Gamestop and the future of the stock market

Clark Howard Show
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Automatic TRANSCRIPT

Game stop became this populist uprising that went across the political spectrum what i learned from the game. Stop mania was that. There's a lot of anger and resentment in america towards the wall street elites and people thought it was just awesome that these really rich fat cats were whining that they were losing billions to ordinary investors. And that's cool but the thing about investing is that there's been a separation in people's minds between the real value of accompany the value of its stock. You know the thing that got set off on it and when my fifteen year old son every day gives me a report on what's going on on the red at boards and what they're saying about this company or that when what they're saying about silver whatever it is and it's this Investing by kind of an ad hoc committee the problem. I have for you and your wallet is if you're just playing with some money that's fine but if you're putting money that you actually are going to need to live on or for your long term financial security know that what's involved in what's being posted on. Reddit are not real investing strategies. I mean you are investing but you're really more engaging in speculation or gambling and it's cool when it works but what happens when a company ends up way beyond its actual real value is there are people who on the roller coaster ride up if they buy it the right exact second sell at the right exact second. They're doing awesome but the people who bought from them when the roller coaster takes scary ride back down. They're the ones who get their wallets cleaned out. And i think that this reminds me a lot of something that happened to generation ago before many people that are investing robinhood. Were even alive. Or we're just young babes and diapers. Hopefully their parents buying generic diapers instead of brand name but whatever that we went through something called the dot com crash where values ninety eight and ninety nine went through the roof for companies that had never made a penny and the more money. They lost the higher their stocks went up and they were all what are known as story stocks and the way those stories ended. They weren't like bedtime stories with happy endings. They were really ugly with companies lost huge amounts of investors money in the billions and what was similar to. What's been going on lately with trades in stocks of unloved companies. Suddenly go way up and then take their right back down. What was consistent. Then that is again happening now. Is that overwhelmingly. The people that were doing this were investors that were smaller. Investors and in cases were borrowing money that they couldn't afford to lose one of the things that's been going on this time also happened in ninety eight ninety nine and that is that people were borrowing on what's knows margin in order to place bigger positions and then when a stock starts its fall. You get hit with a margin call which is where you have to pay off your loan. Basically in a nanosecond. If you don't have the money your whole position is sold out and wiped out so this is something that is not for the faint of heart because as we saw back when the ninety eight ninety nine mania ended in two thousand. We had a massive decline in the stock market. That took many many many years to recover from there are conditions today that somewhat mirror that and so think about investing is something you're doing for a long time or a lifetime not for today's hot stock hot precious metal. Whatever it is if you have money that's your play money. You want to play these games. Go for it on the other hand. If it's money you really really gotta have. This is too hot to handle and you'll get burned bad in the kitchen and krista. You're with me in way back in nineteen ninety nine. I was a song also right And was more salvatori than what what happened with with the stock market it was. It was really something that that people that were financial analysts. Just were shaking their heads. They couldn't understand how these stocks back. Then we're going up and up and up and up which they did until they didn't and when the airline out of the balloon it was fast you know we. We talked about our fifteen year. Old sons When you talked about this on another episode. But i'll have to give you an update. That mind. got his dad to buy him. He gave his dad some cash. And got him to buy a stock. That was another speculative one from read it that he had seen and he is now lost like seventy percent of the money. He gave us that. So i think it was a really good lesson for him. Only a good lesson if people don't just go away and say investing is not for them. Yeah no he's still thinks he's pretty smart. You do have a very smart son. The thing is i. Don't want people if they get burned through this wave of red and aspire mania To not turn away from investing. Say that it's just not worth it. It's too risky. Whatever that's why you have to think widely diversified and term not a single stock. That you're gonna own hours or days. And i know the i've said it again and again i am the dullest human being alive and see. You're nodding your head is incorrect. It is true. Oh no. I'm extremely dull and my philosophies about investing or extremely dull and so i want you to have financial security and you know what if people are having fun getting animated and talking to each other about this trading symbol or that one or whatever. And what's going to happen with this one or that one. No that i would be the person that would put you to sleep talking about how you build. A portfolio with index funds or in a retirement account with the target retirement fund. Because what i'm about you ending up with a real financial wealth real financial security over time. Not the quick

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