Speculation as Entertainment – Bear Market Edition

Happy Friday.

Back in October of last year as the market was already ‘tipped’ but the party still going, I wrote a post titled ‘Speculation Is Entertainment Is The New Netflix And Chill‘.

The gist…

With $11 trillion printed since COVID, we should not be surprised that speculation is a new form of entertainment.

Young people collecting NFT’s with fractional ownership and DAO’s, while spending their weekends talking and trading crypto is ok with me.

Before you know it they will know how to invest and that’s a good thing seeing there is a portion of that $11 trillion that will need to be invested and speculated on well to pay for all the wasted trillions.

In Rome, all the free time led to Gladiators, so take it easy on the ‘youts’ please.

Here we are in late July 2022 and it has been one of the worst years for technology growth stocks and I have noticed that ‘Speculation as Entertainment’ is alive and well.

I was golfing with my sons friends a few weeks back and the guys were on some random sports wagering site betting Jai alai. They had never seen the sport live. It was NOON. It was just part of their workflow because of the smartphone, apps and legalized gambling. I enjoyed chatting with them about the whole thing while having a good laugh.

On Stocktwits, I have noticed the $SQQQ ticker and stream trending often the last few months. This is the three times leveraged Nasdaq 100 SHORT ETF. Retail has gone from all in on crypto and Tech to let’s bet on the end of the world. It is a ‘terrible’ product for speculation on the upside and the downside (my opinion).

Jesse Felder describes it well in a blog post titled ‘Retail Investors’ Appetite For Speculation Appears Insatiable‘, Jesse summarizes:

Aside from the remarkable gain in dollar terms (which just like their bullish brethren appears to be on a longer-term upward trajectory), the 140% surge in these bearish funds is the greatest 6-month increase since they were first introduced back in 2010 in the wake of the Great Financial Crisis. For those that thought a bear market might put a damper on the appetite for speculation (including yours truly), you (we) may need to think again.

So far, at least, it appears the trend change in the stock market this year has only resulted in a shift in the focus of speculative activities rather than a shift in the activities altogether. In the short run, this surge in the popularity of leveraged bearish vehicles makes the market more vulnerable to a short squeeze. Longer-term, however, it raises the possibility that these flows, spanning a number of various vehicles of which these ETFs are merely representative, could serve as just the same sort of accelerant to the downside as they did to the upside.

No wonder we are finally rallying!

Have a great Friday and weekend.

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