GMB Ep #146: Here’s What Happened During the Meme Stock Rally of 2021

You may recall that at the beginning of 2021, the stock prices of AMC and GameStop skyrocketed. There were numerous news articles about people driving up the prices of companies that were not otherwise exceptionally profitable investments. This week on the podcast, Grant dives deep into what caused the Meme Stock Rally of 2021, as well as the importance of investing our portfolios as prudent, long-term investors.

 

 

Show Notes

[03:20] Meme Stock Rally – Grant recalls the events that transpired during the 2021 Meme Stock Rally involving AMC and GameStop.

[10:41] Two Options – Grant explains how short-selling stocks and the options market are the two most common ways to wager against a company.

[21:05] Changes – Grant outlines in broad terms how AMC and GameStop have changed as a result of this chain of events.

[26:22] Research – Grant presents the conclusions of the in-depth research that was conducted on the Meme Stock Rally at both the SEC and Harvard.

[34:30] Lessons – Grant explains how the Meme Stock Rally serves as an excellent lesson on time horizon and irrationality, illustrating how wise investors should consider investing in their portfolios.

 

Resources

Did Pandemic Stimulus Funds Spur the Rise of ‘Meme Stocks’?: hbswk.hbs.edu/item/did-pandemic-stimulus-funds-spur-the-rise-of-meme-stocks

How AMC rode the meme stock rally to revitalize its business: cnbc.com/2022/01/26/how-amc-rode-the-meme-stock-rally-to-revitalize-its-business.html

Robinhood almost imploded during the GameStop meme stock chaos: techcrunch.com/2022/06/27/robinhood-report-meme-stock-gamestop/

Robinhood and CNBC’s Jim Cramer fuel stocks for “stimmy” rally: cbsnews.com/news/robinhood-jim-cramer-stimulus-stock-market/

Stock Market Stimulus: hbs.edu/faculty/Pages/item.aspx?num=62111

 

 

GMB Ep #138: How to Use Options as Portfolio Insurance

As we approach an era of economic uncertainty, many investors are becoming concerned about the value of their investments falling. This is where, if used carefully, options contracts can give investors the ability to safeguard their investment portfolios. In this week’s episode, Grant explains the pros and cons using options as portfolio insurance, as well as some major risks investors could face when using this investment strategy. 

 

 

Show Notes

[02:19] Introduction –  Grant discusses how investing in options can be used to reduce portfolio risk for some investors.

[06:57] Put Option – Grant gives a comprehensive overview of put options and the benefits and risks of investing in them.

[17:10] ETF – Grant explains how having option contracts on ETFs can be advantageous.

[20:25] SPY – Grant describes SPY ETFs and provides a hypothetical scenario on utilizing option contracts.

[24:30] Call Option – Grant shares the pros and cons of call options.

[31:20] Combining Strategies – Grant describes an investment option in which you can create revenue by selling call options against positions that you already hold in your portfolio.

[34:22] Be Mindful – Grant stresses the importance of limiting risk, and why you should proceed with caution if you’re considering this investment strategy.

 

Resources

GMB #137: All About I-Bonds, TIPS, and Bond Investing in Inflationary Times

As inflation continues to rise, many questions have come up regarding best practices for safeguarding investments. This week on Grow Money Business, Grant takes a deep dive into bond investing in an inflationary market, and answers some important questions about Treasury Inflation-Protected Securities (TIPS) and I-bonds. Throughout the episode, Grant shares his thoughts on when they may be a good fit for your portfolio, as well as some important considerations and strategic approaches to bond investing.

 

 

Show Notes

[04:07] Bond Investing – Grant explains the process of bond investing and the importance of allocating a portion of your portfolio to US government securities.

[08:44] Treasury Inflation-Protected Securities – Grant discusses the similarities and distinctions between ordinary US government securities and treasury inflation-protected securities.

[13:41] Interest Rate Risk – Grant explains why the value of TIPS are decreasing even though they are intended to protect investors against inflation.

