Doing ‘The Hokey Pokey’
After coming off the greatest rebound in stock market history, just about every investor seems to be back on top again. From the depths of despair in late March 2020 to the high on the mountaintop in December 2020, the investment environment on Wall Street is … full steam ahead. As you can see in Exhibit 1 all stock market averages were up last year. Some more than others, but obviously the NASDAQ Composite led the pack, because that’s where the highflyers were.
One dominant observation: Practically every investor is doing the same thing … same stocks, same indexes, same allocation. Hence the name of the old song, “The Hokey Pokey,” which implies that everyone is doing the same thing all at the same time. This brings to mind some other times in history when investors were also doing the same thing.
For example, in the early 1980s investors bought every small oil and gas stock that traded. Then in 1990 they bought full force into Japan (the NIKKEI Index is still -30% below its January 1990 level). In 1999–2000 tech stocks were all the rage. In our January 2000 Market Comments, with the NASDAQ up some 85%, we said investor mood was that there was no end in sight. (What happened? The NASDAQ market fell -77% into October 2002.) Then there was the housing and condo craze of 2006–07, an era of so-called free money and risky mortgages. Once again, virtually everyone was doing the same thing.
Let’s emphasize straight away that we at Oxbow Advisors own stocks in both growth and dividend varieties. But our managed portfolios are balanced with some cash and other income vehicles as well. It’s imperative to maintain balance, and that means also having some liquidity.
The Public Is Back …
Here are several examples of what we’ve witnessed over the last few months.
A 15-year-old high school sophomore trading stocks and enjoying it.
No fewer than six people we know of who now day-trade instead of working at a “real” job.
A set of home movers who trade on Robinhood.
Three college students who trade stocks between studies.
Last but not least, an inquiry by a nephew who is in real estate that maybe he should use all his funds to buy NIO Inc., an electric car maker with no profit.