Is Fomo the brand new greed in relation to investing?

If traders insist on attempting to time their strikes in inventory markets, mentioned Warren Buffett virtually 20 years in the past, they need to be fearful when others are grasping, and grasping solely when others are fearful.

It’s good contrarian stuff. And the time-honoured depiction of markets within the everlasting push-pull grip of those two animal spirits has a permanent enchantment as a result of (nuance and caveats apart) it does really clarify lots of market psychology fairly neatly. The issue arises, as now, when greed and concern begin defining themselves as the identical factor.

Within the parsing of the FTX collapse — and of a string of different current debacles that appear ominously comparable as phenomena of the free cash period — concern of lacking out (Fomo) has repeatedly emerged because the vital ingredient within the funding build-up earlier than the autumn. Worry, on this utilization of the phrase and within the context of the FTX and wider crypto run-up, was creating one thing that appeared an terrible lot like irrational exuberance. This exuberance, in flip, was fuelling one thing that behaved from a market standpoint an terrible lot like greed does throughout its periodic stints on the wheel.

Because the Fomo narrative has it, funding cash (a lot of it below the auspices of enormous, seemingly respectable funds) thunders collectively into specific belongings (in lots of circumstances, with minimal due diligence) not as a result of it essentially believes within the underlying alternative however as a result of the rewards are offered as unmissable and the implications of delay or scepticism are in some way scary.

The concept isn’t novel, even when the acronym is. Related thought processes have featured earlier than in earlier crises. In 2007, Citi’s Chuck Prince famously harassed the necessity to maintain dancing so long as the music was enjoying: a freely chosen indulgence offered as an unquestionable obligation.

So is the present model of Fomo simply greed in disguise? It’s tempting to suppose so or, on the very least, conclude that the phrase “concern” right here describes a extra discretionary and simply surmountable dread than, say, the concern of loss, worth destruction or worse. The casting of Fomo as a real concern calls for proof that there’s some value to be paid for lacking out (of the type retailers expertise, for instance, throughout panic-buying prompted by public alarm). Self-recrimination for a bonanza skipped, or the wrath of a dissatisfied investor, don’t fairly depend.

Through the previous half decade of tech-centric funding, nevertheless, Masayoshi Son’s SoftBank has led the way in which in instilling a extra professional set of Fomo considerations for sure traders. When the primary of his Imaginative and prescient Funds launched in 2017, the $100bn car was explicitly designed to create a brand new style of tech funding.

It did this (or deliberate to) by utilizing its scale not simply to determine potential winners however to bathe them with sufficient funding to make sure that, on metrics corresponding to market share, they in all probability could be. This implied assure of dominance, nevertheless flawed, set a tone that may resonate: if funding isn’t about prospects however positive issues, then Fomo isn’t grasping however clever.

With tech and crypto Fomo now in some limbo, a a lot bigger and extra complicated model now sits on the horizon in China, and will dominate company and monetary funding subsequent 12 months. A very good variety of fund managers say they’re already positioning themselves for a short-term “Fomo occasion”. A comparatively fast reopening of China or a pointy leisure of zero-Covid guidelines is a change that no international or Asia-focused investor can afford to overlook. The feeding frenzy might ramp up very swiftly.

However the longer-term Fomo commerce pertains to geopolitics, and to the way in which by which US and Chinese language industrial insurance policies have set themselves sufficiently at odds with each other to make some type of decoupling look extra inevitable. Behind the rhetoric of the US Chips Act and the Made in China ambitions are geopolitical shifts that would ultimately oblige increasingly firms — within the US, Europe, Japan, South Korea and elsewhere — to make some type of alternative between the 2 blocs. In some circumstances, this may take the type of redesigned provide chains and different “friendshoring” investments to permit dual-track manufacturing and gross sales.

For others, although, there could also be critical stress to rethink being in China in any respect. And enterprise leaders and their traders ought to maybe take into account that there could also be legitimate causes to overlook out on the world’s best gross home product progress engine. This, actually, will put the “f” in Fomo: the query is whether or not the concern is robust sufficient for firms to push again earlier than it occurs.

leo.lewis@ft.com