What is it with investors and their obsession with fake things?
Remember when investors jumped on the fake meat bandwagon? Plant-based meats by companies like Impossible and Beyond were going to change the world. Investors jumped on the stocks of these companies to ride the wave of anticipated demand for these meat substitutes. The CEOs of these companies were touting the similarity of these products to the real thing while pushing their health and environmental benefits.
Both Impossible and Beyond touted how similar their beef substitutes were close to the real thing – including the “bloodiness” of the meat. Both companies used different techniques to achieve this result, but the goal was the same – to make the experience of eating fake beef just like eating real beef right down to its bloodiness.
The CEOs of Impossible and Beyond hit both the VC and Ted-Talk circuits to peddle their revolutionary foods. They claimed that their plant-based meats would help solve our health and environmental problems. They listed health problems such as cancer, diabetes, and heart disease that their substitutes would alleviate.
Their fake meats would also solve environmental problems, natural resource depletion, and climate change. They banked on the public and investors getting behind them, and that’s exactly what happened. Both companies raised hundreds of millions of dollars. Beyond went public in 2018, and Impossible in 2019. Investors snatched up their stocks as their products popped up in grocery stores and fast food chains nationwide.
Fast forward to today, and fake meat has crashed and burned. Beyond Meat’s publicly traded stock is down more than 80 percent from its all-time high. Impossible Burger just announced layoffs of more than 20 percent of its staff.
It turns out the products were too expensive for consumer tastes. Vegetarians stuck with more traditional vegetarian fare like lentils or beans that were more affordable, and meat eaters stuck with the real thing that was also more affordable.
Investors are always willing to chase the next best thing – even if it’s fake. This year fake meat came crashing down. Last year it was fake currency – cryptocurrency. I know the defenders of crypto are going to cry foul, and claim crypto is real currency, but when was the last time you bought something with crypto?
Crypto is not a widely accepted currency because of its wildly fluctuating value. I would dare compare it to Beanie Babies, where value is determined by the crowds and hype rather than any underlying value. And just as Beanie Babies crashed spectacularly, so did crypto. In 2022, Bitcoin was down 65%, which was representative of all crypto.
Today’s investors are driven by herd behavior and the fear of missing out (FOMO). They don’t want to miss out on the next big thing – even if that means investing in something fake or of little underlying value. Investors are bandwagoners, and Wall Street and crypto exchanges exploit this.
They’ll entice investors and manipulate the markets through cable, internet, and social media to drive investor behavior to churn the markets and line their pockets. They prey on the behavioral biases that create volatility in the markets.
While the average investor chases fake investments and fake products, smart investors stick to the real thing and to what they know. Instead of gravitating to unproven products with limited track records, they prefer boring, tried, and true assets with a long history of performance and success.
Why do they not chase fake investments like everyone else? Maybe because their goals are different from those of the bandwagon herd investors.
Instead of looking for that big homerun, savvy investors look for consistency. Why? So they can put their money to work and count on their money to generate additional funds to grow wealth consistently and reliably to achieve their goals of financial independence and early retirement. So, while the average investor gets their thrills from the rise and fall of hype-driven markets, smart investors get their thrills from living without financial worry and from doing the things they want to do and not have to do, like long work hours.
To achieve their goal of financial freedom, smart investors don’t gamble or speculate. They would rather invest in the closest thing to a sure thing instead of the next big thing. Don’t get me wrong. It’s not like they won’t take risks, but the risks they take are calculated and can be mitigated through savvy management and other hedging strategies.
That’s why smart investors consistently gravitate towards tangible assets like commercial real estate (CRE). CRE offers above-market risk-adjusted returns because not only do they generate consistent income and growth, but they do so at reduced risk through risk-mitigating strategies such as improving operational efficiencies and exploiting arbitrage opportunities through inefficient markets.
The crowds can have fake investments. The wealthy will stick to the real thing. That’s because real, tangible assets like CRE and even productive businesses offer benefits fake investments can’t, including:
- Cash Flow.
- Appreciation.
- Passive Investing.
- Above-Market Returns.
- Hedge Against Inflation.
- Recession Resistance.
- Tax Benefits.
Because of these benefits, investors should stick with the real thing instead of fake investments.
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.
