Prevailing Narratives

August 11, 2026

“It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.”

-Mark Twain

Yes, it’s one of my favorite quotes, and I know I’ve used it before. Why highlight it again? Because sometimes we feel vindicated. We feel emboldened. Perhaps we will double down because everything is working out. Until, as Mike Tyson says, “you get punched in the mouth.”

As most of you know, I don’t care about being “correct” in my views. My role is to help you grow your wealth and mine. Hoping to use our wealth to increase our freedom and ability to improve our lives and the lives of others.

Prevailing Narrative – Probable Future Reality = Financial Opportunity

Many of you have seen this formula before, and that is because it’s my process all the time. Sometimes the formula gets to extremes, as I described in “Accept Your Reality” (June 2021) about how perceptions about Covid caused people to make huge investing mistakes. Other times, it’s blindly believing that some event will be negative for stock markets (tariffs, Iran war, etc.) or that a particular company will obviously go up in price because their business will certainly be able to capitalize on future events.

The truth of it is, you don’t know. I don’t know either, but a couple of characteristics give August Wealth an edge (I think):

• You don’t know what the future holds, even if you’re certain of it.

• The stronger your certainty, the larger the Prevailing Narrative becomes.

• We watch that Prevailing Narrative closely, not looking for truth in it, but looking for your

  perception of the truth.

• We focus on figuring out the Probable Future Reality. We do not assume we will be

  “correct” or “incorrect” in our views. By definition, if we estimate an 80% chance of

  something occurring, we are also estimating a 20% chance of it not occurring.

• Opportunity can present itself when the Prevailing Narrative is influenced by emotion or

  desire for a particular outcome. When this desire or belief for an outcome deviates greatly from our probable outcomes, we invest capital to take advantage of those investors making emotional decisions. And this happens all the time.

As an example of how silly narratives can be, the Financial Times pointed out this month that the economy looks nearly identical today under the Trump administration as it did in 2024 under the last year of the Biden administration, as measured by unemployment and inflation. However, the share of Democratic voters saying the economy is in good shape dropped from 70% to 5%. The share of Republican voters saying the economy is in good shape increased from 5% to 70%.

This shows how silly narratives can be (from an investment standpoint this example is meaningless). The economy is roughly the same, but voters’ narratives have genuinely shifted. If you debate with people that harbor strong views about the economy, they honestly believe the shift (good economy or bad economy) to be true. Except it isn’t.

People sometimes ask me where to find “accurate” news. In my judgement, the only way is to absorb lots of information and understand the bias and motivation (the context) of the sources of information.

• When gathering information from sources with strong biases (political right or political left, or someone with an axe to grind), I am usually trying to ascertain the Prevailing Narrative.

• When gathering information from sources that think clinically with limited bias, I am usually trying to ascertain the Probable Future Reality. We have our computer models argue on all sides to strip bias from information.

• Sometimes the Prevailing Narrative is held by most of the crowd, when that happens, and if there is a deviation from Probable Future Reality, there is investment opportunity.

Where do we see these opportunities:

Firstly, despite the steady growth of most investment accounts this year, it’s worth pointing out that this has been a tricky first half of the year to navigate: The Iran war, oil and gas price rises, artificial intelligence, memory chip companies exploding in price, the decline in prices of the Mag 7 because of too much cap-ex spending, private credit concerns, Federal Reserve changes and potential interest rate hikes, exciting IPOs, etc. All these topics impacted the Prevailing Narratives.

Our rigorous process remains the same, and there are many areas of opportunities away from the headlines dominating most people’s attention. We diversify, we are patient, and we are tirelessly methodical in our pursuit of growing your wealth and ours.

• We have reduced many of the individual equity names we have held for some time. Some have been wonderful contributors, some have moved much, and one company has been a

  complete bust. On balance though, our patience in many of these unloved companies

  provided a positive contribution to most accounts.

• We have increased our exposure to information technology companies broadly when the

  technology indexes dropped in price.

• We started purchasing a company that holds great potential for future growth and is likely

  to be a reason why the USA continues to be the dominant power globally for decades to come. We patiently purchased this at an attractive price compared to investors that purchased in the IPO.

• Our software names and our credit exposure have rebounded considerably as the market realizes that artificial intelligence may not destroy everything, it may enhance some company’s prospects.

What do we worry about

• China has incredible education, infrastructure, miraculous achievements, cultural richness, and great people. However, I worry about the government’s motivation. The Chinese government will act as a destabilizing force globally. If you want to understand what motivates Xi and the Chinese Communist Party, watch or read the interview with former Australian PM and Chinese expert, Kevin Rudd and Ezra Klein in the New York Times. It is excellent.

  • China continues to expand export markets for growth while the domestic economy and people suffer. If Chinese companies can dominate global supply of essential goods and technology, they gain leverage. Nothing is above the Chinese Communist Party (CCP). Not your life, not your freedom, not your views, not my views, nothing!

  • The Chinese government has deftly navigated the western liberal rules for international law and trade, and they have very effectively used it to gain leverage for their own objectives and world order. Nothing is above the CCP.

  • They do not need war to achieve their objectives, nor do they want war. They do want to advance the objectives of the Chinese system. Nothing is above the CCP.

