J.P. Morgan on the fear of missing out

Nothing so undermines your financial judgment as the sight or your neighbor getting rich.

~ J.P. Morgan, following the Panic of 1907

Larry McDonald on the AI capital spending binge

Yesterday, we had an interesting chat where, it was a private conversation with a guy in the Valley [Silicon Valley] that is really good friends with all of the CFOs of the Mag 7.  He's been out to dinner with them hundreds of times, he's been in the Valley for over 30 years and he's run hedge fund money...  And we had another guy who's been trading semiconductors for 20 years professionally and they were having this conversation around artificial intelligence.  And the one thing they both said... it's like the Manhattan Project where if you're a CFO in the Valley and you're not doubling or tripling your capex the last year and a half in artificial intelligence, you're fired.  They're so terrified to be, two years from now, left on the outside.  So what's fascinating is... the capex has gone from like $30 billion a year to $160 billion a year with no visibility...  There's zero visibility on return on capital.  So this is capital expenditures just being deployed at a sick, aggressive, insane pace.  He called it a "Reagan-Gorbachev arms race" where the CFOs have a gun to their head.  They have to invest...  It's created these distortions where Wall Street analysts are falling all over themselves to upgrade Nvidia, but this capex trajectory is just not sustainable.  And the market's starting to figure it out now.

~ Larry McDonald, "Buy What Wall Street Hates," Stansberry Investor Hour, 26:40 mark, July 29, 2024

Fred Hickey on the everything bubble

The notion that we could be in a new bull market without correcting the unprecedented valuations, the enormous debt levels, all the malinvestments throughout the economy created from years of "free money" and the egregiously excessive investor enthusiasm is ridiculous, but that's how misguided the dancers can become when FOMO takes over.  Investor desire to believe that the good times will continue is nothing new.  There were ten double-digit rallies during the 1929 to 1932 bear market and 16 double-digit rallies during the 2000-2002 bear.  In both periods the stock market rallies averaged 23%.

~ Fred Hickey, The High-Tech Strategist, "Up It Goes, Before It Blows III," June 28, 2023

Brian Chesky on cryptocurrencies post FTX collapse

Now as far as crypto, I think that generally the analogy I'd make is like we're all in a nightclub and the lights just came on.  So suddenly I feel that we have to take a really cold hard look, have a reality check.  The technology's really interesting.  I think we have to be very careful, though, about this frenetic get-in-on-any-technology trend before it's over.  I think we ought to be very very careful about that because that's when discipline goes down.  I think people will regret decisions they make when they have this mentality that "someone else is making money, I'm not."  You really gotta always focus on fundamentals.  You always have to focus on building things for other people of value.  And if the more you learn about somthing, the less you understand it, you just gotta slow down and make sure you really know what you're doing.

~ Brian Chesky, CEO of Airbnb, interview, Bloomberg TV, November 18, 2022

Bloomberg Businessweek on the FOMO economy

It's not just crypto: It's stocks such as those of AMC Entertainment Holdings, GameStop, and Tesla that are beloved on Reddit and Twitter, and it's the houses and condos being snapped up almost as soon as they list. The pressure to keep up with neighbors, friends, and social media meme lords who seem to be in the process of becoming wealthy - or, at least, talking about it - can feel unbearable.

[...]

People flush with pent-up savings after a year of lockdowns have more ways than ever to throw darts at the financial dartboard: zero-commission, zero-minimum trading apps; social media message boards; and exchange-traded funds you can hop in and out of as easily as stocks, including a few that explicitly play to the trend-chasing crowd with such tickers as BUZZ and, yes, FOMO.

[...]

Another cause of FOMO right now is the lack of a strong competing narrative.  Warning against risky short-term speculation and saying "it'll all end in tears" are widely derided as boomerisms.  Partly because it seems out of touch with Generation Z's economic reality, but also because asset prices keep bouncing back.  Bitcoin's rebound from a more than 80% decline in 2018 to a record high this year, along with property and stocks, is classic regret fuel for those who missed out.

~ Lionel Laurent, "The FOMO Economy," Bloomberg Businessweek, June 14, 2021

Mark Hulbert on timing a bubble

Needless to say, things don’t go up forever.  Those who nevertheless continue to invest in such an environment do so with the implicit assumption that they will be able to recognize it, in advance, when the bubble is about to pop—and therefore able to leave the party before everyone else.  This is a dangerous delusion, however; not everyone can be the first to leave the party.

~ Mark Hulbert, "The psychology of a stock market bubble," MarketWatch, April 24, 2021

Sometimes people are drawn to investing
because of 'gambler's excitement'

Brad Lamensdorf on investor euphoria: "watch out!"

The level of investor euphoria recently has been at its highest level in many years. Why is this important now?  This excessive euphoria comes at a time when many investors appear to be ignoring market indicators and bleak economic news signaling the stock market is seriously overbought, particularly after its recent  big surge since March’s low. So, what’s propelling investor to thrown caution to the wind? It’s known as FOMO. That means individual and many professional investors are operating on emotion despite all the warnings because of Fear of Missing Out.

~ Brad Lamensdorf, "Investor Sentiment Turns Euphoric Over Stock Market Outlook: Watch Out!," LMTR, July 30, 2020