Don’t Forget to Sell

The market has been insane recently. I’ll post my returns so you all don’t think I’m full of **it. I’m up about 96% in the last 90 days in my fun money account. I think a lot of people either just getting in the market over the last few months or those who have been investing since they were shitting in their hands and wiping it on their faces have done well. Great. But it’s not real until you sell.

What Should You Do Now?

My fun money account isn’t so much fun anymore. I actually care about some of it. My top holdings a few days ago were CCIV, FUBO, SPCE, and MRNA with call options on all of them (not included in my returns yet). CCIV is a spac that has yet to invest in anything yet it’s up 150% (rumors on a buying a stake in Lucid Motors). FUBO, while I love that stock, returned 5x in two months and SPCE is up 30% today and 3x over the last year. Literally nothing has happened besides stocks with heavy short interest are being bought because people hope another GME short-squeeze will happen. It won’t, but if everyone thinks something will happen, it does. 

The market might continue to be insanely irrational for quite some time. Don’t bet on it going down. But now is a good time to see how much of your portfolio is riding the hype wave versus how much is in solid long-term, value-creating investments. When I started this blog, I was comfortable with the money I was risking on volatile, hype-driven stocks. Now, I’m not. So I sold what I wanted to keep. I’m going to move it into safer investments like low fee Vanguard mutual funds. I might actually diversify across multiple asset classes. Maybe even some of these stocks generate cash flows and pay dividends. I’ll reset back to what I started with in May and start over. 

All I’m saying is don’t forget to sell and keep what you win. The market is a casino right now and if you’re playing the casino, you don’t have control over when you win and lose. Yes, stocks generally go up. But uncommitted SPACs, EV companies with no revenue and unproven technology, space companies mired by delays and stronger competitors, and near-bankrupt defunct companies with negative cash flow will not always go up. I guarantee it. I’ve been a proponent of gambling on these stocks recently. But the gains are real. It’s not fun money. It’s real money. And if you sell, you get to keep it. You can buy shit, save for retirement, contribute to your kids college fund, or, my favorite, models and bottles baby.

So I’m taking about 60% off the table. I’m not sure what I’m investing in with the rest of it, but that’s why I wake up and scan the Internet for degenerates upvoting poorly spell checked posts about companies no one has heard of.

Online Communities Are Destroying Common Sense

I’m not talking about any community specifically, but the days of just googling something or buying a book about it to learn more are getting replaced by niche forums and groups. These groups have more disinformation than actual information. The world is starting to put more trust in people who are like them. Here’s a hint, if you’re going somewhere looking for information, and everyone looking for information goes to the same place, you’re all basically a bunch of people who don’t know anything talking to each other. A massive feedback loop is created and turned into an idiot megaphone and no one is the wiser. If you want to learn about something, buy a book by someone smart. If you want to know if a money manager is any good at managing money, ask to see his personal account. Hint, he better be rich and have solid returns for the last decade at least.

People Trust Communities

Here’s a personal anecdote. I have this fun condition called Trigeminal Neuralgia. In short, it causes excruciating nerve pain in my lower jaw. It’s a pretty rare disease; about 4-5 / 100,000 people have it, so resources are slim and it’s misdiagnosed by well-trained doctors quite often. Unfortunately, one of the best resources for TN is Facebook. There are private groups where people can share symptoms and different treatments. In general, people are very supportive and offer support without judgement. 

However, extreme views often enter the discussion. Right now there is an alarming discussion around people encouraging other sufferers of TN not to get the Covid-19 vaccine. Reasons sited included, a false belief the vaccine uses cells from unborn fetuses, the vaccine causes infertility, it will exacerbate symptoms of TN, the vaccine skipped animal testing, the vaccine was tested on animals, and I don’t even want to type out other reasons sited. Covid-19 presents neurological symptoms in over one third of people who get the virus; why on earth would someone already experiencing neurological nerve pain take the chance of getting Covid-19? Do I need to even go further about how insane that is? I’m not going to. Ironically, people are more easily convinced to act against their own self interest using information that is really hard to make sense of. How is that so?

The same phenomenon is present with investing. People don’t invest because they think the system is rigged, or they don’t know how because it’s just so confusing, or as soon as they invest the market will crash and they’ll lose everything. It’s these same people who are now hopping on Reddit and reading about one of the most sensationalized short squeezes in all trading history that somehow figure out how to sign up with a broker, transfer a huge portion of their savings account and buy stocks like GME, AMC, NOK, BB and airline stocks; all of which are bleeding money, but experiencing extreme volatility due to complex (well sort of, mainly poorly regulated) financial instruments. 
The reason people are comfortable making GME the first stock they own is because of community. We trust the people we spend time around. We trust online groups of people that share similarities to us and we relish at the opportunity to show those who are different from us that they are wrong. It’s not healthy behavior, but it’s so ubiquitous and we can’t really fault anyone for blindly following their community before following simple facts.

The simple facts about investing are the same. Build a diverse portfolio, invest in low-fee index and mutual funds, and do not use leverage. Favor companies that have strong cash flows, provide products and services that are fundamental to economic and human activity and are run by experienced and ethical leaders. The same goes for health advice. Follow common sense guidelines, treatments and preventative measures as recommended by experienced and ethical medical professionals. 

How do you know if someone is experienced? Look at their track record. Have they made a lasting impact in their field. Do they lead with empathy? Do they succeed by innovating as opposed to destroying? Do they build consensus, listen to the people they serve, and give credit where credit is due? Do their values align with you, your community, and greater humanity? Do they make decisions grounded in truth and eschew sensationalism? If it is clearly no to any of these, maybe look elsewhere. Also, name one cult that’s ever been right about something. Anything. Please, I’d love to know.

All that said, go buy some DogeCoin. Let’s get this thing to $1!!!