"There is a famous story, we don’t know if it’s true, about how in the late summer of 1929, a shoe-shine boy gave Joe Kennedy stock tips, and Kennedy, being a wise old investor, thought, “If shoe shine boys are giving stock tips, then it’s time to get out of the market."
Seems like I'm getting a lot of advice about the market from people with less knowledge about the market than shoe shine boys. My mom and my sister are invested in Dogecoin and neither can explain what a cryptocurrency is or even what the doge meme was to begin with. Seems like the next prolonged downturn is right around the corner.
A few months ago I was at a car dealership filing out paperwork on a new car. The sales guy asked me what I did for work. I told him I was in finance. He immediately perked up and asked "Are you into crypto? We all trade it here."
Turns out the whole dealership, or at least most of the employees, traded crypto as a hobby. I asked a few questions, mainly about Proof of Work, and the salesman had no idea what that was. He was completely ignorant of how crypto worked.
The most common feature of assets bubbles is that they draw in people who would normally never engage in risky financial speculation. People early to the party get rich and that draws in everyone else. Its hard to stay out of the market when your neighbor has short-term gains larger than your salary.
In the tulip bubble, everyone was a botanist. In the tech bubble, everyone was an equity trader. In the housing bubble, everyone was flipping houses or getting their real estate license. Now everyone is a crypto trader. Regardless of how useful crypto will be in the future, there is only one way this party ends. Pumping trillions of dollars into the economy can delay the pain, but the pain seems inevitable at this point.
Yes, this apocryphal story sucks. Why wouldn't a shoe shine boy (or an uber driver -- for contemporary equivalence) not have insight from the many conversations he would have with informed people during their day?
The casual throw away statement about business made during transit from a passenger might be important info.
This story is just elitism, and exactly the argument Wall Street used against RH. "unsophisticated traders". Sorry Mr Banker, the market is made up of people. Claiming unsophistication is a projection of their own insecurities.
Because 2 reasons:
1. Insight is great, but I would hope that there is underlying understanding of the field based on actual study and experience(assuming the shoe shiner is not in finance).
2. The shoe shiner or Uber driver likely has no idea who they are talking to, past the initial impression. I would be open to a conversation about finance with an Uber driver, but I would probably not rush home to put money on it.
There are two aspects to the story. One, the shoe shine boy probably heard a lot of stuff. Two, he definitely had no business in trading stock. And two is the important one, once "dumb money" shows up in droves it is maybe time to get out.
If that shoe shine boy (or uber driver) was alive in the mid to late 2010s, they would probably do trading business with RH. And that is why I am bullish on RH.
Does this remind anyone else of the high APR (20-30%) credit cards offered to college students? I remember a table set up outside the main dining hall where they pitched getting started building that credit history ASAP.
Now it's about building that portfolio ASAP and offering it to the most risk-tolerant age demographic. Subtly updated buying whatever you want on credit and worrying about whether you could afford it later, to buying into whatever risky position you want and worrying about covering it later.
No? Because high APR cards are a trap to leech money from the young -- eg debt. Investing in growth assets like stonks is building assets.
Very very different things!
If you’d bought a portfolio of the 2000 class of stonks, most of those equities would now be worthless or acquired for pennies along the way.
There were very few Amazons in the mix, and very many Palms. Even a reliable blue-chip like Cisco is still underwater compared to its March 2000 price.
Absolutely. Sofi is the smart play there vs RH. Getting HNW folks onboard with student loan and HCOL property mortgages, and then cross selling them deposit accounts and investing access. “Young Money” Fidelity or Schwab.
Getting young people to get into debt is a very different thing than getting them to build assets.
RH gives (small) margin loans from trading, not (large) student loans for marginally useful university courses.
These people have no other option but to buy stonks and crypto. Their dollars lose value every year, and even a market downturn will look attractive vs fiat inflation.
Bull market for the next 100 years!
Or will be burned by the next prolonged downturn and exit the market permanently.