"Am I investing in what will one day be considered among the craziest ideas in all of investing history?"
Tulips, Beanie Babies, whatever—if you or your clients have ever had the thought, today is your day.
Engaging in the age-old practice of using comedy to illustrate absurdity, a blunt-talking New York-based asset management firm claims to have established a national day of observance, Investment Risk Management Day, celebrated every January 19.
"Over the past few years, we have, once again, witnessed the propensity of investors to fund even the most absurd investment ideas with upwards of trillions of dollars," Toews Asset Management said. "To this, we say 'OMG.'"
While light and fun, the goal of avoiding fear of missing out (FOMO) and its devastating portfolio effects is serious.
"Investment Risk Management Day is officially recognized with the National Archives," CEO Phillip Toews said. "We are putting together a three-person panel, with behavioral finance expert Daniel Crosby being one, that will decide each January 19 what the worst investment ideas were from the previous year."
Self-reflection is the key to better behavior, and it begins with questions advisors and clients should ask themselves, such as:
- Did your Wall Street training include valuing NFTs based on how frequently they were chosen by 8-year-olds playing Roblox?
- Should I take comfort in the legitimacy of a seemingly absurd idea if the world's largest asset manager invests hundreds of millions of dollars into it?
- Is it cool to ignore historical precedents and destroy my retirement because Gene Fama would disapprove?
- Can countries defy gravity and create money indefinitely, therefore inflating asset prices in a way that the global economy has never achieved before? Or will math and basic economics pull through like they always have? How are we planning for that?
- What is the expected global economic impact of a series of flying Pop-Tart kitty GIFs that can be purchased for fiat currency?
"Upon reflection, investors are encouraged to take this day to reset back to a rational posture on the laws of physics, gravity, and economics," the firm said before recommending that advisors address the issue in a fun yet realistic manner. "For Financial Advisors and CFPs, we challenge you to address conversations with clients in a more fun and engaging manner that still gets at the heart of the seriousness of risk management."
The day is meant to serve as a reality check for market and product euphoria, and what CEO Toews says is the exponential euphoria seen over the last two years.
"I managed assets during the tech bubble," he concluded. "As intense as it was, this is three standard deviations away from that, and it's not over!"
