Top of the morning. Welcome to issue #3 of Signal.

This week we’re tackling a dangerous trap investors fall into: trying to explain the world through the lens of one narrative. From nutrition fads to stock market manias, good ideas often turn into bad outcomes when they’re taken too far. The best investors know to keep asking the very important question: “Says who?”

Let’s get into it →

Imagine trying to feed your family at the turn of the 20th century. Famines are still a real threat in North America and Europe. A couple of bad harvests can wipe out entire villages.

The experts are clear: ‘Calories are what matter.’ If you can pile enough bread, lard, and potatoes on the table, you’re doing your job. Except… kids are coming down with scurvy, rickets, pellagra. Turns out calories alone don’t keep people healthy.

Fast forward to the 1940s. The scientists have cracked the code: vitamins. Every disease can be explained as a vitamin deficiency. The shelves explode with products promising to solve everything in one pill or one bowl. People are lining up to buy them. The food companies cash in.

Then, in the 1970s, incidences of heart attacks are spiking as people live longer and desk jobs take over. The sugar industry quietly funds research pinning the blame on fat. The gospel shifts: “Fat is evil. Carbs are good.” Margarine replaces butter. Skim milk replaces cream. Pasta and bread take centre stage. Behind the scenes? Obesity and diabetes start climbing.

By the 1990s, the pendulum swings again. Carbs are suddenly the devil. Atkins and Keto take off, promising salvation through a return to “pre-agriculture” diets. “Cut out all carbs, even fruit.” Some people slim down. Others burn out. Most just end up more confused than ever.

The real question, whenever somebody serves up a shiny new idea, is:

“Says who?”

Narratives are powerful because they help us make sense of chaos. The danger is when these narratives start to dictate your thinking, instead of just guiding it.

Let’s go back to nutrition for a second.

When heart disease was on the rise, the accepted wisdom was that fat was the enemy. In a sense, that story had some truth: if your diet is overloaded with butter, cream, and red meat, you probably aren’t doing your arteries any favours. At the time, the solution seemed obvious: cut the fat, load up on “healthy” carbs like rice, bread, and pasta.

But if that’s the only lens you use to view nutrition, your diet gets distorted. Suddenly you’re reaching for low-fat baked goods and sugary cereals (all blessed by the experts), while avoiding nutrient-rich fats like avocados and nuts.

And that’s the problem with narratives. They’re useful as a framework, but they’re never the whole truth. Each has an element of validity: calories matter, vitamins matter, fat matters, carbs matter. But whenever people try to apply one at the exclusion of all others, we run into trouble.

Warren Buffett has a saying that nails this perfectly: “The biggest mistakes on Wall Street are not bad ideas, but good ideas taken to the extreme.”

In the investment business, whenever anyone tries to apply one way as the only way, you end up at risk.

Take gold in the 1970s. Inflation was creeping higher: 6% a year in the U.S. as the government printed money to fund the Vietnam War. The dollar weakened by 20% in four years, and investors rushed to gold as protection.

Fair enough: gold is a hedge against inflation. But soon, gold wasn’t just a safe haven, it became the only safe haven. A frenzy followed. Prices shot through the roof and peaked in 1980. Then Paul Volcker (the Fed chair at the time) hiked interest rates, inflation cooled, and gold collapsed. Safe haven no more.

Then came the dot-com bubble. The technology was brilliant, the internet was going to change the world. Unlike its industrial counterparts, new-age internet companies would be able to make a product once and sell the same product ad-infinitum. No factories, no shipping costs.

People were right: the internet would go on to change the world. But the idea that any price could be paid for the internet’s unlimited future profits was a huge mistake. Cue the crash.

And of course, there was housing in the 2000s. Homeownership is a cornerstone of American society. Homes tend to hold value. Over long stretches, they even appreciate. That’s the good idea.

The extreme narrative? “Housing prices never fall nationwide.” That belief got hardwired into trillions of dollars of mortgage-backed securities, and loans made to people who could not afford to repay them. It blinded regulators, rating agencies, and investors. When the narrative cracked, the entire global financial system cracked with it.

Today’s era has its own set of ‘truths’, ideas repeated so often they feel like inevitable facts of life. One is that the market as a whole always goes up.

People point to the S&P 500’s long-term 7–10% average returns and say your money is safe parked in an index fund. But history tells a messier story. The mighty S&P delivered 0% returns for decades at a time: from 1929 to 1954 (25 years), from 1968 to 1982 (14 years), and from 1999 to 2013 (14 years).

Adjust for inflation and the picture gets even uglier. In fact, one stretch delivered no real returns for 77 years (from 1905 to 1982). An entire lifetime.

And that’s just the U.S. Outside America, some markets didn’t just stall for decades, they disappeared. Russia in 1917. Austria in 1918. Germany after WWII. China in 1949. Cuba in 1959. When regimes changed, shareholders were wiped out.

So yes, “the market always goes up in the long term” holds some truth. But the danger is in treating it as the only truth. The past teaches us that timing, cycles, and external shocks can stretch out the ‘long term’ in ways that ruin real portfolios.

Another ‘truth’ making the rounds is that Bitcoin is a hedge against inflation; a new safe haven, digital gold for the modern era. Maybe. But let’s not forget: Bitcoin’s entire history spans just 16 years. That’s barely enough time for one economic cycle, let alone a real test of fire.

The only stress test we’ve seen was the (very) short-lived COVID panic of March 2020. The result? Bitcoin cratered 55% in two weeks, much worse than the S&P 500’s 34% slide. So much for safe haven.

Then there’s AI. The story goes that AI will transform the world of work, wiping out jobs and handing monopoly-like profits to the companies that own the infrastructure. Could be true. But it could just as easily take longer, run into regulation, or play out in ways the dreamers don’t expect.

Here’s the thing: each of these narratives carries some validity. Bitcoin may one day act as a hedge. AI almost certainly will reshape work. But the danger is when we let one story dominate, when we treat it as the only narrative.

A measure of an intelligent investor isn’t the ability to cling to one truth, but to hold multiple possibilities at the same time — without getting carried away by any of them. To allow for uncertainty. To keep asking the most important question whenever you’re presented with a ‘truth’:

“Says who?”

The trades, the ratings, and the thinking, straight from the RatedA desk.

Markets change. Businesses change. Our ratings change with them. In the past two weeks, one company joined the RatedA database for the first time.

We track how our Quality Ratings perform over time to see if higher-rated companies actually deliver stronger returns. Each rating category’s results are measured over a year and compared to the MSCI World Index, then refreshed annually when we update ratings.

We put our own money where our ratings are. The RatedA portfolio is a focused collection of high-quality, cash-flowing companies picked using our own methodology.

Inside this week’s memo: a big portfolio move, plus the playbook for holding onto winners long enough to see them go up 10x.

That’s where the free version ends. From here on, it’s members-only: portfolio moves and the full thinking behind every decision.