Here’s a little advice to those involved in buying GameStop shares from someone who spent many years working in the investment markets and has managed large portfolios:
Congratulations on your success. Hedge fund managers and professional short sellers are the most despicable people on Wall Street. They’re jerks. They don’t care about you. They don’t care about your job. They don’t care about your family. They don’t care about your community. They only care about one thing – getting richer. I can’t stand them, you beat them, so I applaud your victory.
But, you got lucky.
You caught them asleep. That doesn’t make you a stock market genius.
Next time around, they’ll be waiting for you. They may be jerks, but they are pros. They are smarter than you about the markets to the nth factor. If you keep playing their game, you will lose.
So, if you are the kind of person who would challenge Roger Federer to a tennis match for money, for God’s sake, keep playing.
If you would challenge LeBron James to a one-on-one for money, for God’s sake, keep playing.
If you would challenge Steph Curry to a game of Horse for money, for God’s sake, keep playing.
And, if you would challenge Usain Bolt to a foot race for money, for God’s sake, keep playing.
You and your little army of friends executed a brilliant short-squeeze. Congratulations.
But you didn’t invent the move, so stop beating your chests. It’s been done thousands of times before, just to lesser degrees. They will adapt, just as they always have.
If you think it’s so easy that you can keep doing the same thing over and over; if you think you’ve unlocked the door to financial alchemy; if you think you can quit your job, buy a 27-room house and order the Ferrari of your dreams, this won’t end well for you.
It’s not worth losing your savings, your house, your car and maybe even your family over a case of unbridled and uncontrolled egotism.
So if you made some money, walk away happy. Don’t let it go to your head. The financial graveyards are filled with “instant geniuses.”
One final note from this over-the-hill boomer:
When the headlines and the economically incompetent news anchors loudly proclaim “Investors are loading up on XYZ,” what they should be saying is “Some investors are loading up on XYZ, while an equal number are dumping XYZ.” That’s right, it takes two to tango!
It’s an equation so simple, yet 98 percent or more of all players don’t recognize it. For every share of stock you buy, or for every Bitcoin you buy, someone else has to be selling it.
It’s simple, you can’t buy unless someone else is willing to sell, you can’t sell unless someone else is buying. Every day in the markets, the number of units bought has to equal the number of units sold.
So there is a second unnamed party to every trade you make, and that second party has a 180-degree opposite opinion compared to you – you think it’s a good buy, they think it’s a good sell, and vice-versa. Never get so cocky that you refuse to accept that the other guy may be smarter than you, or have better information.
So, who’s the other party? Chances are it’s a pro, or it could be the amateur unlicensed investment advisor on the internet who screams at you to buy, because secretly they want to sell.
How do pros make their fortunes? They beat up on amateurs. They’re ruthless, they don’t play fairly, but whining about it won’t get you your lost money back. Never lose sight of that.
OK, old guy, boomer out.
Larry Shepherd is a longtime collector and coin dealer, as the owner of SIMCO Numismatics. He also serves as the current convention manager of the Central States Numismatic Society. He has a degree in Finance and an extensive background in Economics and Investments, as well as being a Chartered Financial Analyst (CFA). Prior to his career in numismatics, he was a senior executive officer in two banks and co-CEO of an investment management firm. During the 1980s, he was a frequent author and conference speaker on the topic of financial deregulation. From 2008 through 2011, he served as executive director of the American Numismatic Association.
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