📈 Meme Stocks

Yes. This is the City Chad, your philosopher of wealth, ready to help you unlock the secrets of financial enlightenment. Let's start the Socratic dialogue!

In this week’s edition:

• Markets: 😌 Relief Rally

• Article: 📈 Meme Stocks

• News:🍔 Ozempic Affecting Food Sales

• Chad Of The Week: 🧠 Thales Of Miletus

Follow Us: Instagram, Twitter, Facebook and LinkedIn

MARKETS: 😌 RELIEF RALLY

It has been a tragic few days in the World with the events happening in Israel and Palestine. We send our condolences to all the victims of unprovoked violence.

Geopolitical risk has certainly increased. No sh*t, Sherlock. However stocks and other asset classes have fared pretty well over the past week.

A relief rally was overdue from the pretty bad run since the end of summer. There are expectations that the FED will at least pause hikes as inflation subsides.

A company that didn’t do so well this week was luxury goods company LMVH. Yes, the maker of your favorite fancy brands dropped over 6%. It seems even the rich (or wanna-look rich) are also feeling the sting of economic uncertainty.

Let’s see what this turbulent year brings ahead!

ARTICLE: 📈 MEME STOCKS

TLDR: Meme stocks are captivating and unpredictable. Unique beasts in the stock market. Capable of delivering both triumphant victories and harrowing losses. These stocks defy conventional wisdom, driven by social media hype rather than fundamentals. They can inflate to astronomical values but are generally not a good investment. Keep reading to find out more!

• Meme Stocks

• The GameStop Case

• The Risks

• Gambling vs Investing

• Final Thoughts

Meme Stocks

What is a meme stock?

According to Investopedia: “Meme stocks are shares of companies around which online communities have formed to promote and build narratives.”

What makes them so interesting is their unpredictability that leads to great success stories.

But more often than not, to tragedies.

They are those few stocks that suddenly blow up and their price goes through the roof and beyond.

How is a meme stock born? Well, I can assure you that is not because the company is doing necessarily well. In fact, it is often the opposite.

It’s mostly due to hype on social media.

You can view it as the stock market's equivalent of a funny viral video that a week later everyone realizes wasn't all that funny.

By the moment you hear about them it is already too late to invest in them.

The GameStop Case

Picture this: back in January 2021, GameStop was doing super bad, to the point of going bankrupt soon.

Many professional investors were betting against it by “shorting the stock”.

That strategy consists of 1) borrowing shares, 2) selling them immediately for a “high” price, and 3) buying them back later at a lower price to return them to the person you borrowed it from.

So you basically make money when the price goes down.

Suddenly, a bunch of folks from r/wallstreetbets decided to team up to buy GameStop stock like there was no tomorrow. There was an emotional element to this. It was the nerd gamers against the finance jocks.

Guess what, the nerds won (at least for a while). The stock price skyrocketed. At its peak, it was worth over $500 per share. This started from around $17 at the beginning of the month.

Some stock trading apps stopped people from buying GameStop shares citing various ehem reasons. Some saw this as an attempt to protect the big guys from the little man.

This move ticked off a ton of people. Lawsuits flew and there were even congressional hearings about the whole ordeal.

Anyway, it became popular and hit its highest value ever.

However, it was only a matter of time before the stock returned to a reasonable price.

And that, my friends, is the problem… here’s why.

The Risks

Well the big obvious risk is losing your hard-earned cash.

Unless you buy the stock quite early, that’s what is probably going to happen. And knowing when “early” is, is pretty much impossible.

Meme stocks lack strong fundamentals for their price jumps, like growing profits.

It’s all hype, and when the hype cools down, prices crash in the blink of an eye.

In other words, they are riding the rollercoaster of public opinion.

They can go from “to-the-moon” to panic selling real quick.

Some may bounce back to normal; others could stay in that wild ride for a while before they settle.

Investors who bought meme stocks when the hype was high usually end up with stocks worth less than what they paid.

Very simple.

Gambling vs Investing

Let’s get things clear, investing and gambling are two different things.

Gambling is all about luck.

You pick up the right card, roll the dice, and that’s it.

No matter what, you cannot control the dice, nor have a hint of how it will land.

