Unfundamentals vs FOMO vs Stay The Course

Editor’s Note: This post ran in the San Antonio Express News in January 2022. I’ve been going through my archives and posting stuff here I forgot to post. I think this one holds up, so I wanted to have it preserved here.

In January, the month named for the 2-faced god Janus, we face backwards – reviewing all of the things we did not accomplish in the past year – and we face forward, making a plan for what will change in the new year. 

Investing, too, requires a two-faced approach. We face backwards at the cold reality of cash-flows in order to assess the probability of failure. This is the basis of “fundamental” investing. We also face forward at future possibilities, hoping that our optimistic projections will come to pass. This is the basis of “growth” investing. 

Janus, the 2-faced god

Both fundamental and growth approaches are valid – even necessary. They operate in a yin and yang of mutual dependence that allows an investor to survive and thrive in different environments. Rely too much on a fundamental approach and you’ll miss the new, new thing, as buggy whips give way to combustion engines and CD Walkmans give way to Spotify. Rely too much on what might possibly come to pass and you’ll buy castles in the sky that crumble at the next dose of recession, interest-rate hike or supply-side shock.

I don’t know about you, but the last year of investment markets felt completely unbalanced, even unhinged. The year 2021 was the most unfundamental investing year of my lifetime. Like, the whole monkey barrel was hope, optimism, and future projections. Some people seem to enjoy heavy castles-in-the-sky investing. Cool, I guess, but it makes me deeply uncomfortable. This Tinkerbell-based approach – everyone just collectively believing strongly enough in magic pixie dust – is just not my style. It’s utterly bewildering. What did you think?

Now it’s a new year so maybe you will be tempted to dip your toes into the new magic pixie dust as well?. Maybe you, too, could triple your money flipping NFTs? Somebody’s brother’s neighbor you heard about just made a million dollars last year in cryptocurrency, right? That guy doesn’t even work and now he’s worth millions? It’s amazing. 

The problem with unfundamental investing is not so much that I’m going to do it. I am personally not at risk of putting any of my real (admittedly fiat) money into NFTs or crypto. The problem with deeply unfundamental investing – even for those of us not tempted to try it – is that it leads to that most inevitable of feelings, the Fear Of Missing Out. FOMO has always been a primary driver of the growth side of investing. There’s no escaping it. Nobody wants to be left behind while a whole paradigm emerges magically from the Metaverse

My antidote to FOMO is to remind myself – and thereby remind you – that doing the most boring, unsexy, incredibly lame thing with your investment portfolio actually produced an amazing return in 2021. And in 2020. And in 2019.

Tinkerbell Investing dominated 2021

In the face of crazy NFTs, crypto, meme stocks – all of which I consider extreme Tinkerbell-based investing – can we review some basic facts on how well boring old index-fund investing went? 

The annual total return on the S&P 500 index – a group of large stocks in the United States – in 2021, including dividend reinvestment, was 28.7 percent. 

The 3 year return on that index has an annual rate of 26.1 percent.

The 5 year return on that same index was an annual rate of 18.5 percent. 

I don’t know any other way to say this: Those results are freaking awesome

The S&P 500 index continuously hit records throughout 2021. There are other major stock indices which registered higher or lower results, but the simple fact to remember is that doing the most boring, uncreative thing imaginable created blow-your-doors-off returns over the past 5 years. In the face of FOMO risk this is the most useful thing I can point out – how amazingly lucrative boring actually was.

The 5yr total return on S&P500 has been freaking amazing

You want to be a millionaire? If you could achieve last year’s S&P 500 index return for 10 years in a row (I know you can’t but just humor me on the thought experiment) you’d only need to start with $80,207 today. 

I’m not saying 2021 stock market returns will be repeated in 2022. Or that the last 5 years say anything about the next 5 years. All I’m saying is that with a FOMO mindset, we might forget that the boring old U.S. stock market has been incredibly profitable in recent years, if you just bought and held. Zero Tinkerbell fairy dust was required. 

And I also mean to point out in particular that if a 28.7 percent return over one year and 18.5 percent returns annually the last 5 years isn’t enough – I mean if you look at that recent past and say, “No, thanks, only crypto returns of 150 percent over 3 months can satisfy my need to get wealthy” – then I don’t know what to tell you. You may experience a very unsatisfying investment journey in the upcoming years. That’s just my guess.

