Three investors are active in the market at present:

1. Winners – Those who have made an absurd amount of money within a short period of time
2. Losers – Those who have lost an absurd amount of money within a short period
3. Outsiders: People who have neither gained nor lost significant amounts of money but took note of the group 1

All three groups are motivated to trade aggressively.

Winners have made a large amount of money very quickly and believe that they will continue making a large amount of money. Losers have lost a large amount of money and believe they will recover it. Losers want to be rich like Winners.

Winners looked effortless. They bought a JPEG at $500 and sold it at $200k. When the market crashed, they loaded Tesla call options. They bought a coin called a “dog coin” and it flew up to the moon.

The Winnersare divided into two groups. There are the gamers, who are aware that they are playing in a speculative manner and there are the believers. Gamers will most likely keep their gains. True believers are losers that haven’t yet lost.

Outsiders do not acknowledge losers even though the losers outnumber the winners by 10:1. Outsiders believe that Winners are able to make money easily (because some have), so they wish to follow suit.

Losers tried to buy the same things as winners, but bought the wrong products. Each Outsider was a Loser. They’re sure they’ll get the right product next time.

Now the losersand outsidersare envious that the winnersmade money so easily. The combination of jealousy and the promise to gain instant wealth is dangerous. A gas canister with FOMO and an open flame (more later).

Some Winners have made huge fortunes in a short time. These 1% success stories are able to convince the other 99% of losers and outsiders, that they too can become overnight successes.

What is the best thing about 2020? All three groups are free to trade from anywhere, whenever they choose.

Instant Access

You can trade stocks on your smartphone all day. After the markets have closed, you can start trading crypto. You log onto Twitter.com and find your timeline full of predictions about the crash in the markets, thoughts on the latest EV manufacturers IPO, and NFTs.

Financial speculation has never before been so easy to access. Today, there are trillions of dollars of liquidity that can be moved around on the markets at any time.

Markets were open from 9:30 to 4:00 Monday through Friday. You can now trade 24 hours a day. Even if you step away from the actual markets, the commentary will still be there. Twitter, Reddit and Discord have made it possible to combine entertainment and investing. You can join a Twitter group by buying certain stocks. Wallstreetbets rewards you with 20,000 karma for a massive loss. The latest SPAC merger is discussed in 10,000 chatrooms. Exclusive online communities are available to those who own multiple NFTs.

You can’t avoid investing, which is now a game of social interaction.

The FOMO catalyst

You log onto Twitter Dot Com and see that someone made $250k by buying Dogecoin. You check Reddit and see that the most popular post is a guy in a headband who turned $50k into 30 million dollars with a massive wager on GameStop. You think, ” Damn, I could’ve done that. Why didn’t i buy GameStop at $5 per share? Why did I not buy shares of Tesla/Penn/anyother company when the stock market crashed last year? Why didn’t I do XYZ? I won’t miss the next one .”

Why can’t YOU make the same kind of money as a random internet clown?

FOMO has taken over.

Investing –> Cheerleading

You don’t want to buy stocks for 10 years. Who cares? In today’s market, 10 weeks seems like an eternity. You want to earn your money and then parlay that into another investment. Keep compounding until “overnight” you become a millionaire. You read that ChargePoint, a manufacturer of EV charging stations, was going public via a SPAC. The price barely changed. Before any news broke, the price was $10.20. The price is still $11.40. You buy shares worth $50,000 at $11.40 because you can’t believe the market isn’t higher.

You see that other investors have already tweeted about $SBE. You do the same. Everyone should know about the industry’s leading charging company. The shovel and pick to the EV Gold Rush

Oh yeah. Oh yeah.

ChargePoint takes about a month to start climbing. It reaches $20. $25. $30. ChargePoint posts are exploding all over Twitter and Reddit.

Everyone is feeling ” ChargePoint to MOONNN!”

Stock prices are up and investors are ecstatic. The price going up is proof that they were correct! They got rich because they made an excellent investment!

But they didn’t. The company didn’t scale up to several billion dollars in revenue when EV expansion took hold. Profit margins didn’t increase as economies of size grew. Why did the price increase? Has the present value for future cash flows increased by 200% within a month?

The price jumped by 200%, probably because the Losers and Outsiders, who were mentioned earlier, had finally discovered the EV play. They wanted to get on the EV bandwagon. You were early and made a lot of money. Your profits were not related to the execution of the company. It’s been only a month.

You are wrong for the wrong reasons. Your stock shot to the moon because of hype. All of this is irrelevant as long as your stock sells for a profit. You sell. You sell. But you shouldn’t advertise it.

All they do is pump their bags

“Have Fun Staying Poor,”says anyone still holding the thing you just sold. This has become a rallying cry for crypto investors. It is the standard response when someone announces that they will be selling their stake. Why would anyone care what you decide to do with your money, I ask? Your money is yours. It would be nice to give advice to a friend who is making bad financial decisions. It doesn’t affect anyone else in any way if you sell your investment in any asset. It doesn’t.

Some asset prices are driven primarily by factors such as earnings, revenue growth and location (real estate). The price of many assets today is driven by two factors:

1. Hype
2. Promise

Hype

What’s the distinction between a JPEG worth $1.2 million (CryptoPunks), and a JPEG that is completely worthless (a screenshot from this newsletter)? CryptoPunks are thought to be worth something by many. What happens when interest dwindles? Price crash. NBA TopShot is a good memory. What is the first NFT wave?

