LY Med's video: Market Rally Explained Betting on Hertz and Nikola FOMO Investing Rx Ep 15

Thanks for tuning into another episode of Investing Rx. Today we are going to be talking about the recent market rally, Robinhood, recent hot ticket stocks like Hertz and Nikola, and lastly FOMO. We start with a look at the current market – which Nasdaq has recently broken an all time highs. This recovery is a lot faster and sharper than many people expected. In fact many are surprised we are even recovering, and not in a bear market – which is fair, given the current state we are in with the widespread protests, the fact that coronavirus is still present, and double digit unemployment. At our peak in lockdown and unemployment rates, markets were still going up. Some investors are upset – why would they be upset that the stock market is rising and shares are worth more? Because they were looking at the current news and seeing a disconnect – they were hoping the stock market would reflect the current climate and drop. They were holding onto money waiting for this dip so they could start investing. Now this is a mistake that both new and older investors make, and it violates one of the fundamental rules of long term stock investing. The first rule is you cant time the market. Every great investor will tell you you cant time the market, from Warren Buffet to Peter Lynch. Not only can you not time the market, but you make more money by not. That's because of our second rule: time IN the market beats timing the market in the long term. Lastly, this isn’t a rule of investing more of something investors should know. And that is the stock market is a leading indicator, meaning prices reflect investors' expectations for the future of the economy and mostly does not care what the current situation is. And the future expectation is recovery that’s why we’ve been in a bull market or an up market. That might change, I cant predict the future, but that’s why there's a disconnect between the stock market and current economic situation. Next on our news list: Retail investors, which means people like you and I, are jumping onto stock trading now more than ever. Major online brokers, like Charles Schwab, TD Ameritrade, M1 Finance, etc have seen a giant rise in users. Now, the stocks these investors are buying are...peculiar. Take for instance Nikola, stock ticker NKLA. Nikola is an aspiring electric/hydrogen truck maker that has no product and 0 revenue, but stocks jumped up over 100% recently, and nearly 500% overall. Shares are now trading about 10x that of Ford, a company that actually sells cars. Now investing in startups and exciting new tech companies with 0 revenue or are hemorrhaging money is nothing new. Its speculative and hoping that it becomes the next Amazon or Tesla. But this is hoping that the price rises so people can make a quick buck. And no bigger finger points to this than the recent stock trading in Hertz and JC Penney. Why is this peculiar? Well because Hertz and JC Penny have filed bankruptcy. Most times after bankruptcies are finalized, the stock is worth nothing. So why are people putting money in this time bomb? One of the reasons is these traders are hoping to see some pop in return, build momentum, and then when others join, sell it and get out. Its like playing hot potato – that leaves a lot of people burnt. You’ll see headlines detailing massive returns and people who made money and it gets people excited, they want to join in – well they don’t really report all the people who have lost money. In gambling, most people lose money. The last thing I want to discuss is FOMO – or fear of missing out – which is why so many people have poured into these stocks, or tried to time the market or a number of other things to try and get rich quick. Its hard not to get fomo when you see nkla go up 400%. My question is this. Do you get fomo at the people in casinos? When you see someone hit the jackpot at the MGM, do you get FOMO? Do you think, man what am I doing? I should be here in the casino – I should have put money in that machine. If you don’t get fomo then, then you shouldn’t here. My hope is to show you that having discipline, and patience can pay off too. It might not be as sexy as gambling, but those are my thoughts, let me know what you think below. Thanks for watching