Tag Archives: stock market

A Note To Investors/Enthusiasts Of Dogecoin

We live in a strange time. I know you could say that about almost any point in history, but let’s face it. The past year has been more eventful than most. The past few months have been even more eventful if you’re an investor or follow economic news. We recently learned that a multi-billion dollar hedge fund is no match for a bunch of shit-posters on Reddit.

I’m not gonna lie. That story still puts a smile on my face. Last year sucked, but when a bunch of shit-posters on Reddit tank a predatory hedge fund, the world is an objectively better place.

As much fun as that is, there are some other stories related to investing that are worth noting. On top of the craziness caused by r/WallStreetBets, it has been just as chaotic for investors of cryptocurrencies. When the financial world is in chaos, cryptocurrencies that thumb their nose at old economic institutions tend to thrive.

Now, full disclosure, I do own Bitcoins. That’s the only cryptocurrency I own and I don’t own much. I’m not a bold investor. I buy index funds and ETFs. I would not fit in on r/WallStreetBets, nor would I be a good evangelist for Bitcoin.

For that same reason, I’d like to send a special note to those currently caught up in the Dogecoin craze. If you don’t know what Dogecoin is, then that’s understandable. It is a cryptocurrency like Bitcoin, but it’s unique in a few very particular ways.

Most notably, Dogecoin is often treated as a joke. That’s because it started off as one.

That’s not my opinion. That’s literally part of its origin. Its creators, Billy Markus and Jackson Palmer, were legitimately surprised when people started using it. I guess they didn’t get the joke.

That doesn’t mean Dogecoin has absolutely nothing going for it. It is a functioning cryptocurrency that uses some of the same technology as Bitcoin. Its most notable difference is that, unlike Bitcoin, there’s no limit to how many Dogecoins can be mined. Whereas Bitcoin can only ever have 21 million, Dogecoins can be mined indefinitely.

It may seem like a small difference, but that difference matters if you understand the basics of scarcity in economics. Most people understand it on some levels. If you can make an infinite amount of something, then it’s not going to have much value. If something is incredibly finite and difficult to obtain, like gold or Bitcoins, it’s going to have more value.

It’s that concept that I’d like to convey to those cheering on Dogecoin. Thanks to the recent upheavals from r/WallStreetBets, Dogecoin has been surging more than most currencies and even people like Elon Musk are cheering it on.

That’s not unusual. Sometimes, certain assets get propped up for a brief period. That has happened a lot with cryptocurrencies over the past decade. However, with Dogecoin, it’s a lot more style than substance.

Whereas Bitcoin gains value as it becomes more accepted in various sectors of the economy, Dogecoin gains value because people are just cheering it on. One has long-term sustainability. The other ends as soon as people get bored or find something else to cheer on.

Today, it’s Dogecoin.

Tomorrow, it could be JackCoin, a cryptocurrency made exclusively for people named Jack.

Is that the dumbest idea in the history of finance? I don’t know, but entire economies have gone bust for dumb things before.

Again, I’m not an investment expert. I’m not giving investment advice to anyone. However, to those thinking about getting in on the Dogecoin craze, I offer one important message.

You can win with style over substance in a lot of things, but not when it comes to money. At some point, a product has to demonstrate its value. You can only prop it up for so long before basic economic forces take over. It’s not fair and it’s not rational, but that’s how economics work.

Dogecoin will find that out at some point. Investors may have to find out the hard way.

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Filed under Bitcoin, Current Events, rants

Jack’s World Thoughts Experiment: How Much Money Do You Need?

The following is a video for my YouTube channel, Jack’s World. It explores another thought experiment, something I’ve done plenty of times before. This one just happens to involve money. Given the recent events with the stock market, I think the time is right to contemplate money and how it guides our lives. Enjoy!

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A Subreddit Exploited Wall Street Hedge Funds (And I Applaud Them)

Every now and then, a news story comes along that just puts a smile on my face for all the right reasons. Granted, a lot of those news stories involve comic books and sex robots, but certain news transcends my preferences. They’re just too inherently awesome and cathartic to ignore.

This recent story surrounding a sub-reddit beating a multi-billion dollar hedge fund on Wall Street is definitely one of them. In the process, it suddenly turned Gamestop, a store I haven’t been in for three years, into the hottest stock on the market.

It’s the kind of story that would make a ridiculous movie. It’s not “The Big Short.” Hell, reads like a “Robot Chicken” sketch, plus or minus a few poop jokes. Except, this actually happened in the real world.

For those who haven’t been following this story, here’s a colorful breakdown by Esquire.

Esquire: How WallStreetBets Redditors Used Their Collective Power to Manipulate the Stock Market

News about the stock market rarely crosses over into the cultural mainstream, and historically when that’s happened, it’s meant some catastrophic financial event has taken place. (See: The housing and stock market crashes of 2008.)

But the stock market was the single biggest news story Wednesday, financial or otherwise, due to a group of Reddit shitlords pumping up a collection of stocks and pushing some billion-dollar financial institutions to the brink of bankruptcy.