With 2021 in the rearview mirror, and understanding that the future will not recreate the past, I have two concluding reminders. First, try to resist the Tinkerbell allure that has left us open-mouthed, gawking at the unfundamentals of fast speculative returns in pie-in-the-sky stuff. Second, doing the most incredibly boring thing, good old equity index investing, can have a powerful wealth-building effect on your net worth.

A version of this post ran in the San Antonio Express News and Houston Chronicle.

Please see related posts:

Making Sense of Financial Delusions – William Bernstein’s book and the year 2021

How To Invest

Mint.com Interview

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Book Review: The Delusions of Crowds by William Bernstein

My finance book of the year recommendation is one that perfectly matches the 2021 markets moment: William Bernstein’s The Delusions of Crowds: Why People Go Mad in Groups.

Over and over again this year I found myself describing developments in financial markets that seem, frankly, nuts. All I’ve done this year, it seems, is write about wacky finance trends. 


If Bernstein’s investing book The Four Pillars of Investing is an all-time finance classic, his 2021 book is utterly timely, anticipating a year of financial delusions.

In The Delusions of Crowds, Bernstein toggles between stories of financial delusions and religious delusions. Both types of madness depend on two common human frailties. One he describes as the “Asch Effect,” based on a social psychological experiment which showed how humans can be convinced of obviously wrong things by the social pressure to conform to the opinions of others. When the religious leader or the financial whiz says something is true, and enough people around us agree, we tend to agree, despite evidence to the contrary.

Another common thread is our ability as humans, in the face of contradictory evidence, to completely discount one set of facts if they conflict with our pre-existing beliefs. When the apocalypse does not arrive on the prophesized date, Bernstein notes, true believers do not necessarily reject the prophet. Insteaed, we listen eagerly for the prophet’s update on the next plausible date for the End of Times, rather than settle our cognitive dissonance through doubt or disbelief. Contradictory evidence is merely an opportunity to double-down on our fervent faith, not change our beliefs. The South Sea bubble, railroad stocks in 1840 Britain, the stock pools of 1929. The Fifth Monarchy of 1666, the seventh-day adventism of 1843, the Y2K mania. Bernstein does not mention the QAnon phenomenon, but clearly this recent movement falls within Bernstein’s historical pattern.

For those looking for a pure financial wisdom book, I should warn that Bernstein spends considerable time on non-financial matters. Specifically, he digs deep into the clear connection between “End Times” prophecies from past centuries and powerful Evangelical movements today. Bible-inspired numerology and prophecy has entranced people for a millennium. Bernstein makes the case that this madness not only follows historic patterns but also represents a current threat. Apocalyptic beliefs linked to what he terms dispensationalist Protestantism infuses our current politics.

Personally, I am somewhat immune to the Asch Effect. On the other hand, I tend to redouble my strongest views in the face of contrary evidence, often to my embarrassment. Which I will now demonstrate for you, in the course of reviewing the goofiest financial trends of 2021. Those trends, with caveats.

Meme Stocks

The Robinhood app and Reddit-Bro inspired investing in “Meme Stocks” like Hertz, GameStop and AMC kicked off in January 2021 with a bang. We should have known then that the entire year would be an unending string of delusions and madness. Most of these rockets have yet to fall to earth as the year ends, again not what I would have expected.

Stop The Game. Stop.

Caveat: Spotting undervalued companies unloved by institutional investors was the original plausible investment thesis behind some of these meme stocks. That’s cool but only accounted for the earliest movements toward stock appreciation, before the madness took over. 


These are closer to religion than financial bets or investments. The fundamental correct price of Bitcoin remains zero. That’s the same fundamental price as with all the other crypto currencies I’ve ever heard of. Anyway, hundreds of billions of smart investment capital disagree with me. Since approximately 2013, every time I talk to an audience of folks about investing the first question is always “should I/how can I invest in crypto?” My answer is always the same. Something to the effect of I would sooner recommend lighting one’s paper money on fire flying down the highway at 90 miles an hour. But again, I am clearly the idiot in the room. Up until now I have been wrong, wrong, and then wrong again about Bitcoin.

Kevin Roose thought he was joking at first

Caveat: I (kind of) understand blockchain technology might be the coolest tech since the invention of the selfie-stick. But cryptocurrencies are not the same as blockchain, and I will continue to disparage the former while being open to the future awesomeness of the latter.


