What caught my eye this week.
I belatedly enjoyed Dumb Money on Netflix this week. Finumus put me onto it as a chaser to the story in my Active Antics links below about the Canadian who made and lost $300m trading Tesla options.
Dumb Money is hilarious (whereas that second story is almost tragic) but it’s also a solid piece of filmmaking.
The movie deftly captures the time and (all over the) place when Reddit GameStop trading was at its height. From Covid in the backdrop and mask-wearing on the metro to how it transmutes Pied Piper and YouTuber Roaring Kitty’s riffing into the void into almost a communal event – like some virtual version of Woodstock for Gen-Z – you can imagine it being watched in future decades as a historical drama.
For a darker follow-up to this follow-up, also read of Freddie deBoer, who this week offered a cold take on why the meme trading phenomenon still comes with cult-like language from its adherents:
Quite literally, everyone who bought into GameStop can’t make money off of doing so because somebody’s got to be late to the selloff.
Which is why this whole thing is such a particularly sad expression of aspirational capitalism; the meme stock people celebrate their own jocular spirit of togetherness, but fundamentally all of them are looking, someday, to fuck the people who wait too long.
For my part, I said sell very near the height on 28 January 2021. But of course I only had a couple of shares on Freetrade and I’d never have made the stacks racked up by the early diamond hands.
Then again neither would most of those who followed Roaring Kitty and the gang. Dumb Money is a great story but it’s not a guide to investing that anyone should follow – except maybe with some fun (dumb) money.
Indeed hundreds of millions of ordinary people got richer in that period just by holding the index.
As for once in a generation events, joining thousands of spaced-out hippies in a farm would probably be more profitable than playing pass-the-parcel with Reddit’s most degenerate gamblers.
Have a great weekend.
From Monevator
Rightmove. Wrong price [Members] – Monevator
How to buy index-linked gilts – Monevator
From the archive-ator: Investing for beginners: all about assets – Monevator
News
Note: Some links are Google search results – in PC/desktop view click through to read the article. Try privacy/incognito mode to avoid cookies. Consider subscribing to sites you visit a lot.
Rachel Reeves reportedly considering capital gains tax at 39%… – Guardian
…but rules out ‘exit tax’ for wealthy people leaving UK… [Search result] – FT
…while IFS paper says CGT needs to be reformed not raised – Institute for Fiscal Studies
Platforms object to [proposed] investment trusts’ ‘zero’ charges as ‘materially misleading’ – AIC
Landlords and second-home owners rush to sell up ahead of tax and energy changes – Which
House prices close to record high, says Halifax – BBC
Retail sales grow at strongest pace for six months… – Morningstar
…after the UK economy returned to growth in August – BBC
UK indie film industry gets a new tax break – UK Gov
Annual deaths outnumber births in Britain for first time in 50 years – BBC
Are you rich enough to be hit in the Budget? New data from Hargreaves Lansdown – GB News
A little money perspective – A Wealth of Common Sense
Products and services
High swap rates could herald mortgage rates rising again – This Is Money
Schroders proposes ‘Lifetime Savings Initiative’ to help poorer people save – Schroders
Open an account with low-cost platform InvestEngine via our link and get up to £50 when you invest at least £100 (T&Cs apply. Capital at risk) – InvestEngine
How to beat the Disney+ price hikes – Be Clever With Your Cash
Where next for two million savings accounts maturing by end of 2024? – Which
Get £100-£2,000 cashback when you open a SIPP with Interactive Investor (T&Cs apply. Capital at risk) – Interactive Investor
The five rarest 50p coins in circulation, led by Atlantic Salmon special – Royal Mint
Pikachu Pokémon card set to sell for £250,000 at auction – This Is Money
Homes for sale on High Streets in Britain, in pictures – Guardian
Comment and opinion
Do Vanguard, BlackRock, and State Street run the world? – Of Dollars and Data
How rising care costs can wreck your retirement finances [Search result] – FT
The ultra-rich are building a separate world here on Earth [Podcast] – Odd Lots
Boomers’ money secrets are a ticking time bomb for their kids – Sherwood
