The great inversion
The stock market is upside down edition
I’m sick and tired of writing some opening paragraphs. So just imagine something blah, blah blah.
This post might break in your inbox because Mercury is in retrograde. So, here’s the link to the post.
We are being lied to.
The finance industry has a vast army of old white and brown people who peddle propaganda every hour of every day. They designed this system to pump and dump their useless beliefs and their useless stocks. For 100s of years. For 100s of years, these people have convinced us that:
A listed company has to have a good business or even an active business
Companies with good management are good investments
Low valuations are good, and high valuations are bad
Companies need to have pointless things like revenues, profits, and business models
Some random rubbish made up numbers like PE, PB, ROE, ROCE etc. matter
Investing is a serious activity meant for serious people
Lies. Lying lies. Absolute bullshitty lies.
These are all lies peddled by old white people like Warren Buffett, Charlie Munger, John Templeton, and Benjamin Graham. I know you'll tell me that's how they made their money. Yeah, so what? Please don't focus on the fact that they made mode. Focus on how they made money.
They made their money by pumping and dumping these lies.
Even a broken clock is right twice a day! Just because some old white guys like Buffett made $100 billion by believing in fairy tales like value investing and profitable companies doesn't mean they're right. It's a real-life version of a broken clock being right. You don't believe me? I shall prove that all those things I mentioned are a steaming, smelly pile of horse excrement.
Lie number 1: High valuations are bad
Perhaps this is the biggest lie ever told. For 100s of years, old white and brown people have told us that stocks with high valuations are bad. It might have been true for 200-300 years, but that was an anomaly. Around 2020, investors finally figured out they were being lied to this whole time, and they had their enlightenment now moment.
The markets finally became fully efficient, having realized that high valuations = good and low valuations = bad. I don't talk without data. I eat, breathe, and poop data.
Here's are the 20 Indian and US stocks with the highest PE. I've compared them with some indices. The costliest stocks have outperformed the cheaper stocks by a mile. Hence, proved HIGH VALUATIONS = ALWAYS BETTER. Value investing = my ass.
Performance of Growth and Value over the last 3 and 5 years:
Lie number 2: Fundamentally sound stocks are good
This has to be the worst lie ever told. For centuries, these misguided old white and brown people have been stuck in companies with so-called "good fundamentals", whatever that means. So to pump the prices of the absolutely useless stocks with good fundamentals they were stuck in, they started a mega propaganda campaign. They relentlessly brainwashed and fooled people into thinking that nonsense like valuations, positive cashflows, sales growth, moats, margins, good management and good corporate governance mattered.
But you can only fool investors for 200-300 years. Eventually, investors will realize they've been lied to, and like I mentioned, they had their enlightenment now moment in 2020. Here's the performance of some so-called "penny stocks". The CEOs of these companies don't believe in nonsense like profitability, sales growth and good management. And since Jan 2020, when investors became enlightened, the markets have become efficient. This is what Eugene Fama meant when he said that the markets are efficient.
Again, I don't talk without data. I eat, sleep, and poop data.
Here's the performance of what some people derisively and insultingly call "penny stocks", which I've labelled "garbage can" vs the so-called "quality stocks" or coffee can stocks. So much for quality and fundamentals; it's a bunch of cow dung!
If you were penny wise, you wouldn't have been pound foolish, but rather Bill Gates rich!
Lies. They told us lies like fundamentals matter. They were lies. What the hell are fundamentals? Who died and made these old white and brown people the arbiters of good and bad fundamentals?
Lie number 3: Revenues and profits matter
For a long time, these people have convinced us that revenues, sales, and profits matter. They mock companies like Tesla and show derisive charts like this:
But guess what? Profitability and all that nonsense doesn't matter. Again, here's proof!
Lie number 3: You can't get rich quick
This is perhaps the biggest lie that was told. The old white and brown people will tell you that you need patience and that you can't expect more than single or double-digit returns from the stock market. They’ll tell you that you need to invest for 20-30 years and pray to at least 3-7 gods to build wealth.
LIES! They're all lying lies.
By investing in blue-chip cryptocurrencies like KISHU INU, SHIBA INU, FLOKI INU etc., you can make 100-1000% in just a few weeks. But the white and brown people and star managers and advisors will tell you that you need to invest in stupid things like index funds and mutual funds. What nonsense? Lies, they're all lies!
Even if you had bought DOGLON MARS, a fan token of Elon Musk, you would've made 3000%!
Take the case of this genius. He invested just $8000 in SHIBA, and it's worth over $5 billion. Show me one stock or mutual fund that can even give 1/100th of the return in such a short span? Even Jim Simmons isn’t that good.
