by: Cameron MacKenzie
Back when WallStreetBets was hot news, a friend of mine who had no money in the market asked me about the meme stock phenomenon. She wanted to know what I thought about the "little guys" trying to take down hedge funds for the sake of sticking it to the man. And I told my friend that I was horrified. "Why?" she asked me. "Because," I blurted, "it goes against everything that investing is supposed to be!"
She thought that was a strange answer, so I found myself, to my own mounting embarrassment, fumbling through an explanation of how the markets were controlled by sensible, reasonable adults. That it was the one institution in the country–in the world–that wasn't completely overrun by the lunatic mob. We can't, I explained, put our faith in lying politicians or radical jurists or squishy academics or two-faced entrepreneurs, but we can be sure that the people in charge of the money are serious, and committed, and sober.
And then my friend laughed and laughed and laughed.
Only a few short years ago, deep in the midst of Robinhood and SPACs, when Matt Damon and Tom Brady were advertising unbacked currency on national television, when companies that had done nothing at all were trading at 100 times earnings and Tesla was worth more than VW, Ford, GM, Toyota, and Daimler combined, the idea that finance made any rational sense was, quite simply, laughable. And so my friend laughed. And, red-faced, I found myself laughing along with her.
I started paying attention to the market right after the dot com bubble, right after the party had ended and wild-eyed prophets were trying to pick up the pieces. In those hungover days, the people who made the most sense wore suits and spoke softly. They weren't selling a utopia, they were selling solidity, and value, and trust. There was a belief that the things your parents had told you about patience, integrity, and reason were, in fact, empirically true–expressed and demonstrated by the greatest town square of all, the market. And if that was true, then the system was, in fact, balanced. God was in his heaven, and all was right with the world.
I'm reminded of this now because it feels like that mindset has returned to the financial world. The parents have finally come home, shaking a scolding finger, gently berating us for believing that Zoom was really worth $500 a share. But I want to suggest that this belief in the righteousness of, let's say, value, isn't necessarily true, or right, or even good. It's simply one half of the equation.
Were meme stocks "the truth"? Were they "real"? As of today, AMC is at $14 a share, whereas before reddit messages boards, it was closer to $4. While the sober adults (or rather the people who are most willing to play sober adults), currently have the podium, are they really more correct than the crypto bros who made fortunes?
I think it's dangerous to conflate morality, or truth, or lessons you learned in kindergarten, with what actually happens in the stock market. The idea that if you eat your vegetables and get to bed on time then you're going to average a 10% return simply isn't true. It's just another story–one that feels good, maybe, but one that isn't particularly superior to so many other narratives that riddle the map of finance.
I'm coming to terms with the painful truth that the reasonable adults, who are looking very reasonable right now, are simply one face of the market, a Janus to which the circulation of capital turns when the other side has, for the time being, burnt itself down. In other words, there is no more moral certitude in Warren Buffet than in Roaring Kitty. Both will have their day in the sun as the cycle of capital continues, as ever, to run.
That meme stock conversation with my friend ended with her asking me where she should put her money. Under the mattress! I shouted, afraid that Reddit was going to bring down capitalism. But it wasn't. Nor was the President, or Putin, or COVID lockdowns in Shanghai, or Blackrock scandals, or a fanciful currency that Matt Damon swears will make me rich. They all have a part to play in the larger drama–a drama that remains, for my money, the most interesting show in town.
Opinions expressed here are those of the author and not necessarily those of SagePoint Financial, Inc.