Ratlinks: YOLO, FOMO, OH NO LET'S GO
March 2020 features two long-form articles on money and what you should do with it.
Welcome back! I hope your leap day was an enjoyable one. I want to be the first to wish you a Super Tuesday. Two rare calendar events in under a week! What can’t 2020 do?
This month we discuss:
Blow off tops
Renting vs Buying
The first story was written about a week ago prior to the coronavirus fear-induced market sell-off. However it should remain enjoyable and relevant.
Speaking of relevant, if you missed it, coronavirus was highlighted in last month’s edition of RatLinks: Animals - Friend Foe or Food.
Was this forwarded to you?
Do you want to receive Ratlinks in your inbox?
NOW SHE WANT A PHOTO, YOU ALREADY KNOW, THOUGH
I don’t know about you, but every night I go to bed exhausted.
At first, I thought it was due to stress from work, but it wasn’t.
I practice enough mindfulness to be “Zen AF.”
Maybe I am worn out from raising a family? Nope, not it.
The key here is to put as much as you can on your significant other, in order to maximize time for yourself.
Did I have a potential iron deficiency? Highly unlikely.
I crush desiccated liver.
Am I weary from my endless pursuit to win a slashie award? Maybe?
I am almost close to turning left.
Turns out I am just tired from winning.
All we do is win-win-win no matter what.
Look at the stats:
Unemployment at its lowest level ever. American’s 409ks are bursting at the seams. Heck, even the year is currently the highest ever. How far did our last president get? 2016, yeah that’s what I thought. Thanks, Obama.
However, that doesn’t leave me without worry.
What if we are near peak everything? If so, have I gotten more than my fair share?
EVERYONE’S JUMPING OFF A BRIDGE?
The proliferation of the term FOMO (Fear of Missing Out) can be understood as envy-related anxiety about missed experiences (fear of missing out) and belonging (fear of being left out). Beyond feelings, people who speak of FOMO also speak of it as a behavior, most often as a compulsivity (related to what I characterize as conspicuous sociality) and as an illness to be remedied. And although FOMO is often seen as a recent phenomenon, it is a continuation of a centuries-old concern and discourse about media-prompted envy and anxiety (i.e., “keeping up with the Joneses” and neurasthenia).
“Following the Joneses: FOMO and conspicuous sociality” by Joseph Reagle
Fear of missing out
Keeping up with the Joneses
Following the heard
Call it what you want, but this behavior, known as social proof is not new.
Surprisingly society today, permeates the belief that people want to be included or at least be apart of something. Yet, at the same time the country is more divided than ever.
If everyone else is doing it, should you too?
The answer is yes, but you need to be careful.
2020 has made us all acutely aware of what you can and can not say. Political correctness is everywhere as is cancel culture.
Have a dog at home?
Watch out because PETA says the word 'PET' is patronizing to animals.
‘We don’t hate the word pet we’re encouraging people to use something better like companion,’ says PETA’s Jennifer White
Netflix and Chill?
Careful what you pick.
We all know a few movies that would never be released today and therefore should be avoided.
Say one that glamorizes the abandonment of children specifically those left “Home Alone.”
Maybe you want to check out a story about marriage?
Don’t even think about selecting this film. The one that details a custody battle and the resulting story of a divorced father who transforms himself to spend time with his children. Instead of a montage about self-actualization or the trials and tribulations of appealing to an unjust court system. The protagonist decides his best option to spend more time with his family is by masquerading as an elderly nanny.
I know I know.
We have the benefit of hindsight, but even with that, one must wonder who would greenlight a movie that could be offensive to divorcees, Brits and potentially the elderly?
Worst of all the film is set in San Francisco, a sanctuary city!
Sorry, I didn’t mean to trigger you.
SEIZE THE FISH
Face it. Everyone around you is getting rich and you aren’t.
We all know the feeling.
You can smell that sweet sweet moon money.
You want that yacht, you need those tendies.
This is not a new phenomenon, see tulip-mania, tech stocks or bitcoin. Each iteration appears new, but it’s never different.
Pressure begins to build around you as everyone else is getting rich. If you are so smart why aren’t you too?
FOMO lead demand becomes a YOLO induced full send. Eventually resolved through what is known in financial parlance, as a blow-off top.
The blow-off top is a buying climax. It develops as the end of a prolonged uptrend. It signals a change in the nature of the trend and shows a buying frenzy.
FOMO can lead to investor aggressiveness regardless of risk, known or unknown.
Purchasing an overpriced asset in the hope that it has more to run might be a good idea, but it might not be.
Legendary investor Howard Marks even once warned in the memo Latest Thinking, about the risk of making decisions based on FOMO.
