Investments

Weekend reading: The sci-fi stock market – Monevator

What caught my eye this week.

The sky above the port was the color of television, tuned to a dead channel.

So runs the first sentence of William Gibson’s Neuromancer, a book I first read as an 11-year-old and have judged technology against ever since.

As one of the first few thousand people in the UK to encounter the ‘World Wide Web’ in the very early 1990s, I half-saw Neuromancer becoming half-true.

Admittedly I wasn’t sliding through coloured shards of anti-viral software in a 3D manifestation of hyperspace.

But I was chatting to equally astonished kids in faraway Hyderabad. And I had an alternate life as a Dwarven catburgler in a multiplayer text-based MUD.

It was the shape of things to come.

All together now

To be honest, I’ve not re-read Neuromancer for 20 years. Which is probably why reality seems to be catching up, regardless of what Gibson actually wrote.

For example, I remember a scene in which a flash mob is summoned as some kind of tactical distraction, and the attendant street punks and ne’er-do-wells cause mass chaos both on the ground (or in ‘meatspace’, as the cyberpunks called it) and across various digital venues.

I’m not sure this scene takes place. Thinking about it now, I suspect it might have been in one of the sequels.

But it certainly should have been in an early Gibson novel, because the man was a visionary about the unintended consequences of hooking humanity up to – and together with – technology, and those consequences are running amok in the stock market today.

Now showing

How else to explain the loony activity we now routinely see in the stock market each week?

The latest was a re-run of the Gamestop drama from earlier this year, only the meme stock in the spotlight this time was US cinema chain AMC.

Shares in the hitherto struggling operator doubled in a day. At one point it was up around 30-fold for the year. A giant push by retail traders from Reddit (and piling-in professionals) took the market cap to $30 billion.

Showing a commendable nimbleness at getting with the program, AMC management first wooed its new small owners with free popcorn. It then (rightly) dumped a load of new shares on the market to raise hundreds of millions of dollars the next day.

So AMC’s future (though not its sky-high valuation) looks assured for now. All without a corporate restructuring or a tense boardroom meeting with bankers on Wall Street in sight.

In some corners of the market, this is how the game is played these days.

It’s fake it until you make it on a corporate scale.

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It makes me feel old, if I’m honest. As Ben Carlson writes on his blog:

The strange thing about this meme stock saga is we have and have not seen this movie before.

Yes, speculation is as old as the hills and that part of the markets will never go away.

But this is also very different from past excess.

This isn’t some hot new innovation people are bidding up in hopes it becomes the next big thing. This is a company people know is not worth its current value. No one is even pretending that’s true.

This is the internet bleeding into the markets in a big way. It’s a coordinated viral meme working its way through the stock market.

Ben nails it here. Like him, I believe the frictionless physics of the Internet has found its real-world proxy in the shadow theater of the financial markets, and the Internet-raised youngsters are having a field day.

And so, increasingly, are the professionals. Hedge funds struggling to gain alpha in the mostly-efficient market must see excess irrationality to be gorged upon in these recurring bouts of zania.

As Michael Batnick puts it:

Small money might have lit the match, but big money is pouring gasoline on the fire.

Indeed while it’s still tempting to dismiss the meme stock pops and flops as an short-term consequence of bored lockdown trading, we can also see the outlines of how history will remember this era in wider market trends.

For another incarnation of the zeitgeist, see the SPAC boom in the US. That’s seen hundreds of companies raise many, many billions for what are euphemistically called ‘blank cheque companies’.

You might argue there’s a legitimate case to take companies public this way, especially if you’re one of the key promoters who got unfathomably wealthy from mad fad.

But that doesn’t explain SPAC’s sudden explosion in popularity. Cheap money and this Fake It ‘Til The Market Makes It mindset does.

Then of course there’s crypto, and Elon Musk sending Bitcoin hither and thither with a Tweet. Once an outlandish outsider, Musk’s antics over the past few years are starting to seem like they were the shape of things to come, like a Shane Warne or John McEnroe of the markets.

Retire to a quiet room

Some old hands see a return to normality with crypto recently crashing, SPAC enthusiasm dying down, and the price of the frothier tech shares also falling.

Well maybe.

Short of the punchbowl suddenly getting yanked by either the markets or by Central Banks, I suspect Josh Brown may be more on the money in a brilliant essay for Fortune:

Jerry’s not on Twitter. He’s tired of hearing about all the rhetorical twists and turns on the app that are constantly pushing his stocks around.

Sports commentators and actors turned venture capitalists are causing gyrations in the value of his retirement portfolio with their online antics.

Remember when stocks traded on fundamentals? Or at least they traded based on people’s perceptions of the fundamentals. What do they trade on today? It was always a popularity contest. Now it’s a three-ring circus.

