“It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” - Mark Twain
February is derived from the Latin word februum (purification). For me, purification of mind … losing wrongheaded beliefs … is a daily objective. Fortunately, my job allows time to feast on a buffet of quality inputs. But what about the worker bees who toil away from dawn to dusk, shuttle kids from here to there, hit the stores, walk the dog, and are worn out by day’s end? For many, MacDonald’s is often the dinner plan because it’s quick, easy, and satisfying. However, too many trips to MacDonald’s can lead to negative outcomes down the road. Same thing with media consumption. Watching cable news or checking Facebook is so much easier than, say, reading The Economist. And listening to someone who reinforces one’s beliefs is always satisfying. Sadly, unhealthy media diets contributed to our country’s heart attack on January 6th - the Duck Dynasty ransacking of our Capitol Building. Looks like those ‘capital ideas’ to invade the Capitol Building have led to capital offenses, as the QAnon Shaman (here) has come to realize.
I mention all this because I had my own ‘QAnon’ experience twenty years ago. I was a true believer in my firm and its telecom analyst, Jack Grubman. In 1999, Grubman was crowned ‘The King of Telecom’, and was the highest-paid analyst on Wall Street. In 2002, he was fired and banned from the industry for producing misleading research. Having been financially hammered due to my misguided beliefs, I vowed to never again drink ideological Kool-Aid or be played by a con artist.
Today, I wonder about the people participating in QAnon-like markets. Money flows into various index funds with no regard for fundamentals or pricing. Thanks to microscopic interest rates, many believe ‘there is no alternative’ to stocks, that the market only goes up, and that the Fed will backstop any market drawdowns. Tesla, the barely-profitable electric vehicle company, now has a value greater than the next seven auto companies … combined (here). Bitcoin, the Yo-Yo cryptocurrency, was up over 400% last year. People are throwing money at SPACs (Special-Purpose Acquisition Companies), which are nothing more than investment companies with ‘smart guys’ promising to do ‘something’ with the money … investments ‘yet to be determined’. Shares of GameStop, the brick-and-mortar video games retailer, were up over 1,700% in January, thanks to basement-dwelling day traders’ full-on blitz of professional short sellers. One wonders … what comes next? At this time, I caution against putting on a Viking helmet and running amok with these rowdy crowds.
Happy February. Mahomes v. Brady should be a classic.
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Any opinions are those of James Aldendifer and not necessarily those of RJFS or Raymond James. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. Investing involves risk and you may incur a profit or loss regardless of strategy selected.
