I was able to spend a couple days with my young adult nephews last week while on a family getaway trip. All of them are impressive young men. One had just started his first professional engineering job, one was doing a semester co-op with a semi-conductor company, one had lost his co-op due to COVID but was taking summer classes.
Each of them has a bright future, but as they are all just starting out, none of them has any money, and gladly leave me to pick up the tab at the food trucks and runs for beer and this hard seltzer stuff everyone seems to be drinking.
I am of course glad to fund our together time. Hanging out with these youngsters is an entertaining treat, and as they get older not something I take for granted. The discussion topics can get silly, with lots of jawboning going on, but one topic I just couldn’t get these kids to drop was their almost giddy fixation on the stock market.
They all had stories about their stocks. Everyone was an investing hero. My favorite one, “Hey Uncle Marc, remember that cruise ship stock you told me was risky in April? Well I’m up 125%.”
“That’s amazing,” I replied. "It took some courage to buy a cruise line during the quarantine. How much money did you make?”
“Seventy dollars,” he proudly replied. How can someone be up 125% in a stock and only make $70?
Ah, the answer is that each one of these Millennial investors is obsessed with trading fractional shares of stocks on their phones. “Investing” has become an app-based game to them, a game everyone is winning.
I’m not going to get into the merits of phone app-based trading of fractional shares of stock. It’s an interesting technology and a trend that bears watching. The discussions about the trading, however, brought to mind other narratives, one legend, and one memory, both seemingly applicable in today’s stock market.
The legend goes that Joseph Kennedy the senior, patriarch of the Kennedy clan, was going to work at a Wall Street investment house when he stopped to get a shoeshine. While getting his shoes polished the shine boy couldn’t stop giving him stock tips and talking about everyone getting rich. As Kennedy contemplated the conversation with the shine boy while going up the elevator afterwards, he concluded if investing mania had reached all the way to the shoe shine kid, the market was surely overvalued, and when he got to his office he not only sold all his stocks, but he also shorted (bet on the market going down) the market as well. The year was 1929 and the Kennedy fortune was struck.
The memory involves the commercials during Super Bowl XXXIII. It seemed at the time about every third commercial was one of the new online trading firms, my favorite involved a skit about a tow truck driver who had made enough money trading to buy an island. Another commercial involved a monkey, and still another a talking baby. None of the commercials were actually about investing, all of them implied everyone was getting rich with stocks. It was January 2000, the world changed that year in March.
Now I’m not saying at all we are standing on the edge of a market precipice and a crash is imminent. I certainly wouldn’t know if it were. But perhaps the most dangerous words in all of investing is “this time its different.”
There is growing confidence in my mind, however, numerous trends today validate the opinion the U.S. stock market continues to be in a late stage bull market. Previous late stage bull markets in 1929 and 1999 have tended to end in glorious fits of greed and speculation.
Late stage bull markets can last for years, and judgment during this part of the market cycle is easily clouded. It’s time to remember, even when investing appears to become easy, it never actually is.
Opinions are solely the writer's and are for general information only and are not intended to provide specific advice or recommendations for any individual. Stock investing involves risk, including loss of principal. Marc Ruiz is a wealth advisor and partner with Oak Partners and registered representative of LPL Financial. Contact Marc at firstname.lastname@example.org. Securities offered through LPL Financial, member FINRA/SIPC.