Step Right Up, Folks... And Lose Money
It has never been easier to lose money in the stock market...
Between special purpose acquisition companies ("SPACs"), meme stocks, cryptocurrencies, and now artificial intelligence ("AI"), investors seem to be chasing one bubble after the next.
And each one ends the same way... and it's not with the air slowly seeping out.
Yet, it's happening again.
And it'll happen again...
And again...
SPACs are passé, but IPOs are back...
And with any kind of IPO resurgence, this means a bunch of companies that should never go public, will – this year, look no further than VinFast Auto (VFS) or Sacks Parente Golf (SPGC) since each went public…
The revival of crypto is sure to spawn a new crop of crummy coins and cons.
As for AI... it has a resilience not seen since the early days of the Internet, even though there are really just a few public companies that can genuinely lay claim to AI.
Here's the thing, and it's something I've written in the past but continues to confound me...
With thousands of publicly traded companies, why is it that investors tend to gravitate to the likely losers? Or, as I recently wrote, the "financially fragile"? Or companies so speculative that chances of making money with them are likely less than buying a scratch-off at the grocery store?
A big reason, of course, is human nature...
Making money is fun, but making it fast is even better. Fear of missing out ("FOMO") is a powerful motivator and, let's face it, you only live once (“YOLO”).
You've done it... I've done it... heck, even the brilliant physicist Isaac Newton has done it. Or as one of my followers on Threads put it...
Actually, it was the South Sea Bubble, the English version of FOMO in the 1700s. As the Wall Street Journal’s Jason Zweig wrote in his update of Benjamin Graham’s classic, “The Intelligent Investor”…
Sensing that the market was getting out of hand, the great physicist muttered that he 'could calculate the motions of the heavenly bodies, but not the madness of the people.' Newton dumped his South Sea shares, pocketing a 100% profit totaling £7,000. But just months later, swept up in the wild enthusiasm of the market, Newton jumped back in at a much higher price — and lost £20,000 (or more than $3 million in [2002-2003's] money. For the rest of his life, he forbade anyone to speak the words 'South Sea' in his presence.
FOMO is like a magnet... It just pulls you in. YOLO gives you an alibi. It's why traders trade and gamblers gamble.
DISCLAIMER: This is solely my opinion based on my observations and interpretations of events, based on published facts, and should not be construed as investment advice.
Feel free to contact me at herbgreenberg@substack.com. You can follow me on Twitter and Threads @herbgreenberg.
Great post!!
Exceptional individual investors have a behavioural advantage... staying calm amidst the storm