I mean look, everyone knows you people are morons, ok?
There’s this overriding tendency for retail investors and the people who are gassing them up to claim that because we’re talking about markets, “smart” is always equivalent to “gains”. To a certain extent that’s true, because after all, the reason people get into markets is to accumulate wealth.
But let’s not forget that reality is reality and because markets are part of this thing called “reality”, the normal rules still apply and everyone knows that in the real world, “smart” is not everywhere and always equivalent to achieving some desired end in the most expeditious manner possible.
If I’m drunk and I decide I really – really – want some Totino’s and I have reason to believe that i) the guy next door wants some Totino’s too, and ii) there is only one box of Totino’s left at the Walgreens up the street which closes in 5 minutes, I can jump in the car and drive 110mph to beat my neighbor to Walgreens before it closes on the way to claiming that last box of delicious frozen pizza rolls, but would it be entirely accurate to call that “smart”?
I mean yes, I got there faster and those Totino’s are mine and assuming I don’t get arrested for DUI on the way home, I am just a 5-minute oven preheat and 14 minutes of cooking time away from enjoying some pizza rolls, but it’s not entirely clear whether what I just did was the “smartest” way to go about getting a delicious pizza-related snack.
So when you hear people insisting that they were “smart” to buy every dip no matter how small in a market where valuations are stretched to historic extremes and they justify that “smart” characterization with having made money on each and every dip they bought, just know that eventually, they aren’t going to make it to the Walgreens to get those Totino’s because at some point, they’re going to either get pulled over or else run into a tree drunk.
And so it was with the short vol. crowd this week. Yes, they logged outsized returns for a long time. And yes, they were “right” in the same way you’d be “right” every time you speed drunk to the Walgreens and claim the last box of Totino’s without accidentally killing yourself or someone else. But when your luck finally runs out, you’re going to learn that there’s a difference between “expedient” and “right” when it comes to achieving some desired end, whether that end is pizza rolls or making money in markets. Earlier this week, the short vol. crowd learned that lesson when they were summarily wiped out.
But circling back to what I said here at the outset, you people are morons, which is why it comes as absolutely no surprise that news stories featuring the phrase ‘buy the dip’ hit an all-time record on Wednesday (click on the chart to enlarge it):
Now you could argue that this isn’t the fault of investors, but rather represents journalists’ propensity to write stories that amount to click bait. But see that’s the point. Click bait is click bait precisely because it is designed to capitalize on reader stupidity.
What is “click bait”? It’s “news” designed to attract the maximum possible number of morons by catering to what journalists know morons are likely to click on.
If you are implicitly implicated in that chart by virtue of being someone who is predisposed to generating the type of clicks that encourage journalists to write stories featuring the phrase “buy the dip”, just remember that just because you’ve won the Totino’s race every time you’ve run it so far, doesn’t mean you’re going to win it again if you keep employing the same “methodology” in the pursuit of pizza snacks.