The Dumb Money Is Playing the “Game of Fools”

[Money Trends with Andy Krieger]( Welcome to Money Trends! If this is your first time reading one of our issues, learn more about us [here](. And if you have any questions or comments, shoot us a note anytime [here]( or at feedback@andykriegertrading.com. The Dumb Money Is Playing the “Game of Fools” By Imre Gams, Editor, Money Trends The Greater Fool Theory tells us that the price of an asset is not determined by typically rational standards, such as the asset’s intrinsic value. Instead, prices are determined by whatever a buyer is willing to pay for them. If you subscribe to the Greater Fool Theory, you might not flinch at buying an overvalued stock so long as you’re confident you can pass it on to someone else (a “greater fool”) willing to buy it at an even higher price. Institutional investors are certainly not immune to succumbing to the Greater Fool Theory. But it’s usually the Little Guy who ends up being the greatest fool of all. The most dangerous thing about this “game of fools” is that if enough people decide they want to play, the market can move strongly for quite a long time. This has been on full display ever since the stock market found a bottom on March 23. What started off as a typical bear market rally quickly devolved into something else entirely – certainly into something I’ve never seen before and did not expect. The “Great Pandemic” has so far triggered both the fastest stock market collapse and the fastest recovery in history. The spectacular thing about the recovery, however, is that it’s been largely driven by retail traders. These traders are collectively known as the “dumb money,” because they tend to buy the top and sell the bottom of the market. Usually, the Little Guy is left holding the bag after all the institutional investors mop up their positions. This time, however, was very different. This time the Little Guy DID manage to pick the bottom. Still, the retail crowd managed to live up to the dumb money moniker. Let’s take a look at a list of names that traders at some of the more prominent retail brokerages have been happy to buy since the March 23 low: - Hertz (HTZ) – The car rental giant declared bankruptcy in May. - Nikola (NKLA) – A hyped up electric truck manufacturer… which has zero products on the market, with zero sales, and zero revenue. - American Airlines (AAL) – In the wake of a global shutdown, it’s been forced to slash its workforce. It’s also still contending with a world that isn’t ready to board planes the same way as pre-COVID yet. - Delta Air Lines (DAL) – Not in any better of a situation than AAL. - Carnival Cruise Line (CCL) – The face of an industry that has absolutely been hammered by COVID-19. There’s optimism, and then there’s foolhardiness. The latter will carry you only so far. All these companies are involved in transportation, which is going to continue to suffer as the COVID-19 pandemic rages on. In the near future, I’d advise you to stay away from investing in any companies that depend on tourism and long-distance travel. Remember, if you choose to play the game of fools, you better hope you aren’t the last fool to join the game. If you are, you will be left holding the bag for everyone else. Regards, Imre Gams Editor, Money Trends [Money Trends with Andy Krieger]( Andy Krieger Trading 55 NE 5th Avenue, Delray Beach, FL 33483 [www.andykriegertrading.com]( To ensure our emails continue reaching your inbox, please [add our email address]( to your address book. This email was sent to {EMAIL} because you subscribed to this service. If you no longer wish to receive emails from Money Trends with Andy Krieger, [click here](. Andy Krieger Trading welcomes your feedback and questions. But please note: The law prohibits us from giving personalized advice. To contact Customer Service, call toll free Domestic/International: 1-888-206-3481, Mon–Fri, 9am–5pm ET, or email us [here](mailto:feedback@andykriegertrading.com). © 2020 Omnia Research, LLC. All rights reserved. Any reproduction, copying, or redistribution of our content, in whole or in part, is prohibited without written permission from Omnia Research, LLC. [Privacy Policy]( | [Terms of Use](