They're lying to us.
Just because these people don't have the brains to make money in blue-chip cryptos, they are deceiving the entire world to invest in so-called "good quality stocks" and "index funds" and are convincing people to expect mediocre 10-12% returns!
They want you to be mediocre! That’s unacceptable.
If you are even a little smart, there are plenty of special situations in crypto, and you can become richer than god in just a week. Take the case of SQUID; it's a fan token of the hit TV series Squid Game. It's up 269817% since inception. 2 lakh per cent! And the "smart" white and brown people want you to invest in mutual funds? What goddamn nonsense?
They're lying to you. They want you to invest in mutual funds to pump up their shitty investments.
Lie number 4: Stocks and bonds are the bedrock of a portfolio
For 100s of years, these people have lied to us and told us that stocks and bonds are how you build a portfolio. They came up with all sorts of nonsense like modern portfolio theory, mean-variance, efficient frontier, asset allocation and all sorts of other fancy-sounding rubbish. For all this nonsense, a portfolio of stocks and bonds has delivered high single-digit returns or, if you're lucky, low double-digit returns at best.
But if you had instead bought a photo of a rock, you could have sold it for millions. This rare photo of a rock just received a bid for 3.5 million dollars. Monalisa, my left foot! Stocks and bonds my right foot!
Or if you had bought some pictures of penguins for cheap, you could’ve sold them for thousands of dollars. This is investing, not garbage like stocks and bonds!
Lie number 5: You need patience to make money in the stock market
This is another despicable lie. For 100s of years, these "smart" people lied to you that you need to invest in good stocks and good mutual funds and wait for the market to go up. Yes, they wanted you to wait patiently like morons and pray. Lies.
Idiots hope for luck. Geniuses make their own luck.
Take the case of "meme stocks". The smart people with their PhDs and their quantum underwear would tell you that these stocks have horrible fundamentals and that investing in them is a stupid idea. Lies. What even are "good fundamentals", who decides them? For 100s of years, some old people have convinced us that these numbers matter. But in 2020, a new generation of young, smart investors stopped believing this propaganda.
This new generation of young investors weren’t naive cossetted fools. They were smart and savvy. So, in a profoundly individualistic institution like the stonk market, they decided to cooperate and work together. They assembled on forums like WallStreeBets Reddit, Discord, and Twitter and started buying stonks and call options of companies like GameStop and AMC Entertainment. Supposedly "smart people" considered these terrible companies and had returns millions of pages of PDFs that these companies would die.
Instead of waiting for the market to go up like chumps and make single-digit returns, they decided to make the market go up. It's long been known that one of the biggest factors in human progress has been cooperation. That's how humans survived lions, tigers, mammoths, and Godzillas and Salman Khan movies. But markets have always been an individual pursuit. Cooperation and coordination were frowned upon. It was derisively labelled price manipulation, price rigging or insider trading. Again, fancy and scary terms made up by old white people with thinning hairlines.
But the young, smart people didn't buy this propaganda. They collectively decided to move the prices of stocks. They were done waiting!
Here's how some of these so-called "meme stocks" have performed year to date compared to S&P 500 (SPY). SPY has returned an insulting 24%, while a blue-chip meme stonk like Hertz has returned 2386% and AMC 1659%. That's the power of cooperation.
Fools wait for the prices to move. Legends move their own prices. These old people with arthritis and butt doughnuts might call it "pump and dump", but who cares? These smart young people are making money hand over fist. Sweet success!
Lie number 6: Investing is a serious activity for serious people with serious clothes
The gall of these people. These old people will tell you that the stock market is a serious place for serious people with serious clothes, and that it's not a place for fun and entertainment. Lies.
This new generation of young, smart investors don't buy this nonsense. They call themselves apes, cockroaches, and lizards. They play pranks on all these serious people with serious clothes who tend to have the proverbial stick up their wazoos. These smart young people have blown up hedge funds and all the greedy fat cats who were ripping off old pensioners with their 2/20 fund structures.
They are waging war against short sellers—greedy people who think that stocks like GameStop and AMC have to go to ZERO. They don't care if they lose money, they're proud of their losses. These apes, lizards, and cockroaches know they are losing money for the greater good. A small price to change the markets, and the world.
In the last year, these young apes and cockroaches have taught these serious people with serious clothes a lesson they’ll never forget. They might have a lot of money, a lot of PhDs and their goddamn Bloomberg terminals, but they are no match to the army of apes and lizards—cooperation wins always!