20 rules for markets and investing – Charlie Bilello
14 ways to improve your credit score – Be Clever With Your Cash
The noise factory – Behavioural Investment
How to diversify your pension pot [Podcast, cheers for the Monevator mention] – Merryn Talks Money via Apple
Nerdy factor research mini-special
Do expectations errors explain factor returns? – Verdad
Trawling ancient market history for factor evidence – CFA Institute
Naughty corner: Active antics
Thoughts on running multi-baggers – Maynard Paton
Return on mental capital – Flyover Stocks
How a Canadian carpenter became an options trader, made $300m, then went bust – Sherwood
Do US election prediction markets offer an arb opportunity? – Sherwood
Yeah the US market is very expensive mini-special
High valuations are about time horizons… – Cullen Roche
…still, Jeremy Grantham sees US stocks in bubble territory – Morningstar
Kindle book bargains
Failed State: Why Nothing Works and How to Fix It by Sam Freedman – £0.99 on Kindle
Technofeudalism: What Killed Capitalism by Yanis Varoufakis – £0.99 on Kindle
Bad Blood: Elizabeth Holmes and the Theranos Scandal by John Carreyrou – £0.99 on Kindle
Casino: The Rise and Fall of the Mob in Las Vegas by Nicholas Pileggi – £0.99 on Kindle
Environmental factors
Looking after L.A.’s favourite fake beaches – BBC
Insurer warns 7,116 new UK homes are being built on flood plains – This Is Money
America is lying to itself about the cost of disasters – The Atlantic
What range anxiety? One UK Tesla has clocked up 700,000 miles – This Is Money
Robot relationships mini-special
When your lover is a bot – The Walrus
The perfect girlfriend – Esquire
A.I. overlord roundup
Google DeepMind scientists share the Nobel prize for chemistry – Guardian
The rise of AI-powered job application bots – 404 Media
A data-driven case that A.I. has already changed the US jobs market – Forked Lightning
OpenAI talent exodus gives rivals an opening – Wired
Off our beat
Just 0.1% of Internet users are responsible for 80% of fake news – Sherwood
Metric-less success – More to That
Where have all the Chief Metaverse Officers gone? – Wired
How rich are Arab rulers? [Search result] – FT
The mystery of the dead billionaire – Sherwood
American’s disorder problem [US but UK feels similar to me right now…] – The Casual Fallacy [h/t Abnormal Returns]
[…] The unstoppable rise of mobile phone theft – Guardian
And finally…
“Life is very long unless it is not.”
– Gabrielle Zeven, Tomorrow and Tomorrow and Tomorrow
Like these links? Subscribe to get them every Friday. Note this article includes affiliate links, such as from Amazon and Interactive Investor.
The money perspective article is interesting. I plain refused to believe the similarly boosterish Aeon article about this in the West, in a similar vein, but perhaps they were also right, given that big picture.
It’s harder to get a perspective across a lifetime, because I also accumulated capital, so the reference point is changing.
“Dumb Money” and films like it are wonderful financial lessons for investors especially the small guys
They also allow the amateur investor the vicarious pleasure of “trading “ without actually having to put any money down except the price of the film ticket!
Education never stops,human nature,s willingness to get a bargain/gamble is eternal
For a small investor like me constant reinforcement of the benefits of index investing and then “staying the course” is a dynamic state that needs constant reminders
Hats off to the artists and bloggers(Monevator) that help most of us to keep on the straight and narrow investing path!
xxd09
The Causal Fallacy link struck a nerve. I have had to spend a fair bit of time around Stratford in East London, not the post-Olympic bit but the original town. There is little crime compared to when I was a youngster but lots of bad behaviour, ranging from rude to the obnoxious to the downright intimidating.
Society needs rules, or an etiquette, to work and it does not take much for it to break down. People copy others and if they see someone ‘getting away’ with it they are more likely to do the same, to the detriment of everyone.
zero’ charges as ‘materially misleading’ – AIC. The IT sector is getting to the point where their charges figures are going to be forever suspect. I never did see a satisfactory explanation of how their charges are listed wrongly. It looks to me like they are trying to cover up high charges.