Investing has some luck factor but the biggest difference with a casino is that the odds are stacked up in your favor over the long term.

…as long as you have a sensible approach to investing that includes a well-diversified portfolio of companies with real fundamental value.

Meme stocks align a lot more with gambling rather than investing. So it is not really a viable strategy to grow your wealth over the long run.

Best to avoid it.

Final Thoughts

Although meme stocks can be fun they are not real investments in the traditional sense.

They are more like financial slot machines.

If you want to gamble your money, better go to a casino.

At least they give free drinks!

NEWS: 🍔 OZEMPIC AFFECTING FOOD SALES

We featured Ozempic’s Power Move a couple weeks ago. And the company keeps steamrolling ahead. This time causing some collateral damage to other businesses.

Surprisingly, around 15% of Americans already use it.

That’s quite a number and some of its effects have spilled over into other areas of the market.

Specifically, Walmart has noticed a reduction in food sales.

It is good to see people being able to control their appetites and overall health. But I think it seems quite dystopian.

Who would have thought that all we needed for these modern sociological diseases was to swap one industry for another?

Don’t get me wrong, many people have no other option and the drug works wonders. But it would be a shame for to become a default for people without serious medical conditions.

And it isn’t cheap either. Without insurance it costs around $1000. So it isn’t a long-term solution for most...

I just think that taking these kinds of shortcuts, although useful, can carry unexpected consequences in the long run. It basically can become a way of outsourcing your discipline. And that ain’t no Chad move.

What do you think? Reply to let me know.

CHAD OF THE WEEK: 🧠 THALES OF MILETUS

This week, the title of Chad of the Week goes to Thales of Miletus.

No, we haven’t lost our marbles.

Even though this gentleman died more than a couple millennia ago, a Chad is always a Chad.

And there is something to learn from him… This time in the field of money making.

He was an ancient Greek philosopher born in the city of Miletus, which is now in Turkey.

He made contributions to many fields, especially mathematics.

But the story I bring you today is about finance.

Specifically, the first recorded options trade in history.

The story goes like this:

Thales wasn't a wealthy person, but he was quite knowledgeable, and his fellow citizens criticized him for having useless knowledge.

To prove them wrong, Thales decided to study the weather and predicted a superb olive harvest a year in advance.

As a result, he placed a deposit on local olive presses.

Since no one could be sure if the harvest would be great or a dud, Thales got a deal on those presses.

When the harvest was a hit and everyone needed the presses, he charged a pretty penny for using them.

The cool thing? Thales wasn't risking it all.

If things went south, he'd only lose that initial deposit. He basically bought an option.

Smart guy.

What we can learn from this Chad move is that there's always a way to apply knowledge.

What knowledge or skills do you have that are not traditionally used to make money, but could be?

Thinking orthogonally is a life skill few people apply. But it could be you.

Thales also left behind quite a legacy. Options are financial operations with the potential to make you super wealthy if you play your cards right.

But some types can also carry a lot of risk. We will leave that for another edition

Thales, you not only have a badass name, but a badass story to tell.

You da Chad.

💖 SHARE THE LOVE

If you enjoy this content, please share it with those you love. Hit the little button below and the magic will happen:

🧔‍♂️ CHAD MEME

DISCLAIMER

The material on this email and our website is for informational and entertainment purposes only and we make no guarantees as to the accuracy or completeness of its content – it is subject to change. Please conduct your own due diligence and research.

None of this information is financial advice, and you should consult your financial advisor before making any investment decisions. Your capital is at risk and you may lose more than you initially invested. We do not provide any offer or solicitation to buy or sell any investment products, nor does this constitute an offer to provide investment advisory services.

The Chad index (“the index”) is a combination of historical returns for the following assets:

Equities: Vanguard FTSE All-World UCITS ETF USD Acc
Fixed Income: iShares Core Gl Aggregate Bd UCITS ETF USD Hgd Acc
Real Estate: iShares Developed Markets Property Yield UCITS ETF USD (Acc)
Gold: Gold Bullion Securities Limited
Ethereum
Bitcoin

The index is rebalanced quarterly to the target weights shown in the table. The target weights are subject to change. The index does not represent the performance of a real portfolio and does not imply a recommendation to invest in any of those assets. Past performance is not an indication of future performance.