Avoid 'Center of the World' Syndrome to Become a Better Investor Today

The human brain is programmed with many psychological biases that we've developed across millions of years to help us survive... Regular readers know I often reference these when talking about both trading and investing, as they impact our decision making a great deal. Disciplined (and successful) traders learn how to overcome these biases to make […] Not rendering correctly? View this e-mail as a web page [here](. [Empire Financial Daily] Avoid 'Center of the World' Syndrome to Become a Better Investor Today By Enrique Abeyta --------------------------------------------------------------- [This could be the No. 1 stock to beat inflation]( The analyst who bought Apple at $0.35 and Amazon at $2.41 is now pounding the table on a play he believes could be the No. 1 inflation stock. [Full story here](. --------------------------------------------------------------- The human brain is programmed with many psychological biases that we've developed across millions of years to help us survive... Regular readers know I often reference these when talking about both trading and investing, as they impact our decision making a great deal. Disciplined (and successful) traders learn how to overcome these biases to make money. One common bias is called "recency bias," which is where we look at what happened most recently and expect it to happen again in the near future. This is a very well-known bias among both psychologists and traders. There's another bias that I've always found to be interesting – and not one that has been officially identified... It's what I like to call the "importancy bias," or "center of the world" syndrome. This where we all think that every moment we live in is the most important moment ever. These biases came to mind when reading a recent Bloomberg Opinion article from columnist Merryn Somerset Webb... The article started with a recent poll asking U.K. fund managers which sector they expected to perform the best over the next year and the following five years. There were two clear leading sectors for both time frames: energy (28%) and information technology (21%). All other sectors had far fewer proponents, with health care coming in at a distant third (11%). In the article, the author then went into an interesting argument about where we see the global economy evolving... The juxtaposition of these two sectors – energy and information technology – demonstrates two different views of the next few decades. The tech-driven view is what we would call the status quo. These investors expect us to return to an environment that looks like something we've experienced in the past several decades. The author of the article described it as... A time of falling and low inflation, of plentiful (and pliant) labor, cheap energy, easy access to capital, globalization and a gradual shift in the world's wealth from tangible things (energy infrastructure, machines, factories, inventory and the like) to the intangible (patents, data, brand value, etc.). We broadly agree with this characterization, although we think the conversation about the shift in the world's wealth is dismissive of the creation of the world's value. Yes, there has been incredible growth in the value of intangible assets as a percentage of world wealth (from 17% in 1985 to 90% in 2020, according to the article)... But that doesn't mean the real-world value creation ratio has been the same. This isn't a zero-sum game. The article then goes on to talk about how many of these factors are changing... We've seen the highest inflation in 40 years, and there's a healthy debate about how long and how high it will remain. Much of that debate revolves around the drivers for the most recent period, which the article outlined – labor, cheap energy, access to capital, and globalization. Each of these is undergoing some structural changes that may have huge ramifications. Across the developed world, we're seeing an aging population, declining birth rates, and a cross-current of immigration... meaning we face a basic supply-and-demand problem for labor, especially in the bottom half of the job market. It's to be determined what happens with energy prices, but in the recent period we've certainly seen them go higher. The combination of resource depletion, reduced access to capital, and higher cost of renewables is likely to lead to higher prices over time. Access to capital is also a real debate, but the expansion of capital availability we saw during the past three years isn't going to go on forever. We're on the other side of that now, and we see it in interest and mortgage rates. Finally, there's globalization. The forced shutdowns due to COVID-19 exposed the potential weakness of our supply chains, and we're still feeling the ramifications of that impact. In terms of global trade and outsourcing, there's a clear trend toward bringing portions of the supply chain back onshore. There's a strong argument that we'd gone too far with offshore production and that this is a trend that should have started earlier. In fact, that argument could be applied to all of these factors. What the most recent period has done is expose structural weaknesses and changes that have been well underway for decades. It simply forced us to finally address them... In the battle between these two views – the status quo of intangible assets versus the revolution to a new paradigm around tangible assets – the article concludes... Consider me on the side that says this is not a blip – the same side as Morris Chang, founder of Taiwan Semiconductor Manufacturing Company. As he said: "Globalization is almost dead and free trade is almost dead. A lot of people still wish they would come back, but I don't think they will be back." Forget everything you have learned about investing in the last 20 years. --------------------------------------------------------------- Recommended Link: [Can you afford to wait 17 years?]( Former $1.4 billion hedge fund manager Enrique Abeyta says waiting for dividends could be a losing strategy. He says you could be waiting for 17 years just to see a small return for your troubles. Instead, he's urging a radically different approach. One that's already helped Americans capture nine years, 14 years, even 17 years of stock market income... in as little as six days. [Click here to see the details](. --------------------------------------------------------------- So, where do we stand? Let's return to our earlier discussion of psychological biases... It seems that those arguing for the status quo are suffering from "recency bias," but also that those arguing for the new paradigm suffer from going too far to the other side of the spectrum. Our view is in the middle – why couldn't both be right? Why can't we see a world with a continued explosion in value creation and productivity driven by technology and also a resurgence in the world of tangible assets? Think of it as the tangible world catching up with the intangible world! As we look back across the past 30-plus years in the market, two thoughts come to mind... First, don't bet against progress. You may be a short-term winner, but you're likely to lose in the longer term if you ignore big trends for the future. Second, try to combat "center of the world" syndrome by looking at the answer in the middle. Revolution may seem to be the big trend now... but evolution is the norm for human history. If you're like most U.S. investors, 2022 has been tough on your portfolio... That's why I just sat down and recorded a brand-new presentation where I explain the exact steps you need to take to "resurrect" your portfolio starting as soon as tomorrow. Plus, I give away the name and ticker symbol of one of my favorite trades to make today – no e-mail address, credit card, or phone number required. [Watch it here while it's still available](. Regards, Enrique Abeyta December 21, 2022 --------------------------------------------------------------- If someone forwarded you this e-mail and you would like to be added to the Empire Financial Daily e-mail list to receive e-mails like this every weekday, simply [sign up here](. © 2022 Empire Financial Research. All rights reserved. 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