What happens when interest rates drop?

Rug Pull

The value of many expensive assets has either increased dramatically or not at all. For example, an EV truck company that had $0 revenue two years ago was only worth $7 billion. The same EV truck manufacturer with $0 revenue is now worth $150 billion ).

Crypto is the obvious offender. Pay a C-list celeb to promote your project online and then dump it on retail. Create a Twitter thread that explains how Web3 is going to decentralize the world, and then link it back to a NFT.

What does this screen capture mean?

No.

What is the point?

Also, no.

You may think that some of the companies or technologies you have chosen will revolutionize everything.

I believe that many of these assets are solutions seeking problems.

What happens when the solutions do not solve problems? Other investors panic and sell when they lose interest.

All of them are the same: SPACs. Crypto, penny stocks. NFTs. Overpriced growth stock. Someone purchased something early. The internet spreads the word about this thing. The price of the asset skyrockets despite no change to its underlying asset. The price is now completely dependent on the interest. The net worth of people who have a large stake in these assets is directly related to the hype surrounding their investment. It’s no wonder that “seller bullying”, or online harassment, has become so common. The parabola increases in price, followed by a parabolic decline. Hype fuels the parabola. This parabola will invert if interest wanes.

Enjoy being poor!

Promise

Here are some future promises.

• Rivian has a value of $150B, which is more than Volkswagen despite its $0 in revenue. But EVs will be the future.
• Bitcoin is a trillion dollar decentralized currency that also acts as an inflation hedge. The dollar is gone, Bitcoin is the salvation.
• NFTs create exclusive online communities

What do you get when “what could have been” is slapped by reality in the face?

• What will happen when Ford and Volkswagen make 20x as many EVs Rivian while having smaller market capitals?
• What happens when the market as a whole realizes that healthy currencies are not inflation hedges by nature? If you disagree, then think about it. Why would you purchase anything if the currency itself was constantly increasing? You would hold only that currency. It would not be a currency because no one would be exchanging the currency. Currency is used to buy useful products or invest in assets which will increase. The currency cannot be the asset. Bitcoin is more of an asset than currency.
• What happens if no one cares if your Twitter profile photo is an ape on the internet? Who wants to be part of a group where the only thing in common is buying a JPEG image?

Let’s look at some of the other promises stories.

Peloton. It’s a new world to discover that connected fitness did not have a large MOAT.

Zillow. It’s hard to compete against the pricing power of local real estate markets.

This dumpster fire, though worth $5 billion is not acceptable. )

Prices go up when there are good stories. Great stories can create wealth for generations. Broken stories destroy fortunes.

The Greater Fool Theory is a case study in real time. Investments driven by hype and promises are an example of this theory. Everyone thinks everyone else is a fool.

What is the Regulation?

The SEC’s job was easy 20+ years ago. Goldman Sachs employee traded on insider information? Busted. Someone funneled money from a pension? prison.

Now?

Anonymous Twitter accounts are able to access 100,000+ member chatrooms before identifying specific stocks that have low float and announcing arbitrary price targets.

Crypto boys name currencies after popular Netflix shows, then rug-pull buyers and disappear with millions.

NFT creators are able to sell their “projects” as the start of a valuable online community and can flip their JPEGs at six-figure prices.

Decentralization has the advantage of not having anyone to protect you. How can regulators keep up with this Pandora’s Box alternative investments? They can’t.

Boiler rooms are now Discord servers. Ponzi schemes became decentralized projects. The CEO of the largest automaker in the world taunts SEC with an acronym that is promiscuous and faces no consequences (though I like Musk’s tweets so I hope there are no changes).

The markets of today are like the Wild West, but the Sheriff is drunk and the robbers have robbed the arsenal.

Grift Gods

Let’s now tie everything together.

Anyone can access markets and market commentary 24 hours a day. Online, investors and speculators show off their wealth overnight. This causes FOMO amongst others. You think, “If he made millions why can’t I?” All the winners, losers and outsiders in today’s market think that they will be the next success stories and are looking for the next quick-rich flip.

Twitter and Reddit have become the new marketplaces for investment. Losses generate online karma. You can be in good standing on the Internet if you own certain assets. Everyone online is pumping up their bags and criticizing those who sell.

Then, one particular asset will catch the eye of the public. Then they tell their friends. Then you see it on CNBC. Twitter is trending with the story. The story is so compelling, it doesn’t matter if it is true. If enough believe they will buy it. If enough people buy the product, it will increase in price. If you sell the right amount and buy at the right time you can make millions.

People who are able to create compelling stories. FOMO-inducing people. Who can influence influencers? They will make a lot of money. It’s true that someone else will have to lose a lot of money in order for them to make a profit, but does it really matter? They’re not going to be caught.

We’re in the middle a trillion-dollar game of musical seats. Some people believe their chair cannot disappear. Others sit on a seat before the music stops. And a few people just grab a chair and walk out of the room. Only those who follow the rules are losers.

Half of the players will be wrong if they all think that the other player is the suckers. You don’t hear about suckers. You only read about the winners. You think that you will be the next winner.