Rolling the Dice

January 24, 2025

Please note – I am traveling this week so the article below was written in advance. I know there have been many market moving events this week. I will cover those (and more) next Friday. In the meantime, enjoy this post and stay well.

During a recent interview, JP Morgan Chase CEO Jamie Dimon was asked about cryptocurrency, more notably the recent resurgence in so called “meme coins” including one issued by President Trump himself (more on this below). Jamie’s response drew a distinction between investing and speculating and he was very clear. “People are going to speculate. Some will win. Some will lose”

Speculating vs. Investing

Speculating is defined forming of a theory or conjecture without firm evidence. And in recent years, speculation has crossed into investing’s lane with many conflating the two terms. You may remember the meme stock meme mania (AMC and GameStop to name a few) and in recent months, excitement surrounding meme coins like DodgeCoin, Fartcoin (no, I’m not kidding), and Trump’s recently launched coin. When people buy these securities, it is usually without much firm evidence concerning the cash flows and future prospects of the underlying business or asset – in large part because there simply isn’t any such evidence. Look at Trump’s coin. It’s not backed by any asset or cash flows (other than his name/brand). When you buy that coin, you are simply guessing/hoping that someone will buy it from you in the future for a higher price. The same applies to all of the meme coins and to some extent Bitcoin. All of these coins remind me of trading in collectibles (baseball cards, artwork, etc) – there is no way to value the assets so they become worth what the next person will pay you for it.

Many will argue that investing in the stock market is akin to speculation. And for some, it might be. But for myself (and likely for all of you), investing is a serious endeavor. Considerable research goes into the decisions regarding your capital allocation and there is meaningful evidence to support these decisions (ie: businesses that have strong management teams, underlying cash flows and earnings, productivity, innovation, product pipelines, etc). There is a difference.

Proceed with Caution

What’s wrong with speculation? It’s not necessarily wrong per se. You should just be honest with yourself about what you’re doing. You should understand what it is you are buying and what will dictate your future return. And you should keep the amounts you are “wagering” under control – I’d suggest not using any level of cash you can’t afford to completely lose.

Few Final Words on Meme Coins

I highly suggest that you read this post by Scott Galloway. When I first heard of the coins issued by Donald and Melania Trump, I was concerned about the potential for conflicts of interest. Scott paints a pretty grim (yet accurate) picture of what could happen with these coins. There is no transparency of transactions and a meaningful ownership by the two namesakes (one of whom leads America). Something to keep in mind if you are considering supporting these meme coins…

As always, this post represents my opinion and others may disagree with my thoughts on the above. That’s what makes a market – buyers, sellers, and those who will sit this one out.

Onward we go,

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