[21:26] I Bonds – Grant describes the structure of I-Bonds, and shares his thoughts on who is best suited to invest in them.

[25:48] $10,000 Limitation – Grant shares a strategic approach on how to circumvent the $10,000 per year per person investment limit that the Treasury Direct website imposes.

[29:00] Emergency Fund Cash – Grant explains why he does not recommend investing emergency fund cash in I-bonds.

[32:50] Borrowings – Grant describes how rising inflation affects borrowing and how to benefit from borrowing in inflationary times.

 

Resources

GMB #136: Taming the Cost of College With Brad Baldridge

Properly planning for a college education has become one of the crucial decisions that could define the future of a young adult. This week on Grow Money Business, we’re joined by Brad Baldridge, a licensed financial planner, consultant for college funding, and main podcaster for the “Taming the High Cost of Education.” Brad assists families in preparing and saving for college by offering individualized planning services and insights on the most recent tax, cash flow, and academic strategies. Throughout the episode we discuss many important strategies for reducing the cost of college expenses.

 

 

Show Notes

[01:54] Background – Brad describes how he became interested in college planning and shares some thoughts on why it is so expensive.

[05:23] Sticker Price – Brad explains the evolution of sticker pricing and how it impacts college planning.

[21:24] Process –  Brad walks us through his advising process on how he helps individuals apply, enroll, and select the best school for them.

[27:16] Strategies for Business Owners –  Brad explains what company owners should know about planning and paying for their children’s college education.

[45:36] Common Mistakes – Brad outlines several common mistakes people make when planning for a future college education.

[50:22] Best Choice – Brad explains how to differentiate between applying to a college with a reputable financial aid office versus one that may not be as transparent.

[59:42] Taming the High Cost of College – Brad describes how his college funding company serves its clients.

 

Resources

GMB #134: Crowdfunding Opportunities in Real Estate With Craig Cecilio

Historically, if you wanted to purchase a private investment, you had to qualify under the SEC’s standards as an accredited investor. After 2012, certain regulatory modifications made private investments accessible to non-accredited investors. This week our guest is Craig Cecilio – CEO and cofounder of DiversyFund Inc. DiversyFund is a crowdfunding platform that enables everyday investors to generate wealth by democratizing alternative asset investment.  

 

 

Show Notes

[03:36] Background – Craig explains what caused the regulatory changes that opened up private investments to non-accredited investors. 

[11:37] More Opportunities – Craig shares his thoughts on why opening up investments makes the most sense.  

[15:16] Craig’s Story – Craig describes how his real estate investing background led to the founding of DiversyFund, Inc.  

[27:28] Best Practices – Craig shares some important considerations when it comes holding or selling properties. 

[29:18] Communication Cycle – Craig describes what it’s like to report to 30,000 investors and how he considers their needs when making decisions. 

[35:29] Communication Transparency – Craig stresses the significance of transparent communication. 

[39:26] Process – Craig outlines the steps required to acquire his company’s services. 

[43:43] New Strategies – In addition to expanding geographically within the multifamily industry, Craig reveals his plans to offer new and alternative strategies.  

[46:19] Lifecycle of Funds – Craig shares when it makes sense to collect money from investors in relation to the lifecycle of the funds. 

[48:32] Challenges – Craig discusses the most challenging aspects of business expansion. 

 

Resources

June Market Commentary: Lions, Tigers, and Bears, Oh My!

May Recap and June Outlook

The Fed lion has found the courage to increase interest rates drastically, the inflation tiger is still ambushing the economy, and now the stock market is flirting with bears. The question for investors is: Are we still deep in the forest? Or is that the Emerald City on the horizon? To extend the metaphor – that wizard wasn’t much help, and the solution to the problem turned out to be a liquidation.

Just to be clear, they melted the witch. We’re not suggesting melting your portfolio.

