In the span of a few weeks last month, investors witnessed two of the most talked-about financial stories of the year.
The first was the historic initial public offering of SpaceX (SPCX). The company raised a record amount of capital, briefly valued above $2 trillion, and propelled Elon Musk to become the world’s first trillionaire. Retail demand was extraordinary, and the IPO became as much a cultural event as a financial one.
The second involved a Reuters investigation into the Trump family’s growing portfolio of cryptocurrency ventures. Reuters estimated that the family generated approximately $2.3 billion in profits from several crypto-related businesses while outside investors in those same ventures collectively lost roughly a similar amount as token prices fell.
At first glance, these appear to be completely different stories.
One involves one of the world’s most innovative companies.
The other involves politically branded cryptocurrencies.
One represents genuine technological achievement.
The other has generated debate about celebrity branding, speculation, and conflicts of interest.
Yet from the standpoint of investor psychology, they share something remarkably important.
Both illustrate how today’s investing culture increasingly encourages people to make decisions based on narratives, personalities, urgency and fear of missing out rather than on disciplined investing processes.
Great Companies and Great Investments Are Not the Same Thing
Let’s begin with SpaceX.
There is little debate that SpaceX has fundamentally changed the economics of space launch, satellite communications, and commercial aerospace.
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It is a remarkable business success story of the past quarter century.
But remember an important truth—a great company is not automatically a great investment.
History offers countless examples.
The railroads transformed America.
The automobile transformed transportation.
The internet transformed communication.
Artificial intelligence is transforming computing.
Yet investors who purchased outstanding companies at unrealistic prices often experienced years, or even decades, of disappointing returns.
Markets price expectations.
When expectations become extraordinarily optimistic, future returns become increasingly difficult to achieve.
That doesn’t mean SpaceX won’t become an outstanding long-term investment.
It means disciplined investors ask different questions than excited investors.
Instead of asking, “How high can this go?” they ask, “What assumptions are already reflected in today’s price?”
Those are very different questions.
The Other Side of Hype
The Trump family’s cryptocurrency ventures represent a different version of the same behavioral challenge.
Reuters’ analysis estimated that Trump-affiliated crypto projects generated roughly $2.3 billion in gains for the family while investors who purchased those assets collectively lost about the same amount as prices declined.
Whether one views those ventures as legitimate entrepreneurial activity, clever branding, or something more controversial is almost beside the point for investors.
The more important lesson is behavioral.
Why did so many people buy these tokens?
Very few purchasers were analyzing discounted cash flows.
Few were evaluating competitive advantages.
Few were studying long-term business economics.
Many were responding to something else. A story. A personality. A movement. A sense of excitement. Perhaps even a belief that they were participating in something historic.
Markets have always rewarded compelling narratives.
Unfortunately, narratives do not always reward investors.
Financial Entertainment Rewards Excitement
Neither of these stories emerged in isolation.
They unfolded inside today’s investing media ecosystem—a world built around clicks, views, likes, reposts, livestreams, and algorithmic amplification.
Financial media increasingly rewards the same characteristics that social media rewards:
· urgency
· confidence
· bold predictions (without accountability for being wrong)
· emotional reactions
· larger-than-life personalities.
Calm analysis rarely goes viral. Thoughtful discussions about valuation rarely dominate trending topics. Careful risk management almost never becomes breaking news.
Excitement sells.
Discipline does not.
That creates an environment where investors are constantly encouraged to react rather than think.
The Fear of Missing Out
The most powerful force behind both stories may not have been greed. It was fear.
Specifically, the fear of being left behind.
When investors see headlines about…
· historic IPOs,
· revolutionary technologies,
· overnight fortunes, or
· rapidly rising digital assets,
…many begin asking, “What if I miss this?”
That question has fueled virtually every speculative episode in market history.
The Nifty Fifty. The dot-com boom. Housing speculation. Meme stocks. Certain cryptocurrencies. Now artificial intelligence.
The details change. The psychology does not.
The Attention Economy Has Changed Investing
Today’s investors face a challenge previous generations never encountered.
