There are 2 kinds of people in the stock market right now: People who are in on the joke and people who aren't

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On Wall Street, there is nothing like a reminder from the old timers that everything we're doing has been done before. In times like this one — when the market is awash with cash, stocks go from kissing all times highs to careening downward, and retail traders have aggressively joined the fray — this reminder is often a warning that most hot new investment crazes are just old-timey bubbles in disguise.

And so it was last week, when billionaire Charlie Munger — the nonagenarian business partner to legendary investor Warren Buffett — took the mic at the Daily Journal annual meeting. He blasted Bitcoin as useless, calling it "the pursuit of the uneatable by the unspeakable." He accused Robinhood of leading its users into "speculative orgies." And said that Special Purpose Acquisition Vehicles (SPACs) — which allow investors to raise money to create a publicly traded entity in hopes that it will buy a private company within two years — are the indication of an "irritating bubble."

I started a joke

To Munger all of these new fangled instruments designed to separate you from your money are part of the bull market joke. Some people are in on it, and some people are not. That's what happens when things get silly in finance. All kinds of products can be dreamt up when there's lots of money sloshing around, but not all of them can ultimately deliver. 

Or as Munger put it, "the investment banking profession will sell s--t for as long as s--t can be sold."

And it's not just the investment bankers telling stories now. Now it's also corporate CEOs who've decided to become crypto influencers, anonymous people on Reddit, that guy from Barstool Sports, and anyone — from Colin Kaepernick to former Goldman Sachs COO and Trump administration official Gary Cohn — who knows someone at a hedge fund. 

All of these people are participating in the story that sells the bubble instruments Munger was complaining about. 

I promise you that most people on Wall Street are in on the joke. But they are trained to play whatever cards the market deals them. Sometimes that means the art of stock picking is complicated balance of numbers over time — like a job Danny Ocean would pull robbing a Las Vegas casino.

Other times, like now, trading stocks (and some other new stuff) is more of a smash and grab job — like Bonnie and Clyde running into a bank, grabbing the cash, and escaping into their still-running getaway car parked in front.

Consider all the hubbub over GameStop and the power of retail traders betting as one. Will Robinhood revolutionize trading for the masses and turn everyone into an investor? Probably not. Once the pandemic ends people will have other things to spend their money on like restaurants and travel. And I for one am waiting for all the stories about people getting fired for trading on Robinhood all day at work once we have to go back to the office.

But will every hedge fund worth its salt be checking the Wall Street Bets subreddit for as long as this retail trading trend goes on? You bet. They'll be trading on the information they glean there and probably impart some wisdom of their own too. It's all fun and games until somebody loses a savings.

Telling stories

Every joke is highly dependent on the setup story, and on Wall Street it's no different. Before a bubble bursts, it has to be blown up. We are watching that hype machine in real time.

The market has already launched 175 SPACs this year, each of them being their own mini-story about the future. These vehicles raise money so that a public entity can merge with a private company, allowing that private company to circumvent the IPO process (you know, that pesky process through which we discovered the WeWork was WeWorthless).

Everyone has a SPAC now because you would be crazy not to. Research indicates that — mirroring the life cycle of any bubble — they are far more profitable in the fundraising-honeymoon-anything-is-possible beginning phase than they are when all is said and done. A Harvard study found that while most SPACs "issue shares for roughly $10...by the time of the merger the median SPAC holds cash of just $6.67 per share."

Of course, usually the funds that raised the money have peaced out by then.

When it comes to Bitcoin, sometimes the story is that eventually we'll all have some Bitcoin. Never mind that Treasury Secretary Janet Yellen explained why that doesn't make sense at the DealBook conference last week. Mining Bitcoin leaves a massive carbon footprint and transactions are incredibly slow.

"It is a highly speculative asset and you know I think people should be aware it can be extremely volatile and I do worry about potential losses that investors can suffer," Yellen said.

