The Roaring 20's

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"The economy is the start and the end of everything." - David Cameron

The Roaring 20's

Recent inflation numbers have me reflecting on all the wild things we have seen in the market over the last two years.

Look at the image above. None of those events are normal, which will make for a great story to tell my kids one day.

When I start to preach the ways of the market, and how quickly things can shift, these are the examples I am going to show him (or her).

Let's begin with what started this anarchy.

The Vid

Covid-19. The coronavirus that shut down the world, caused political chaos, killed thousands, and resulted in billions of dollars lost. For the first time in history the global supply chain was frozen, and that’s not even the craziest part. The rumors, speculation, secrecy, and frankly even lies surrounding the virus created an environment that had the entire world asking questions. For many of which the answers are still hidden.

This virus sparked the initial fall of the S&P 500. In less than one month the S&P recorded two of its biggest single-day drops in history. Before you could blink, the market was 30% below highs and investors were panicking.

The government then stepped in and decided to “make it rain.” Deposits of $1,200 per income tax filer in addition to $500 per child were sent out to households that qualified. After three rounds of this, the Fed had injected over $803 billion into the US economy.

Combine this injection with the push for online work and the perfect storm was created. The market began a face-ripping recovery. After just 6 months the S&P was back at all-time highs. Work from home stocks like Zoom, Shopify, and Square exploded by 500%.

Everything was going up, and I mean everything.

To The Moon

As we crossed into 2021 we experienced a market manipulation event that I’ll respect for years to come. Gamestop was a dying company. What was once a store that kids like myself begged their mom to go to, was being replaced by digital downloads and gaming subscriptions.

That’s when the Reddit forum “Wall Street Bets'' came to the rescue. They were, and still are, a community known for YOLO trades who pride themselves on going from rags to riches, back to rags.

It was brought to their attention that hedge funds had 71 million shares of Gamestop shorted, worth about $4.66 billion. I’m not going to explain the details of a short squeeze, but essentially Wall Street Bets led a charge of retail investors against the hedge funds by purchasing and holding shares of Gamestop. This caused the stock to rocket over 1,700% in a matter of days.

WTF is an NFT

And just when you think you’ve seen it all, welcome to the world of crypto and NFTs.

To summarize, a JPG image of a rock sold for over $2.6 million. This guy could of used a fraction of that to pay for my college, but no he wanted a picture of a blue rock.

Other NFT projects also saw their prices reach millions of dollars per JPG. On top of this, altcoin projects, staking, and yield farming strategies popped up claiming to earn investors hundreds of percent in returns just for holding coins.

At the same time, Bitcoin experienced an increase of over 500% while Ethereum gains topped 1,000%. Social media was filled with “Bitcoin to 100k” posts. Little did they know in just a few months they were going to be closer to 10k.

SPAC Pump

Move along, and we get into the world of SPACs. Short for Special Purpose Acquisition Companies, SPACs became the craze and started posting insane gains. Investors would invest in a SPAC based on pure speculation of which company was going to be brought public. It was nothing crazy to see 100%+ gains.

The boom or bust dream was alive and well.

Back To Reality

Now it seems we are seeing the fallout from the extreme bull mentality that dominated the last two years. What were once hot stocks, have now retreated to their pre-covid levels. Crypto has followed a similar down-trend, and thanks to 9% inflation (blame stimulus, blame Russia, blame Biden, blame your goldfish, either way, it’s high) we have seen interest rates continue to climb.

Investor sentiment has come back to earth. A number of those 500%+ stocks are now -90% from highs, and I couldn’t tell you the last time I heard about a SPAC deal.

And my unpopular opinion, I’m a fan of it.

Everything shouldn’t go up. As an investor, there is risk in anything you put your money into. It is accepted, and the price you pay to hopefully earn a return on your money. Nothing is guaranteed.

Being in an environment with regular gains of hundreds of percent isn’t healthy for the investor, and for sure isn’t healthy for the market. If you play the game long-term, you bank on consistency and the market repeating what it has done over the last 50 years. For that to happen, there must be stability.

To those who were saying it’s unstainable from the start, it’s easy to be the “I TOLD YOU SO" guy. But there is no point in that. Real people lost a lot of money, and sometimes learning the hard way is the best way to learn. Hell, I learned a few myself (still holding FSLY).

Conclusion

If you survived the last two years, congratulations.

I hope that those who were hurt don’t judge the market as a scam, but decide to explore the world of investing further, and realize the power of compound interest.

Looking back at 2020-2022 it was damn fun to be a part of, and it isn't over yet.

In terms of market excitement, it rivals any other time in history and will be a story I tell for years to come.

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Resources:

Simply Invest With ETFs - Learn the in’s and out’s of ETFs and why they are the simplest and most effective way to invest.

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Tweet Hunter - Automate your Twitter and build an account that will pay you $100 a week.

Personal Capital - Track all of your investments in one place.

Nothing in this email is intended to serve as financial advice. Do your own research. Thanks for reading, if you have any questions, comments, suggestions, etc. about the email send me a DM on twitter. See you soon!