The clues that this new era was dawning were everywhere around the office, though. About half of the team seemed to spend most of their days trying to come up with a dotcom business idea that no one else had thought of yet. The other half, including lots of very smart people, were trying to make their millions trading the incredible volatility that accompanied the dotcom boom, in almost all cases with barely an inkling of the workings of the stock market.
I can’t think of any in the first group who ever achieved their dotcom dream – although a few successful web shops eventually emerged from our early experiments. And those playing the markets that had quickly made large paper gains soon found themselves sitting on very real losses as the bubble burst almost on the stroke of the millennium. Indeed, as Megan Boxall wrote a fortnight ago, it is not getting rich quick that is the hard part in investing – it is keeping hold of it that’s the real challenge.
But what the experience really taught me was how easy it is to be sucked into such excitement. It’s hard to sit by and do nothing when it seems that everyone else is getting rich when you’re not – the investing equivalent of keeping up with the Joneses as it were.
Hearing about the Reddit user who this week turned their $50,000 life savings into $22m betting on shares in GameStop, a retailer on the brink of existence, is a powerful lure, and it is a similar story with shares in Tesla or cryptocurrencies – social media is awash with tales, and instruction, of how to get rich quickly trading such ultra-high-risk assets. In bitcoin’s case, the very fact that people still quote the value of their bitcoin in dollar or sterling terms should tell us that the ‘alternative currency’ narrative isn’t behind a great deal of the latest gains.
In saying this, I run the risk of being pilloried by the bulls – in the case of GameStop shorter Citron Research, pilloried in fact became death threats. Indeed, the GameStop saga has forced many professional shorters out of the market, either because of the financial hit or because of the risk that the Reddit crowd try their luck elsewhere. That seems sensible, because retail punters are already looking to repeat the trick with similarly bombed-out and heavily shorted shares – among them more giants of yesterday, including Blackberry and Pitney Bowes. And where the US leads, the rest of the world follows – two of the UK’s most heavily shorted shares, Pearson and Cineworld, enjoyed similar bounces this week.
I suspect that, at the end of the day, the shorters will not retreat for long – a company’s problems do not go away just because inexperienced traders are buying its shares. And when they do return, the fear of missing out that is driving companies like GameStop to crazy valuations – $20bn for a bricks-and-mortar retailer selling physical products in a market that’s gone largely digital – will undoubtedly start to work in their favour. Remember, after every wild party often comes the hangover to end all hangovers.
