- Nicholas Tartaglia
Align Your Capital with Principles of Value to Ensure Sustainability.
FOMO is a very real phenomenon that is very easily identifiable from the eyes of an investor, since the sensations driven by the subconscious fear of missing out tends to produce chaotic and unintended outcomes for unaware investors. When we look at economic law, from the traditional classic perspective, scarcity is a fundamental natural law that even economics, a framework of resource equilibrium must respect. When the markets disconnect from value, what becomes prevalent is the desire for short term price action due to short short term profit desire (greed), beyond what we have naturally been able to produce in wealth. This is why we can argue that the markets primarily in North America have deviated from this law of scarcity. We have done so both psychologically and monetarily. Fake desires fueled by an artificial monetary system driven by political ideologies which abuses the Keynesian framework of economics. As Thomas Sowell says, “The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it.”
When we humans overindulge in anything in life, they lose value. Psychological bubbles from a market perspective are heavily driven by pure human desire of greed, which distorts efficient capital allocation principles and demonstrates their ignorance of the value of scarcity. We want what we cannot have, it’s a behavior very much apparent in humans, and through that our culture fuels ego and greed. From these cultural inputs we get bubbles that go beyond the realm of reality. That should create questions of the sustainable nature of many asset classes.
With observable issues in:
- over indebted nations
- massive consumer market which fuels the massive equity multiples which do not leave true fundamentally value, unless trading is your desire.
- near zero economic landscape for Europe, North America and Japan
- over inflated real estate
- over inflated equities
- over inflated egos
- over inflated desires
- massive political tension which ripples into the ecosystem since politicians impact monetary and economic policies
- less productive younger generations - they are the future labor force of a desired viable and strong economy
- socialistic ideologies are continuing to penetrate deeper the political culture of North America (government knows best and government will take care of the people).
As a friend of mine said ""when a country asks for more government, when it wants the state to fix all of its problems, it's and indicator that the people of that country are getting weaker, and they are espousing the victimhood mentality. A country of strong people is a country where its government is limited. To limit your government means that you are strong and mature enough to take care of yourself. In America, the people are asking for more government, wanting them to do everything. Well, don't be surprised one day if you end up living in a place where your whole life is pretty much state-mandated. A country only has the leader it deserves: - Germinal G. Van.
- worsening education which reflects the future labor capability of the ecosystem
These deviations that exist beyond the mean of an efficient market produces forms of chaotic ruptures. When we accept that asset classes and businesses exists within an economic ecosystem, then as an investor, we must respect the laws of economics, and run from areas of the economy that does not respect these fundamental laws, especially if we want to play the long game. Value is the desire of a contrarian. Becoming a contrarian may be a way to play the long game, one where the capital allocation objective operates outside the realm of FOMO and short term price addiction. Many of the in the limelight businesses and asset classes are entering the realms of artificial expansion, especially in price action. Look at the current 2020 covid reality, while the fundamentals of the economy which puts into question the future wealth of the middle class, the equity markets are flying. We have multiples pushing numbers that are out of this world, and do not respect the value of strategic economic allocation of hard earned money.
Be careful is the only real warning. When things become more volatile and chaotic, sustaining long periods of time away from the mean equilibrium of economic value, there tends to occur a lot of pain. Life as a human itself demonstrates these patterns to be true,