“Boomers’ money secrets are a ticking time bomb for their kids”
Fortunately, or wisely, we have so far avoided that sort of mess. But I still worry a little as to how, when I have pegged out, my widow and offspring will locate all our money. It’s all listed in notebooks but obviously not with passwords and the like. And of course I’ve not produced a Treasure Map of where all our gold sovereigns are buried.
Actually we don’t have any gold sovereigns but if we did how/where would we store them? I thought I’d had a couple of decent ideas but both opportunities have since vanished. And even if I found a satisfactory solution, how/where would I record it?
A word of warning: when a cousin died a swine at the Care Home stole her keys and let herself into the house and stole some valuables.
“ Quite literally, everyone who bought into GameStop can’t make money off of doing so because somebody’s got to be late to the selloff. Which is why this whole thing is such a particularly sad expression of aspirational capitalism; the meme stock people celebrate their own jocular spirit of togetherness, but fundamentally all of them are looking, someday, to fuck the people who wait too long.”
This encapsulates Bitcoin perfectly. Bitcoin is sadly much more harmful than meme stocks due to pointless and eye watering energy wastage.
The Canadian Tesla option guy story on Sherwood is possibly even better than Dumb Money.
There’s probably whole tiers of discussion one could have about the duties and boilerplate protection for “financial advice” from organisations but it does seem that he might have a case that professionals singularly failed to save him from himself. Though I suspect reading between the lines he might also have been suing them if they’d moved a substantial chunk of his portfolio into boring indexes and he’d missed out on further Tesla growth.
Guess I can’t quite understand the mentality that let it all ride on one company (and let’s face it one highly unstable individual). Mind you I’d likely have cashed out at below the first C$10m and gone to live a quiet life.
Great to hear Monevator name up in lights on the fantastic Merryn (Summerset Webb) Talks Money podcast this week! Hopefully that drove some extra traffic to the website.
The episode was “How safe is your pension pot” released on Tuesday, if anyone wants to listen (only 12 mins long)
John Stepek is clearly a long term reader, which is (well deserved ) high praise, for the treasure trove of insight that is Monevator
“…joining thousands of spaced-out hippies in a farm…”
Unless it’s the one with the special kool-aid
To many Keith Gill was a folk hero and probably remains so. There were lots of Keith Gills but he cut through just at the right time. It’s more a socio-political story than investing one of course and the lessons and some of basic themes from the story will not doubt replayed in part in the forthcoming US election.
I will be booking a movie ticket for some light entertainment.
@AlCam. Regarding whether I am buying pre-retirement or at retirement. I think the idea that we can break up the process discretely into accumulation vs. deaccumulation is not always helpful. Twenty years ago, my post-tax income might have been 100% of my net worth. I was in accumulation mode. Now, it’s 5%. Practically, my net worth is being driven more by my portfolio than my job. Retirement is coming in the next few years. I essentially look more like a deaccumulator. So, my portfolio needs to reflect that now.
I’m also accumulating linkers to partially hedge the risk that real yields fall back into negative territory. I fear that much more than real yields rising. My bias is to buy longer-dated linkers now, not short-dated ones. I still have incoming cash and nominal bonds to hedge that. And, yes, this is somewhat of an active view.
About FX hedging, as I said, I see that as a totally different view from whether I buy foreign linkers or not. If I had a foreign portfolio of 70% equities and 30% bonds, and decided I wanted to be 50% FX hedged, it matters not whether that 50% is 30% FX hedged bonds and 20% FX hedged equities or 50% FX hedged equities. Same currency position.
Right now, I am not hedged on many of my USD assets. Theoretically, FX risk is uncompensated volatility, so I should hedge. I see FX, though, as basically an active decision for every currency pair.
@GF – have also been dismayed by how poorly the ‘over-reporting’ of investment trust charges has been explained. Ultimately though, as I understand it, the argument boils down to this:
Investment trusts are listed companies with a relatively stable number of shares (being closed-ended), therefore their price is determined not only by the value of the assets (net asset value, or NAV) into which they invest, but also supply and demand for the shares in the investment trust.