Sometimes Bitcoin's story is that, since governments can't be trusted and the world is following apart, Bitcoin will eventually be a store of value like gold. This has some companies LARPing central banks and adding Bitcoin to their balance sheets. So far it has merely added more volatility for these companies' stocks, worrying investors that companies like Tesla have hitched their wagons to a time bomb.

No matter, the CEO of MicroStrategy — another company that has bought into the craze — said he's considering borrowing in order to buy more Bitcoin. 

Ultimately, though, what most people on Wall Street will tell you candidly is that Bitcoin is is a tool for speculation. Of course, the Wall Streeters who are speculating on Bitcoin and other currencies love all these tall tales about its future. The stories ensure that more people who are not in on the joke hand over their money, so they'll keep telling them.

The only laugh that matters is the last one

Everything I'm saying is really annoying to everyone making money in this market. Fine. After hearing that Munger said that it's "stupid" to have a culture that encourages as much gambling in stocks. Robinhood's spokesperson Jacqueline Ortiz Ramsay called his view "disappointing and elitist."

Then she went all in on the story Robinhood's been selling. It's a really good one, you may have heard it during the GameStop Congressional hearing earlier this month. She said that the platform is empowering a "new generation of investors" and people who don't have access to "generational wealth." Munger, she suggested, is behind a great "cultural shift" of our times. How can you argue with that?

You don't. Munger's basic response to all that was 'look man I get it, we all gotta eat.' 

When everyone is making money, it's easy to laugh away a warning from an cranky billionaire who was of legal drinking age when the Allies bombed Dresden. Wall Street goes into hype beast mode about individual stocks all the time, it's just that right now with everyone at home and logged into their trading accounts, and TikTok kids making sea shanties about doge coin this has all gotten out of hand. A lot of these new people are not in on the joke, and they will not be laughing when it's all over.

Join the conversation about this story »

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Business Insider

  • Wall Street has gone into hype beast mode selling SPACs, crypto, and the power of retail trading.
  • This is because, during bubbles, selling nonsense is a big part of the investing business.
  • Unfortunately we've got some newbies out there who may not know what that looks like.
  • This is an opinion column. The thoughts expressed are those of the author.
  • Visit the Business section of Insider for more stories.

On Wall Street, there is nothing like a reminder from the old timers that everything we're doing has been done before. In times like this one — when the market is awash with cash, stocks go from kissing all times highs to careening downward, and retail traders have aggressively joined the fray — this reminder is often a warning that most hot new investment crazes are just old-timey bubbles in disguise.

And so it was last week, when billionaire Charlie Munger — the nonagenarian business partner to legendary investor Warren Buffett — took the mic at the Daily Journal annual meeting. He blasted Bitcoin as useless, calling it "the pursuit of the uneatable by the unspeakable." He accused Robinhood of leading its users into "speculative orgies." And said that Special Purpose Acquisition Vehicles (SPACs) — which allow investors to raise money to create a publicly traded entity in hopes that it will buy a private company within two years — are the indication of an "irritating bubble."

To Munger all of these new fangled instruments designed to separate you from your money are part of the bull market joke. Some people are in on it, and some people are not. That's what happens when things get silly in finance. All kinds of products can be dreamt up when there's lots of money sloshing around, but not all of them can ultimately deliver. 

Or as Munger put it, "the investment banking profession will sell s--t for as long as s--t can be sold."

And it's not just the investment bankers telling stories now. Now it's also corporate CEOs who've decided to become crypto influencers, anonymous people on Reddit, that guy from Barstool Sports, and anyone — from Colin Kaepernick to former Goldman Sachs COO and Trump administration official Gary Cohn — who knows someone at a hedge fund. 

All of these people are participating in the story that sells the bubble instruments Munger was complaining about. 

I promise you that most people on Wall Street are in on the joke. But they are trained to play whatever cards the market deals them. Sometimes that means the art of stock picking is complicated balance of numbers over time — like a job Danny Ocean would pull robbing a Las Vegas casino.

