The GME/AMC Debacle: It Wasn’t What You Thought

The above is a text exchanged between Chad and I on the day GME was tanking big time.

Too many people think the markets are easy money. They’re not. And this “easy money mentality” is what led people to chase GME and AMC and lose a lot. There was also a ton of misinformation spread on social media regarding these stocks, sucking everyone into buying them. And now a lot of those people are underwater.

The whole saga has been framed as a David vs. Goliath fight, but it was never that. It makes for a good, gripping story, but, like Gary Taubes’s “Good Calories, Bad Calories” book (Gary is really good at coming up with compelling, yet false, narratives), it’s a story that just isn’t true.

The unfortunate thing is that false narratives have consequences. Gary’s false narrative leads people to an irrational paranoia surrounding carbs. The GME/AMC false narrative caused people to lose money.

On our sister site Stockwonk, I wrote an article that clears up a lot of the misconceptions surrounding this situation. I go over what really happened, who really won or lost, whether the market is truly “rigged”, and talk about the bad habits that a lot of people have when it comes to the stock market.

Check out the entire article here.

“Buy Low, Sell High” is the”Eat Less, Move More” of Investing

The parallels that exist between the worlds of fitness and finance never cease to amaze me. Both should be founded in sound, evidence-based principals that rely more on consistency and patience than on quick fixes and flash.

But unfortunately, both worlds suffer from catchy slogans, that while technically correct, do little to actually help the people they’re aimed at supporting.

In fitness, “Eat Less, Move More” is the catch-phrase of the neophyte trainer who just can’t understand why anyone can’t just follow this simple mantra and enjoy the body of their dreams?!

As anyone who has been in fitness for any length of time will tell you, getting our clients to “Eat Less, Move More” is ultimately the goal, but without actual real-world, individual guidance to go along with the catchy slogan, most people will fail and never reach their goals.

The same is true in finance. “Buy Low, Sell High” is good advice at face value…you do want to buy stocks at a lower price than you sell them…but is this catchphrase actually helpful?

I’d say it’s no more effective than telling an overweight person to “Eat Less, Move More!” Here’s why…

Yes, you want to sell a stock (or fund) for more than you bought it for. But beyond the simple math, a LOT more information is needed before you “buy low” or “sell high”.

Let’s first look at “buy low”…lower than what…what you’re going to eventually sell it for, sure…but what else?

Let’s take a stock I own Netflix (Ticker NFLX). I originally bought NFLX for roughly $30 a share over a decade ago. At ANY point in the last decade I could have “sold high”, if my sole criteria was to sell it for more than I bought it for.

I rode NFLX up well over $300 a share…sell high! Nope, I held. Then I rode it back down to about $70…still doubling my money, but damn. Should I have “sold high” and at least doubled my earnings? Maybe.

Or maybe I should have bought more. Again, that depends on my perspective. At $70 I could have considered it a “sell high” (based on my purchase price) and gotten out.

Or, I could have considered it another buy point because $70 was WAY lower than the peak. (Buy the Dip!…another catchy slogan)

Ultimately, I held and rode it back about over $500, the stock split, I rode it higher, the stock split again…and then I bought more NFLX at $500 a share in 2020. Wait, did I just “buy high”? WTF??

I should note, the cost basis of my original $30 shares are now at a split-adjusted price of about $4.21. So how do I determine when to “sell high”? And how on Earth did I buy shares at $500 when my original shares only cost me $4.21?

The fact is, it’s all relative. Much like the many times in fitness and nutrition that the proper answer is “It Depends”, the same is true of the stock market. When to Buy and Sell a stock “depends”. And “Buy Low, Sell High” is simply inadequate and oversimplified advice.

I invest in companies I plan to hold for at least 3-5 years. Some, like Netflix and Apple, I’ve held for a decade. And they continue to be companies I like for the future and have no intention of selling any time soon.

These are the kinds of topics we take a deeper dive into inside the FitProFinancial membership site. While we can’t tell you how to invest your money, we can tell you our thought processes behind how we invest ours. And we can talk about why we are interested in certain stocks or funds now, and why we put our money into them in the past.

We post all of our own holdings in the portfolio tracker and you can both follow our portfolios and create your own too!

So join us inside where we nerd out on finance the same way we’ve “nerded out” over fitness and nutrition the last 2+ decades.

Today’s FPF Investments

Hey, FPF followers, this is James, the nerdier and less handsome half of Fit Pro Financial. I wanted to let you know of some of the investments I made today in my general Vanguard long-term investment account (not my trading accounts). These aren’t buy/sell recommendations. These just outline my general thought process regarding investing. I treat my long-term investing similar to my stock trading in that I have a rationale behind why I’m making an investment or trade. And that rationale isn’t something like, “because it’s cheap!” Sometimes stocks can be cheap for very good reasons (i.e., the company is failing), no matter how expensive it was in the past. Remember, Washington Mutual was a cheap stock that only got cheaper until they went into receivership. A lot of investors get burned when they buy stocks simply because they look cheap.

I think very carefully about not only long-term potential and upside, but also the risk involved.

Here’s what I bought today:

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The information in this post is subject to our terms of service. Any information or tools provided are for informational purposes only and do not constitute financial or investment advice. Investing involves risk and you can lose all of your initial investment. Consult with a financial professional.