I first came across this term, FOMO, when researching the Millennial generation. Millennials, Gen Y or Echo Boomers as they are also called were born between 1982 and 2000. Now the dates do vary depending on what researcher you read, but I am pretty close.
William Strauss and Neil Howe are widely credited with coming up with the name Millennials. They are also the authors of a book I am reading, “The Fourth Turning, What the Cycles of History Tell Us About America’s Next Rendezvous with Destiny”. More on that in another blog.
FOMO
Millennials grew up with computers, (Apple went public December 1981), the internet (1995 Bill Gates threw his company behind “the internet tidal wave” , email, Napster, cell phones, Apple iPhone, iPod, Facebook, Pandora, Twitter and on and on. They became masters of social media and as a result came down with…FOMO…”the fear of missing out”.
They had FOMO for what their friends might be doing, what they knew or didn’t know, what events were happening. In general it creates a little bit of anxiety that constantly keeps them checking social media. But FOMO is not just confined to Millennials. And when it comes to the stock market, it spreads to people of all ages.
Warning Signs
I came across an article on Zero Hedge that talks about the FOMO taking place in the stock market. In it they show several charts, many of which you have seen or heard me talk about on this website or in my videos. In last week’s post I talked about the CAPE, now at a level only exceeded by two other times in history.
The video with that post talks about the 30 year high in Investor Intelligence Advisor’s Survey, Percent Bullish. In the video embedded below I discuss the selloff in the high yield Bond Fund (HYG) which actually started diverging two weeks ago.
But what really concerns me is when I hear about retirees keeping their percentage in stocks at a high level or even upping their level, in what I believe is FOMO. And don’t take much comfort in in ETFs. All you have to do is look at the chart of many ETFs for August 20015 to realize what happens when everyone heads to the exits at once.
Financial ETF (XLF)
Technology ETF (XLK)
When trading, you soon learn that you rarely catch the absolute high or low. You learn to be happy with catching the chunk in-between. And as Paul Tudor Jones says, “The most important rule of trading is to play great defense, not great offense.” This applies to investors as well as traders.
Brief Market Video
In today’s video I look at this week’s market action by reviewing the DJIA, the Short Term Trading Index, High Yield Bond Fund (HYG), Dollar Index and 3 stocks: Halliburton (HAL), Gilead Sciences (GILD) and Caterpillar (CAT).