This GameStop thing?
Frankly, I've lost track of what stage of grief I'm up to.
No, I'm not crying for the short-sellers who made their beds (and their bets) and now have to lie in them.
No, I'm not crying for the reddit crowd who like some self-styled (cough) Robin Hoods (cough), were trying to stick it to The Man, while simultaneously making The (same) Man, in a different guise, rich – and who lost 60% of their investment overnight.
No, I'm not crying for the brokers who are having to raise billions of dollars just to make sure they stay solvent as this palava plays out.
No, I'm not crying for the regulators, who somehow – even in the shadow of the GFC – had no problem (or just no solution) for 140% of a company's shares apparently being sold short.
The grief I'm feeling is rooted in the fact that this whole shemozzle was so bloody avoidable.
The grief I'm feeling is that 'investing' is being caught up in this modern day speculative mania.
The grief I'm feeling is that the stock market – one of the world's best inventions, which has powered innovation for centuries – is being used as a casino.
The grief I'm feeling is that any normal person could have told you the whole thing was – is – nuts.
Here's the thing: I know of no other profession, pursuit or preoccupation so determined to ignore the lessons of history.
We have case study after case study of dumb risks being taken.
Speculation going badly.
Money being lost.
There are books and books of quotes, warnings and examples.
You don't even need to be that old, to have heard or seen the stories – first hand – about what could go wrong.
"The markets can remain irrational longer than you can remain solvent." – John Maynard Keynes
"Only when the tide goes out do you discover who's been swimming naked." – Warren Buffett
"I can calculate the movement of stars, but not the madness of men." – Sir Isaac Newton
"If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy." – Warren Buffett
I could go on.
And the examples:
The GFC, when counterparty risk was exposed for the enormous threat it is.
The Poseidon boom.
Long Term Capital Management, the hedge fund that was home to literally a dozen Nobel Prize winners… and still went broke when the computer models themselves broke.
The dot.com boom, when business models were old hat, and billions were being punted on little more than 'eyeballs on a website'.
Every. Speculative. Mania. Ever.
Seriously, if this was any other industry, and the participants failed so spectacularly to include the lessons of history in their work, they'd be out of a job before you reach the end of this article.
Can you imagine a doctor, in 2021, grabbing leeches and a garden saw on the way into the operating theatre?
Can you imagine a scientist starting with "Well, we know the Sun rotates around the Earth…"
Can you imagine a builder reinventing the recipe for bricks, and mortar, from scratch?
And yet, we have an industry – my industry – that seems to believe that history re-starts about once a decade and that anything before that isn't worth considering.
Is it ego? Probably. There's no shortage of it in finance.
Is it greed? Almost certainly. After all, the rewards for taking risks with other people's money are immense, and the risks (to you!) pale into insignificance next to the size of your potential bonus.
Stupidity? This time, no. People in finance are far from stupid. Often the smartest guys in the room. But did I mention Long Term Capital Management? IQ, unfortunately, is far from enough in this game.
Is it inexperience? Probably. Combined with the other three, above, it's far easier to imagine you're a genius and come up with a new 'can't lose' system than to spend time learning from history.
Is it hubris? Now we're on to something…
Actually, I think I've worked it out.
The finance industry is essentially analogous to a group of Year 9 boys.
See, my wife is a consultant and teacher. And she tells the story of every new group of Year 9 boys, who suddenly come up with the greatest set of excuses and behaviours, sure to get one over on the teacher.
Except, in their haste, they don't seem to be able to conceive that last year's Year 9 did exactly the same thing, also ignorant of the group before them.
And the group before that.
Just because it's new to them, their developing brains just don't seem to realise that other people have seen it all before.
If only they'd thought to ask.
God only knows how long this GameStop thing has to go.
But here's what I know:
First, Wall Street, far from being 'beaten', will find a new way to win this sort of game.
Second, the losers are likely to be the poor schmucks who either don't see the bigger picture, are blinded by the 'story' of beating Wall Street, or whose money is being managed by the few Wall Street losers who end up being the exception that proves the rule.
Third, this could have all been avoided if people stopped using the stock market as a casino.
And fourth… this will all happen again, around a decade from now.
So, I want to leave you with a way out.
It's very simple:
Don't try to beat Wall Street at it's own game.
Beat Wall Street by playing a different game!
This whole thing hasn't impacted my portfolio, at all. It hasn't impacted the companies I've recommended at Motley Fool Share Advisor nor any other Motley Fool services.
It only cost you money, if you decided to play the GameStop game. If you wanted to take extra risk. If you thought you could outsmart and outtrade the next guy. If you didn't learn the lessons of history.
I'm frustrated, on behalf of the many thousands who got sucked into this game.
Some of them will have been dragged away from sensible investing, for the promise of a quick buck. Others will have bought GameStop as their first foray into 'investing' – and some of them will likely never invest again after being burnt.
(And I'm frankly annoyed as hell at public figures who should have known better, but were actively egging on the crowd. It was irresponsible and reckless.)
But it hasn't cost me a zac. Nor has it changed how I invest, or what I invest in.
So I worry for others. I hope it hasn't put them off investing, or given them the wrong impression.
I hope it hasn't taught them the wrong lessons, or made them more likely to do silly things, in future.
I hope they can remember that it's the tortoise who wins, not the hare.
And that, in investing, fortune doesn't favour the (crazy) brave.
It overwhelmingly favours the patient.
At The Motley Fool, that's how we invest.
Fool on!
