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If you are happy you might be a realist

Updated: Aug 17, 2021

This week Yan spent time in Houston and she is now heading over to San Antonio. As for me, I am taking a family vacation in Southern California. It has been a year and a half since we flew on an airplane, and we picked an earliest weekday flight. Before the pandemic, this flight is usually packed with business travelers but this time it is not even half full. Perhaps it is a sign that business travel may have a long road to recovery, but leisure travel is coming back. Universal Studio has just reopened, and by my own unscientific estimation as a recent visitor, the lines are about half of what it used to be, and guests are mostly local or domestic travelers… but I am personally optimistic that theme parks and big evens are on their way back. The industry expects attendance level to exceed 2019, though certain types of events will take longer to recover… so book you festival tickets.

Speaking of optimism, I read a recent article written by Neil Howe with the title “Are Americans suffering from too much toxic positivity?” We are surrounded by life coaches urging us to be optimistic and grateful no matter what, which may be doing more harm than good. It wasn’t until the 1990s that optimism became an industry. Since 2001, the number of part- or full-time life coaches worldwide has soared +790%. According to Neil, the pressure to think positive can end up making people feel worse about themselves when they’re not doing well. A 2020 study that compared people's financial expectations to actual outcomes over a 18-year period…they found that both overestimating (optimism) and underestimating (pessimism) outcomes were associated with lower psychological well-being than setting realistic expectations. Compared with realists, optimists saw a -13.5% reduction in life satisfaction scores and an +11.8% higher level of psychological distress over the long run.

I am also seeing the rise of real estate coaching programs and countless real estate celebrities want-to-be touting their successes on social media. There is a palpable optimism that even if you pay high for an investment you will always sell for higher. Part of this irrational exuberance is attributed to the Federal Government which put a backstop on all financial catastrophe with accommodating monetary and fiscal policy. In the near terms, I see that our political system will continue its dovish policy which is positive for real estate and all risk assets. In the long run, should I be optimistic that the Government will always be able to fix our economy? Going back to Neil Howe’s point, in the long-run I am happier if I am a realist, so I would rather invest asset classes with strong fundamentals such as demographics and real demand, instead of chasing price momentum. Being able to read and contextualize data helps me to be grounded. We will discuss more about asset class allocations in the coming weeks. Yan will also share with us her research on markets she visited.

Have a great summer weekend!

Invest with Confidence.

Henry Yuen Sharpe Investor Group Want to invest for passive income? Click here

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