Irrational Investing

“It’s different this time.”

“If this isn’t a sure thing, I don’t know what is.”

“I don’t see any reason this would stop anytime soon.”

“This many investors can’t be all wrong.”

Those are just a few of the things investors have been heard saying during all of the recent investment bubbles.

Remember the dot-com bubble? Internet companies were the wave of the future. The investor appetite for dot-com IPO’s was insatiable.

Remember the mortgage-backed securities craze that triggered the 2008 Financial Crisis? Investors couldn’t get enough of them. Banks couldn’t originate subprime loans fast enough so Wall Street could issue securities backed by them.

One simple word popped both the dot-com and subprime bubble.

FUNDAMENTALS!

When experts who saw beyond the market hype started questioning the underlying economic fundamentals of both bubbles, it was the beginning of the end.

The lack of profits with the dot-coms and the high rates of default on subprime loans belied the market appetite and when word got out about the underlying weaknesses, it was over. The bubbles popped, taking trillions in paper wealth and retirement plans with them.

ir·ra·tion·al

/i(r)ˈraSH(ə)nəl/

adjective

Hindsight is 20/20 and in hindsight, the feeding frenzy behind the dot-com and mortgage-backed securities bubbles was irrational. There was no logic behind investors snapping up unprofitable dot-coms and securities backed by delinquent loans.

In basic economics, the price of a commodity rises and falls with supply and demand – backed by market fundamentals.

For example, in a drought, water becomes more valuable – pushing up its price. Notoriously volatile gold is backed by basic economic fundamentals. It’s a tangible asset that has been valued from the beginning of time because of its aesthetic properties and scarcity.

When inflation fears creep in, investors often turn to tangible assets as a substitute for currency because tangible assets like gold and real estate can be used for bartering. There are rational reasons for the pricing of tangible assets.

You would think that investors would learn their lessons about bubbles from past bubbles but that’s never the case. This may have to do with a concept known as a generational conceit – where every generation believes it’s unique and knows more than previous generations. 

Speaking of bubbles, there are two simultaneous bubbles brewing right now that can be explained by generational conceit and it’s the Millennial generation fueling both bubbles:

The Dow is currently trading near all-time highs – trading at nearly a P/E (price to earnings) ratio of 30 – nearly double its historic average. The feeding frenzy is fueled by Millennials who firmly believe this time it will be different. The experts who dig into the fundamentals are predicting a crash because there is no logic to the current irrational stock craze.

Bitcoin is also trading at all-time highs at $37,800 per Bitcoin. In just one year, it has climbed more than 360%. It is currently trading at more than $17,000 per coin since its high of nearly $20,000 in December 2017 before crashing to near $3,000 in March 2018.

Is there any logic behind the recent meteoric rise of Bitcoin? Have the world currencies collapsed – necessitating an alternative currency?

No. There’s no logic. Bitcoin is still intangible, it is still not backed by any government, and its security – despite being touted for it – is still sketchy.

So why are investors snapping up stocks and Bitcoin?

The same reason people were hoarding toilet paper in March when COVID hit – the fear of missing out. There was no logical reason for stockpiling toilet paper. Paper companies assured everyone there would be enough production. This didn’t stop people from hoarding.

Investors are likewise being driven by an irrational fear of missing out on stocks and Bitcoin and it’s the latecomers that are going to suffer when the bubble bursts.

How can you as an investor avoid getting sucked into irrational investing?

I don’t feel good about the underlying fundamentals of the stock market or Bitcoin right now. The economics don’t make sense. That’s why I’ll stick to tangible assets like real estate – assets that are shielded from irrational investing behavior.

Real estate is not liquid. The cost of entry and illiquidity are what shield real estate from mob behavior – behavior that can sink net worth and retirements. That’s why I’m drawn to real estate more than ever.

While the markets for stocks and Bitcoin go crazy, I find refuge in a tangible asset like real estate.

DISCLAIMER

This is neither an offer to sell nor a solicitation of an offer to buy the securities described herein.

THE OFFERING IS MADE ONLY BY THE PRIVATE PLACEMENT MEMORANDUM. THIS MATERIAL MUST BE READ IN CONJUNCTION WITH THE PRIVATE PLACEMENT MEMORANDUM IN ORDER TO UNDERSTAND FULLY ALL OF THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES ASSOCIATED WITH AN INVESTMENT IN THE SECURITIES TO WHICH IT RELATES AND MUST NOT BE RELIED UPON TO MAKE AN INVESTMENT DECISION.

