Keep Your Wits About You!

Pressed for time this weekend, so forgive me if I miss a proper edit here and there… But I woke up this morning feeling a strong desire to write the following…


So, my wife and I decide that we need to own a pickup truck; everybody needs to own a pickup truck, or needs to know a generous soul who owns a pickup truck.

We know the model we want, but, alas, we can’t just order the damn thing on Amazon. 

Somebody’s got to go deep into the jungle, dodge the arrows aimed at their pocketbook, and ultimately drive out — forever wondering if that “insanely great deal” they “negotiated” the salesman into was really all that insanely great after all.

Me to my wife: “Honey, you know I can’t go during market hours. And, darn it, I have afternoon appointments. You’ll do great, I know it. But don’t agree to anything without calling me first!”

So I get the call one afternoon last week (must’ve been between appointments 😎). 

After a few minutes of back and forth, through my poor wife, with the sales manager — I absolutely knew that the one they sold the night before, that was displayed on a ramp so I’d see it every day on my way to work, had bigger wheels than the one in the picture my wife sent me (the sales mgr claimed otherwise) — I asked her to put him on the phone. 

What a nice guy! Yeah, I know… 

So, after we got the wheel thing straightened out, I was right of course, he proceeded to explain that for our purposes those skinnier tires would work out much better. I stopped him dead in his tracks when I told him he can chalk it entirely up to vanity…

Okay, I’ll now get to the point of this message: 

He of course asked my wife what I do for a living… 

Once (during that first phone conversation) we were done “negotiating” over wheels, etc., he asked if he could ask me a question, I said “of course,” he then said “Ethereum, what do you think about it?”

The next day, he and I had another reason to chat by phone, can’t recall at the moment what it was about, but I do remember him telling me that “there’s this secret meeting with thousands of CEO’s tomorrow, and it’s all about Bitcoin. They expect it to push the price to 50 to 100k.”

I of course respectfully pointed out that I was also aware of the “secret meeting” and that if he and I both knew about it, of course it was no secret. And that if it was no secret, and if it was sure to incite a buying frenzy pushing the price of Bitcoin to those heights, well, it’d be there already…

So, then came the night of reckoning, and of check writing. And while the truck stuff was actually pleasant enough, what ensued was fascinating.

Since I got such an “insanely great deal” I was expected to return the favor. 

My wife had moved on to pick up dinner for the grandkids (she was kidsitting and had to run out to sign some papers), leaving me all alone in the jungle, and the witchdoctor had my keys!

Well, now that it was only he and I, he just stood there, staring me in the eye. Finally, he squinted, I squinted, he took a very deep breath through his nose, I was frozen. He then proceeded to reach into his pocket. Having no gun to draw in retaliation, I was left wondering if this was the end. 

Imagine how relieved I was to see that it was only his cell phone he was reaching for! Well, I shouldn’t have been…

He drew his device, and with arm fully extended he shoved the screen right up the tip of my nose. On it was displayed his stock portfolio… Ohhhh boy, I thought to myself, here we go…

Then pulling his phone back to his abdomen, while turning sideways, with screen titled in my direction, he waved me in. He used the index finger of his free hand to point to the symbols, one a time. “So what do think about Tesla?” “How about Nokia?” “Nio?” “AMC?” “I didn’t jump on GameStop when I should have, is it too late?”

Yes, of course, I had something to offer about each position… But no buy, sell or hold advice…

Then off to the warranty guy… And, yes, he has a portfolio… And, yes, some of the same names came up. However, I must say, this guy impressed me. He gave me a real thesis for each position (he didn’t own Tesla, by the way, and told me why), and went on to explain how rent moratoriums, etc., are painting an untrue picture about the state of the economy.

We talked about the pulling forward of purchases record government stimulus creates, and the inevitable letdown to come that hardly anyone seems to expect. 

This guy was thinking! He’s going to do just fine… I.e., he’ll survive what’s inevitably to come…

Not so sure about his manager… Although I really like the guy…

Honestly folks, it’s been just over 20 years since I’ve seen this much fervor over stocks. And we’ll lump certain cryptocurrencies (same fervor, new target) in there as well…

Like back then, I’m fielding questions from folks on stuff they’d never dream of considering under normal market conditions; it’s just that they know somebody, or know somebody who knows somebody, who’s making a killing! Just like 1999!

Of course there’s Reddit, but I know of small custom chatrooms where friends share stock tips; then abuse one another when somebody’s tip hasn’t moved within a day or two after delivering it… Just like 1999!

I know of situations where folks quit well-paying jobs to trade full time. Just like 1999!

Employers have told me of employees coming to work and bragging about the thousands they’re making in their early morning trading sessions… Just like 1999!

And there’s much more…. Valuations, call volumes, euphoric sentiment readings, volatility, margin debt, on and on… Just like (in many cases more so than) 1999!

As legend has it, it was 1929 and Joseph Kennedy Sr. was getting his shoes shined. Upon receiving unsolicited stock tips from the shoeshine boy, he proceeded to rush to his office and put out short lines on all manner of common stock. He determined that if a shoeshine boy is enjoying the kind of success in stocks that would have him presenting himself as an authority, the market had to be at a most speculative top. 

Mr. Kennedy was short stocks as the 1929 crash unfolded, and made many millions in the process.

Here’s from JK Galbraith’s accounting of the period:

“One thing in the twenties should have been visible even to Coolidge. It concerned the American people of whose character he had spoken so well. Along with the sterling qualities he praised, they were also displaying an inordinate desire to get rich quickly with a minimum of physical effort.”

“Early in 1928, the nature of the boom changed. The mass escape into make-believe, so much a part of the true speculative orgy, started in earnest. It was still necessary to reassure those who required some tie, however tenuous, to reality. And, as will be seen presently, this process of reassurance—of inventing the industrial equivalents of the Florida climate— eventually achieved the status of a profession. However, the time had come, as in all periods of speculation, when men sought not to be persuaded of the reality of things but to find excuses for escaping into the new world of fantasy.”

“…men and women had proceeded to build a world of speculative make-believe. This is a world inhabited not by people who have to be persuaded to believe but by people who want an excuse to believe.”

“It is another feature of the speculative mood that, as time passes, the tendency to look beyond the simple fact of increasing values to the reasons on which it depends greatly diminishes. And there is no reason why anyone should do so as long as the supply of people who buy with the expectation of selling at a profit continues to be augmented at a sufficiently rapid rate to keep prices rising.”

And here’s billionaire Chris Sacca commenting (on his tech bubble experience) on Twitter last week:

 

In closing, let me just say that I absolutely don’t know when this speculative mood comes to an end, nor what the ultimate consequences will be… But I absolutely do know that the market is presently extended in historic and unsustainable fashion! Which has us, via non-correlated assets and options, hedging our clients’ portfolios — while we nevertheless continue to exploit fundamentally-sound opportunities where we see them…

Have a great weekend! And, please, keep your wits about you…
Marty

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