Crypto Envy? Beware Greed and FOMO - Jeff Tomasulo

Crypto Envy

To us, Jeff is describing what he knows from his years of experience and some call the "psychology of regret". It is also closely related to the concept of a Giffen good in economics. That is an item in which its demand goes  up as its price does, like perfume. Cryptos are right now exhibiting Giffen Good  qualities because of the press and hype surrounding the launch of futures for sure.  This is why it is all the more important to not forget your discipline.  When the world is telling you to buy something because it went up, the Fear of Missing Out (FOMO) that Jeff describes so well can be overwhelming.  

The message is clear to  us. There will be other opportunities, don't chase the last one. Ignore the fact that your next door neighbor who just bought a Rolls with his Bitcoin winnings is just lucky, not good. Stick to your rules, and remember trading, as well as investing, is a marathon, not a sprint. The market will be there tomorrow - Soren K

GREED and FOMO

Written by Jeff Tomasulo, CEO Vespula Capital

Every month, I speak to around a hundred retail investors at a conference in Utah. Over past six months, I’ve been getting pretty much the same two questions. “Where do you think the market will go?” and “Would you invest in Bitcoin?” keep coming up. Both questions are obviously very subjective. The more interesting question, the one that has plagued me at times throughout my career, is about the thought processes of investors. Why do investors find it so compelling to invest in assets and projects where the risks are hard to measure and the probabilities of success are so low? It mainly comes down to two consistent killers of returns, Greed and Fear Of Missing Out (FOMO).

Greed and FOMO have been affecting investors and people outside of the investing world for centuries. That is why get rich quick infomercials still work today. Most of us have an inner desire to catch that one special stock that goes from 50 cents all the way up to 100 dollars. This is the allure of the penny stocks. It is also why bitcoin is getting so much attention today. Yes, it is a new technology that can, maybe, possibly, someday change the world. That’s why Greed and FOMO are kicking in.

Greed and FOMO are the main reasons why certain stocks go parabolic. We like to dig deep into our pasts and remember all the times we wanted to invest in a stock like Apple at $12 in 1997 but didn’t do it. Or when Google broke above $500, and people told you it was overvalued. Or that time you had an opportunity to invest in that start-up with a few of your friends, but you didn’t. They walked away with a few hundred thousand dollars. You do not want to miss out again! Greed and FOMO! That is how we justify buying Boeing at $295 or AMAZON $1165 even after they have both soared over 50% this year.

Ironically, we usually do not recall all the times that we missed out on losing a ton of money. For me, it was Bear Stearns the Friday before it was bought by JP Morgan for $2 a share. By not pulling the trigger at $30.85 a share, I saved myself $200,000. Was I jealous of my friends who invested in an energy drink company when I didn’t? The four of them lost a total of a million dollars because the CEO was stealing money from the company. We have to remind ourselves that when our Greed and FOMO is high, it can cut both ways. More often than not, it usually goes the wrong way.

One thing I have learned over the past 22 years of investing is that there is no need to fear missing out. The 1960s and early 70s had the Nifty Fifty, the 1990s had the Internet, and today we have the FANG stocks. There will always be new opportunities, but they probably won’t be the same companies. [EDIT- And jumping on bandwagons can be detrimental to healthy diversification - Soren K]

To me, there is a difference between investing to make consistent returns and trying to hit that magic home run. There is nothing wrong with home runs. The keys are how you go about it and how much money you allocate to it. This is what I tell anyone who will listen: If you have Greed and FOMO running through your veins, take a very small portion of your overall portfolio and make small bets on these types of ideas. That way, you can satisfy your Greed and FOMO without losing a fortune. Hopefully, over time you will even hit one or two of them and actually make some money.

Read more observations by Jeff Tomasulo HERE

Comments

east of eden Fri, 12/15/2017 - 17:46 Permalink

Well, maybe. But it is also true that the demise of the US dollar is at hand, and people, the great mass of unwashed are not as stupid as the 'experts' think they are'. So maybe they lose 10 or 15% on bitcoin, maybe. It is still a lot better than having a bank account stuffed full of 'feral reserve notes', that will buy nothing.

monero east of eden Sat, 12/16/2017 - 00:16 Permalink

Investing in fiat currency is really the idiot move considering the condition of the global economy.  All these guys, like this author, are stuck in there ways of valuing everything in dollars, so Bitcoin looks like any other bubble to them.  They don't realize that its really govt fiat currency that is on its way out.Once the gold suppression finally starts failing and gold also takes off they might realize it.

