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For all the angst and bickering brought about by the market moves of the past week—longs vs. shorts! hedge funds vs. retail investors! Robinhood vs….Congress!?—I am left with one overwhelming feeling: bullish.
After all, consider what made the GameStop short squeeze possible in the first place. Namely, so many individuals had so much money in their pockets that they were willing to employ what’s known as the you-only-live-once investing strategy, as in, “YOLOing entire ROTH IRA balance into GME,” in the words of one Redditor.
Remember the bear market of 2020 that lasted all of a couple weeks? Me neither. But it seems like it was enough of a reset that, after years of worry that the post-2008 bull market was wearing on too long, investors seem to think this new bull is just warming up.
You’ve heard of the K-shaped recovery, which has tacked on more than $1 trillion to billionaires’ net worth during the COVID crisis. It’s also made non-billionaires who can afford to buy stocks much richer, and turned many an average Joe into millionaires. Racking up stock profits has gotten so easy, professional options traders are celebrating their ability to make “free money.” (And we haven’t even gotten to crypto yet.)
Besides, many of the people who have recently piled into stocks—some taking their stimulus checks straight to Robinhood—don’t subscribe to the school of value investing a la Ben Graham and Warren Buffett (whose Berkshire Hathaway, by the way, has woefully lagged even the Dow for the past several years). These new traders follow the school of BTFD, or buy the f***ing dip. Take a friend of mine, for example, an engineer at one of the top five tech companies. In mid-March, he poured his savings into Tesla when it swiftly lost half its value at the start of the pandemic. He’s spent the past few months on a beach in Hawaii.
As I recently wrote, in the new issue of Fortune, “If you want to make money in today’s market, why own anything but technology stocks?” (I was only discussing traditional assets; my colleague Robert Hackett tackled the question of whether you should add Bitcoin to your portfolio. Frankly, it seems like a pretty good bet too.)
Indeed, what makes these risky investments particularly appealing now is there’s almost nothing else to buy. With Fed interest rates remaining at roughly zero for the foreseeable future, bonds would be a mistake—as they have been basically since the last recession, assuming you wanted to make money. The PIMCO Total Return fund, long a go-to investment for responsibly cautious investors, has over the past decade averaged returns of just 4% a year. You would have made more money by using that money to buy a modest house, as the median American home has appreciated more than that over that timeframe. It’s not even worth comparing that paltry performance to stocks or cryptocurrency.
“That is literally one guy buying a car, and the other guy is going, I don’t have a car,” says Dan Chung, CEO and chief investment officer of asset manager Alger, who generally doesn’t recommend anything but stocks to people younger than his 91-year-old mom. Warning against bonds, he tells me, “My point is, people are literally going to become poor that way.”
As I joked to a colleague the other day, “The new rule of markets is stonks only go up.” I exaggerate. But the r/wallstreetbets rally is more proof that the market may have become too bullish to short. Last week, Andrew Left, the famed short-seller behind Citron Research known for his market-moving reports, said he would stop publishing bearish calls and “pivot” to just bullish recommendations, citing “the changing dynamics in the market.” Betting against stocks has gotten harder, Left said, noting his losses on GameStop as well as marijuana stock Tilray some years earlier. “With that, we’ll become more judicious when it comes to shorting stocks,” he said. As for going long? “We have some great ideas,” he added.
If you think this essay is the sign of the market top, who cares? I mean, YOLO.
Jen Wieczner
DECENTRALIZED NEWS
Credits
Gemini adds high-interest crypto savings accounts ... CalPERS ups its stake in Bitcoin miner RIOT ... Visa and Anchorage build Bitcoin API for banks ... Hashmask digital art craze sweeps Ethereum ... Ant Group made a $2.3 billion quarterly profit before CCP crackdown ... Robinhood's IPO can't come too soon ... Clubhouse says it will make money from subscriptions ... Brazil's Nubank hits $25B valuation ... Black-owned challenger bank Greenwood Financial hits 500,000 signups in first 100 days ... The story of Argentina's forgotten crypto headquarters.
Debits
Robinhood competitors like WeBull are ready to exploit bad press ... Hedge fund titans lose big in GameStop short squeeze ... British regulators take aim at 'buy now-pay later' ... Slavoj Žižek says WallStreetBets is 'corruption for everybody' ... Cuts leave IBM Blockchain a shell of its former self ... SEC moves against alleged crypto scams promoted by Steven Seagal ... Blockchain impresario Justin Sun loses big on GameStop ... The failed quest to recover Mt. Gox's lost Bitcoin.
BALANCING THE LEDGER
"My heart is with the people; My wallet is with Steve Cohen."
That probably sums up the sentiments of many Wall Street pros over the last week or two, but leave it to The Mooch to say it out loud. Anthony Scaramucci joined The Ledger's Jen Wieczner and Jeff John Roberts to discuss his firm Skybridge Capital's new Bitcoin fund (he calls a $100,000 target for 2021) and GameStop warfare. Cohen, whose hedge fund lost big on $GME shorts, is a "personal friend," says Scaramucci, and manages some of Skybridge's funds.
The Mooch is also, we learned, enjoying Kings of Crypto, the new book on Coinbase by The Ledger's Jeff John Roberts. It's a must-read ahead of the exchange's impending public market debut.
BUBBLE-O-METER
$1,564
The new all-time high for Ether (ETH), set early Wednesday EST. Between DeFi, NFTs, and the broader boom in speculation, it's been a very strong year for Ethereum, which sat at $188 early last February.
FOMO NO MO
Being a top donor didn’t bring any particular perks, never mind an ambassadorship. For his money, Bankman-Fried took part in a single Zoom event, at which 20 people who didn’t know one another listened to speeches and took awkwardly timed stabs at asking questions.
From a New York Magazine profile of Sam Bankman-Fried, the 28 year-old CEO of cryptocurrency investing firm Alameda Research. Bankman-Fried is a billionaire several times over, thanks largely to a 2018 arbitrage opportunity between American and Japanese Bitcoin prices. In 2020, he became one of the largest donors to the Biden election effort, donating $5 million to the campaign and other groups. As the profile details, Bankman-Fried is not particularly engaged with electoral politics, but is a dedicated adherent of Effective Altruism, a movement that promotes earning money, and then donating it, as a way to change the world.
THE LEDGER'S LATEST
The real story behind Robinhood’s decision to restrict GameStop trading—and that 4 a.m. call to put up $3 billion - Jeff John Roberts
Robinhood says it 'wasn't trying to help hedge funds' - Lance Lambert
Robinhood faces class action suit over GameStop halt - Jeff John Roberts
Restructuring could tank Ant Group's value by 50% - Naomi Xu Elegant
Bitcoin surges 20% on Elon Musk tweet - Robert Hackett
Coinbase to go public through direct listing, with a possible valuation of $50B - Jeff John Roberts
GameStop wasn't the only $GME to go wild - Grady McGregor
M&T Bank CEO René Jones on building the next generation of Black CEOs - Phil Wahba
Reddit users say they're not behind the silver squeeze - Chris Morris
'Security Tokens' could fix the problems highlighted by GameStop - Graeme Moore (Commentary)
MEMES AND MUMBLES
This edition of The Ledger was curated by David Z. Morris. Contact him at david.morris@fortune.com