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GMB #132: From Tech Founder to Venture Capital & Real Estate Investor with Zain Jaffer

The world of real estate is full of opportunities for investors who strive to build wealth using innovative strategies. This week on Grow Money Business, we have a fascinating conversation with Zain Jaffer. Zain is a tech entrepreneur, a real estate investor, and the founder of Vungle, which was sold to Blackstone for $780 million in an all-cash transaction in 2019. Today, he invests in real estate and real estate technology businesses through both venture capital and private equity funds.

 

 

Show Notes

[02:15] Zain’s experience – Zain describes what he finds so appealing about real estate investing.

[09:58] Investment Opportunities – Zain shares what he looks for in new investment opportunities and how he assesses whether or not they are a suitable fit.

[16:54] Institutional Impacts on Real Estate – Zain and Grant discuss the argument that institutional interest in residential real estate is making it more challenging for individuals to purchase their own homes.

[22:15] PropTech Startups – Zain describes his future career goals and plans to continue investing in PropTech startups.

[26:33] More on Real Estate Investing – Zain shares some common themes he hears presented from startups seeking investments.

[34:09] Zain’s Journey – Zain outlines his professional journey, starting with the founding of Vungle, to his eventual $780 million exit.

[41:05] Cryptocurrency – Zain shares his thoughts on cryptocurrency.

 

Resources

GMB Ep #129: No, Index Investing Isn’t Bad For The Markets

 

With recent developments in the financial markets, we’re seeing quite a bit of people who are concerned about index investing and the effects it may have on the economy. We dedicated today’s episode of Grow Money Business to addressing some of these concerns. Throughout the episode, Grant shares his thoughts on four of the biggest arguments against index investing and some studies that question the legitimacy of each.

 

 

Show Notes

[03:18] Recent Developments – How the recent developments in the financial markets reignited the discussion against index funds.

[06:15] Competition – One of the major arguments against index investing is that it reduces competition within an industry. Grant shares his thoughts on why this notion is not valid.

[13:11] Corporate Governance Standards – Grant explains how index funds allocate their resources in a way that’s beneficial to shareholders and why index investing won’t create corporate governance issues.

[16:46] Price Discovery – Grant breaks down how the price discovery mechanism works and why index investing is unlikely to hurt price discovery.

[28:20] Income Inequality – Grant shares his take on the argument that index investing exacerbates income inequality.

 

Resources

What’s Driving the Recent Volatility? A Quick Guide

The Federal Reserve has been very clear about its intentions to move more aggressively in fighting inflation. It currently defines “more aggressively” as a likely series of 50 basis point rate hikes, beginning with the May Federal Open Market Committee meeting. This will mark the first time in 22 years that the Fed has doubled the normal 25 basis point increase.

In remarks at a panel discussion at the IMF on April 21st, Chairman Powell reiterated that it is appropriate “to be moving a little more quickly” on rate hikes. He also indicated that he believes that financial markets are “acting appropriately generally,” meaning that they are adjusting to the expectations of higher rates.

Markets are forward-looking, so prices today reflect what markets think will happen in the future. A good example of this is mortgage rates: The average rate on a 30-year fixed-rate mortgage was 5.29% as the last week of April opened. For contrast, in early March, it was 3.76%.

Markets are having trouble interpreting this information. The problem is that so far, we’ve heard the Fed’s intentions, but without corresponding data showing whether or not rate hikes are working, markets can’t assess the likely path. And that leads to volatility.

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What’s the Fed Up To? Rates, Inversions, and Quantitative Tightening

The U.S. Treasury yield curve inverted last week. An inversion is when the shorter-term yield in a pair of U.S. Treasury maturities is higher than the longer-term yield, reversing or inverting the normal relationship. The significance of a yield curve inversion is that inversions have a history of predicting recessions.

The yield curve inverts because investors believe that the economy will slow in the future. The Fed attempts to control inflation by increasing interest rates, which makes business investment more expensive. Markets appear to think that the Fed will overshoot with rate increases, which will stifle rather than slow economic growth. The Fed will then have to begin decreasing rates again.

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