In reply to by east of eden

Yellow_Snow Fri, 12/15/2017 - 18:25 Permalink

Another idiot trying to rationalize his 'missing the boat'...... and Don't you invest in Bitcoin either, cus I missed out... so should You.Why would anyone listen to an idiot that missed the greatest investment opportunity of our lifetimes ???

webmatex webmatex Sat, 12/16/2017 - 05:51 Permalink

Couldn't resist...or How to talk CryptoCool jive.What is “HODL” in the Cryptocurrency World? + Must Know Cryptocurrency Termsfrom: https://coinsutra.com/hodl-popular-cryptocurrency-terms/By:Sudhir Khatwani In:Cryptocurrency Last Updated:8/12/2017 One day I decided I would become a cryptocurrency day trader. In that quest, I joined a trading chat room on Telegram.There, I was surprised to see that I was not able to understand any of their conversations. The people inside this chat were using jargons and terminologies that I hadn’t ever heard anywhere else in my life.I looked in my Oxford dictionary and couldn’t find any of these words! Then I asked my good friend Google…From there, I learned about all these terms, and I was finally able to understand the conversations in the Telegram group.But if you are also new to Bitcoin and the cryptocurrency space, you may not know what any of these things mean. Am I right?Even on cryptocurrency Reddit threads, Telegram groups, WhatsApp messages, and Slack channels, you must have noticed people misspelling “HOLD” as “HODL” despite having an auto-correct feature on their phones or computers.In these crypto communities, offline or online, with the rise of cryptocurrencies, a new breed of lingo has also developed. If you join a crypto-conversation without knowing these jargons, you might feel left out and more than a bit puzzled.So today, I am going to discuss a few of the popular jargons in this cryptocurrency space.What is “HODL”?The very first time the term HODL appeared on the Bitcoin talk forum was in 2013 and came from a member named GameKyuubi under the thread “I AM HODLING”.From the look of the post, he was drunk and wanted to convey the fact that he was holding his BTC despite the serious fall that had just happened.Since then, this misspelled term became very popular in the Bitcoin and cryptocurrency world. Whenever a person says in a conversation that he/she is hodling or suggests to hodl, it means that they believe their coin will be profitable one day, if not today.So basically, “HODL” was originally a typo which has now popularly earned the status of a humorous backronym: https://en.wikipedia.org/wiki/Backronym“HODL” – “Hold on for dear life”If you’re new to the cryptocurrency space, you’ve probably seen some other jargons that you don’t know about. Here’s a quick reference dictionary for some common crypto-terms:Popular Terms every cryptocurrency day traders must know:1. FOMOFear of missing out. It means the fear of missing out on the profit which might result from an investment or a decision.***Note The Wiki definition – "A pervasive apprehension that others might be having rewarding experiences from which one is absent". (Really scary, reverse of "And it's gone)!2. ATHAll time high. This means that the price of a certain cryptocurrency or coin has broken all of its past records and is trading at the highest price it has ever achieved.*** ATH events spawn Tulip Trolls (see FUD).3. BEARThis is a term borrowed from the Wall Street people. This means a trader/investor who believes the prices of a particular cryptocurrency or market will fall and wants to profit from that fall.4. WHALE This is a term borrowed from gambling people. It means a trader with a fat account, usually one who is bullish (one who thinks the market will rise) on the price of any specific cryptocurrency. These people are also referred to as bullish whales. *** Or Fonestars.5. BEARWHALEThis means a trader with a fat account who is bearish on the price of a cryptocurrency.6. BAGHODLERThis is an investor or a trader who has been holding (or hodling) for too long on a particular cryptocurrency and now has to face the consequences of that decision.7. REKTThis is a misspelling of “wrecked”. This term refers to a trader or investor who is utterly ruined and destroyed with losses from the current downfall of a price.***can also be used by ZH'ers to refer to a boating accident in which CC or PM are irretrievably lost  - "Got Rekt"!8. TO THE MOON This refers to a crypto’s upward momentum as it keeps climbing in price, as in, “The price of this coin will one day go to the moon!” ***TTM can also spawn Tulip Trolls (see FUD).9. ADDYThis refers to a cryptocurrency public address (or key). For example: “Tell me your ADDY, (gotta Addy daddy) please.”10. FUDFear, uncertainty, and doubt. This term usually refers to investors who are unsure of the potential of a situation. ***Best charicterised by David Stockman although he probably got no CC.11. CHOYNAA deliberately distorted way of referring to China. As China is a country which is immensely influential in the Bitcoin space, it has largely dominated mining and trading activities.***My contribution -Having confidence in a long term CC position whilst profiting handsomely. Its a HODLDODDLE! Im FULLY HODDLED. TAKING A GLEN.https://www.youtube.com/watch?v=P-YuzyRAObE And for those who wish to take a pause, chill and stop watching their HODLings rise - 4K - Tulip Flowers - 2 Hours Relaxation Video | Skagit Valley Tulip Festival in WA State - Episode 1https://www.youtube.com/watch?time_continue=11&v=abTfuux_5cY

