The kids are all right

Here is an opinion article from USA Today, and it’s written by some lady named Nancy Tengler. I’ve never heard of her, but the disclosure at the end says she “is chief investment officer at Laffer Tengler Investments and the author of “The Women’s Guide to Successful Investing.”

I don’t know why it rubbed me so wrong, I guess it probably has to do with the fact that I’m an American and sometimes I don’t want advice from filthy rich people — especially when it comes to the stock market. I don’t need the small class of individuals who didn’t see the 2008 financial crash coming telling me what is and is not a good investment. The opinion piece opens like this:

I will go to great lengths to avoid crowds. I have found that they rarely bring out the best in people. Whether myth or not, the notion that lemmings will follow a herd off cliffs — an old Wall Street metaphor — is illustrative. Crowd-think can be destructive.

Right away I knew this random rich woman was not my kind of person. I wouldn’t doubt that she, as someone who is affluent, does go to great lengths to avoid crowds. She has no idea what it’s like to be a frontline worker, someone who everyday has to rub elbows with the unwashed masses. Everything is a class issue, and only a privileged few have the ability to get away with comparing ordinary people to a herd of lemmings following one another off a cliff. She goes on:

Enter the meme-stock craze, where investors follow tips from celebrities or message-boards, regardless of the underlying fundamentals of the company. A crowd of traders is buying stocks simply because their peers are buying.

Tengler is obviously making reference to the subreddit “wallstreetbets,” but it sounds like she has no idea what a message board is or how it works. There are literally millions of people who post on there; people aren’t investing money based off “tips from celebrities.” It’s just regular people talking about stocks that they like. No one gives a fuck about “the underlying fundamentals of the company.” Billionaires are placing substantial bets on various companies to fail, and the wallstreetbets crowd are buying those stocks to drive up the price. That’s all that’s happening.

Take Blackberry (BB), for example. I came across my old Blackberry while cleaning out a junk drawer this past weekend. I am pretty sure the last time I saw it was over 20 years ago. That Blackberry was indispensable to me in the late 1990s and early 2000s, which makes my point. When was the last time you saw one in use?  Blackberry is now primarily a software company and no longer makes smartphones.  Revenue has been declining for years. 

So the insinuation, regardless if she is telling the truth about finding one in a junk drawer, is that Blackberry is a failing company and thus isn’t worth its current share price. She references Blackberry in particular because the stock recently shot up after a bunch of retail investors — i.e. ordinary people — decided to buy. Those investors weren’t playing a game of four-dimensional chess; they simply saw an opportunity and decided to make a move.

Why then is the stock up 142% this year?  And why have the price movements been volatile? In January of this year alone, the stock went from $6.63 to a high of $25.10 before closing out the month at $14.10. I’d rather take my chances at the craps table.

Is she mad that people made money trading Blackberry stock? I mean maybe I’m obtuse, but shouldn’t we be celebrating a company that came back from the dead? Is it not a good thing that retail investors made smart bets on a stock that was worth $6.63 at the beginning of the year and is currently (as I write this) worth about $16? She mentions she would rather take her chances at the craps table, and maybe she should. The stock market is, after all, just another form of gambling. Maybe she’s upset that her investment firm didn’t see this coming and a bunch of working class people did.

If stocks trade on earnings and earnings growth expectations (as they have for hundreds of years) there is no credible rationale for the moves we have seen in meme-stocks this year. 

Hey, I have a rationale: money isn’t real. It is only as real as we (consumers) make it. These rich assholes who swear on the Invisible Hand Of The Market — and treat the will of free markets as God Himself — who have made countless millions of dollars speculating on the successes and failures of companies, ought to know better than anyone that it doesn’t matter what they think a company is valued at. The market decides.

Gamestop (GME), the poster child of the memes, is up 1,298% year-to-date, despite a declining business model

But the ultimate speculative head-scratcher is the trading in AMC

The company went to the new issue well once again (for 11.5 million shares) with an announcement on June 2nd that issued a stark warning, no doubt crafted by the company’s lawyers:

“We believe that the recent volatility and our current market prices reflect market and trading dynamics unrelated to our underlying business,” it said. “Under the circumstances, we caution you against investing in our Class A common stock, unless you are prepared to incur the risk of losing all or a substantial portion of your investment.” 

Yikes.

