Weekend reading: to a millionaire and back again

What caught my eye this week.

I know we only recently revisited the meme stock mania of 2021, when I reviewed the Netflix documentary Eat the Rich.

But there’s no better post to flag up today than Alexander Hurst’s epic variation on the theme in the Guardian this week.

The title – How I turned $15,000 into $1.2m during the pandemic – then lost it all – sets the stage.

But there’s more than just ‘loss porn’ to Hurst’s account, as we’re shown how suddenly coming into money warps your thinking:

I stopped searching for 50 sq meter one-bedroom apartments in central Paris and instead started browsing €1.5m lofts with rooftop terraces, or scrolling through Sotheby’s listings in French Polynesia, drooling over a small private island I could buy for $890,000 – as in, I could actually buy it.

It wasn’t hard to rationalize it. After all, my Amherst classmates had grown up going to vacation homes and boarding schools, and were destined to inherit large transfers of property or investment wealth.

I would not; instead, I felt the impending burden of my parents’ underfunded retirement accounts looming.

The piece really spoke to me: Hurst feels like a brother from another mother who went down a rabbit hole I avoided only by being born 20 years earlier.

And it takes guts to admit to such losses – and the truths that lie behind them – in public.

As my co-blogger wrote when he revisited the bursting of the 2021 bubble:

The market mints winners and losers every day.

The tricky bit is that failure is silent, while success is noisy.

Generally that’s true – but this time has been different.

The Reddit traders paraded their successes and failures very publicly throughout their epic bender.

Maybe that’s why this time we’ve been given an account of the morning after.

The first trillion is the hardest

Notes from the meme stock boom are not easy reading for the squeamish, what with all the leverage and the roll call of trading tools like options and shorts – as well as plenty of obscure small cap stocks.

But the truth is you can lose a lot of money just fine with everyday investing into some of the biggest companies in the world.

As Ben Carlson says over at A Wealth of Common Sense this week in recounting the fall from grace of Meta (nee Facebook):

I’m not trying to pour salt in the wound here for people who own these stocks.

This is just a not-so-gentle reminder that stock picking is extremely difficult, even over the long run and even for best-of-breed corporations.

On the way up you kick yourself for not investing in name-brand companies with stellar stock performance.

Then when they inevitably crash you begin to wonder if those gains are ever going to return.

For those who don’t follow the market with a magnifying glass like me and Ben, this chart shows how Meta has left the trillion-dollar market cap club:

Despite being one of the most successful and profitable companies of all-time, Meta has now been beaten by a diversified index fund over the past decade.

For love not money

When I used to write more about my naughty active investing – that stands in such contrast to the Monevator house view and the wise posts of my co-blogger – I was sometimes accused of hypocrisy.

Why was I telling people they should invest in boring index funds, when I do something completely different?

Was I keeping all the good stuff to myself? Did I think I was better than everyone else?

That sort of thing.

Follow that link to learn more about why I’m still a stock-picker and an active trader, for my sins.

But let’s be clear about one thing.

I haven’t increasingly told people over the years that they’ll almost certainly do better with index funds despite my being an active investor.

On the contrary, I know all the market’s capricious whims. The agonies and ecstasies, as Ben puts it.

And I say you’ll almost certainly have a more pleasant life if you invest passively because of my experiences as an active investor!

Enjoy the weekend, and the many great links below.

From Monevator

How to choose a bond fund – Monevator

Worst job in the world: Bank of England governor – Monevator

From the archive-ator: 101 ways to save money – Monevator

News

Note: Some links are Google search results – in PC/desktop view click through to read the article. Try privacy/incognito mode to avoid cookies. Consider subscribing to sites you visit a lot.

House prices will fall 10% in 2023, according to estate agent Savills – This Is Money

How will the Bank of England’s hike to 3% interest rates affect you? – BBC

BoE tells investors to rein in excessive expectations for rate hikes – Bloomberg

UK private wealth portfolios down by up to a third [Search result]FT

The over-50s leaving the UK labour force – Guardian

Products and services

Vanguard to explore giving more voting power to index fund investors – Pensions & Investments

UK pensions: it’s easy to cut fees [Featuring a handy link to Monevator]Guardian

The lucky customers being paid to use power this winter – This Is Money

Which shops offer the best value lunchtime meal deals? – Which

Open a SIPP with Interactive Investor and pay no SIPP fee for six months. Terms apply – Interactive Investor

Britain’s biggest energy suppliers to offer discounts for off-peak usage – Guardian

Falls in UK mortgage rates predicted as BoE signals dovish outlook [Search result]FT

What to do if you need to remortgage – Which

Homes for sale in conservation areas, in pictures – Guardian

Comment and opinion

The present defines the past – Of Dollars and Data

News you can’t use – Humble Dollar

George Soros: issuing perpetual bonds would show that Sunak is serious [Search result]FT

How to combine annuities and drawdown to maximise retirement income – This Is Money

Morgan Housel: little rules about big things [Podcast]Morningstar

Why Americans don’t feel crushed by this year’s big bear market – The Irrelevant Investor

The capital allocation approach to household budgeting – Humble Dollar

Why rough edges in financial markets remain – Abnormal Returns

Breaking the cycle of financial shame – Morningstar

Building a risk-free 4.36% paying 30-year withdrawal portfolio with US TIPS [US but interesting]Alan Roth

At the company retreat – Indeedably

Spending money mini-special

The money value of time – Young Money

J.D. Roth: money won’t magically fix all your problems – The Fioneers

Minimalism, ‘lagom’, and critical consumption – Money With Katie

Naughty corner: Active antics

The power of not having a view – Behavioural Investment

Revisiting the case against value – Validea

There’s only one problem with low-volatility portfolios: the price – Advisor Perspectives

Armageddon or time to get back in? – Investing Caffeine

Covid corner

Scientists have their eyes on several ‘Deltacron’ crossover Covid variants – Fortune

Kindle book bargains

No Rules: Netflix and the Culture of Reinvention by Reed Hastings – £1.99 on Kindle

How Will You Measure Your Life? by Clayton Christensen – £0.99 on Kindle

Why the Germans Do it Better: Notes From a Grown-up Country by Peter Kampfner – £1.19 on Kindle

Your Next Five Moves: Master the Art of Business Strategy by Patrick Bet-David – £0.99 on Kindle

AI image generators mini-special

Art will persist, but the old artists will be rendered into Soylent – Wired

The golden age of AI-generated art is here. It’s weird [Search result]FT

Environmental factors

Europe’s climate is warming at twice the global average, says WMO report – Guardian

Beyond catastrophe: a new climate reality is coming… – New York Times

…but UN chief warns of doom without an historic climate pact – Guardian

Off our beat

Brexit: why did it all go to pieces? – Prospect

Troll posts on Twitter decline markedly on Russian public holidays – Klement on Investing

How do you make the perfect toy? – The Walrus

Cumulative versus cyclical knowledge – Morgan Housel

The surprising science between better relationships – Next Big Idea Club

Ballerina music box – Fortunes and Frictions

And finally…

“A world equity index tracker is the only equity investment a rational investor ever needs to own.”
– Lars Kroijer, Investing Demystified

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