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A bite sized discussion on timely financial news and investment topics, to help you maximize your net worth and wealth for the next generation with Justin Dyer and Mena Hanna of AWM Capital.
Justin Dyer: Hey everyone.
Welcome back to another
episode of a WM Insights.
We're gonna talk fads today, really
going from hype to developing habits
to really build real wealth long,
real multi-generational wealth.
We're in this period of.
What's being thrown around
is the new attention economy.
And that's driving a lot of fads
back to the forefront, I would say.
And so we're gonna get through or go
through what's making them so tempting,
why they might work in the short term,
but generally speaking, why it's not a
repeatable, robust way to really maintain
that long-term, multi-generational wealth.
The downside usually wins out
or washes out, you could say.
So, we're gonna jump right into it.
Let's talk let's kind of define
what we're talking about.
A fad is something that is, realizes
really short term momentum driven
gains, probably something that's
not super strong and fundamentals.
It's strong in maybe a short-term
narrative and excitement in marketing
and branding, but when you just go
Beneath the surface, you are, you're often
left looking, asking more questions and
wondering what's actually going on here.
And so.
We're gonna talk about some current
and historical fads that have been
driving a lot of attention, a lot
of short-term wealth creation.
And then kind of punchline
here is a lot of loss of wealth
as, as well on the back end.
Mena Hanna: Yeah.
And we've seen so many different.
Examples, you know, starting off
with the com bubble where the Nasdaq
appreciated 800% over a five year
period of time, which is crazy.
And kind of when people started
realizing that there were no
fundamentals to back pets.com
and these multi-billion dollar
businesses that were just the
name or kind of as you alluded to,
were just there to get attention.
And not dollars.
You saw an unwinding of those
markets and a pretty big drop off.
So I think that fundamental
piece really carries itself
out to all of these examples.
Go to cannabis stocks next, because
those were getting really hot,
especially around COVID time.
There was legalization in
Canada, legalization kind of
in, in new states in the us.
Justin Dyer: US
Mena Hanna: We saw a lot of
deals on the public and private
side.
Justin Dyer: Yeah, certainly
on the private side,
Mena Hanna: tons of deals on the private
side, and I would bet if I were to go back
and look at those companies, not a lot
of them actually survived because there
was this green rush, a ton of capital
moving into these markets super quickly
before anything was really established.
And yeah, you've seen, you know, at least
in the public market side, some of these
stocks are down 90% since their peaks and.
Unless something miraculous happens,
you are not getting that money back
that is gone for forever, potentially.
Yeah.
Right.
So yeah it's really just a warning.
Justin Dyer: I mean, there's plenty
more examples and we'll probably
weave some into the conversation here.
I want to go back to the
NASDAQ example 'cause I think
that's incredibly important.
It's arguably a diversified index.
So you know, NASDAQ or Nasdaq 100 very
similar, driven by kind of a small
number of stocks when you look into it,
that took almost 15 years to recover.
Now it's a great reminder.
Reason why I want to go back
to it is because the Nasdaq.
Market or NASDAQ index gets a
lot of attention in the present
day because it's done so well
and we are long-term investors.
You all are long-term investors, so it's
good to take that step back and say, oh
yeah, well, it's done exceptionally well.
Over a generally speaking, long
period of time, 10, 15 years, probably
you could sit 15 years, but if you
in started investing in Nasdaq in.
At the bottom 2002, let alone
at the peak in 2000, right?
Your returns look a lot different.
And so this is a long-term game.
And not only are we talking about
chasing hype over very short periods
of time, but even looking at markets.
Over arguably a long period of time, 10,
15 years, like we're talking about Nasdaq
right now, you can be led to different
conclusions and to really believe or ask
yourself the question of this time is
different, which is a big a big mindset
or a common mindset that people get
into around, Hey this is why fads work.
Right?
They're you're convincing
yourself of this time is different
amongst many other things.
Mena Hanna: Yeah, and
especially with the.com
bubble, I think something that we
see in the data that we're presenting
in the mainstream media is a lot
of people just start looking at
returns, starting in the year 2000.
And there's a lot of history and a lot
of data that we have prior to that.
So even the way that you slice and dice
the data can really mislead you on.
How an asset class has performed, how
tech has performed over, you know, a
longer period of time than just the past
Justin Dyer: years.
Yeah, totally.
So there's some data mining,
let's call it, that, lead people
to chase, chase hype, chase fads.
What else contributes to it
in this attention economy, as
Mena Hanna: they
say a lot of it's emotional.
Like it's great to get excited.
I get excited when asset classes roar
and when there's optimism in markets.
And unfortunately also with excitement
comes some certain degree of fomo.
Like you see money being made,
you see people doing well
and you want to participate.
You want to be a part of that.