Shall we all invest in an enterprise best described as “an undertaking of great advantage, but nobody to know what it is?” That was the infamous published description of a speculative business advertised around the time of the South Sea Bubble of 1720, a phrase which equally applies to the Special Purpose Acquisition Companies (SPACs) that hit maximum popularity in early 2021. 

Picture of South Sea Bubble or really any SPAC you’d like it to be

You put your money into an empty vessel and hope that the named backer finds a private company to take public through purchase. Why wouldn’t you want to put your money into an unknown business that has A-Rod, Sammy Hagar, or Kevin Durant as its backer? Note: That’s both a rhetorical and a sarcastic question.

Caveat: SPAC investors typically get an option to request their money back once an acquisition target gets announced. So, it’s a bit like a free option for the original SPAC backers.


Have people entirely lost their minds? You bought a digital thing and you value it highly because there can only be one copy (or a limited number of copies) of the digital thing? And this is worth $1 thousand or $1 million, or $50 million to you? 

Caveat: Art collecting is always insane when viewed from a finance perspective. Probably best to just leave it to aesthetics and the phrase “There is no accounting for taste.”


There are only so many times I can point out how stupid this stock has been in the past, is now in the present, and always will be in the future, for ever and ever, amen. And at each point in time, I have not only been proven wrong, but proven colossally wrong. Like, it’s the wrongest stock-picking call anyone has ever made in the history of making wrong market calls. I feel really great as Tesla shares have zoomed from a ridiculous $100 billion valuation to a ludicrous-mode $1 trillion market capitalization in less than 2 years. But still: Y’all are crazy. I feel extraordinary conviction on this.


Caveat: I understand the cars are great. I have no problem with the cars. Just the stock, and its price. And it’s bizarre owner, Elon Musk. Him I have a problem with. But again, I’m the idiot, I admit that.

The most common ending to human delusions, financial and religious, is heartbreak. In finance, however, some bubbles serve the purpose of creating the conditions for future economic innovation. After the wreckage of a burst bubble, we can often see in retrospect how the creative destruction was necessary, or at least that it seeded new growth. This will be useful to remember, when the current crazy ends in tears.

A version of this post ran in the San Antonio Express-News and Houston Chronicle.

Please see related posts:

All Bankers Anonymous Book Reviews in one place

Book Review: The Four Pillars of Investing, by William Bernstein

The NFT Revolution

Tesla – How Do I Hate Thee?

What If You Back The Wrong SPAC?

This Is Your Bitcoin Warning

Stop The Game. Stop.

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The NFT Revolution

NOTE: This one ran in the San Antonio Express News back in May 2021, and its being posted a bit late. 1

San Antonio-based graphic and web designer Ron Garcia works at the intersection of technology and art. On May 8th he and his fellow members of RePublic Arts Collaborative will host a gathering “The Revolution Will Be Digitized,” in a near-downtown studio, featuring physical art as well as digital art at auction in the form of NFTs. 

Non-fungible tokens (NFTs), as you may know, are THE art trend of 2021. Collectors can purchase individual copies of digital art, verified and authenticated with their NFT certifying ownership. If the NFT-linked art ever changes hands between collectors, that will be tracked, and artists can collect a commission on the sale.

Warning, a brief word salad ahead:

Garcia’s preparation for the show includes teaching artists how to upload the digital files of their work to the Ethereum blockchain. He also coaches them on how to create a digital wallet, linking their regular bank accounts to Coinbase, which serves as a place to store cryptocurrency. As part of the link of art pieces to an NFT, artists will need to pay the “gas fee” needed to mine a unique Ethereum coin that will serve as the NFT.

Are you with me so far? Not really? I’ll spend the rest of this space unpacking that word salad above.

Blockchain is the term for distributed computer networks that create a permanent database (like a fancy spreadsheet!) that allows anonymous participants to verify storage of data and transactions without any central authority. The point of linking an NFT to digital art is to offer a permanent certificate of authenticity as well as a way of tracking the art’s authorship and the collector’s ownership. 

NBA TopShots kicked off the mainstream NFT market

Garcia purchased an early NFT released by the National Basketball Association, which pioneered the issuance of blockchain collectibles with something called NBA Topshots. NBA Topshots are digital video clips with stats – basically like online playing cards – first released in October 2020. Garcia bought one for $14 and later reports flipping it for $1,000. That experience opened his eyes to the possibility of NFTs for artists. Why couldn’t his fellow artists participate in and benefit from this emerging technology?

