Overheated Consumer Investing

Why aren’t more Americans talking about the risky investments in their daily lives? The signs are everywhere.

The signs are everywhere that — the bull market, inflation, easy money, low-interest rates, untethered main street v stock market activity, three rounds stimuli checks, and on and on — are going to send Americans into an amazing correction, hopefully not a meltdown.

What is so bizarre is that almost nobody is speaking and writing about the dozens of other, non-economic signs that are all around us.

I know why nobody speaks about these things, they are beneficiaries of this incredible asset and wealth run-up. But there are always the hangovers, just how bad will this one thump out brains?

Photo by Austin Distel on Unsplash

The signs are around everywhere. Let’s just mention a few unusual ones and questions to ponder when you think about these signs?

1. Everything is an asset class. Baseball Cards, Old Sweaters, NFTs, Cryptocurrency. Ask yourself, why weren’t these valuable last year sitting in your garage or what makes one NFT more valuable than another?
2. Meme Stocks, Penny Stocks, and Retail trading. What is the value of these traded companies from a time value of money, or Discounted Cash Flow analysis? When and why has their valuation been untethered from how all equity assets have been valued for the last few hundred years, that is discounting back at a discount rate all future cash flows to arrive at a Present Value of the companies equity?
3. Real Estate prices, again? Ask your 2007 or 2008 self, “does this feel like the naughts”? If your conscience sort of says yes, then ask, why does this feel like 2007, again?
4. Inflation, haircuts or food. Or pick any consumer service or good. How much more expensive is it to get your haircut in 2021 versus 2015 or 2010. That’s real inflation. If it was cheaper, drop me a line with your barber’s phone number so I can make an appointment! If it was a lot more expensive, ask yourself, “are your wages and investments keeping up?”
5. Professional Advice…from non-professionals? If another Lyft driver, shop-keeper, recent college graduate give me investment tips, or tries to convince me of second home real estate investment or the next BitCoin, ask yourself, “why is this person ‘A’ — giving me any investment advice, and ‘B’ — what qualifies this person at all”. Smart investor are FIFO (First In, First Out), and herds are usually LILO (Last in, Last Out)
6. Access for all as investors? Does access for all these new investors via gamification of Robinhood, accreditation into syndicating real estate investing, and their limited governance due to the JOBS act, really make the access retail and small investors easy or just more risky? Question to ask, why has access been given more freely, and what is the real economic risk around this access?
7. Credit for millennials, via ‘Buy Now Pay Later’ options, and other alternative-financing, are really credit cards for Millenials and GenZ. Ask yourself, ‘should two entire generations have unregulated and ungoverned access to credit cards to purchase consumer goods and services and become in debt?’

Also, there are world-leading economists worried about inflation, but that another post…

Let’s start to ask some questions about risk, valuation, timing, sustainability, access, and probably a dose of investor realty so you too can survive the coming meltdown.