And it really, unfortunately.
Comes down to when are
you hearing about this?
If you're hearing about this when
your normal, you know, barista
is talking about when, yeah.
If you're getting into Bitcoin when
hearing about your, like, hearing about
it from your 70-year-old uncle, it's
probably too late and you're going
to be on the wrong side of this wave.
If you're hearing about this
early, you happen to get lucky.
You are.
Integrated within the world of venture
where all of this technology is new
and there's actually people that are
fundamentally looking out for new
waves and investing extremely early.
Like some people that we know
have been investing in crypto
since 2010, that makes more sense.
So it really depends on
the source, unfortunately.
And what we've seen in a lot of these
waves and a lot of these cycles is,
these retail investors get in at the
wrong times historically, you know,
but during COVID, a lot of people
had a lot of time on their hands.
They started buying stocks and
you know, you had that GameStop
effect where people were chasing
companies that didn't make money.
Companies that were unprofitable
because it was a joke, it was a meme.
These.
You know, crypto currencies that had
absolutely no value or utility, and it
worked for a period of time and then
it didn't, you know, you have some
economic issues, you have rising interest
rates, it doesn't work, and a lot of
these people end up getting wiped out.
So unfortunately, retail
investors historically haven't
been doing a good job of that.
Now, this time has been a
little bit different this year.
Retail investors bought the Liberation Day
dip quite a bit, so that's a good sign.
Maybe there's more sophistication
and consistency there, but yeah,
nine times outta 10 from the last
few market cycles that we've seen,
people are buying high and selling
low,
Justin Dyer: unfortunately.
Yeah, that's right.
It's like saying this time is
different, has not been a systematic
way to, to invest, at least throughout
the history of, of investing.
So I would caution, caution listeners
to really believe, right, it's, this
time is different until it isn't is
generally the, the way things play out.
What.
Let's shift gears.
So we've talked kind of about okay, fads.
What are they, what, what are
some examples in the present day?
What's the general or common
denominator between, behind them?
But why do they fail?
Mena Hanna: I think they fail
because ultimately, at the end of
the day, our system is a system, and
if you buy something, the way that
you make money is by selling it.
And it's sort of like a
pyramid scheme, like you can't.
Continuously sell off at
crazy valuations forever.
So there is a point of time
in which reality sinks in
and someone is caught holding
Justin Dyer: the bag.
Yep.
That's with fads.
To be clear, that is not
with sophisticated research.
Investing, right?
That is not how we think about the
world and trying to play fad and
figure out who's left holding the bag.
So, to be very clear, I wanna
make sure that's stated.
But yeah, you're right there, there's,
there is, there's a great adage that I
like to think about that in the short
term, the market can be a voting machine.
What we're talking about today, crypto,
in some examples, meme, stocks, et
cetera, like those are little microcosms
of that in extreme examples where
momentum and momentum is actually an
academically studied feature of markets.
In some cases where there.
There's kind of a lack or detachment
from what we call fundamentals, right?
Like what are what's the
underlying business actually doing?
Because when you're investing,
if you're buying stocks, you're
buying a piece of that company.
When you're buying a piece of that
company, you're buying a piece of the
revenue or a piece of the profits or
a right to the profits, your share
of the profits of that business.
If those fundamentals are not there or
they're not growing, then what is your.
Interest, what is that
investment actually worth?
And at some point you go
from a voting machine.
To a weighing machine, like where
a weighing machine has physical
properties and we don't know
when that actually takes hold.
Right.
In times like this, where there is a
little bit of a detachment from reality,
and we're not necessarily saying we're
back in the com era, although there's some
metrics that kind of can go back to that.
And point to the disconnect between
prices and actual, economic fundamentals
are pretty wide, but we don't know
what that tipping point is going to be.
And so having that process and
staying disciplined and paying
attention to long-term fundamentals
and understanding like, Hey, we
might not be with the herd today.
But that's okay.
'cause we're in this game of staying
staying wealthy over the long term.
I think that's a great reminder as well.
And also, no, with a diversified
portfolio you're actually
benefiting from the herd mentality.
You're just doing it in a much
Mena Hanna: disciplined way.
And I actually want to hit on
your point about staying wealthy.
Most of our clients are already wealthy or
are on the trajectory of becoming wealthy.
You don't need to create this,
you don't need to hit the lottery
twice if you are very hard to do.
Yeah.
Very hard to do.
So that is the mindset that
you need to be operating in.
Alright, you've already won the lottery.
You're a world class athlete.
You don't need to buy a hundred
thousand dollars of Pepe Coin
and hope that it 1000 Xs.
Right?
Because you know your
career could do that as is.
And it's exactly what you said.
It's the game of staying wealthy.
And that is very different from
getting to that wealth in general.
That preservation game
is totally different.