That supply and demand is affected (upfront) by the costs charged to NAV, which is why most investment trusts trade at a discount to NAV.
Investors will be willing to pay a higher price for £100 of NAV that’s subject to 0.3% per year of costs (e.g. management fees) than £100 of NAV subject to 2% per year of costs, all else being equal, i.e. being relatively predictable in advance, costs are ‘priced in’ (upfront) as part of the share price discount.
With the costs already being reflected in the price paid for the shares, the costs obviously act as a drag on the NAV over time, but they don’t act as a drag on the share price at which you can sell later on down the line (unless the costs change, affecting the discount rate).
Therefore “costs are not a direct drag on investment returns”, so you can act as if the costs were zero, the same as for shares in any other listed company like Shell or HSBC or AstraZeneca (all of which also pay lots of money to management to make capital allocation decisions as part of the running of the company, but are disclosed to investors as not having an ‘ongoing charge’).
With open-ended structures like funds and ETFs, by contrast, which (more or less) can only be bought or sold at NAV, costs act as a direct drag on investment returns.
Hope that helps
Screwup by me. My comment #11 seems to have gone into this thread, when it was aimed at the prior thread.
@John Thank you for your explanation. In your explanation you say ” the costs obviously act as a drag on the NAV over time, but they don’t act as a drag on the share price at which you can sell later on down the line (unless the costs change, affecting the discount rate). ” I would say thats not true because if the share price is at a discount to the NAV then any reduction in the NAV due to costs will be reflected in the share price assuming the discount remains the same. When you do sell at a later date on down the line then the costs will have eaten into the returns on the NAV and assuming the discount remains the same, will have to be reflected in the share price. Costs do impact on returns and will register in the share price, you cant disregard them.
@ZX (#11):
Thanks for the interesting additional info re the Q’s I posted at the earlier @TA posting. Very interesting and I get the idea of getting your longer term [linker] hedges in whilst they are relatively well priced and covering the nearer term using a different approach whilst you are still working.
Regarding Gamestop – I quite liked Eat The Rich : The Gamestop Saga. And regarding fraud / Ponzi schemes – Madoff – The monster of Wall Street is also quite good. Both on Netflix.
Thanks for the FT article on care costs.
It’s unaffordable to live with this kind of condition once you have high care needs due to something like advanced MS. In fact, MS is the second main medical condition (after cancer) in terms of the number of people going to Dignitas.
It is so sad that every government has failed to sort out both the cost and the (never even mentioned) quality of social care. I don’t understand why more people are not up in arms about it.
As an ancient -Haphazard-wife and I now 78 -with a lot of our friends disintegrating around us -these sorts of thoughts are ever present
Personally have told the children that I don’t intend to hang around-saved enough money in the kitty for Dignitas for both of us (wife and I) -if required
Care home fees if needed are upwards of £50000 pa if a care home becomes necessary
Obviously the more the kids look after us the less if any care home fees required( increased inheritance!) -luckily we have 3 kids with functional families to fall back on-is that good luck or thinking/planning ahead?
Interestingly one of my children married a Muslim and in the Muslim marriage ceremony there is a specific obligation to look after the parents-they appear to mean it too!
I think the Government has a role to play but some personal responsibility is required too -a balance to be struck here
What is also interesting and eye opening is how much care actually costs -a cost that was bourn by families in previous generations
Will there ever be enough money to solve this scenario-probably doubtful
xxd09
@GF – I think the argument is that future costs affecting the NAV is known in advance and is therefore already reflected in the share price, i.e. it’s priced in.
Here’s the clearest explanation of it that I’ve found elsewhere, with a useful and simplified – maybe even oversimplified – example: https://www.hawksmoorim.co.uk/research/articles/disclose-dont-double-count/
For what it’s worth, I’m not saying I completely buy the argument, just relaying it. Seems to me it may be a bit more complicated, as investment trusts rarely have fixed lives, and often use other mechanisms (unpredictably sometimes) to manage their discounts, e.g. continuation vote provisions, buyback policies etc.