A Closer Look … Stocks-Inexperience-Investors-Hedge Funds-Day Trading-

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!

Any ideas?

-A.N.

Supporting links

Bloomberg

CNBC Business

Business Insider

ENTREPRENEUR

A Closer Look

with Anthony Newcombe

Topic: The most important characteristics of an entrepreneur

Area: The impact of parents’ words on their children

en·tre·pre·neur /ˌäntrəprəˈnər,ˌäntrəprəˈno͝o(ə)r/

noun: entrepreneur; plural noun: entrepreneurs

a person who organizes and operates a business or businesses, taking on greater than normal financial risks in order to do so.

(credit: Oxford Languages)

Entrepreneur (my definition) – An entrepreneur represents many key elements wrapped into one. First and foremost, he or she must be a born leader, a person who yearns to be the most responsible party in any business decision to be made.

Characteristics of an entrepreneur

An entrepreneur is creative, highly intelligent, and motivated to succeed at a level greater than the typical wage earner. He or she understands that decision – or indecision – could mean the difference between a great idea becoming a great product, service, or organization – or just simply one of many “brainstormed ideas” that go nowhere.

Understanding …

An entrepreneur understands that he or she needs a roadmap to success. By creating a comprehensive plan of attack, the entrepreneur will now be able to take educated and informed risks because all options have been weighed prior to committing one way or another. Once all the possible angles have been carefully thought out, he or she will have shifted the odds of success as much as possible in his or her favor and will know that the time has come to seize an opportunity.

Fantasyland

by Kurt Andersen, pub. 2017, pp. 440

Fantasyland: How America Went Haywire: A 500-Year History

What I learned from this book

I learned that no matter what your political affiliation, your viewpoint on whether we, as Americans in 2018, are in a good place or a bad one, safe or dangerous – there is in fact a 500-year documented history that we can break down that may assist in explaining it all. Once we can divide it into smaller, more digestible pieces – perhaps we can then figure out the best way forward. Only time will tell.

Conspiracy of Fools by – Kurt Eichenwald, 675 pgs.

What I found most amazing about this book

It was interesting to revisit the new millennium – a time when the U.S.A.’s company heads were spending like drunken sailors, startups were hideously overvalued and debt- laden without revenues, and the world appeared to be at everyone’s feet. This was termed the dot com boom days. Of course, it didn’t last. Nothing this hedonistic could have lasted long. Within a few years of 2000, most were brought to a grinding halt – as a result of economically unwise strategies and reckless errors.

It is now 2017 and history appears to be repeating itself. Despite the fact that we recently experienced two economic crises – the dot com bust in 2000-02, AND the Great Recession in 2008-09 – we have yet to fully learn from the error of our ways. What should have changed our ways permanently seems to have eluded us in favor of more greed and arrogance. For the most part, our collective capitalist memories seem to have been wiped clean after each recovery – only to repeat similar (and sometimes worse) actions in later years.

We should try harder to never forget that we are not the only economic empire to ever exist in history. It’s so easy to become complacent with the belief that we can always “pull through the next one.” I guess we’ll only truly realize this when we experience the event that becomes too catastrophic from which to recover. At any rate, this book is a great reminder of what happens to those who operate without thinking about the consequences of their actions.

What I DIDN’T like about this book

I liked pretty much everything about this book. I think it was interesting, well researched and a smooth read.

Whom would I recommend to read this book

This book is a great read for any adult who has an interest in learning about the true story of a seemingly normal Fortune 50 company which was hijacked by corporate greed and steered into destruction. It’s easy to forget about all of the family members of every employee who are affected by such incompetence and selfishness. Retirement accounts are squandered, college plans vaporize and innocent futures are never the same again. This is all the result of self-inflicted wounds and the inability to stop deviant behavior despite combined years of executive education and experience. By not having (or choosing to circumvent) a system of “checks and balances,” it is easy to get so many people (innocent and not so innocent) become ensnared in a colossal and deadly spiral.

Any thoughts?