We all know that picking stocks is a bad idea and that we’re sure to underperform a broad-based index. We know this. We got hit over the head with it in 2016–2017.

And yet… there is more speculation than ever.

This is demonstrably irrational behavior. If everyone stopped their degenerate call option buying on Tesla (TSLA) and put that money in the Vanguard Total Stock Market Index Fund, they’d probably be a lot better off. But the degenerate call buying continues—$15 billion was spent on single name call options in the last week. Why do people do this?

Because it is fun.

Because you have to have dreams, and anecdotes feed those dreams. I have one for you.

My brother’s friend put his entire 401(k) in Tesla a couple of years ago. After the first run-up, I told my brother to tell him to sell some. He didn’t. He’s now up 1,600%. He wasn’t exactly affluent before, but he is now. One of the many Tesla millionaires. He is not a CFA. He is not a person trained in the dark arts of financial statement analysis. He just liked the stock.

People hear stuff like that, and it is monkey see, monkey do. If that idiot can get rich, then I can get rich. And if Tesla is what got him rich, then Tesla will make me rich. That is the logic.

For sure, there are some people who knock it out of the park and do better than they would have in the Vanguard Total Stock Market Index Fund. But for every person who knocks it out of the park, there are a hundred who show up late to the party and get waxed like a surfboard.

I’ve seen three big bubbles—one in 2000, one in 2006, and this one, which is bigger than the other two combined. There have been a number of mini-bubbles along the way, like the short volatility bubble of 2017. This one has gone on a little longer than most.

When Your Avocation Is Your Vocation

People are having fun with this. I will admit to stepping back into crypto last week, for the first time since my epic bitcoin trade from 2019 to January of this year. I’m ignoring bitcoin for the moment and, instead, building a portfolio of altcoins. Why? It’s fun. Not that I was bored before, but I’m certainly not bored now, and I’m not playing with money that I can’t afford to lose. And who knows. Maybe I will knock it out of the park.

But some people take this very seriously. They make some money in crypto or Tesla, they fancy themselves Market Wizards, and they start hatching plans to quit their jobs and trade full time. I have been hearing stories of painters and plumbers, and carpenters who have made much more money trading than they have in real life, and they’re quitting to trade full time. I remember the last time I heard these stories. Things got a bit bumpy for the next few years.

I’ve talked about this a lot on the old radio show and my podcast—everyone loves the idea of being their own boss and making their own schedule, but day-trading as a business is just no fun. Your risk preferences change when you have to come up with rent every month. Too much pressure. Most people give up within six months.

There are a lot of fun things that I wouldn’t want to do for a living. DJing, for instance. You have 200 gigs a year, you’re chronically sleep-deprived, you spend all your time on planes, you’re dealing with drunk idiots and scummy nightlife people all the time, and you’re going deaf. Much more fun to record a mix in your bedroom and post it on SoundCloud.

There’s Nothing Wrong with It

There’s nothing wrong with trading as a hobby. I mean, that is the whole point of the newsletter business, right? I don’t promise anybody anything. I certainly don’t promise that you’ll outperform the S&P 500, although we sometimes do. I do promise that picking stocks is fun, and if you stop yourself out of your losing trades and let your winners ride, you have a fighting chance.

Mental accounting is dumb, but if you have 90% of your money in “safe” stuff, like a mix of bonds and dividend stocks, and 9% of your money in “fun” stuff, like whatever tech stocks you like to punt around, and 1% of your money in “garbage,” like crypto and such, that’s not a terrible asset allocation. And it’s an asset allocation that maximizes both growth and fun. It’s when 100% of your portfolio goes into garbage that it becomes a problem.

If you have questions about any of this, well, send me a note here, and maybe we’ll cover it during my Live Q&A on Monday, November 15, at 1 pm ET. Don’t hold back—if you’re wondering about something money-related, someone else is, too.

I’ve already reserved spots for 10th Man readers, so you don’t need to do anything to sign up. Just check your inbox Monday morning for the link to the live event.

Tomorrow Night

I’m playing tomorrow night at Doux Supper Club in New York! Hope to see you there. Please go here to get tickets. It’s going to be amazing.

Jared Dillian

subscribers@mauldineconomics.com