So on that note, switching
gears a little bit.
These fads are gonna continue to come up.
There's always going
to be these new waves.
How would you analyze them, review them,
take in all of the information and sort
of systematically go through them via a
checklist to figure out if this is a fad
or maybe if it's a legitimate investment
Justin Dyer: opportunity.
Yeah, sure.
Of course, I have a little bit, some
notes ahead of time as we prepared,
but just running through it real,
real quickly is, does this compliment.
Or fill a part or a piece
of a diversified portfolio.
We were talking earlier today outside
of this conversation that, hey,
if we want to be diversified, you
know, the simple framework there
is, okay, let's own the market.
And so that's a question you could ask.
Is this part of the
market that actually rep?
Or is this something that
represents part of the market
and therefore I want to own it?
If the answer to that is yes,
then okay, you know, check that.
Is there a.
Repeatable methodology to this?
Or is this just a story?
I mean, a great example, present
day example is American Eagle.
I'm sure a lot of people have heard about
the Sydney Sweeney marketing campaign.
That marketing campaign, whatever you
think about it, added $200 million to
American Eagle's market capitalization.
Does American Eagle make better
jeans now and have they turned
that into actual revenue?
I don't think they have quite yet.
Maybe they will because people are
paying attention and we're talking
about it and it will actually end
up in as revenue on the top line.
But at as it stands right
now, that has not happened.
And so.
Yeah.
Right now that is just a story that is
not long-term kind of repeatable process
to and value accretion to that business.
Does the opportunity have sound financials
in a clear path to profitability?
This is kind of in the
startup space, right?
It's not just an idea.
You're not just saying like, like your
example of the Ponzi scheme, right?
Can we just sell this to someone else
because of the story at a higher price?
What's the worst case scenario?
And if you're adding
this to your portfolio.
Mena Hanna: and
Justin Dyer: It can go to zero.
Is that gonna permanently impair
your ability to meet your priorities?
I mean, that is incredibly important.
Do the people running the show
have real experience and integrity?
I mean, gosh, the integrity piece
of it's incredibly important, right?
A lot of these hype involved or hype
induced opportunities end up being.
More than just, Hey, this was an
investment opportunity that went belly up.
It's like this.
There was some sort of grift here
and borderline illegal behavior.
Have you done the work or are
you just following the crowd?
That one I think is probably
the most important here.
Ask the questions.
Understand as much about the
business as you possibly can.
Leave no stone unturned.
Talk to other clients.
Talk to customers.
Validate the idea.
What potential traps can come up
with this fa is this something that,
you know, you're gonna end up facing
a huge tax bill, or the regulators
are gonna come clamping down on it.
And then I, you know, real, as we
kind of wrap here, does it help
achieve long-term objectives?
That's more than just, is this
supporting a diversified portfolio?
Is this actually helping?
Increase your expected returns or
build a more robust portfolio, and
then how often will you kind of
revert back and check to see if the
points above actually still hold true.
So you walk through this list and there's
probably more, this is just like a real
simple framework we put together here.
And if it doesn't pass most of these
it's probably worth just passing, moving
on, and keeping your process in place
Mena Hanna: For now,
I do want to actually touch on two
of the points that you made around
ethics and around also doing the work.
We saw this with FTX.
People were so excited about FTX and
crypto in general, that they decided to
do none of the work and didn't look at the
ethical side at all of the business or.
Justin Dyer: or
Mena Hanna: The partners and really
the leadership and management.
So it is so important to just slow down,
take a step back, really evaluate what
you're doing, and evaluate investment
opportunities for what they are,
who they're actually being run by.
Justin Dyer: by,
Mena Hanna: And not just jumping
on a train because you think that
it's gonna go somewhere cool.
It is so, so important to be diligent
here and unfortunately, sometimes
financial markets force you to not
be diligent and move extremely fast.
And history has shown
us that it's better to.
Be slow and potentially miss
out then move too quickly.
Yeah.
And
Justin Dyer: Well get wiped out
totally.
And it, and it goes back to what we
talked about, this whole I idea mindset
of staying rich, play the stay rich game.
And that leads to process
over hype chasing or fomo.
That leads to just a reminder
that if something sounds too
good to be true, it probably is.
Yeah.
Maybe someone.
Got lucky and got in before
and made some money on it.
That has happened.
But that is not a repeatable
process and way to, to ensure
a, a proba high probability.
A high likelihood of, of keeping your
wealth and even growing it for the
multi-generations that come after you.
So, with that we'll
wrap, uh, today's show.
Stay rational, stay researched,
uh, as we jotted down here.
I really liked that one.
Maybe we'll adopt that
as a a formal tagline.
Until next time, own your wealth,
make an impact, and always be a pro.
Thanks for listening.
Okay.