Experiencing FOMO in Finance

In episode 3 of Don’t Buy The Bull, Cassandra Toroian delves into the concept of FOMO (Fear of Missing Out) and its impact on investing. She also discusses the dangers of making investment decisions based on envy, greed, and short-term emotions.

Tune in to gain insights on making sound investment decisions by overcoming the fear of missing out.

TIMESTAMPS

[00:01:17] FOMO (Fear of Missing Out) in Investing.

[00:09:20] Short Selling and Stock Market.

[00:10:25] Investing in Gold Advice.

In this episode, Cassandra Toroian discusses how FOMO is driven by emotions such as envy, jealousy, hubris, ego, and greed, which can cloud judgment and lead investors to make impulsive decisions based on the desire to catch up with perceived successful individuals.

Additionally, Cassandra stresses the importance of prioritizing fundamental investing principles over speculative trading. By adhering to a sound investment strategy based on quality stocks and long-term growth potential, investors can mitigate risks and work towards achieving their financial goals in a prudent and sustainable manner.

QUOTES

• “Just as we can invest and buy a stock for the long term, there are people out there who will do the opposite. Their form of investing is actually shorting a stock. That means they're selling the stock that they don't own. And their conclusion is that stock because that company is flawed fundamentally, that stock will go down.”
• “You can look it up and see what exactly a company's short percentage is. And it'll even tell you the number of days it would take for that stock to cover all of its shorts. In other words, If a company has a small float of stock, it could take many, many days for them to cover and close out the short positions because it becomes a self-fulfilling prophecy.”
• “But my point is, is that if you don't take a look at what is going on with a company's stock as far as the short position percentage out there and how many days to cover that it would take, that can be a very bad recipe for disaster if you're feeling like you're missing out and wanna get in on one of these.”

SOCIAL MEDIA LINKS

Cassandra Toroian

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WEBSITE

FirstHand Research and Consulting LLC: https://1sthandresearch.com/

Transcript

Welcome to Don't Buy the Bull, a podcast dedicated to unmasking the truth behind how so-called trusted Wall Street institutions and the American government really work. I'm your host, Cassandra Taurian. You can call me Cass. I'm a seasoned former equity analyst, investment manager and former Wall Street Journal All-Star Analyst. And I'm passionate about helping people think for themselves by teaching them about things like investing, which may not be their forte. My only goal is to help you figure out how to use your own discernment and instinct to make good investment decisions for yourself. I have no skin in the game. And to do what I'd like to help you do, we have to look at the world around us, since the stock market does not operate in the bubble. So let's dive in. We're gonna continue talking about some interesting, probably not that well-known concepts investing in. One of those has to do with FOMO. We know what FOMO is, right? It's the fear of missing out. Well, that can really hurt you when you're investing. It's a very short-term phenomenon that can have very dire long-term consequences for your money. What do I mean by that? Well, it's amazing how it seems to be the whole concept of FOMO has popped up more and more as we have gotten access to information much more quickly. And I think that's because the information flow is so fast. We feel like we're only maybe a step or two behind something good and that maybe we can catch up. Well, the problem with that is easier said than done. And unless we really understand the dynamics that are at work, we could get hurt. So. What is fear of missing out really mean? Is it really fear or is it really something else? And people don't want to really just address the fact that, let's call it as we see it, it's actually envy. It's the envy of someone else being successful in something, in some way. And you, human nature, call it what you want, want to try and catch up, want to also be that, and you're jealous. So you can call it jealousy, you can throw in there some hubris, some ego, some greed, all of these are really not very respectable. concepts. So personally, if I'm going into an investment with these kinds of feelings inside me, I would think that's probably pretty bad karma to begin with, but that's me. So But why does this matter? Well, because it's kind of like the hot potato. And when you start looking at some real world examples of what exactly this means, you'll understand. I'm sure some of you remember the meme stock of GameStop from a couple of years ago. You have to know it because it was even on national news a few times over the course of several weeks. Every day that stock was going up, it was on a tear. It was crazy. Hundreds of points, right? I mean, it got to the point where back in the days when I was managing people's money, they were asking me, should we be in this stock? And of course, I would say, no, that's really not the way we invest people's money on a whim, essentially. But hey, some people did make money on it. But what was underlying why that stock kept going up? Well, yeah, it was FOMO. But what was on the mechanics of why it kept going up? Well, it's something called short selling. That stock suffered, if you will, a massive, massive short squeeze. Do you know what that is? Well, it's very simple. Just as we can invest and buy a stock for the long term, there are people out there who will do the opposite. Their form of investing is actually shorting a stock. That means they're selling the stock that they don't own. And their conclusion is that stock, because that company is flawed fundamentally, that that stock will go down. It may not be yesterday or today or tomorrow. It could be a week from now, a month from now, six months from now. But they're willing to wait it out because they think they can make a huge profit with that stock falling. They buy it back at a lower price. and they make the difference between the price where they sold it and the price where it dropped to. That change is their profit. So in order for someone to sell short stock, they have to be able to borrow it. Well, that requires going to their custodian and asking to borrow the shares, which is no big deal if you're talking about 100, 500, 1,000 shares for a retail investor. But if you're talking about a big fund or a professional investor that wants to sell short 10,000, 20,000, 50,000 or more shares of something, well, they're going to eventually get to a threshold where they can't borrow any more shares to sell short because there's only a finite number of publicly traded shares available, which is really called the float of the stock. This is public information, by the way. You can look it up and see what exactly a company's short percentage is. And it'll even tell you the number of days it would take for that stocks to cover all of its shorts. In other words, If a company has a small float of stock, it could take many, many days for them to cover and close out the short positions because it becomes a self-fulfilling prophecy. They try and buy back the shares to close out their short, but the stock price moves up, they try and buy it again, they can't at that level, the stock price moves up, it becomes a supply and demand issue. And it gets very, very painful if you are the short seller. On the other side of the coin, if you happen to be long the stock, you're a long owner, then you're making money as that poor chap is losing their shirt for every point it goes up. You're making the money and that short seller is losing. So It's really a lot of aggravation at the end of the day. But my point is, is that if you don't take a look at what is going on with a company's stock as far as the short position percentage out there and how many days to cover that it would take, that can be a very bad recipe for disaster if you're feeling like you're missing out and wanna get in on one of these. So, folks that got into GameStop on the wrong day, it's like hot potato, who's gonna be the last sucker holding it before the ball drops out. Cause it will, it will, it'll eventually end. So, I think this is where, you need to decide, am I going to be a fundamental investor or am I just going to play around? If you're more interested in day trading and things, I'm not your girl. I like investing in a method that is tried and true over many, many, many, many decades, buying quality and sticking with it. Dividends are our friends. We'll talk more about those things. But, you know, there's people out there that just say, I don't want to be involved in the stock market because it's just too much. So they turned to other things like gold and now cryptocurrency, I guess, on some level. But next time we're going to talk about gold and maybe silver, because I think it's important. It's a question that probably over my 25 year career, I've had multiple times where people have asked me about gold. And again, this is all personal choice, but there are real things to look at when it comes to deciding whether gold fits into your portfolio. We'll talk about that next time. So talk to you soon. And remember, do not buy the bull. Thanks so much for tuning into this episode. I really do appreciate it. Be sure to subscribe to the show, and that way you'll get updates about new episodes. Or if you really liked it, maybe you can share it to other folks you know. That I would really appreciate. So until next time, this is your reminder not to buy the bull. Ciao.