The offering of securities described herein will not be registered under the Securities Act of 1933 (the “Securities Act”) or the securities laws of any state and the securities are being offered and sold in reliance on exemptions from the registration requirements of the Securities Act and such laws. Neither the Securities and Exchange Commission nor any other federal or state agency has passed upon the merits of or given their approval to the offering of the securities, the terms of the offering or the accuracy or completeness of the offering materials. The offering of securities is being made only to Accredited Investors, as defined in Rule 501(a) of Regulation D of the Securities Act. An investment in the securities is highly speculative and involves substantial investment and tax risks. All prospective investors must review the Private Placement Memorandum in its entirety, including the section entitled “RISK FACTORS” before investing.

An investment in Four Peaks Capital Partners, LLC is highly speculative and involves substantial risks, including, but not limited to: (1) Four Peaks Capital Partners, LLC success depends upon the performance of the Manager in managing Four Peaks Capital Partners, LLC and its investments, including decisions involving investment of Four Peaks Capital Partners, LLC’s capital and the acquisition and disposition of properties and there is no guarantee Four Peaks Capital Partners, LLC will raise enough capital to perform its investment objectives; (2) There can be no assurance that a prospective investor will receive any return on investment in Four Peaks Capital Partners, LLC and/or realize any profit on a prospective investor’s investment in Four Peaks Capital Partners, LLC and a prospective investor could lose all or a substantial portion of its investment; (3) The Manager has limited or no net worth and there can be no assurance that the Manager will have sufficient funds to meet its obligations to Four Peaks Capital Partners, LLC or to otherwise financially support Four Peaks Capital Partners, LLC; (4) The Class A members and Class B members have no power to take part in the management of Four Peaks Capital Partners, LLC and have limited voting rights and will not have the opportunity to evaluate or approve any of Four Peaks Capital Partners, LLC’s investments; (5) The Class A Interests and Class B Interests will be illiquid, and the transferability of the Class A Interests and the Class B Interests will be substantially restricted; (6) Four Peaks Capital Partners, LLC may not have the cash flow necessary to make distributions to its members; (7) Four Peaks Capital Partners, LLC will not diversify its investments and, therefore, the success of Four Peaks Capital Partners, LLC will be dependent upon the success of the properties; (8) There are substantial risks associated with real-estate investments and ownership of storage facilities and mobile home parks; (9) There are various potential conflicts of interest among the Manager and its Affiliates and their principals.
Investors must read and carefully consider the discussion set forth under the section entitled “RISK FACTORS” in the Private Placement Memorandum for a complete discussion of these and other risks pertaining to this investment.

These projections are speculative and based on specific assumptions, which, if incorrect, would cause the actual returns to differ materially from the projected returns. You should review the entirety of the assumptions and risks set forth in the Private Placement Memorandum.

Any underlying assumptions and any forward-looking statements herein may not be accurate, the projections herein shown may not occur, and actual results could differ materially due to risks and uncertainties that are beyond the Company’s ability to control or accurately predict. To the extent, the information in this communication conflicts with the information in the Private Placement Memorandum, the information in the Private Placement Memorandum shall govern.

The securities offered are an illiquid investment and involve a high degree of risk; Investors should be able to bear the loss of some or all of their investment. Investors should read and understand all of the risks and the entire Private Placement Memorandum before making a decision to invest. Past performance is no indication of future results and there can be no assurance that Four Peaks Capital Partners, LLC will be able to execute the investment objectives for the Properties or the Offering.

This material is for general information purposes only and does not constitute legal, tax, investment or other professional advice on any subject matter. Information provided is not all-inclusive and should not be relied upon as being all-inclusive.
Any capitalized terms used but not otherwise defined in this Presentation shall have the meanings set forth in the Private Placement Memorandum.

Any reference to “Four Peaks” “we” “our” or “fund,” regardless of capitalization, shall refer to Four Peaks Capital Partners, LLC, and its Affiliates.

For additional risks and disclaimers, visit https://www.fourpeakscapitalpartners.com
Four Peaks Capital Partners, LLC

2024 © Four Peaks Capital Partners™