Garcia – like others attracted to the NFT market – foresee the increasing importance of the Metaverse, a virtual reality that exists either apart from or alongside physical reality. In the Metaverse, humans will need to populate their living areas with video or static digital art. When you observe young humans like my teen and pre-teen constantly interacting with their friends via screens, I think the Metaverse is not far away. It’s actually kind of here already.

“Society is changing to a whole new form,” says Garcia. “All these different things are happening. I saw that NFTs are part of that whole turning. We’re going from the physical space to the virtual space,” he continued.

Digital art NFTs use the blockchain associated with the cryptocurrency Ethereum, making that preferred medium of exchange for art-linked NFTs. The Ethereum blockchain works similarly to, but does not interact directly with, the better-known Bitcoin blockchain. 

Coinbase is a company that facilitates blockchain transactions, charging fees for services like offering a digital cryptocurrency “wallet” to individuals. Coinbase Global Inc went public on the NASDAQ stock exchange with a direct listing in mid-April. 

With a market capitalization above $60 billion, Coinbase is evidence that some investors believe in the staying power of blockchain transactions, as well as the fees that Coinbase can charge cryptocurrency participants. 

Garcia views the fees from Coinbase as high, but hopefully someday soon will come down through competition.

Let’s now review the good, the weird, and the bad of NFTs.

The unquestionably good: Artists who work in digital media – including video and music – have a new tool for creating and selling limited-quantity or individual pieces that collectors can own. 

When Napster made music incredibly easy to reproduce and pirate illegally around the year 2000, musicians lost their ability to earn music royalties. Music streaming services have since gone a long way to solving that problem. 

NFTs may, analogously, allow artists to earn money through the sale of their work that otherwise might be infinitely reproducible and pirate-able. Earning additional commissions each time a piece of art changes hands has so far been generally impossible with physical art. So NFTs are maybe a helpful leap forward for digital artists. 

As a technology, NFTs represent the first blockchain application that I think solves a real problem – specifically, the problem of verification and authentication of art and ongoing payments to artists.

Here are as couple of weird NFT outliers that happened in March 2021, as these things exploded in popularity.

So damned meta

New York Times business columnist Kevin Roose arranged the NFT auction of a digital image of his printed newspaper column about NFTs, which sold for the equivalent of $560,000.

The big weird one, the one that conferred global art legitimacy on NFTs, was from Beeple.

A digital artist named yes, Beeple, sold an NFT via auction house Christy’s a digital montage of his images named “Everydays: The First 5,000 Days,” for $69 million. 

As a result of these outliers, and as a responsible finance guy, I feel obligated to attach a warning sticker on this new thing. NFT art is not worse than signed baseballs or rare stamps or first edition books. It’s not even necessarily worse than paying $100 million for a physical Van Gogh or Picasso, if that’s the scale you operate at, financially.

Beeple’s Everydays

But they are also not suitable as investments. 

As art? Sure. As a neat technology? Definitely. As an expression of your values? Very cool, I love it. But only burn money on this that you would otherwise dedicate to collecting for non-financial reasons, please. Please don’t dedicate your money to this in the hopes of a quick flip. Turning $14 into $1000 quickly on an NFT flip, as Garcia did, should not be your financial expectation.

The emergence of NFTs this year exposes the different fundamental worldviews of different types of people. Technologists, of course, will embrace NFTs, for their clever deployment of blockchain to solve a problem. Artists, unquestionably, should welcome the emergence and adoption of NFTs. 

“A lot of artists are afraid of technology. It goes against their artistic sentiment somehow,” adds Garcia. “On the local front that’s the biggest contribution I can make.”

Financial types – and I’m mostly in this camp – view NFTs with a combination of awe, worry, and shadenfreud-ish skepticism. 

Of course as a business columnist I also cannot help but slow clap, nodding sagely in approval that someone somewhere would spend over $500,000 for a digital copy of a newspaper business column. I am absolutely on board with any reader of this column, for example, looking to create a collector’s item of my own work. Heck – you could even buy this from me at half price. Let’s say $250,000 as a starting amount, just to be fair all around. Hit me up, let’s collaborate.

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  1. Since NFTs could very well disappear forever as a thing in the next month, or they could become the most important invention since sliced bread, I figured I should post it before people entirely forgot how crazy NFTs seemed in the Spring of 2021