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This Day in History...

11/24/2020

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On November 24, 1759 Mount Vesuvius, on the Bay of Naples, erupts for the thirty sixth time since it buried Pompeii and Herculaneum in 79 AD.

The mountain goes dormant over the next two and a half centuries with the exception of a minor eruption in 1855. After that, it is the population that explodes. Talk about fear of missing out...clearly the painful lessons of history are no match for the allure of wine, olives, and ocean-front property. Over 700,000 people now live in the “death zone” around Mt. Vesuvius. Believing they are safe and their subjective risk is low, has led many to take on riskier behaviors, not to mention astronomical mortgages.

With no major eruption of Vesuvius since 1944, and none of the explosive variety since 1779, it is easy to downplay any danger at all. Thus, when an eruption does occur, things end up likely worse, more lives lost and property damage, than if there were more frequent eruptions and no illusion of safety. All investors, not just those in tony Italian real estate, engage in similar behavior. This is where FOMO and risk tolerance converge. Lulled by recency bias into perceiving less risk because of current positive returns, many change their behavior, accumulating more volatile assets. Guess what happens next? When volatility erupts, they get burned. Compratore stai attento. Translation: buyer beware.
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Patrick Huey is the author of two books:  "History Lessons for the Modern Investor" and "the Seven Pillars of (Financial) Wisdom"; this is considered an outside business activity for Patrick Huey and is separate and apart from his activities as an investment advisor representative with Dynamic Wealth Advisors.  The material contained in these books are the current opinions of the author, Patrick Huey but not necessarily those of Dynamic Wealth Advisors.   The opinions expressed in these books are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security. They are intended to provide education about the financial industry. To determine which investments may be appropriate for you, consult your financial advisor prior to investing. Any past performance discussed in these books is no guarantee of future results.  As always please remember investing involves risk and possible loss of principal capital. 
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