Hedge fund Melvin Capital needed a $2.75 billion bailout on Monday after the stock price for GameStop, the video game retailer, spiked to more than $70 a share over the weekend. Just a month earlier, the stock was hovering near $15. Melvin was shorting the stock, hence the need for a bailout. Reports of Melvin Capital’s financial struggles sent GameStop’s share price soaring even higher, though, to more than $100 a share on Monday, putting the hedge fund in an even more precarious financial decision. As of this writing, the stock was trading for $330 per share—77 times higher than its share price of $4.28 a year ago.

The GameStop stock rally is the handiwork of r/WallStreetBets, a Reddit community where people share news, memes and personal anecdotes about playing the stock market.

Let’s all take a moment to shed a fake tear for a hedge fund that sought to make money by hoping a company would die. Let’s also take a moment to contain our rage that those assholes still got a multi-billion dollar bailout with little to no debate, but I digress.

That article gave us the basics. In short, a bunch of people on Reddit decided to exploit the short positions that a bunch of hedge funds had on Gamestop and make a ton of money on the side. It’s the kind of gimmicky stock trading tactics that you’d see in “The Wolf of Wall Street,” minus the strippers and ludes. The only difference is this didn’t break any laws and only fucked over hedge funds.

If you need a more thorough breakdown of just how those hedge funds were fucked over, here’s a video by the YouTube channel TLDR News. They break it down beautifully. I must warn you, though. If you get excited by seeing hedge funds get screwed over by a bunch of Reddit trolls, you might not be able to contain yourself.

Now, why do I love this story so much?

Why am I making such a big deal of it?

Why is this even news on such a large scale?

The answer is fairly simple. It’s not just that I love Reddit and have been an active user for years. This kind of thing just doesn’t happen that often. A bunch of normal, everyday people on Reddit getting the best of a Wall Street hedge fund? It just doesn’t seem possible.

Even if you’re a die hard capitalist or an dogmatic liberation, you can’t be too fond of hedge funds. In addition to being fertile grounds for fraudsters, con-men, and Gordan Gecko wannabes, they have just one goal. They seek to make rich people even richer. How they go about that varies, but they’re not above lying, cheating, and effectively gaming every capitalist system to their advantage.

They’re basically villains for both capitalists, socialists, and communists alike. They’ll screw over anyone, be they individuals or companies, so long as they can turn a profit. They don’t make anything. They don’t create or develop products that they sell to willing consumers. They mostly dick around with math, balance sheets, and stock prices to make money. That’s it.

I’m not a fan, to say the least. Watching them lose is like watching Lex Luthor get beat up by a five-year-old girl. You don’t think it’s possible, but it’s a glorious sight when you see it.

Honestly, this is the kind of story we need right now. A bunch of nobodies on the internet find a way to screw over a hedge fund whose business model involves screwing over struggling companies. What’s not to love? That’s a superhero narrative wrapped in true capitalism wrapped in American ingenuity. Ron Swanson himself would be proud.

There’s a lot more I could say about this. Since the story is still unfolding on many fronts, I’ll hold off. I’ll just say that if r/WallStreetBets does nothing more than screw over a hedge fund trying to profit from Gamestop’s demise, they’ll still have done a great good for this world.

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How I Would Spend A Million Dollars (And NOT Go Broke)

We’ve all dreamed about it. We’ve all fantasized about it. In fact, other than having an army of naked bikini models or an army of Ryan Gosling clones, it’s probably one of our most frequent fantasies. What would we do if we suddenly became rich?

I know I’ve fantasized about it. Then again, I fantasize about a lot of things. It’s kind of necessary when you’re trying to be an erotica/romance writer. You need to be able to conjure the kinds of potent fantasies that make women need to change their panties and men wish they hadn’t worn such tight jeans. It’s a skill I’m developing and one from which I hope to gain greater success in the future.

Now I know the odds aren’t exactly in my favor right now. The odds of any writer of any genre, regardless of sex appeal, becoming as wealthy as Stephen King or Stephanie Meyer is right up there with scoring a date with Taylor Swift. However, with the recent interest I’ve attracted from publishers, those odds are improving. It’s not much, but any improvement is better than no improvement at this stage of my publishing career.

Even with the odds still not in my favor, I often find myself entertaining various scenarios on what I would do if one of my books became a best seller. Specifically, I often wonder what I would do with the money I make.

First off, I would not immediately get on the first flight to Las Vegas and spend three nights in a hot tub with five strippers, a keg of beer, a buffet of deep-fried Twinkies. Unless you’re a billionaire, that sort of thing is best left to pornos and low-budget skin flicks on Cinemax.

Second, it’s worth pointing out that a whopping 70 percent of lottery winners end up going bankrupt. On top of that, according to Sports Illustrated, over 60 percent of professional athletes go bankrupt after their careers are over. Even if you suck at math, you should know that those are not trivial figures.

Here’s a good way to illustrate that point: imagine you ordered your favorite pizza, but over two-thirds of it was eaten before it got delivered. That’s a lot of pizza you’re missing out on. Now imagine you were supposed to live off of that pizza. Losing over half of it now feels a lot more serious, doesn’t it?

