Morgan Housel is a partner of Collaborative Fund, which invested in Socar, Beyond Meat, Kickstarter and Tagomi (now Coinbase). He is also a Wall Street Journal columnist and bestselling author on personal finance and investments. Here is why he calls this market "crazy."
Social media instead of expertise
Mr. Housel opined that there are only two things about the ongoing market situation he is sure about. First of all, the market is crazy. Second, the behavior of its participants changed permanently because of social media.
Two things can be true about this market:
1. It's crazy.
2. Social media has permanently changed investor behavior in ways many professional investors haven't yet come to terms with.— Morgan Housel (@morganhousel) June 3, 2021
Professional investors still cannot come to terms with many of these changes. Although some investing narratives remain valid, others are subject to change while new ones are being created.
Mr. Housel stresses that it is the narrative (the "story aspect") that is of paramount importance for today's investing:
Every investment is a number from today multiplied by a story about tomorrow, and the story aspect is just so much more potent now.
Thus, the investing veteran wants to prevent everyone from interpreting the ongoing euphoria as evidence that the market "never crashes."
We are all to blame
Moreover, it is all of us who are responsible for making markets so fragile. Social media influence built up by "crowd wisdom" is impressive like never before:
I think it's opposite: we've just made it easier for crazy things to happen.
It looks like Mr. Housel's theory works perfectly for the cryptocurrencies scene as well. As covered by U.Today earlier, Elon Musk pushed the Bitcoin (BTC) price down once again.
Tesla's Techno King tweeted a sad song by Linkin Park and an emoji that hints at the Bitcoin (BTC) dump. The crypto king then erased six percent of its gains (almost $2,500) in no time.