Overpriced markets may have further to go but remember that the potential catalysts we have to worry about most may be the unknown ones.
If you decide not to invest, you have to sit back as everyone else seemingly gets rich. How will it feel when your doorman buys a Ferrari? What do you do then? Complain as you miss out on ANOTHER RECORD CLOSE?
Just remember that by waiting this long, it is likely the second YOU jump in, YOU know the market is moving lower. Then again maybe it won’t. Caveat Emptor.
At the end of the day. Do whatever you want. It’s your money.
¡YOLO!
Disclosure: RatLinks is no way constitutes investment advice, nor is it in any way providing recommendation or guidance that attempts to educate, inform, or guide an investor regarding a particular investment product or series of products. If you made it this far I’m saving you a seat on the next financial rocket ship, just set your tesla autopilot to make a left at the bitcoin ATM. Look for me, I’ll be the guy with the AirPods. While it’s painful being contrarian if you can wait out the hysteria when the market corrects you will be one of the few ready to step in. When it is the hardest to buy that is likely the best time but if you don’t believe me, ask Warren Buffett.
THIS OLD MILLENNIAL
With the 21st century entering its third decade, demographics are becoming more complicated. Millennials, individuals born 1981-1996, are now dividing into two cohorts - old and young.
Old millennials are more likely to be settling down, starting a family and telling the world about it on Instagram.
Young millennials are more likely to know how to code, crush white claw and send nudes via Snapchat.
Old millennials are looking at longer-term housing decisions and debating what is better: renting or buying. The debate boils down to should you continue to rent or should you become a full-fledged adult and shackle yourself with joys of homeownership.
The argument between rent vs buy used to be simple. If you could afford it, you should buy.
Why not.
Buying a home was a rite of passage. Allowed for tax benefits through mortgage and property tax deductions and best of all, home prices prior to 2008 never declined.
Before you say capitalism is so dumb. Be careful prospective Bernie Bro or Yang Gang-banger because as a homeowner you might have more in common with private equity titans Steve Schwarzman or Leon Black than a socialist bartender from the Bronx. As purchasing a home appears quite similar to leveraged buyouts (LBO).
In a traditional LBO, where a private equity firm takes a public company private. The PE firm pays roughly 1/4th-1/5th of the purchase price in equity and financing the remainder with debt. When purchasing a home historically, 20% of the value of a home is used as a down payment, becoming the equity component with the remaining 80% financed via a mortgage (debt). For example, if a $1,000,000 home purchased with a 20% down payment of $200,000 turns out to be worth $2,000,000 in a few years. Thanks to leverage the return is magnified from a 2x return if only cash was used (2000/1000) to a roughly 10x return through debt (2000/200).
The above example is purely hypothetical. The ability for real estate value to double in a few years depends on geography and demand. If you want to learn more about renting vs buying, I suggest the following links from LifeHacker and the New York Times Rent Buy Calculator.
Before we move on, it is worth noting there is another major factor that impacts the rent vs buy decision - state and local tax deductions aka SALT.
However, that is a really esoteric and BORING topic. Instead let’s divert focus to the other shaker.
BUD ASSET LIGHT
Millennials aren’t the only ones debating whether to rent or buy. Gen Z, individuals born between 1997 and 2010 appear to never want to own anything. Rather preferring to rent; be it a home (Airbnb), a car (Uber) or the runway.
The sharing economy is here in full force and appears to work best with “fallow assets.” Expensive items that people rarely use, says Aileen Lee, founder of the venture capital firm Cowboy Ventures.
The gym appears to be the perfect proving ground in the rent vs buy debate.
Today, you can get a standard monthly gym membership, join class pass (rent all the gyms), buy home gym equipment or subscribe to streaming work out classes.
Peloton the leader in home exercise bikes wants you to “own the gym” but has gone full circle allowing for a 30 day rental of their equipment. Peloton knows that once users get the bike in their home, their craving for internet fame coupled with the potential for virtual high fives. Wins out over the crippling anxiety of going to the gym and interacting with real people who may actually applaud your efforts.
Not that I would know anything about that. I would never change my Peloton user name to something ridiculous knowing there is a high likelihood of a shout out during the ceremonial century ride.
Ratlinks echos Peloton’s congratulations of Dr. Richard Tickle for his tremendous abilities in and out of the saddle.
Until Next Month
Happy Chinese New Year 恭贺新禧 The Year of The Rat (Links)
Good advice from Portugal
IN MEMORIAM
Rapper Pop Smoke (1999-2020) known for his mixtape “Meet the Woo” was involved in a fatal home invasion this month.
The below video explains what happened and helps you better understand the current California home invasion crisis.