Yesterday I was at a social gathering. The topic of markets and investing came up because a few of the people there make relatively small personal investments in their spare time. The gathering included people from various backgrounds, locations, and professions, so I was very curious to hear what everyone had to say. I observed three notable points:
- Negative sentiment – These people are interested in investing only in traditional cash-flowing businesses. This wasn’t surprising; I’ve heard the same from other investors and entrepreneurs. What stood out was the negative sentiment my friends had about start‑ups, technology companies, and to a lesser degree public equities. Their views applied to all start-ups and technology companies (excluding mega caps such as Google).
- Historical trends – They expect certain asset classes, including real estate, to continue to perform well even in the current interest-rate environment.
- Debt – They’re still embracing the use of debt to purchase physical assets.
Here are my thoughts on each point:
- Sentiment about start-ups and technology companies may have swung from too optimistic to too pessimistic.
- Understanding why a trend occurred in the first place is important. Then you can assess whether the same conditions still exist and gauge the probability of the trend continuing.
- Everyone must make the decision that’s appropriate for their personal situation when considering whether to assume debt.
I enjoy going to social events that include people from various backgrounds and perspectives. I get a lot out of conversations at these events. It’s a great opportunity for me to understand how different people think about things.