I'm not internationally known...but I'm known to rock the microphone. I was fondly recalling Rob Base's famous lines from "It Takes Two" this week. In the past five days I have received questions about the U.S. stock market from contacts in the U.K., Germany, Australia, Thailand and Brazil.
As I've mentioned in a recent Real Money columns, I am working on a project in Brazil, and more on that soon. The other (and truly better) half of the Portfolio Guru family has strong connections in China, South Korea and Japan, and her WeChat is lighting up with U.S. stock-related questions this week as well. I guess the question no one ever wants to be asked is "Honey, should I buy GameStop (GME) ?" Attempts at domestic bliss aside, I have learned that sometimes the best response is "I don't know." I really don't know. I told her that Wednesday, and I am telling the rest of the Web-enabled world in this column today.
There is some weird stuff going on up in here. This week's action in GME, among others, is even more evidence that the markets are easily manipulated. They always were, but I can't think of a more guilty troika than Jerome Powell, Robinhood and the newly named Treasury Secretary Janet Yellen.
It's their fault. This is what free money hath wrought.
It is not pleasant to look at and it gives my industry -- the only one I have ever known since I was a 15-year old bike riding intern in the financial Mecca of Lebanon, Penn. -- a bad name. You know what? We deserve it.
But this is a product of zero-interest rate policies, and now the scalps are hitting the wall. TD Ameritrade has "limited" trading in GME (andAMC Entertainment (AMC) ) and they won't be the last names to lose trading liquidity. The speculative frenzy that has driven this market -- again, aided and abetted by Powell, Mnuchin, Yellen, and pretty much everyone in D.C. other than Paul Volcker (who died in 2019) -- is not about to go away. The genie is out of the bottle. The beast has been unleashed.
As Toby Keith sang (he was actually talking about adjacent bars in Nashville) "Well, there's Winners and there's Losers." That's the thing. I don't feel bad for the losers at all. I had never heard of Melvin Capital before the other day, and I really don't care if they and other hedge funds go broke. Leverage is a very, very, dangerous drug.
But so is the media. And the mess that is our U.S. media in 2021 unfortunately extends to the financial media. They give platform to the likes of Andrew Left at Citron, thereby making ordinary folks think he has some special knowledge or that he is running a large firm (he's not) and, most gallingly, that we should pay attention to him. Erroneous on all counts.
We are all playing poker in this market and that's where the "tell'' comes in. Left used Twitter-owned social media channel Periscope to put out his sad song on GameStop. That was THREE HUNDRED points ago. But, as Marshall McLuhan said, the medium is the message.
I honestly have never been on Reddit in my life, so I can't offer an opinion on it or the ideas found there. But Twitter (TWTR) is an abomination, in my view.
So, that's the lesson here. Don't attempt to get investment ideas from Twitter. And, for goodness sake, deactivate your account. It takes 30 days for full deactivation to occur after the initial request -- my Emancipation Day will be Feb. 6 -- but it is worth it to be free from idiotic comments.
But Twitter isn't causing GME to go crazy -- and platforms like TD Ameritrade to restrict trading in it -- it is simply our two old friends: Fear and Greed. These two have ruled Wall Street from the days trading actually took place on the Street (that's really the history of the now-defunct "Curb," the AmEx, not the NYSE) and they are not retiring any time soon.
So then, buy companies with strong fundamentals, solid balance sheets, and leave the crazy kids' stuff to...the crazy kids. It's never boring, but when folks who aren't regular players start to enter the game, that's when people get hurt. Don't get hurt. Ever.