The phrase ‘Pig in a Poke’ was coined in Britain as a means of saying that a buyer should be careful to see and know what they are buying. The French word for bag or sack is poque. That has been changed in our language to poke. A dishonest seller would offer you an unopened bag which would contain a cat or some other animal besides a pig.

My own father often counseled us to believe almost nothing we heard and only half of what we saw ourselves. But in today’s investing, I am amazed at how easily many people with money (and seemingly intelligent) will be so trusting about products offered today.

For example, please consider the organizations known as SPAC’s. According to Investopedia, a Special Purpose Acquisition Company is one formed to raise money to later purchase or merge with another company. Not surprisingly, these became quite popular in the mid-2000’s leading up to the great financial crisis of 2008, again in 2020-21.

Even though people lose money in ways like this, they are still willing to trust promoters to put their money to work in whatever future deals they can find or conjure up. Promoters do not even use a bag! Even when a private concern has an operating business, an initial public offering (IPO) is widely considered to be among the highest risk forms of investment. At least you receive a prospectus providing facts and figures.

There are a couple of safeguards in place. The managers have up to two years to acquire one or more companies or merge with them. If they are unsuccessful, the money must be returned to the investors. Second, the shareholders have the right to vote on whether to approve the deal or deals proposed. Those are certainly not strong enough for me personally to ever consider investing in one.

You see, our legal system even under the supervision of the Securities and Exchange Commission allows one to promote a wacky business proposal with almost nothing to back it up—so long as the truth is told. Therefore many prospectuses will boldly state that you may definitely lose your money and that none of the company’s plans and objectives may be achieved.

In my opinion, prospectuses are written by lawyers for lawyers. I would guess that no more than five percent of investors ever read one before investing. In law school, many of the hardest working students who could major on minor details would prepare to specialize in securities law because that is where the biggest starting salaries were offered.

Meanwhile, on Monday, the NASDAQ Composite index hit an all-time high mark. Bitcoin and other forms of crypto currencies are all the rage. This is in spite of the signs of internal economic and financial rot continuing to boil below the surface.

Grant’s Interest Rate Observer of May 9, Volume 43, No. 9, informed us that credit problems continue to rise. At year end 2024, for example, over 11 percent of credit card balances were more than 90 days overdue. Of the $1.6 Trillion outstanding student debt, only 38 percent of borrowers are current on their obligations. For the past five years until now, the Department of Education has not even tried to collect them.

Mr. Market can be wrong in either direction—bullish or bearish—for a long time. One does not want to be overrun by the bulls, but it is getting more difficult to feel the optimistic part of being cautiously optimistic. Bubbles do burst and time will tell.

(Past performance is no guarantee of future results. The advice is general in nature and not intended for specific situations)