It's not personal, it's strictly business. That infamous line, uttered by Michael Corleone in The Godfather, seems apropos right now in this post "everything goes up world" that we now find ourselves in. Until last year, right at this time, stocks didn't always go up. Not everything you touched rallied.
But when we got to the bottom one year ago, an amazing thing did happen: stocks almost universally rallied and those who were circumspect, those who had "seen it all" and "knew better than to think that money grows on trees" were reviled as boomers who wanted to keep younger people in their chains.
A lot of the criticism was right. The majority of the hedge fund managers who came on our air, hated the market. They didn't believe in science. Many talked about the apocalypse coming although some talked out of both sides of their mouths literally scaring the heck out of us while buying stocks right into their own self-created abyss.
But armed with stimulus checks and imbued with optimism, the younger investors took advantage of "stonks" as they called them and went all in. They were led by the folks on Reddit and cheered on by Dave Portnoy, the entertaining Bar Stool creator who, without offering any advice, captured the zeitgeist of stocks always going up.
When Portnoy pointed out that the cruise line stocks, battered by the pandemic, were good buys because they kept going higher, a neat bit of circular reasoning, he established credibility that even he didn't know he had. Those who bet against them were overwhelmed. They were wrong. It was a great call and he relished it without ever taking it as seriously or as vehemently as his followers. For Dave it was strictly business at times funny business, but for many of his followers it became personal.
Then there was the phenomenal rise of Tesla (TSLA) . Elon Midas Musk just kept being right, something that started literally last year this week when the bears realized, holy cow, not only was he going to make it, he was going to triumph because his car was really a tech delivery machine.
After that came the pot stocks, a down-on-their-luck group that suddenly ignited as we discovered that every state that put legalization on the ballot saw the people vote yes, culminating with a Democratic win that solidified it all.
Then there were the do-no-wrong software plays, led by Palantir (PLTR) , a company that most of the owners may not even know what it did in part because it is black box and you are not supposed to know what they did.
Finally, it came down to the short-busters, the AMCs (AMC) , the BlackBerrys (BB) , and yes, the Great White Whale, GameStop (GME) . At this point it was all personal because the rally wasn't based on GameStop at all, it it had to do with busting an "evil" short-seller who finally caved taking with him the mechanical reason why it rallied to $400. The short-seller, again, was wrong, and at this point it was all personal.
Now we are finding that stocks don't always go up. The CDC won't let the cruise lines sail. I'd rather be in a pot arms dealer like GrowGeneration (GRWG) than a pot stock itself. GameStop delivers an amazing quarter and it goes down anyway because there's no one left to cover their short. Tesla fails to rally even with a $3,000 called shot over the weekend by the guru of personal. A befuddling appearance by the CEO of Palantir leaves us wondering if they aren't just another software company. And we are overrun by supply of stock from everywhere, insiders, SPACs, corporate equity offerings everywhere we look.
So what happens now? We are at the crossroads. The new investors either succumb to depression and acceptance that stocks do go down all of the time and they leave. Or they regroup and recognize that stocks are strictly business and it's best to find ones you really know and be able to buy more when they go down, not run for the hills.
It's a chilling moment for many, magnified by the upcoming IPO for Robinhood, an app that became an ethos that became a disaster because of GameStop and AMC. My hope is that the younger investors recognize the business aspect, drop the personal, and reposition into companies that really benefit from the great opening. Maybe raise cash, take gains when you have some and buy into weakness, not strength. My fear is that it's over; too much money lost even as the averages go higher. Either way, younger people have learned a valuable lesson: these are just pieces of paper, you can't love em, you can't hate them, you just know them and own them. Nothing more, but nothing less.