It makes no sense. Jerry is tired.

Upstairs there’s a burst of excitement, the sound of a young man cheering. It’s Jerry’s kid, Aiden.

Aiden’s been out of school for years. He’s making as much as Jerry did 30 years ago.

Josh says your father’s stock market is never coming back.

I wonder if it’s all another sign that William Gibson’s surreal sci-fi future is rushing forward.

We’ll see.

Have a great weekend everyone. Fingers crossed for 21 June, eh?

From Monevator

Managing an investment portfolio: how to keep it on track – Monevator

Learning Cantonese and learning investing – Monevator

From the archive-ator: Understanding the low interest rate era – Monevator

News

Note: Some links are Google search results – in PC/desktop view you can click to read the piece without being a paid subscriber. Try privacy/incognito mode to avoid cookies. Consider subscribing if you read them a lot!

First-time buyers in England offered homes at up to 50%-off – Guardian

UK house prices jump by 10.9%, the fastest in seven years – Reuters

Brexit-supporting Wetherspoons’ boss wants more EU migration – Sky News

G7 nations confident of reaching a global tech tax deal – BBC

US adds 559,000 jobs in May as fears of hiring slowdown fade – Guardian

Crypto mining booms on subsidised energy in Argentina – MSN

A bet on emerging market outperformance is a bet against the US dollar – Factor Research

Products and services

Employer perks you could be missing out on – ThisIsMoney

We both get £50 to invest at Seedrs if you sign-up via my link and invest £500 in 30 days – Seedrs

Clone investment scams: what are they and how to spot them – Hargreaves Lansdown

It’s time to lock into a cheap fixed-rate mortgage – ThisIsMoney

Could you get a better savings rate from a bank you’ve never heard of? – Which

Sign-up to Freetrade via my link and we can both get a free share worth between £3 and £200 – Freetrade

By 2024 just 7% of shop payments will be in cash, predicts report – Guardian

Why advisers are moving towards retainer-based fees – Think Advisor

Homes for sale for flexible workers, in pictures – Guardian

Comment and opinion

In defence of buy-to-let landlords [Search result]FT

Three types of enough – Calibrating Capital

Couples need £26,000 a year to be content in retirement – Which

Is $1 million still worth $1 million? – Of Dollars and Data

Too frugal for me – Humble Dollar

A bear case for future stock market returns – Banker on Fire

How inverted thinking can improve your investing – Acorns

Natural selection favours index funds – A Teachable Moment

It’s a weird time to be an investor – Abnormal Returns

Now that’s what I call financial independence: 26 – The Escape Artist

Naughty corner: Active antics

Tobacco and defense sectors offer shelter from inflation – Fortune Financial

Stocks, bonds, bills, and inflation [PDF; a feast of US data]CFA Institute

John Lee: a dark year has been kind to my portfolio [Search result]FT

Permanent capital: the Holy Grail of private markets – Enterprising Investor

Covid corner

Covid infections rise by two-thirds in a week in the UK – BBC

US now says the Pfizer vaccine can be stored in a standard fridge for a month – Yahoo

“I’m not too scared to reenter society. I’m just not sure I want to.”The Atlantic

Covid long-haulers continue to baffle doctors – Bloomberg via MSN

Vaccine lotteries are sad, but also perfect – The Atlantic

Evidence of Covid lab leak would have been destroyed, says ex-MI5 boss – Sky News

We have bigger problems than Covid-19’s origins – The Verge

Kindle book bargains

(Don’t have a Kindle? Buy one – they’re great and save a ton of space!)

Liars Poker by Michael Lewis – £0.99 on Kindle

Business Adventures: Twelve Classic Tales from the World of Wall Street by John Brooks – £0.99 on Kindle

Legacy by James Kerr – £0.99 on Kindle

Think and Grow Rich by Napoleon Hill – £0.99 on Kindle

Environmental factors

President Biden to suspend Trump’s Arctic drilling leases – BBC

Socially responsible funds do not deliver excess returns – Advisor Perspectives

World at risk of hitting temperature limit within next five years – BBC

Off our beat

Answering the call – Humble Dollar

Why quirky people are attractive – BBC

Number of smokers hits an all-time high of 1.1 billion – Guardian

America has a drinking problem [Interesting history of booze]The Atlantic

From Hartlepool to the hangman: the flag-wavers now running the Tory Party could take Britain back to the gallows – Prospect

The massacre of Tulsa’s ‘Black Wall Street’ – Vox

Cultivating the art of noticing in the age of scrolling – Literary Hub

A long lead time – Seth Godin

And finally…

“Never buy anything from someone who is out of breath.”
– Burton Malkiel, A Random Walk Down Wall Street

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