Other times, like now, trading stocks (and some other new stuff) is more of a smash and grab job — like Bonnie and Clyde running into a bank, grabbing the cash, and escaping into their still-running getaway car parked in front.

Consider all the hubbub over GameStop and the power of retail traders betting as one. Will Robinhood revolutionize trading for the masses and turn everyone into an investor? Probably not. Once the pandemic ends people will have other things to spend their money on like restaurants and travel. And I for one am waiting for all the stories about people getting fired for trading on Robinhood all day at work once we have to go back to the office.

But will every hedge fund worth its salt be checking the Wall Street Bets subreddit for as long as this retail trading trend goes on? You bet. They'll be trading on the information they glean there and probably impart some wisdom of their own too. It's all fun and games until somebody loses a savings.

Telling stories

Every joke is highly dependent on the setup story, and on Wall Street it's no different. Before a bubble bursts, it has to be blown up. We are watching that hype machine in real time.

The market has already launched 175 SPACs this year, each of them being their own mini-story about the future. These vehicles raise money so that a public entity can merge with a private company, allowing that private company to circumvent the IPO process (you know, that pesky process through which we discovered the WeWork was WeWorthless).

Everyone has a SPAC now because you would be crazy not to. Research indicates that — mirroring the life cycle of any bubble — they are far more profitable in the fundraising-honeymoon-anything-is-possible beginning phase than they are when all is said and done. A Harvard study found that while most SPACs "issue shares for roughly $10...by the time of the merger the median SPAC holds cash of just $6.67 per share."

Of course, usually the funds that raised the money have peaced out by then.

When it comes to Bitcoin, sometimes the story is that eventually we'll all have some Bitcoin. Never mind that Treasury Secretary Janet Yellen explained why that doesn't make sense at the DealBook conference last week. Mining Bitcoin leaves a massive carbon footprint and transactions are incredibly slow.

"It is a highly speculative asset and you know I think people should be aware it can be extremely volatile and I do worry about potential losses that investors can suffer," Yellen said.

Sometimes Bitcoin's story is that, since governments can't be trusted and the world is following apart, Bitcoin will eventually be a store of value like gold. This has some companies LARPing central banks and adding Bitcoin to their balance sheets. So far it has merely added more volatility for these companies' stocks, worrying investors that companies like Tesla have hitched their wagons to a time bomb.

No matter, the CEO of MicroStrategy — another company that has bought into the craze — said he's considering borrowing in order to buy more Bitcoin. 

Ultimately, though, what most people on Wall Street will tell you candidly is that Bitcoin is is a tool for speculation. Of course, the Wall Streeters who are speculating on Bitcoin and other currencies love all these tall tales about its future. The stories ensure that more people who are not in on the joke hand over their money, so they'll keep telling them.

The only laugh that matters is the last one

Everything I'm saying is really annoying to everyone making money in this market. Fine. After hearing that Munger said that it's "stupid" to have a culture that encourages as much gambling in stocks. Robinhood's spokesperson Jacqueline Ortiz Ramsay called his view "disappointing and elitist."

Then she went all in on the story Robinhood's been selling. It's a really good one, you may have heard it during the GameStop Congressional hearing earlier this month. She said that the platform is empowering a "new generation of investors" and people who don't have access to "generational wealth." Munger, she suggested, is behind a great "cultural shift" of our times. How can you argue with that?

You don't. Munger's basic response to all that was 'look man I get it, we all gotta eat.' 

When everyone is making money, it's easy to laugh away a warning from an cranky billionaire who was of legal drinking age when the Allies bombed Dresden. Wall Street goes into hype beast mode about individual stocks all the time, it's just that right now with everyone at home and logged into their trading accounts, and TikTok kids making sea shanties about doge coin this has all gotten out of hand. A lot of these new people are not in on the joke, and they will not be laughing when it's all over.

  • There are 2 kinds of people in the stock market right now: People who are in on the joke and people who aren't photo


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