor, because everyone needs an origin story - people like to have something to anchor them. Its participants succumb to an idea about the “right” way to invest. In the early 1970s it was go-go growth stocks. For a while in the 1990s it was all about Buffett and value. There are times, like the late 1990s, when it’s all about momentum. But these are all just ideas that the market is telling itself are true at any given time, instead of viewing the markets as systems that move and evolve over time. Markets go through phases, shifting from one regime to another. Neil Stephenson, Snow Crash, 1992, Chapter 56. No matter how smart we get, there is always this deep irrational part that makes us potential hosts for self-replicating information. Or a tune that gets into your head that you keep on humming all day until you spread it to someone else. We are all susceptible to the pull of viral ideas.

Snow crash 1992