with Anthony Newcombe
Some Causes of the Stock Market Volatility Craze
Topic: That ‘silly, crazy stock market’ this month
Categories: Economics, Financials, and Social Psychology
Between a rock and a hard place? You probably spent some of the past few weeks rummaging through the onslaught of news concerning the stock market. In just a few days, there were swings from single digits to over thousands of percentage gains. What is the most amazing part? Ironically, these public companies did absolutely NOTHING different to cause this phenomenon. In fact, some of the biggest debt funds pounced on this situation to dump old, crappy positions they had. This generated some outlandish profits (for those who could get out in time!)
However, for those who don’t own any stocks, I hear you. Who cares, right?! Well, the rest of us care. Unfortunately, it caught our attention instantly. This might be due to many of a certain age recall being caught up in this “spin cycle” very similar to this in our investing past. In fact, if your stomach didn’t roil a bit, and your brow didn’t raise, you must be a first-time trader. You have no scar tissue built up from previous downturns. You haven’t been burned…yet.
Moreover, if you recall in spring, 2001, there was a ton of hoopla regarding “surging dotcom stocks.” It seemed like you didn’t even need an ounce of ability to make profitable picks during that time. Just buy, buy, buy (Thanks, Jim Cramer!) Subsequently, there was a different kind of BOOM! There was a “crash-landing.” In little time, the markets tanked. Everyone ran for the hills, and many brokers ducked their calls. We were shirtless, stuck, and scared!
Nevertheless, I’m not naïve enough to think that the ‘dotcom bubble of 2001’ is anywhere near the same as the last two weeks have been. But I tell you, when you see some of the publicly traded stocks like GameStop (GME) and AMC Theaters (AMC), it forces a reflection moment. These stocks went from (practically) zero to amazing heights. Then, they returned to earth again in mere days. Unfortunately, it rhymes with some of our tortured past like 1987’s Black Monday, spring 2001, and September 2008. I agree, all had different characteristics. We won’t get into them all, but each created a form of sheer terror in the marketplace at the time!
Thankfully, at least for today, it seems like the storm has mostly passed. We’re back to the “old, regular froth” that we’ve become accustomed to from the past several fiscal years. We’ll just keep our chinstraps fastened, our eye on the ball, and continue onward, right? I mean, what else can we do? Happy investing, folks!