Greater and Lesser Fools
Grizzled investors will tell you that if you feel euphoric after a trade, it wasn’t a good one. You should feel awful and be second-guessing yourself. That’s the sign of a great trade.”
–Andy Kessler, “A Stock-Trading Dupe is Born Every Minute”; The Wall Street Journal (2/21/2021).
Admittedly, three weeks does seem a little hasty for the definitive postmortem on the whole “GameStop/Reddit/WallStreet Bets” stock-trading bubble (and predictably, now very-much bust).
But, I don’t think you’ll find a better take (takedown?) than Andy Kessler’s piece in today’s Wall Street Journal (of course, it’s also the case that three weeks in real life (“IRL”) can be a veritable epoch online — Quick! how long has it been since Donald Trump left office?).
According to Kessler, GameStop was a classic “pump-and-dump” scheme, updated for today’s nanosecond trading and Internet chat boards.
As always, the victims (“marks,” “dupes,” “fools” — your choice) are the ones who got sucked in as the stock moved ever-higher, then were left holding the bag once the smart money had safely departed (and profited).
P.S.: Kessler also puts his finger on why I find trading (vs. buy-and-hold indexing) so fraught and otherwise unappealing.
That’s because great trades are always indigestion-inducing.
Applying Kessler’s maxim (which I know to be true), the better trader you are, presumably the more indigestion you have . . .