Fundamentals Always Matter
Over the last two years we’ve had a tremendous bull market. Well, not the last six months, when we’ve been firmly planted in the a bear market.
But 2020 and 2021, was a glorious time for the stock markets. And it’s ironic because it was the time when fear gripped people’s lives and everyone thought the world was going to hell. Yet, governments doled out so much stimulus that people were actually better off than they had been in long time.
Enter the retail trader.
Interestingly enough, when people say retail trader, they almost always think it’s a young kid on TikTok or YouTube telling you to buy “stonks”. But, if you really follow the data, you’ll be surprised how many people actually withdrew their plans from managed money and decided to run their own stock accounts.
Perhaps fueled by the ease of online brokers like Robinhood and encouragement from the younger generation who posted 100% gains, even the older generation thought they could do much better are investing that the wealth managers in stinky old banks.
Unfortunately, most people missed the part where you need some degree of education about the stock market to be able to consistently make profits. People who’ve been trading for years still lose money.
But, the thought process was understandably skewed because there was ample liquidity in the system and you could literally throw money at even the worst company and just the amount of people piling into, would make the price go up.
Not to mention, the general liquidity was multiplied by easy leverage with a click of a button and options that made you feel like you were playing a game on your mobile. The gamification of the stock market, they called it.
All of this fueled crazy stock buying frenzies and when I tried to warn a person or two, I got the proverbial dirty look. What did I know about investing and the stock market?
But, in the end it all ended in crying and there were so many people caught out by the stock squeezes of the companies that were practically no where close to the price they were commanding. The valuations of these companies were…