  • China is already hunting down its own citizens that are not contributing to the benefit of the CCP wherever they may be. Nobody is above the CCP; it doesn’t matter if you have another passport or residence.

  • With increased unemployment and a disastrous domestic economy, Chinese youth are finding the military and police academies a much better career choice than business. They can help enforce the idea that Nobody is above the CCP.

• I worry that this issue is not addressed by the west appropriately. It’s not about “containing” China as the government narrative might promote. It is about the lack of openness and embracing freedoms that the western world values. It is obvious that once you are reliant on China for supply chains, they will use that leverage (processing of rare earths, European solar and car manufacturing) against you. This isn’t unique to China, so would any other government, including the USA. The difference is that they are motivated by the ideals of the CCP, and Nobody is above the CCP.

If you value the ideals that the USA represents, you would do well to fight for those ideals. To think that the USA can leave the rest of the world alone or continue with international norms of the past 25 years is hubris. The world has dramatically changed, and those systems are no longer fit for purpose.

• While the media is consumed with Iran, Israel, and the USA meddling in other countries’ affairs, there are powerful forces seeking to undermine the ideals that the United States represents. This will not stop. That brings me to the topic of Iran, and the narrative that Iran is somehow winning the war. Social media and the media writ large seem to be perpetuating this narrative. Why the Prevailing Narrative continues to move away from Probable Reality:

  • Iran does have some leverage. The Revolutionary Guard recognizes that the war is causing political problems for the Trump administration and Republicans mainly due to high gasoline (petrol) prices. If they can keep the Strait of Hormuz shut, they can keep oil and refined petroleum prices high.

  • It seems very likely (approximately 80% as of writing) that Democrats will win the House of Representatives, and they have a decent chance of also taking the Senate (45% probability roughly as of writing). So, the Iranian Revolutionary Guard probably feels they can extract concessions from the USA, and they would be correct. The issue is how long this leverage lasts.

  • Iran is almost certainly over playing their hand because no matter what happens:

    • Countries in the Gulf are already moving whatever product possible without

      using the Strait of Hormuz.

    • Iran will not have the ability to build a nuclear weapons program (Israel and

      the USA will see to this).

    • The Iranian military has been decimated. Whatever drones and missiles

      remain are far less than what they had before. They can continue to be a menace, just a limited menace.

    • The Iranian economy has been decimated ,and they are likely to be struggling to pay the military and their families. The Iranian government is severely restricted to send cash and weapons to its proxies (Hezbollah and Hamas) in the region.

    • The NY Times recently had an excellent article on how Hezbollah’s finances are collapsing in Lebanon. The organization is being severely marginalized, and the government in Lebanon is negotiating directly with Israel.

    • Hamas is engaged with the Board of Peace in Gaza about giving up its weapons. Rebuilding of Gaza progresses slowly with far less Iranian influence.

    • Syria continues to move forward and engage with the west. Iran’s influence and ability to transport weapons through Syria is greatly diminished.

• Iran is projecting power through social media, and the broader media landscape, but I struggle to see what they have accomplished. They have succeeded in being a menace to their neighbors and the Strait of Hormuz, but at what cost? They have lost almost all other points of leverage. The Revolutionary Guard is universally hated by their people and their neighbors, and now they have no ability to make money nor supply money and weapons as a threat. The probable reality is still quite high that Iran will have to engage the west in some capacity to move forward.

  • Most people in the region would like to move forward with a better life for their families.

  • Most governments in the region would like to help people in this pursuit.

  • The world view of the current government in Iran does not fit with what

    almost everyone else wants. It seems they are pushing a boulder uphill.

A Summary View

I understand that many people in the United States and Europe would like us to keep out of international affairs, but I don’t think there is a full appreciation that this would mean many of the freedoms they care about would diminish as well. Iran’s agenda of destroying Israel as a country was not congruent with these freedoms. Likewise, once Israel has security, the US must ensure they keep their power in check relative to their neighbors.

My hope is that the world presently, led by the United States, continues with this unique opportunity to help secure more freedom for people to pursue a better life in the Middle East and in the American hemisphere. Hopefully domestic politics do not derail this, but that is a risk. My probabilities still put better odds on the following:

• A more prosperous Middle East and better relations generally between countries.

• Russia and Chinese influence will be kept out of the Americas.

• The USA technology leadership and innovation will continue to increase the USA power

  globally (China will continue to fall behind, regardless of the narratives). New industries

  with high-end manufacturing will take place in the USA.

• Low end manufacturing will increase in Mexico and relations between the USA and Mexico

  will benefit both countries economically and from a defense perspective.

The Probable Reality: We are living through a unique time in history technologically. It will be very difficult to imagine the coming changes, and how much the United States is likely to dominate because of its ideals for freedom and its openness to ideas and cultures.

The Prevailing Narrative: Attention spans of people and the media are very short. There will be all kinds of shifts in narratives and themes as people seek to control change that cannot be contained. Uncertainty and disruption will destroy many of the prevailing viewpoints of “experts”.

Financial Opportunity: The potential for possible wealth building in the current environment is unlike anything I have ever been a part of or read about in history (in my opinion).

The trick is having a rigorous process that allows you to stay invested over time.

Best,

Joe

Investment advice offered through August Wealth Advisors.

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