Nihilism Sputters
All memes, no math
With many of our traditional institutions in shambles and elites in disrepute, nihilistic celebrities have emerged to make a mockery of their field. Their awfulness is the point. It gives their fans permission to lower the bar. Many examples are in trivial fields that degrade our culture, but not in ways all that salient to me. Grotesque, morbidly obese and not always female contestants win beauty contests. The ugliness is the point and it is intended to repel. But I don’t care that much about beauty contests and would have hardly noticed if a beautiful woman won. The personal peccadillos of populist political candidates up and down the ballot are part of their appeal. The worse they behave, the more fun their fans have in offending their hated elite rivals. Ugliness replaces beauty. Lowness invades high office. They are intended to insult the medium and the worse the contestant the better the point is enunciated.
Financial nihilism crescendoed during the late ZIRPy era overlapping with Covid hysteria in early 2021. The value of money was obscured by its cost hitting zero. This inflated everything from NFTs to meme stocks. This was exacerbated by stimulus checks, “stimmies” that were treated like fun money by their recipients. These hit accounts while most sports were shut down, so people, especially young men, couldn’t test their luck with sports betting. This was the perfect environment for fermenting a short squeeze such as GameStop (GME) in January of that year. The move was animated by an animus against hedge funds short the stock (combined with an enthusiastic ignorance of all aspects of valuing companies and shorting stocks. The retail holders bidding it up even created this second language of financial terms barely recognizable to professionals).
But June 2024 has many differences. Retail investors are still app based, but Robinhood (HOOD) has dialed back some of the hysteria. Free trades still make the process seem less weighty than when there’s even a trivial cost, but they eliminated the confetti graphics when a trade is placed. GME doesn’t have a particularly high short interest. Stimmy recipients have long since blown through that money and far more with the rampant defrauding of the Paycheck Protection Program (“PPP”). Most importantly, money now has a cost. Robinhood, the very online trading app that fueled the hysteria, now offers Gold members 5% APY. That means that there’s a tangible opportunity cost for wild speculation over prudent saving.
GameStop’s top promoter, Keith Gill, presented his thoughts on GameStop yesterday:
Don’t spend the better part of an hour watching this. There is zero substance and the style is drug addled and mentally ill. That is why over 2.2 million people watched. His fans want to take down the status of work, intelligence, and logic. They want this to be a mockery. He gives them what they want. The stock is still up, trading at a multiple of what it is worth. This is all part of the same nihilistic culture whose fans want to live action role play the destruction and meaningless they feel in their own lives. It has not yet run its course. But logical people are starting to poke their heads up a bit. We took it all for years — low is high, men are women, money is limitless, theft is legitimate, fiery is peaceful, math is optional — and were not supposed to notice or say anything. But we noticed and are starting to say something.
One day we will all look back at that time we actually gave a rat’s behind what a grifter called @TheRoaringKitty (check out the feed, all memes, no math) thought about anything and have a good laugh at our own childish naivety.
That day is Monday. And every day thereafter.
- Cliff Asness
As much as I agree with Cliff, I also agree with my colleague Andrew Walker who says,
Never short a meme stock.
So neither participate nor stand in the way of the madness of crowds. Steer clear and await mean reversion. Fads and manias will always be with us. But each round will have a different set of owners. This last round was particularly stark because its participants went beyond lacking logic to actively despising it. They were objectively stupid (not new) and proud of it (new). They self-identified as “retards”; many overlapped with self-described “incels” (involuntarily celibate). Past generations of low status young men struggled to get a date but I never saw so many who took pride in this instead of trying to fix it. We will be able to watch the direction of GME and other meme stocks such as Trump Media & Technology Group (DJT) to see if the fever eventually breaks. Their fans are not necessarily stupid; they’re hopeless. The world doesn’t make sense to them so they want it to not make sense. But there is an urge inside of most people to grow up, to get out of their parent’s basement, to do meaningful work, to marry, to form and lead a household, to build a business, and to contribute. For a generation that frequently talks about “sustainability” they must know that nihilistic antics are unsustainable. Someone has to do the work that they don’t. And when it comes to stock analysis, the work is fun, rewarding, and sustainably lucrative. GME fans should try it.