In reply to by webmatex

JibjeResearch Fri, 12/15/2017 - 18:32 Permalink

Any stupid person can make a shitload of money.  Just buy any top 10 crypto and wait a year, you'll make some kind of profit.People are so dumb..., money is everywhere in the cryptos market.

JelloBeyonce JibjeResearch Fri, 12/15/2017 - 20:17 Permalink

While I don't disagree with you that people are dumb, the rest of your comment is so very short-sighted. That fallacy of guaranteed earnings is what drives bubbles & subsequent crashes.  In the debt-based economy (which is present across the entire world economy, as the US the driving force behind the world economy), there is no such possible scenario as everyone making money, it is impossible (every single "dollar" in existence is countered by an equivalent amount of debt.  Consequently, without debt, there is no money in existence).  By the very nature of the debt-based economic model, the many eventually lose out so that the few can gain.  There can be no other way.History has proven time and again, when the masses all feel there's no way to lose, that's when the debt-based system starts to crumble.  Crashes happen because no one expects them.  Cryptos are no exception.  There are no unlimited resources......and as such, debt always eventually catches up to itself.  Decentralization does not change that fact.  Cryptos are just another grand wealth redistribution scheme.I challenge you to logically refute the fact that everyone can win in the crypto market (you can try to argue it, but time will be ultimate proof).  All gains realized will either be short-term, or vastly inequitable.     That being said, becoming rich takes no intelligence or skill....it only requires one to forsake all others solely for themselves.  It only requires the quality of ultimate greed.  When you get rid of all concern, empathy, or care for others, and have no qualm taking away from others, for your own sake......you will be rich.  In fact, the dumber one is, the better chance they have of acquiring wealth.  Wealth accumulation mostly relies on primitive urges (instinct), not intelligence.  The intelligent most often prefer to value their knowledge over simple primitive urges like wealth.  Intelligence is a sign of higher evolutiuon.  Wealth requires only a primitive mind & primitive desires.  Many of the smartest people throughout history have been dirt-poor. 

In reply to by JibjeResearch

HRClinton JibjeResearch Fri, 12/15/2017 - 20:33 Permalink

Re "Any stupid person can make a shitload of money.  Just buy any top 10 crypto and wait a year, you'll make some kind of profit."Great!  So YOU are one of the gutsy BTC geniuses, who saw the BTC opportunity early on and are now so rich, that you can afford to feel superior and ridicule the people you mention?No?  I see. So you're just another schmuck, who loves to ridicule anyone who thinks different than you."And that is why I'm richer than you", to quote Jamie Dimon (of all people). You see, I was one of the gutsy geniuses who Saw, Bought, got Rich. Eat your tiny heart out, asshole!

In reply to by JibjeResearch

JelloBeyonce Fri, 12/15/2017 - 19:48 Permalink

The very basis of the fractional-reserve (debt-based) economic model absolutely relies on greed.In the debt-based economy, every single dollar in existence is contered by an equivilent amount of debt.  If everyone were to pay off all their debts, there would be no money in circulation (or existence). Thus, the only way some people can accumulate wealth, is by forcing others into debt.  One of the definitions of greed is accumulation of wealth above & beyond (& without consideration for) others.This is why there are always, and always will be bubbles...they are an absolute necessity in the debt-based economy.  Bubbles are just grand ploys of wealth redistribution.  

JailBanksters Fri, 12/15/2017 - 20:04 Permalink

The great thing about Cryptos, is everytime the Banks try to Manipulate it's value,it just makes it increase in value. It must be really pissing off the Central Banks and Banks because it's the first time they can't directly Manipulate it by selling something they don't own or creating their own money to go shopping with.This is why ALL Central Banks are scrambling to create their own brand of Amazing Awesome Cryptos and not to trust a Crypto not under direct control of a Central Bank.   