Yikes, indeed. You know the only thing that’s worse than a one-sentence paragraph? A one-word paragraph. Nancy Tengler is going through a really hard time right now because she likes to give financial advice and doesn’t think it’s fair that poor people are making money from speculating on message boards. She does have a flare for the dramatic, though. Good old Nancy thought she was being so poignant when she said “Yikes.”

When the narrative doesn’t make sense it is because it doesn’t make sense. Eventually, reality will catch up. This is not to say that some traders won’t make money. They will. But home run streaks eventually end. 

“Some” is doing a lot a lot of work in the this is not to say that some traders won’t make money bit. Almost everyone who invested in Gamestop, AMC, and Blackberry have made money. Hundreds of thousands of people. Maybe millions. Again, I can only assume her disgust throughout this article is based on the idea that those millions of average people don’t deserve those gains. I’m not an expert on any of this stuff, but my gut feeling tells me the only ones who do deserve to make money through the market are hedge funds and other members of the 1 percent.

If you are an investor, resist the temptation to chase these names. Enjoy the singles and doubles in your portfolio. Over the long-term, stocks generate real (after inflation) returns in the high single digits, and nominal returns are closer to 8% to 9%. The rule of 72 reminds us, at that rate, you will double your money every eight to nine years. 

Ah, yes. Please tell me more about all the brilliant financial theory that has led you, the CIO of an investment firm, to become rich. You know what happened in 2008 to all the workers who had their entire life savings wrapped up in 401K portfolios, those who followed the advice of people like Nancy and tried to parlay their single digits into a comfortable retirement? They lost everything. $20 trillion in household wealth got lit on fire when the market crashed.

It reminds me of a story my mother used to read to me, something about a tortoise and a hare. 

It’s so easy for rich people to believe slow and steady wins the race. If you have the time to wait, then there’s a good chance you are going to win, anyway. Unfortunately for tens of millions of Americans, they don’t have the time to wait. For them — or, for us — it has to be a sprint to the finish line. It’s either that, or we will die trying.

This is gambling. The stock market is a gamble. When I gamble at a casino I am not there for a long time, but goddamn it I will have my fun. I spend $500 or sometimes $1,000 and I go hard at the chance to double or triple up. But I’m not going to be playing for longer than 30 minutes or an hour, generally. It either happens, or it doesn’t. A binary proposition.

On the flip side, it’s the wealthy who can keep coming in for $500 or $1,000 at a time. Again and again. They can wait out the cold streaks, because all they need is one good run to get all their money back. Sometimes it never comes, and the reason they have table limits at casinos is because theoretically players could just lose every hand and keep doubling their bet until they win. (They call this the Martingale.) For rich people it doesn’t matter how much they lose, since the more money they have the better chance they have of getting it all back.

The stock market isn’t the same, but I would argue it’s similar. If you always have more money waiting behind, then you can place enough bets to find one or two winners that will make up for the rest of your losses. If you don’t have a lot of money then it doesn’t really matter if you win or lose, because you have nothing to lose. Not real money, anyway.

When I read this article I laugh at how Tengler tries to “warn” everyone to stay away from these meme stocks, even though in reality they have made millions of people money. Money that they wouldn’t have otherwise had if they followed the dinosaur logic of researching the underlying fundamentals of the company. Like I said earlier: no one gives a fuck. If anything, the only reason any of the meme stocks have been pumped up is because rich assholes like her bet on those companies to fail. The wealthy followed the underlying fundamentals a little too closely.

I am not a serious investor and I do not give financial advice. All I am saying here is that the old way of thinking doesn’t work anymore. The new frontier is betting against all the rich people in their mansions in the hills who have been telling us the rules, and have been profiting at our expense, for our entire lives. I believe a lot of money can be made strictly by going against what these people have to say.

At the end of the day, fuck ’em. It’s us versus them, and they don’t want you to win. They want you to stay in your place, keep growing your retirement portfolios little by little, and then when the market crashes again they will be the only ones left with any money to pump back in the stock market and make more millions.

American Capitalism is a sick game, but in the end I am here to play. I appreciate wallstreetbets for expanding my portfolio, and I also appreciate that for every million (or more) people who have made money on the meme stocks there will always be a Nancy Tengler. She, and the wealthy like her, will always be there to tell us to stop playing in the street. She, and the wealthy like her, will always be there to tell us to stop making so much noise. She, and the wealthy like her, will always be there to tell us to get off their lawn.

And while we’re at it, they will always be there to tell us to stop making so much money in the stock market by betting against people like her.

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