Well Runs Dry
If you told me at the end of 2020 that there’d be a gaming company that single-handedly took over the airwaves in January 2021, I would’ve bet the name was Roblox ($RBLX):
The Metaverse is arguably as big a shift in online communication as the telephone or the internet. Within the next few decades, its applications will exceed our wildest imaginations. Perhaps the greatest opportunity it presents is to bring together people from all walks of life and foster a civil digital society. In 2021, that new society will begin to emerge for real. Link
The stock market of December 2020 welcomed Airbnb ($ABNB) and DoorDash ($DASH) to its public listing, the former of which I had been anticipating for over a year and the latter of which puzzled me with its lofty first-day valuation due to hungry (?) buyers.
And then, Roblox delayed its debut until the new year and asked the private market for some money, and lifted itself to almost a $30 billion valuation. Link
Great! I love direct listings. They’re more fun than traditional IPOs. And financial go-betweens make less money.
I guess the first month of the year was off to a decent start, even though it meant me waiting more weeks to buy Roblox and eventually paying more dollars per share.
And then GameStop ($GME) literally popped up, and I thought I had traveled back in time 30 years like Marty McFly.
As a kid, one of my first stops in any mall was Electronics Boutique, a forerunner to GameStop, which showcased the latest games for my Nintendo ($NTDOY), Sega Genesis, and barely functional personal computer.
I would look around for any soccer video game, dreaming that one day the graphics and user play would resemble what FIFA 21 eventually became. Link
Back in the 1990s, when music was last good, I had to rely on my parents’ money to buy those video games.
In the 2000s, I put my own money to work and finally began investing in the stock market.
I made good, okay, and bad decisions as a novice investor.
One of my good buys was Electronic Arts ($EA), the FIFA franchise developer that also produces Madden NFL 21, whose ticker symbol I still remember as $ERTS.
One of my okay buys was Bank of America ($BAC), where my checking account got money direct deposited from my salaried job. It seemed familiar and safe, and I frankly didn’t put in much effort to consider better options.
One of my bad buys was DryShips, which was a Greek shipping company I bought one afternoon while off from work after seeing its one-year chart on CNBC and thought, “Hey, I should buy that!” and placed what I thought was a limit order to buy, but turned out to be a market order to buy… right away.
Calling it a bad buy is an understatement.
Calling it an investment is an insult to the word “investment.”
But it was an invaluable lesson, which I’d rarely make again, at least not as lackadaisically.
The ticker symbol was $DRYS before it unceremoniously left the market.
Here’s a fun paragraph from DryShips’s Wikipedia page:
DryShips executed eight reverse stock splits between March 2016 and July 2017, shrinking 11.76 million shares to a single share, according to Seeking Alpha. Shortly before DryShips’ final reverse split, Mother Jones journalist Kevin Drum, citing figures from The Wall Street Journal, noted that DryShips investors had lost 99.99% of their investments between early November 2016 and mid-July 2017. Seven reverse splits had been executed at this point; a final reverse split, announced on July 19, 2017, caused the company’s shares to lose another 51% of their value over the next three trading sessions. Link
What sucks about the stock market is that, yes, you can lose 100% of your investment.
People understand that, but few personally experience it with their own dollars.
When I owned DryShips, I lost almost all that sunk investment before its share price sunk.
Here’s how my emails read: bought at $108.30 per share and sold at $4.50 per share.
But what was criminally stupid was not only my action but my inaction.
Over two years passed by between the first buy date and the final sell date.
That money should’ve been put to work in sunnier pastures.
The compounding that was lost to time is the penalty I paid.
I hate to quote Albert Einstein, like a cliché Instagram ($FB) story or, worse, a LinkedIn ($MSFT) post, but here it is:
Compound interest is the eighth wonder of the world. He who understands it, earns it… he who doesn’t… pays it. Link
Sometimes, quotes are misattributed to Albert Einstein, but this is one I learned and remembered from him since I was terrible at physics in high school and didn’t understand his other instructions.
What is amazing about the stock market is that, yes, you can also make way more than 100% of your investment.
But don’t snap ($SNAP) me your thoughts on Dogecoin ($DOGE.X) and think we’re on the same page.
I’ve never shorted stocks or traded options, or done anything with margin.
I learned that last lesson from Saved by the Bell at an early age. Link
Thanks, and R.I.P. Dustin Diamond. Link
