It’s a fact that we as humans tend to do things in groups we wouldn’t imagine doing on our own. This tends to result in actions many of us later regret.
Remember that Summer of ‘98 in Pamplona? Taking a break from college, you just wanted to take in the spectacle of the “Running of the Bulls” and laugh at other fools stumbling over each running for their lives from 1,300-pound beasts.
It was all fun and games until your childhood buddies – impaired from a few drinks too many – decided to jump the barrier and join in on the “fun”. It wasn’t long before you became one of those fools you were just laughing at just moments before.
Later, as you found yourself writhing in pain in a Spanish hospital bed as you explained to your parents on the phone that the horn you took to the back of the thigh wasn’t all that bad, it occurred to you that maybe it wasn’t the best idea “to go with the crowd.”
Wall Street is a lot like the Running of the Bulls in that investors often go along with the crowd without knowing exactly why and often regret it later.
Wall Street can be crazy like Pamplona but without the “fun.” Running with the bulls is crazy, but it’s an amusing kind of crazy. Wall Street, on the other hand, is bipolar and nobody’s ever described bipolarism as “amusing” or “fun.”
Wall Street is a bipolar market that can transform from despair to euphoria and back again in an instant – often with little underlying economic justification.
And Wall Street has never been more volatile or more bipolar than it has been recently – rising and falling with herd behavior, knee-jerk reactions to the news and social media, and lightning-fast computer trading.
Just like Thanksgiving tends to bring out the worst in people suffering from bipolar disorder, elections tend to bring out the worst in Wall Street as investors are filled with angst, uncertainty and a roller coaster of emotions – usually for no particular reason other than the dread of change or lack of change.
It doesn’t matter who’s in office or the mood of the country, elections mean added volatility to the markets. It’s a fact that volatility spikes in the months leading up to an election.
Wall Street bipolarism has been on full display lately. The market may be riding high recently but there are no underlying economic fundamentals to support this latest bull run.
Unemployment is still high, GDP is still lagging by more than 10% every quarter and major companies are still filing for bankruptcy. The S&P 500 is back to January levels after a 35% drop in March from COVID-19.
Since then it’s been a roller coaster, but the latest run has experts befuddled by stocks that are way overvalued based on the Price/Earnings benchmark.
There is a clear disconnect between the Stock Market and the actual economy and the message coming from many analysts is clear: what goes up must come down.
Like the wise relatives who skip Thanksgiving dinner to avoid all the high drama of those crazy relatives, there is a group of wise investors who avoid Wall Street craziness. They prefer stable private markets away from Wall Street.
In 2019, these wise investors whiffed trouble in the air. They knew 2020 was an election year and they also knew the longest economic expansion in history was bound to end.
These wise ultra-wealthy investors included members of the exclusive investment club Tiger 21, a peer-to-peer networking investment club consisting of 500+ members in 29 cities in the United States, Canada, and the United Kingdom. Each member is required to show $50 million in investable assets just to join and pay annual membership dues of $30,000.
The members of Tiger 21 generally avoid Wall Street madness but they went completely out of their way to avoid it in 2019. While everyone was rushing into the stock market – not unlike this year – the members of Tiger 21 withdrew what little allocations they had left in the market.
Where did they reallocate?
Cash flowing commercial real estate and private equity in cash flowing businesses have historically been a reliable shield against recession and collective Wall Street madness.
While Wall Street investors chase the dog’s tail, the ultra-wealthy hunker down for the long haul. Long-term private investments have long offered passive income, growth, and a buffer against inflation, recession, and volatility through tangible assets. In a market downturn, these assets are the perfect counter to economic turmoil.
What are your options for avoiding Wall Street madness?
If you want to avoid the Wall Street game, you can get off the boat and wait for the next one or change boats altogether. Waiting on the sidelines doesn’t grow your wealth so might as well consider the alternatives.
The members of Tiger 21 have historically allocated more than half of their assets towards real estate and private equity but by the end of 2019, they had boosted their allocations even more.
According to the Q3 2019 Asset Allocation Report of the Members of TIGER 21 boosted their commercial real estate and private equity holdings to 54% with commercial real estate investments making up 29% of members’ assets – up from 27% from the previous quarter.
Who would you rather pattern your investment habits after?
Wall Street nervous Nellies or successful investors with $50 million in investable assets who clearly have been around the block and know how to build and preserve wealth.
Elections or not, the ultra-wealthy don’t fret the results too much. That’s because they’re not invested in Wall Street where lunatics run the asylum.
Don’t let your fortunes rise and fall with the latest stock market wave.
Things may be going well now on Wall Street but don’t rely on Wall Street rallies to secure your financial future – especially when they’re not based on any solid economic fundamentals and especially when all signs point to a market correction.
- Don’t play the game.
- Insulate yourself from election volatility or whatever else-induced volatility.
- Cash-out and be ready to take advantage of key investments in commercial real estate and private equity to prepare yourself for the next downturn and every downturn thereafter.
Learn more about our latest investment opportunities here.
Kyle Jones is a co-founder and Key Principal of TruePoint Capital, LLC. Kyle is responsible for the company’s strategic planning, investment decisions, asset management, and overseeing all aspects of the company’s financial activities, operations, and investor relations.
Kyle obtained a Bachelor of Science degree from Texas State University – San Marcos, where he also played Division 1 Baseball.
