GameStop, Goliath, Crypto Craziness & Golden Nuggets: Pt II

Crypto craziness continues

In part one of this blog we talked about GameStop and related crypto craziness. WallStreetBets was David taking on Melvin Capital as Goliath. In this case David's stone was a short squeeze that almost killed the hedge fund.

The tweet and pumps spilled over into crypto and ETH has now hit multiple all time highs. This past week was filled with unlimited articles on the GameStop mania. 

Here is a super deep dive opinion piece covering the essence and magnitude of this continuing story. Grab a cup of coffee or tea it's a rather long article. 

Robinhood Can’t Democratize Finance Using Old Tools

Let's move on to the golden nugget part of the story.

Talking mindset with my sons

I enjoyed a nice dinner with my sons last week and shared about the GameStop story. Since they are young and into games the story proliferated whatever they we reading on the internet. They said, "yeah I heard something about that." I mentioned the price of GameStop going from $20 to $350 and their immediate reaction was, "we should get some." Their comment triggered the following lesson.

Their reaction is typical for some adults who operate on FOMO (fear of missing out) and other types of non-grounded thinking. I said the opportunity is long gone at $350 per share and buying on the hype is a sure fire disaster.

Chocolate nuggets

I offered to run out and get chocolate ice cream and candy right away if they could tell me Warren Buffett's famous saying. (I know he has many, but there was one in particular I was looking for) I've told then many times and if either one of them guessed correctly, they both won the prize.

No trips no chocolate

They couldn't guess the answer which saved me a trip to the store. I told them once again in the words of Warren Buffett "Be fearful when others are greedy and greedy when others are fearful." Everything you need to know about prudent investing and being a good fiduciary of your own resources is baked into that phrase. It's rather catchy as well so it feels good to repeat it to yourself.

Rollercoaster crypto market

Crypto is the perfect ecosystem to practice the saying and learn it well. I've been watching crypto for 8 years and I've watched it go way up and way down including the largest asset crash in history in 2018. I'm pretty good at being greedy when others are fearful, yet theear of missing out is like a very strong gravitational force even for seasoned investors.

The Golden Nugget

You never fully graduate from FOMO. You can only hope you keep it in check and don't get too high on yourself. It takes practice and it's good to start learning early. Soon enough I'll test my sons again with the chocolate offer and see if they win this time around. In the meantime, we set up their new crypto wallets and transferred their BTC and ETH so they can start being responsible for their own assets. (They even have their own safes to back up their seed phrases) Then I told my sons their MAIN job is to watch the crypto. It's that simple just watch and observe what the market does. They've experienced the 10X returns and now they need 50% losses to complete the learning. I hope they witness enough up and down cycles to nurture the patience of being greedy when others are fearful and fearful when others are greedy.

PS. The same thing applies to GameStop at $350 and the same principles apply to all asset markets.

Good luck and remember your goal is a always a Crypto Bullseye™

Yours in Crypto, 

Kirk Phillips, CPA, CMA, CFE, CBP

DISCLAIMER: The information in this newsletter can not be construed as tax advice because tax advice can only be dispensed with an official engagement letter.