HRClinton JailBanksters Fri, 12/15/2017 - 20:18 Permalink

Crypto Envy? Giffen Good? FOMO?  Maybe. But there's more to it than that. Some of us BTC-stackers and HODLers are in it to win it. We're "Going Galt":We're putting FRB fiat into the Parallel Economy and keeping it there.Parallel Economy = CB fiat killer   = Decentralized, discreet, not tracked easily or at all   = Barter + PM + CC1 + AA2     1 Crypto Currency,     2 Appreciating Assets (Antiques, some Art, Diamonds, Gems, prime RE)See? A whole new paradigm toward the CC ecosystem.Got clarity and civic courage? Pass the word.

In reply to by JailBanksters

JelloBeyonce JailBanksters Sat, 12/16/2017 - 03:31 Permalink

Uhh, not quite.  Bitcoin (and other cryptos) are highly subject to manipulation, just as are other forms of "currency".If you haven't, you should research the concentration of holders of cryptos.  There are stats showing some few 1,000 people hold 40 percent of BC (similar to most cryptos as well, also precious metals, and other "currencies").  This concentration of ownership is the cause of manipulation (supply & demand).  In fact, from an objective viewpoint, the methodology behind the perceived value of cryptos is identical to that of the stock market (again, supply & demand).  When you can control the supply (via ownership concentration), you can greatly manipulate the perceived value.  Reduce supply, increase demand, and therefore drive the price up, then sell (increasing supply, reducing demand, consequently lowering or crashing prices).  Rinse & repeat."Value" is purely a psychological phenomenon, thus anything of "value" can be highly manipulated. Before every great economic bust/crash, there is some grand scheme that the richest of the rich use to extract money from everyone else and toward themselves....the great wealth diversions.  The masses aren't getting rich off cryptos, only the few are (the masses think they are, or will get rich - which is a necessary factor for the scheme to work).  It's profiting off human stupidity.    The mindless masses are just falling for the same old tricks, but being fooled by the allure of "technology".  Contemporary humans think they're so damn evolved & smart, yet they keep making the same stupid mistakes. It amazes me that so many people are so willing to put their full faith & trust in something like BC, without even fully knowing (or knowing at all) who's behind it (the false-narrative of the supposed "elusive" BC creator Satoshi Nakamoto).  The guy is completely fictitious.Why are people so willing to put so much faith in something they know absolutely nothing about?Wilfred Trotter and Edward Bernays were correct.  Most humans are so easily controlled.  People much rather prefer amusing anecdotes over truth, facts & knowledge.  The mindless masses will believe anything, regardless how false, as long as it's presented correctly.     Propaganda is only effective when people don't recognize it as such.  Cryptos could easily be propaganda of the bankers.  Make people believe they're investing in some "grass-roots" or "alternative" currency, all while controlling it from behind the scenes.  Don't believe me?......then present the alleged Satoshi Nakamoto to me.  You cannot prove that the central banks did not invent the Satoshi Nakamoto character as a means of diverting attention to themselves, in their creation of BC."Decentralization" does not fix the underlying problems of the debt-based economic model.  In this debt-based model, the few eventually win only at the expense of the many.  It has happened time and again since known recorded history.....It'll happen again with cryptos.  

In reply to by JailBanksters

webmatex JelloBeyonce Sat, 12/16/2017 - 06:32 Permalink

It amazes me that so many people are so willing to put their full faith & trust in something like BC, without even fully knowing (or knowing at all) who's behind it (the false-narrative of the supposed "elusive" BC creator Satoshi Nakamoto).  The guy is completely fictitious.Why are people so willing to put so much faith in something they know absolutely nothing about?Don't believe me?......then present the alleged Satoshi Nakamoto to me. Hmm Bring me the Head of Satoshi Nakamoto!Theres no faith involved, the blockchain runs algoes over the internet to produce a ledger and means of exchange, only the superstitious would demand the creator appear before him when commanded. Its just open sourced code, free, third party, no patents, no owners, none centralized.I don't need to meet Tesla to have faith in AC current because its a fact of life.Only difference is that CC provides something BETTER than the old system - until it is proved to be otherwise.Unlike most technology which tends to have dual good/bad uses, Blockchain offers only positive benefits.And : "Decentralization" does not fix the underlying problems of the debt-based economic model.  Wrong. Decentralization is always good and as theres no debt in a CC its an antidote to the debt based model.Kate Moss was a debt based model for a while too (REKD), but we all get over it.

