If the Gamestop and AMC short squeezes taught us anything about the current markets, it’s that retail investors are here to stay; but if society has taught us anything in the past five years, it’s that things don’t need to make sense for them to be real (or make money).
Do you remember when you didn’t have to wear a mask everywhere you went? Do you remember when reality TV stars played their role on Instagram instead of inside of The Oval Office?...When are “experts” going to realize that we’re living in a new age? A digital one, one where technology reigns supreme and social media influence can have more power than traditional institutions.
Let's look at the facts. The Robinhood and Reddit generation, myself included, are in for a rude awakening when the next doomsday bear market swing hits. All we know is buy, buy, buy and I’m not talking NSYNC. This historical bull market run has retail and institutional investors on a bigger high than the emerging cannabis sector; but the next fiscal downturn (whenever it happens) is surely going to be a shock to the system for most of us.
Commission-free trading, which was pioneered for the new generation of traders by Robinhood, changed the landscape and set up many novice investors for failure. In that same breath, it also made us a ton of easy money. Kudos to those who booked gains at the right time during the course of this past year either knowingly or unknowingly. In contrast, we are soon going to see who’s been gambling with their money versus who actually understands the principles of finance and the importance of developing a balanced portfolio.
With that being said, the current resistance in the marketplace to Bitcoin, Dogecoin, and other cryptocurrencies in general have been highly supported by seemingly trivial statements from financial titans in the industry. In a 2018 interview with CNBC’s Becky Quick, Warren Buffet, Charlie Munger, and Bill Gates had the following to say about Bitcoin specifically:
Buffett: “...the asset itself is creating nothing.”
Munger: “...I think it’s a scum ball activity.”
Gates: “...I would short it if there was an easy way to do it.”
Venture capitalist, engineer, and philanthropist Chamath Palihapitiya (as seen in the video) disagrees and retorts their analysis quite simply so I’ll spare you mine; however, I will add that FinTech is a young man/woman’s game.
Now, before you raise your blood pressure and label me as just another Millennial with an uneducated opinion on a blog, let me note that like Chamath, I am also a purveyor of Mr. Buffett's investment philosophy and have actually read his annual reports dating back to the 1970’s. What I agree with most is his sentiment that for an individual to have success in the markets, one cannot time the market but must have time in the market...what I disagree with is his and their cynicism, chastisement, and judiciary claims on a technological advancement that none of them are actually experts on. Granted, that interview is three years old, but those same retorts are still being used today for the crypto industry at large. As a collective, the FinTech community is still unaware of the full capabilities of the blockchain, and we’re just now cracking into its possibilities for applicable implementation.
Education is the name of the game, and it’s something that is sorely lacking in the financial industry. Instead of casting judgement on the new wave of investors, why not focus on collaborating with and preparing us on how-to take the reins of the financial future? There has to be a meeting of the minds where convention-meets-innovation.
In 2003, Skype spearheaded the modernization of video conferencing, followed by WhatsApp in 2009, FaceTime in 2010, and Zoom in 2011, yet it took the COVID-19 pandemic in 2020 to forcefully propel Baby Boomers and the Gen X’ers to adapt; and boy are some of them having a difficult time doing it.
...Let me get to the meat of this cow though.
Throw Out Fundamentals & Technical Analysis
Dogecoin is the sexy girl at the party that everybody secretly wants their turn with but won't or can't say it out loud (i.e. it’s cheap)...you know she's promiscuous but if she gives you a shot you will probably hit it anyway. The new retail trader doesn't care about what's safe or what's traditionally considered smart anymore. They don’t care about T-Bills and money market funds, they want what’s sexy...For the record, I don’t support or follow this trend, but I don’t have to support other's investment strategies to capitalize on my own and neither do you.
The Doge Play has nothing to do with fundamentals or technical analysis and everything to do with these three things:
1) Risk vs. Reward
$250 to one individual might be the same as $25,000 for another. If you're willing to pony up the dough, then why not take a chance on a cheap asset that has the potential to benefit from a 5,000% upswing? Mark Cuban seems to believe the same:
2) Knowing What’s Cool Before the Rest of the World Does
My background is in talent evaluation and that same skill has proven useful in the world of investing, hence my YTD portfolio returns (one of them). My key to success in business has been to be where the big money is going to be, before the big money gets there, and to cash out soon after it arrives.
3) The Power of Celebrity & Social Influence
If five years ago I would have told you that Kim Kardashian would help win the release of two women from prison and soon be practicing to become a lawyer, you would have laughed me out of the room. The same case can be made for Donald Trump as POTUS and JAY Z’s partnership with the NFL.
With Mark Cuban, Elon Musk, Gene Simmons, and now Snoop Dogg on the Doge bandwagon, how much longer until others follow suit?
Look - I'm not saying throw your life savings into Dogecoin. I wouldn't recommend doing that with Disney, Apple, or any other security either. I would say however, follow the 5% rule. As in designate up to 5% of your portfolio’s allocation for hedge worthy investments such as gold, silver, and/or whatever cryptocurrency floats your boat; and when you do, understand the real-world implications of capital and market risk.
...We're already playing in a game that's been rigged for decades, so you can miss me with the bear talk on Doge, especially from investors who are creating fake Reddit profiles and finsta accounts to avoid admonishment from their firms for selling away or making "risky" investment decisions that they don't agree with. Be smart, take measured risks, stay disciplined, think independently, and see the long-play.
Bitcoin in 2016 ($405). Amazon in 2016 ($515). We've seen this story play out time and time again. Don’t underestimate the power of being early to the party.
So how would I play Dogecoin? I say get your money while you can during the alleged pump and dumps, and/or buy & hold until somebody like Elon comes along and places real value behind the coin by making it the official currency for one of his new inventions.
You want to talk about a bull case in itself? Don't play yourself and discount Elon’s achievements with PayPal and Tesla. He might come off as Kanye-esque, but in the words of Mark Jackson "that's a bad, bad man" when it comes to technology innovation.
Disclaimer: At the date of this publishing, the author was an owner of the aforementioned digital asset.