Wise observer Nassim Taleb urges us to consider the life story of a Thanksgiving turkey.
From birth, the turkey is fed and cared for every single day. We can imagine it thinking, “Human beings love me and want the best for me. Yesterday was great, today is great, and tomorrow will be just as good.” Based on its experience, there’s no reason for it to think otherwise.
But then comes a day in early November, and things change . . .
Naïve investors have had a similar experience. Lots of foolish things seemed to rise day after day, reinforcing the idea that they would continue to go up.
Crypto-currencies, IPOs, the so-called “meme-stocks” that were hyped on social media, self-driving cars, and even bonds – let’s not forget this supposedly safe investment – all seemed to have little risk. Investors thought the only mistake was not to buy more on any pullback in price.
But reality does have a way of intruding. Things with no real staying power drop in price with little chance of coming back. Investors who do not know what they are doing suffer big losses.
But if a sense of disillusionment creates opportunity, as it so often does, value-minded investors can take full advantage.
Barry Dunaway, CFA®
Director of Research
America First Investment Advisors, LLC
This post expresses the views of the author as of the date of publication. America First Investment Advisors has no obligation to update the information in it. Be aware that past performance is no indication of future performance, and that wherever there is the potential for profit there is also the possibility of loss.