Information is no longer scarce.
Attention is.
Algorithms compete for your emotions because emotional engagement keeps you reading, clicking, and watching.
This changes how financial information is presented. Instead of asking, “What is most useful? many platforms ask, “What is most likely to generate engagement?”
Those objectives are not the same. In many cases, they are directly opposed.
In the case of the SpaceX IPO I would say there is almost no good reason for an individual investor to have bought that stock at this time. There was so much hype about the company and Elon Musk, the price was bid up as some of the early money cashed in on the frenzy.
I will note here that Cabot generally recommends avoiding IPOs because of this
phenomenon. Other than the bragging rights of being able to say you owned the stock from its IPO, there is rarely a good investing reason to buy in the first 12-18 months.
If the opportunity is as strong as promised, there is almost always another chance to buy it at a good price before it really takes off. The more hype about an IPO, the more frenzied the buying is, and the greater the reason for individual investors to wait.
Process Versus Prediction
The irony is that successful investing rarely depends on predicting which headline comes next. It depends on having a process that works regardless of the next headline.
Disciplined investors develop rules before emotions become involved. They determine:
· appropriate position sizes,
· diversification,
· risk limits,
· buy criteria,
· sell criteria,
· and portfolio objectives.
Then they allow those rules, not headlines and social media, to guide their decisions.
Excited investors do just the opposite. They experience emotion first. Then they create reasons to justify it.
Celebrity Is Not a Due Diligence Process
There is another important lesson connecting these stories. Celebrity should never replace analysis.
Elon Musk has built extraordinary companies. Donald Trump has one of the world’s most recognizable brands. Neither fact alone tells us whether a particular investment is attractive at a particular price.
Nor should any famous name substitute for understanding business quality, valuation, competitive position and risk, or fit with your portfolio.
Markets have repeatedly demonstrated charisma is not an investing methodology.
The Wealth Transfer Investors Rarely Notice
One of the least appreciated realities of speculative investing is that hype often creates wealth transfers rather than wealth creation.
Early participants may profit handsomely. Founders may become dramatically wealthier. Sophisticated “insider” investors may exit at favorable prices.
Late arrivals frequently provide the liquidity that makes those gains possible.
That pattern has repeated throughout financial history. It is not unique to cryptocurrencies or IPOs. It is a recurring feature of markets whenever enthusiasm outruns disciplined analysis.
The Better Question
Rather than asking whether SpaceX is overvalued or whether politically branded cryptocurrencies should exist, investors might ask a more useful question, “Why do these opportunities create such powerful emotional reactions in the first place?”
The answer tells us far more about investing than about any individual company or token.
Human beings naturally seek excitement. We crave stories. We admire visionary leaders. We fear missing extraordinary opportunities.
Modern financial media amplifies every one of those instincts. Successful investors learn to recognize them without allowing them to dictate decisions.
The Real Investing Edge
None of this suggests investors should avoid innovation.
Nor does it suggest avoiding artificial intelligence, space exploration, or digital assets categorically (although Cabot also has more than a little wariness when it comes to “investing” in crypto).
Innovation has always been one of the great engines of wealth creation.
The challenge is separating genuine innovation from emotional investing. That requires discipline. It requires humility.
It requires acknowledging that no opportunity, no matter how exciting, is exempt from thoughtful analysis and risk management.
The biggest investing lesson from these two headlines is not about Elon Musk or Donald Trump.
It is about us.
It is about the choices we make when excitement becomes louder than judgment.
The investors who build lasting wealth are rarely those who react most quickly to headlines. They are the ones who consistently ask the same questions regardless of what dominates today’s news:
· Does this fit my strategy?
· Do I understand the risks?
· What assumptions are already priced in?
· How does this improve my long-term portfolio?
The greatest investing edge has never been getting the next prediction right.
It has been maintaining the discipline to make good decisions when everyone else is being swept away by the latest story.
That was true 55+ years ago when Cabot was founded and it remains true today.
And in an age of social media, 24-hour financial news, celebrity investing, and artificial intelligence, it may be more important than ever.
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