So why does this happen? Who do people who strike it rich go broke? Well, it isn’t just a matter of owning pet Tigers, owing child support to multiple women for multiple children, investing in failed business ventures, or buying one too many cars, although that’s part of it. There’s a psychological component to it.

Unless you’re born rich or become rich through skilled business savvy, which only applies to a fraction of the population, you don’t know how to be rich. Yes, there is a certain amount of skill to being rich. Like any great talent, not everyone has it. As such, not everyone knows how to deal with it.

There’s even a psychological term for it. It’s called Sudden Wealth Syndrome and it’s pretty prevalent among lotto winners and professional athletes. When someone gets a sudden influx of wealth, it causes a great deal of stress because their brains aren’t wired to handle it. They’re so used to being not rich that it just feels off.

This is why it’s so easy for lotto winners and professional athletes to go broke. Their brains aren’t wired to see all this money the same way Bill Gates of Warren Buffet sees it. In some respects, they look at money the same way they look at milk. They need to spend it or it’ll expire.

That’s what leads them to just throw it away, giving it to friends or investing it in businesses that have the organization of a 6th grade science fair project. They don’t realize until it’s too late that money doesn’t go bad. It’s okay to actually save it and it’s possible to invest it in a way that’ll ensure you don’t need to dine on Ramen noodles and hot pockets.

Now to be fair, most people don’t know squat about finance or investing. It’s not a class public school teaches to kids at a young age. I get the sense that administrators understand that most kids in public schools aren’t going to strike it rich so it’s not worth the effort. It’s cynical, but understandable.

Given these odds and the tendency for non-rich people to piss their money away like an incontinent monkey, I’ve already crafted a plan on how I would invest a million dollars if I ever achieved that kind of success. This isn’t a fantasy. This is a plan. I may never get a chance to implement this plan, but like a condom, it’s better to have one and not need one rather than need one and not have one.

For this plan, I start with about a million ($1,000,000) dollars. I know Bill Gates can probably find that much money in his couch cushion, but it’s a nice even amount to work with. Since the human brain is terrible at dealing with large numbers, it helps to keep things even.

With this million, here are the simple steps of my plan. Any future lotto winners or professional athletes who want to follow this plan are welcome to do so. It’s free, it’s easy, and anyone who knows how to work a cell phone can do it.

Step 1: Pay off ALL the taxes first, if possible

This is, by far, the most important step anyone with money can take. The IRS is, in many respects, the ultimate dominatrix in that she’ll hurt you in ways you didn’t know were possible. You do not want to defy her.

Step 2: Set up an investing account with a reputable bank and pick one with the lowest fees

This is fairly easy for someone with money. If you have a million dollars, most banks will roll out the red carpet for you. Some will even waive certain fees if you have a lot of money in the account. Depositing a million dollars will usually get you a lot of leeway in that respect.

Step 3: Buy either an index fund (VFINX) or buy a blue-chip stock with a healthy dividend like Verizon, Exxon, or GE

The key here is not to buy a stock you’re going to sell for a quick turn around. The key here is to buy the stock and just basically forget about it. From here, you focus entirely on the dividends. They’re basically Wall Street’s version of masturbation. They’re the gift that keeps on giving.

Step 4: Build a budget around the dividends

From here on out, I focus on the monthly or quarterly dividends that the stock or index fund pays. With a million dollars, it’s usually not enough to just live in a mansion and never have to work again. You usually need several million for that. However, it’s still pretty considerable.

For example, let’s look at how $1,000,000 pays with buying Verizon. As of this posting, the dividend yield is %4.49. Do a little basic math and that comes out to $44,900 a year, which is paid out quarterly with four payments of $11,225 over the course of a year.

Take a breath now. That’s the most math you’ll need to do with this strategy. With this means is that you’ll have a yearly income of over $40,000 for doing absolutely nothing. It’s basically a slacker’s wet dream.

Now unless you want to dine on caviar and snort cocaine off a supermodel’s ass every week, you can budget $44,900 a year to live fairly comfortably. For me, this means taking that $11,225 quarterly dividend and budgeting it for three months at a time.

In most areas that aren’t New York City or San Francisco, you can find a decent home with decent amenities for that sum, plus utilities. That’s the ultimate endgame for this plan of mine. I invest the money in a way that gives me a passive income I can use to pay for the essentials, ensuring that any money I make beyond that is just icing on the cake.

There is one more step though and it’s also quite essential. If you followed the first step, then it should be easy to figure out.

Step 5: Pay all the necessary taxes associated with your investment and dividends

Again, it’s worth re-emphasizing how much you do not want to mess with the IRS. They don’t care if you take your money and throw it at a flock of pigeons. If you don’t give them their cut, they’re going to come after you and you will be in a world of legal trouble that no amount of money can make easier.

There you have it. That’s my plan if and when I ever become rich from either my publishing efforts, by winning the lottery, or by marrying Jennifer Lawrence, whichever comes first. I hope I get a chance to implement it one day. Until then, I hope others take the wise advice of Warren Buffet.

When it comes to money and investing, nobody can beat the market. The best you can do is not lose to it, but unlike gambling or sports, not losing can still be pretty damn profitable.

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