In reply to by JelloBeyonce

jfb Fri, 12/15/2017 - 22:14 Permalink

Cryptos not backed by commodities will all crash, including bitcoins. I sold 10% of my cryptos today, will sell another 10% in 2 weeks at most. Bubble. Tulipemania.Two years ago it was still possible for some of the bitcoin idealists to explain how it would become the money of the future, how it was a brilliant concept, I was convinced then. No longer. Too slow, too many new & faster competing crypto currencies. If you ask them today if bitcoins will be widelly used to purchase stuff online, they will just answer that it rises fast, so it's a brilliant concept because you can "store wealth". Ya, as long that the pool of buyers to tap grows; so it's just a bubble. They got everything upside down. Greed. Gold & silver were not declared as a "way to store wealth" or a "currency" by some king. They were traded as a commodity, bartered, along with wheat, animal skins, fish, wool, weapons. Because you could make shiny jewels with silver & gold. Only after, due to their properties -rarety, divisibility, resistance to rust,etc..- they were adopted as a currency, and after as money. Because they were backed by something; you could still make jewels with them.And what can you do with bitcoins in the long run? Nothing. Sure, they are backed by the eletricity bill to create them. I will offer you 200 tons of ashes left by a wild fire, a lot of energy was consumed to create those ashes, or either 10 oz o old, which one do you prefer?So if the promiss that bitcoin will be widely used as a currency was a mirage, what is left to back bitcoins? Nothing. It will return to zero. 

JelloBeyonce jfb Sat, 12/16/2017 - 02:46 Permalink

Your comment is quite insightful.  It's refreshing to hear from someone that actively engages in cryptos, but also still willing to realize and admit their flaws.  However, even currencies backed by commodities are subject to eventual crash.  Nothing, absolutely nothing has maintained guaranteed steady value forever.  Booms & busts have been elemental to all things of value.  Example - much of early colonist America used tobacco leaves (a commodity) as currency, yet that currency eventually crashed (as has all other early forms of "decentralized" currencies).  Commodity trading in itself has always been highly volatile.  You want a stressful, highly insecure life?  Try becoming a commodities Trader.  The industry has one of the highest career turnovers.  Most of those Traders flying high today, will be broke tomorrow.Odd things used as currency throughout history include: Sea shells; Livestock; Rocks/stones; Rice; Fish (seafood); Grains; Peppercorns; Salt; Animal pelts; and other "commodities".  Yet each of these has seen boom & bust cycles, and many viewed as nearly worthless shortly after being so highly valued. The main problem is that "value" is purely a psychological phenomenon.  Nothing possess natural, intrinsic value.  The trouble with the psychological basis of value is that human psychology is not static, but highly dynamic.  What one values greatly today, may be regarded as mere trash in the future.  Trends and fads are forms of propaganda created solely to create value for truly worthless items.  Things only posses value when someone can convince others of that perceived value.  As long as people allow others to control them and determine what is "valuable", people will remain as slaves to those manipulators. So who wants to buy my pet rock collection?  It's really valuable. 

In reply to by jfb

Infinite QE jfb Sat, 12/16/2017 - 05:48 Permalink

I have to say that the Rothchilds, the obvious creators of Bitcoin, have played this brilliantly. Get a bunch of disaffected youth, tech junkies to their core to believe in it.Then get an eventual pied-piper of Bitcoin, Max "Pump-n-Dump" Keiser, a jew, to go on an obvious banker led charade called Smash JP Morgan and claim that by buying silver, JPM will be destroyed. So the older crowd buys into silver before the rug is pulled from under them.Faith in "old money" being crushed, Max then gets his followers onto the Bitcoin train and makes them a fortune. The whole world then gets the meme that cryptocurrency equals wealth attainment and the train has left the station.Hats off to the Rothchilds. They've proven once again how foolish the goy can be!

In reply to by jfb

magnetosphere jfb Sat, 12/16/2017 - 09:28 Permalink

you almost got it. bitcoin is indeed a commodity, and the solution is simple: remove the block size limit entirely. one of these coins will do it, and become the next global reserve currency. we already have irrefutable proof that a proof of work commodity currency can function as the global reserve currency: gold for thousands of years.

In reply to by jfb