If after ten minutes at the poker table you can’t spot the rube, then you are the rube. – Ancient Poker Proverb
I haven’t played in awhile, but I used to play a lot of poker. A LOT of poker. I’ve won several tournaments and I can hold my own in very solid games. I used to play in an illegal card room in the basement of a high-rise condo at I-440 & West End. Until it got raided. Luckily I wasn’t there that night. The Poker Proverb above is a great mantra to repeat as you walk into a poker room, or most any life situation for that matter. Spot the rube. Don’t be the rube.
Speaking of rubes, Hometown International ($HWIN), that owns a single deli in New York that has done around $35,000 in sales over the last 2 years. The company reported more than $600,000 in expenses last year along with a net cash gain of $2.2 million from “financing activities” [CNBC]. Market cap of the company? Just north of $100M [FactSet]. Are you kidding me? There’s a rube in those Reubens somewhere.
Next I had a friend call me in February. He wanted me to invest in GIFS of NBA players shooting 3-pointers and layups. The hell? NFTs are all the rage and TopShots is the place where the money is hot and stacks poker chips are flying. What do I do with these GIFS? I haven’t watched an NBA game in decades! My friend ended up losing about $500 and has about $500 left in his account he wants to salvage and bring home. The company won’t (can’t?) send his money back to him. How much for the GIF of the rube shooting an airball?
Dogecoin was created as a joke. What came first, the meme or the coin? Its market cap is currently worth more than Marriott International Inc. or Ford Motor Co. Should Dogecoin hit $1, as Mark Cuban is touting, its total value would exceed companies like AMD, CVS, or General Motors. Dogecoin serves no purpose, and unlike bitcoin, faces no limit on the number of coins that can exist. Right now its main advocates are TikTokers who sing about it making us all rich. I’m singing about rubes with Dogewallets.
Gamestop is pure gambling. A guy named Roaring Kitty is leading a group of Redditors on a no-limit bender as folks from all over the globe call the pot. GameStop hasn’t turned a profit since 2017 and has gone through 5 CEOs in that time. It has reached a market cap over $20B, about equal to Kellogg’s, a solidly profitable company with a rich history. You could make reasonable arguments to value GameStop’s stock somewhere between $0 and $15/share. It has traded as high as $480 recently. These are rubes with joysticks in their hands…
What is going on here? It’s FOMO. It’s social media engineering. If everyone is talking about it, then I don’t want to be left out. I don’t want to be the rube who misses out on the big money. All my friends are doing it and making a killing. I know a guy who made $10,000 in one day. This is my chance to make up for lost ground investing. I’ll throw a hundred or two at it and if I lose it’s no big deal.
We eschew common sense economic principles in hopes of a quick buck or a colossal gain. Gone are the days of valuing a company based on its balance sheet. We value it on its social media rank instead. Folks are investing hard-earned money on whimsical notion instead of empirical evidence. We all want to be the person with the winning hand.
How many people do yo know who suck at football betting? On Monday everyone picked the winners right? Maybe the conversation is better hand on Friday. Better yet, show me the ticket you cashed… Are you a player with 10 bucks on the line? Or are you truly building steps toward wealth with $10,000 – $100,000 or more at play? Help me weight your play.
How about real assets? I recommended $WOOD (a timber ETF) here and here. $WOOD is up 80% over the last year. In the same posts I’ve recommend $BNO (a Brent crude oil ETF) that is up 99% over the past year. Boring, not flashy, and they don’t play well on a Reddit thread, but real money.
Over the summer I started noticing signs of a rotation out of the super cap companies and into smaller and medium sized companies. I started pointing this out in the Man on the Move Facebook group. I rotated into $RSP (mentioned here and here) and it is crushing the returns of the S&P500 right now, up over 70% in the last year. I’m also been touting Jeffrey Gundlach’s $DSENX in our Facebook group, and it is crushing the S&P500 index as well and up 70% as well in the past 12 months. Lastly, $VEXMX is crushing returns over the last year with an easy 100% gain. I’ve touted that in our FB group as well.
Diversification across a wide class of assets in a wide sampling of global markets will be key going forward. As we emerge from the pandemic and current US leadership takes aim at Americans with increased taxes, currency devaluation, wealth transfer initiatives, social reforms, and insane regulations, it will be very important to diversify globally.
This is get rich slowly. It’s boring, but it works. I’m sure you can still make a TikTok video out of it though, just leave your pants on. Please.
Take a moment to survey the landscape. Can you read the room? Take a look around. Do you see the rube? Do you see lambs being led to slaughter? Are people grinning at you and eagerly offering you a seat at the table? Can you see the endgame and know both your entry and exit?
It’s worth memorizing that old Poker Proverb…
Cheers, and thanks for reading!