Stocks Only Go Up (TN02)
Good Morning!
If we all trust the process, we can manifest a stock market that never goes down. Just… trust the process.
This Week
Fighting The Fed
This week’s roller coaster was bound to happen at some point. A few naive investors truly believed that the stock market could not drop because of the Fed’s backstop. These investors knew how much risk they were taking but thought that it wouldn’t backfire because, and I quote, “the stock market is the only viable option.” It is worrying when investors feel like they have no other options. It leads to people believing that there’s no price too high for assets as long as the Fed “promised” to provide liquidity. Another problem with this reasoning is that investors don’t have to listen to the Fed.
What happened this week was a show of defiance. So far, the bond markets had been trusting the Fed, but they’re starting to diverge. The bond market is forecasting higher inflation, but the Fed is trying to reassure that inflation shouldn’t be a problem. They’ve said that they don’t plan on raising interest rates till inflation is above 2%. Since we’ve been below 2%, they believe it’s ok for us to overshoot it for a bit. The question now is whether they’ll be pressured to raise their target from 2% to 3 or even 4% instead of increasing rates. My weekly recap video raises the question and explores how investors can position their portfolios to combat inflation.
BUZZ
Last week, I mentioned my interest in how social media and bots are starting to have a meaningful impact on markets. This week, Dave “Paper Hands” Portnoy launched BUZZ. It’s an ETF that tracks bullish sentiment from online sources such as social media, news articles, and blogs. It sounds like a recipe for disaster, but I was disappointed to find out that there were barely any meme stocks in the top ten holdings. No GameStop or AMC.
Non Fungible Tokens
A digital collector’s dream. NFTs are all the rage nowadays. On the surface, it looks like people are paying millions of dollars for freely available images on the internet (they are). But it isn’t that simple. I used to laugh at pokemon card collectors when I was in middle school, but they’re the ones laughing now. I’m not a collector myself, but I get it. The technology here goes beyond proof of ownership & authenticity. Check out this cool video I found on the topic.
Jack's Been Active
- TIDAL joins… Square? The acquisition made no sense to me. For the most part, it still doesn’t. I can see Twitter x TIDAL happening, but not Square.
Square is acquiring a majority ownership stake in TIDAL through a new joint venture, with the original artists becoming the second largest group of shareholders, and JAY-Z joining the Square board. Why would a music streaming company and a financial services company join forces?!
— jack (@jack) March 4, 2021
- Jack Dorsey is selling the first-ever tweet as an NFT. The highest bid as of writing is $2.5m.
Are We In A Bubble?
You won’t get an answer here, but I’m starting to notice some of the following patterns that worry me:
- Too much capital chasing too few opportunities
- “No price is too high” mentality.
- Crowd-think
- Investors getting defensive about positions and opinions.
- Reluctance to re-balance a position because it recently mooned
I’m not sure if we’re going to see a stock market crash soon. But as an investor, your portfolio should be positioned to benefit from the future. Yesterday’s winners aren’t guaranteed to continue their winning streak.
