- Martin Fridson, CFA
Confronting the Fear of Missing Out (FOMO)
Nobel laureate Robert Shiller reports record-low investor confidence that stocks will avoid a 1929-style crash within the next six months. At the same time, we read of widespread fear of missing out (FOMO) on eye-popping gains in certain hot sectors.
Symptomatic of the stock fads spawned by the current monetary policy is the 1,675% rise in electric vehicle (EV) maker NIO’s shares over the past 12 months. NIO’s October 26 price of 26.01 is based on latest-12-months earnings per share of -$8.10.
An October 26 article promoting momentum investing offered a simple definition: “Buy high… sell higher.” Note that Step 1 is easy enough, but Step 2 requires the market’s cooperation.
The present boom has created excitement around special purpose acquisition companies, or SPACs. An investment manager’s recent presentation showed that in a typical arrangement, by the time unitholders reach breakeven on their investment, the sponsor has made 10 times its invested capital.
Fear of Missing Out should be replaced with Fear of Getting Taken In (download full article below).