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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