Beware FOMO and The Big Loss

“Fear-of-missing-out is more powerful than fear of losing.” ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ March 22, 2024 Beware FOMO and The Big Loss “Fear-of-missing-out is more powerful than fear of losing.” ― Naved Abdali [Special Reminder: In case you missed [our recent announcement]( The Essential Investor has merged with legacy contributors to Agora Financial. The new, larger, more inclusive project is called The Grey Swan Investment Fraternity. If you’re interested in the scope and benefits of our new endeavor, please see what prompted us to merge [here](. If you’ve been a member of The Essential Investor, please keep an eye out for your new benefits.] Dear [Reader], March 22, 2024 – While perusing the news this morning, I got a phone call from an old friend and reader, Miles, from Biloxi, Mississippi. Here’s how it went down: I’d just read these words from Bloomberg… A raft of central bank meetings have this week signaled hopes for rate cuts this year are on track, boosting traders’ optimism and leaving stocks headed for their best week of the year… after US stocks saw hefty outflows in the runup to the Federal Reserve’s policy meeting that took the S&P 500 Index to fresh all-time highs. And then — bzzzz — my phone buzzed. It was my buddy Miles. And not a moment too soon. Miles and I first met on one of our real-estate excursions down to Rancho Santana in Nicaragua. We got to reminiscing about the old days. He told me he first started reading back when Bill and I introduced the Daily Reckoning to the world. At the time, we were musing about the daily absurdity surrounding the tech bubble and bust. Miles admitted to me, this morning, that he hadn’t taken our advice. Instead, he’d taken the advice of a tech strategist at Merrill Lynch named Henry Blodget. He bought AOL when it was trading for $90 — and rode it all the way down to $12. An 86% loss. Ouch. We had a good chuckle. It’s easy to laugh at your investment mistakes from the other side of pain. It’s not so easy to learn from your own mistakes at the time they’re happening, or from the mistakes of others. During a bubble we tend to focus on the fantastical… and forget the life lessons that booms and busts have been all too willing, historically, to dish out. One of our main goals in researching and writing about these trends, cycles, booms and busts is to avoid the Big Loss. That, and to be entertained by human frailty. CONTINUED BELOW... >>ADVERTISEMENT<< 2024 – The Real Election Year Surprise In 2016, the October Election Surprise was Hillary Clinton’s email scandal… In 2020, the October Election Surprise was the suppression of all the dirty material on Hunter Biden’s “forgotten” laptop… Now, in 2024, we’re forecasting an October Election Surprise that almost no one sees coming — and this time it’ll be way more devastating than anything you’ve seen before. [Click here to learn about 2024’s real October Election Surprise »]( It’s not at all what you think. CONTINUED... As we recount in the conclusion of our new edition of Empire of Debt, the idea of the Big Loss comes from the great investment writer Richard Russell. Russell pointed out that most people make most of their money incrementally, over a long period of time. They earn; they save; they invest. If they’re lucky, they end up with a nice little pile of money, but only after they are well into middle age. The danger is not that they’ll miss the next great investment opportunity — AMZN, Google, Netflix, NVidia, and so on. Those opportunities are few and unpredictable. In the mainstream, we mostly read about them when the journalist doesn't risk anything by covering a story. It’s already a success. Everyone’s talking about it. Unfortunately, by then, it’s also a long time after its price makes it a good investment opportunity. And the insiders are cashing out. In the rest of the economy, the story is different. And not covered very well. Thousands of new companies emerge. But few survive. Finding good investments at a fair price takes diligent work and, frankly, a fair bit of luck. The real danger for most people, especially over the age of 55, is not missing out on some unknown new innovation. Instead, it’s getting whacked by something well-known that turns out to be untrue. In the late 1990s, the threat of the Big Loss came from the faith that people placed in new technology — specifically, in the internet and its spin-off dot-coms. Heavily investing in the sector would be okay for a young person. They usually don’t have much to lose, and the most important thing for them is to learn.The popping of the dot-com bubble provided a lesson they wouldn’t soon forget. The next Big Loss came in the real estate market. It looked like a sure winner. In 2002, the median house sold for $145,000. By 2007, it was $215,000. In other words, it gained about $15,000 per year. Assuming the buyer put down a 20% deposit, that was a return on cash of nearly 50% per year for five years. Smart investors figured out how to leverage it — “flipping” houses themselves or investing in housing-related industries. There was a lesson to learn there, too. Over the next five years, the median house lost $45,000 in value. Buyers in 2007 would have seen their entire 20% deposit wiped out. As homeowners, they could hold on for another five years and they would have been okay. Prices came back. But the speculator, flipping multiple houses or buying shares in a go-go mortgage lender, was doomed. In June 2009, in an article cleverly titled “Angelo’s Ashes,”‘ the New Yorker looked back at one of the great mortgage-finance businesses and its founder, Angelo Mozilo: … Countrywide Financial Corporation was regarded with awe in the business world. Fortune published a story in September, 2003, called ‘Meet the 23,000% Stock,’ which said that Countrywide had ‘the best stock market performance of any financial services company in the Fortune 500, measured from the start of the Great Bull Market over two decades ago.’ Shareholders who had invested a thousand dollars in 1982 would in 2003 have more than two hundred and thirty thousand dollars. On January 11, 2008, Bank of America announced it would buy Countrywide for four billion dollars in stock — a sixth the amount of its market value before the crisis began. That was a loss of 83%. The biggest challenge today, as we outlined in these pages yesterday, is avoiding getting swept up in “fear of missing out” – or FOMO – investing. So it goes, Addison Wiggin, The Wiggin Sessions P.S. Miles had been prompted to call, in part, because he read yesterday’s missive on the Melt-Up Rally and remembered his experience with AOL back in the day. Without putting words in his mouth, I believe the kind gentleman is refocusing his successful ride in stocks, recently, away from today’s headline grabbers. Please send your comments, reactions, opprobrium, vitriol and praise to: addison@greyswanfraternity.com. The Daily Missive from The Wiggin Sessions is committed to protecting and respecting your privacy. We do not rent or share your email address. By submitting your email address, you consent to The Wiggn Sessions delivering daily email issues and advertisements. To end your The Daily Missive from The Wiggin Sessions e-mail subscription and associated external offers sent from The Daily Missive from The Wiggin Sessions, feel free to [click here.]( Please read our [Privacy Statement.]( For any further comments or concerns please email us at feedback@wigginsessions.com. If you are having trouble receiving your The Wiggin Sessions subscription, you can ensure its arrival in your mailbox by [whitelisting The Wiggin Sessions.]( © 2024 The Wiggin Sessions 1001 Cathedral Street, Baltimore MD 21201. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized financial advice. We expressly forbid our writers from having a financial interest in any security they personally recommend to our readers. All of our employees and agents must wait 24 hours after online publication or 72 hours after the mailing of a printed-only publication prior to following an initial recommendation. Any investments recommended in this letter should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company. Sent to: {EMAIL} [Unsubscribe]( Paradigm Press, LLC., 1001 Cathedral Street, Baltimore, MD 21201, United States