In polite company, you never refer to behavior as “dumb”. Instead, it’s simply inappropriate or unexplainable. Just like really wealthy people are never crazy. They’re eccentric.
There are lots of reasons for unexplainable behavior, that’s why they’re really not “unexplainable”. They’re just dumb.
If you watch shows like “Dateline” often enough, you’ve seen every bizarre act and the reasoning behind the act. You’ve also learned that there’s never a shortage of unexplainable behavior.
Television ratings seem to do particularly well when the reason behind the action is passion. When it comes to motives, greed is also a big favorite in the gawker community.
We like hearing stories that have greed as an underlying factor.
Murder for insurance money is very popular, especially if unrequited passion was also involved. How great is it to watch an episode about a wife that allegedly killed her husband for the insurance money so that she and the cabana boy could retire to the Dominican Republic?
Greed is also a big factor in investing. People do really stupid things because of greed. But greed is nothing more than great passion for money or other items of value.
Everybody’s heard the axiom that “bulls and bears both make money, but pigs get slaughtered”, but when it comes to battling with human nature, axioms don’t stand a chance. It’s a lot easier to spout them than to heed them.
Another investing axiom, although not encased in such a short memorable saying, is that you don’t stay long going into the weekend if there’s uncertainty in the mix.
This past weekend was one of those that you would have expected smart investors to have been on the sidelines.
After all, the previous week saw gains every day, even though some of those came in the very last hour of trading. The rally was fueled by speculation that the European Union was closing in on at least a short term solution to averting a Greek default.
Stocks climbed and precious metals took big dives.
But on this Friday, one of those quadruple witching Fridays, even in the face of unsettling news on the EU front, th e market still went higher.
In the last hour of trading on Friday I posted on Twitter questioning my intelligence, as I would have expected a sell-off heading into the weekend. Least of all, the bad news that went counter to the rumors and hope should have put a damper on things. Add to that the 5 straight days of gains and it would seem that profit taking would be in the cards.
Sure, maybe the smart guys took their profits on Friday, but I sort of doubt it. Who then was behind what happened on Monday? Definitely not the little guys like me.
Of course, I had a vested interest in seeing some profit taking, as I stood to lose nearly 50% of my holdings to assignment unless the market reversed course.
It didn’t.
As I wondered why it didn’t do the obvious, I learned of a new psychiatric disorder called FOMO – Fear of Missing Out.
It actually refers to the need to be constantly plugged into social media. It helps to explain why people would risk their lives to text a meaningless message while driving. It also explains why I kept breaking into a cold sweat on Monday as it was again one of those infrequent days that I had to work outside of the house.
Bad enough that I was cut off from CNBC, but Twitter was nowhere near as ubiquitous as its become in my normal life. The need to responsibly attend to work saw to that.
All I knew was that the market opened down around 250 points.
From my perspective that was what I’d been hoping for. It gave me a chance to buy back shares of British Petroleum, Textron, Dow Chemical, DuPont and Triple Q’s at less than they had been assigned to me.
But why did the market go up on Friday when it seemed so obvious that it should have done just the opposite?
FOMO.
Fear of missing out on more irrational upward price movements. Given that most of last weeks’ price increases were based on rumor and hope, what reason would anyone have had to actually go against the flow? History and common sense were no match for unexplained price action. Axioms were meaningless when there was still the prospect of more inappropriate price climbs.
In this context FOMO is greed.
Otherwise smart people fall prey to FOMO all the time. I suppose that it’s really a normal reaction. I feel it every time I sell shares or every time I decide to buy shares in one company and not another.I definitely felt it Monday morning as I went on a wild shopping spree in the first 30 minutes of trading and then wondered whether I missed out on even better bargains because I didn’t wait longer to blow through the money.
It’s hard to imagine yourself being the only one with nothing to party about, so yougive in to the FOMO.
This morning I’m back at my usual perch and will be so for another month.
Twitter and CNBC will be fully engaged. I won’t miss out on a single opportunity to say something irrelevant in 140 spaces or less.
In the meantime, as the market reversed much of its downward trend in the last hour of trading on Monday I decided not to sell any call options.
Yet.
But I have no FOMO.
There’ll be plenty more opportunities to miss out on and there’ll never be a shortage of them, either.
Tweets and texts come and go but FOMO is here to stay.