Give me your money and I will invest it for you. I won't tell you what I am investing it in, and there is no guarantee of any return. I might even lose all your money! What, you don't think this is a screaming deal? Trying to latch on to "the next big thing!" makes you vulnerable to scam artists.
Trying to beat the market is everyone's dream, but if you live on this planet for more than a few revolutions around the sun, you realize it can quickly turn into a nightmare. When I started out investing, It thought I could beat this stock game and come out ahead - be one of those big-time winners and make lots of money and become a millionaire.
Well, I did become a millionaire, but not through sharp investing, but my boring old mutual funds in my 401(k) and some rational real estate investments in income-producing properties. The gambles I took on stocks all went South pretty quickly, and I realized I was naive to think I would beat these folks who were far smarter than I was - and that many of them were little more than con-artists. If you lived through the Enron debacle, you'd realize that.
Yes, it is shocking - there are thieves out there who wear three-piece designer-label suits and ride to work in limousines, all paid for with your money. You want to stop the 1% from taking over? Stop sending them all your money, whether it is through dubious investments, or by purchasing all the crap they sell or by going on their social media sites. You can starve the rich, but it starts with your pocketbook.
If you don't want to do this, well, stop whining about how other people have it so much better than you.
Recently, there have been a spate of SPAC offers - Special Purpose Acquisition Companies. They have been around a long time, but in the past, the small "retail" investor rarely touched these with a ten-foot pole, or indeed, even knew they existed. Now they are hyped by celebrity investors and even celebrities themselves. Little people throw money at them, and often are throwing money away in the process. Some folks think these should be regulated more and it isn't hard to see why.
Take Virgin Galactic, for example. They never did an IPO - Initial Public Offering - which would have required a lot of scrutiny from the SEC as well as disclosure of detailed financials of the company. Not only that, a lot of people would have weighed in on the value of the company and its prospects, particularly given the delays in building their "Spaceship Two" and the tragic crash of the second prototype.
Instead, a SPAC was formed by a guy who was one of the founders of Facebook. He bought a huge share in Virgin Galactic and effectively took it public without having to go public. Neat trick! But then he hyped the stock on social media, the price went up and he sold out a huge chunk of his shares. He made a lot of money, the small retail investors now own a piece of something that has never made money and probably never will.
Don't get me wrong, I am a big space nut and an airplane nut and worship the ground Burt Rutan walked on. Richard Branson is also a really cool dude as well. So together, a "space plane" is a no-brainer, right? Well, the space business is a black hole that sucks up money. Ask Elon Musk about that - and the numerous crashes and explosions on the test stand. One of his weird Buck Rogers rockets they are building down in Texas just blew up after landing successfully. That was an improvement over the last one, which smashed into the ground and blew up. It is a risk-taking business.
And the model of Virgin Galactic is a tough one. They are doing suborbital flights at a time when other for-profit space companies (including Space-X) are doing orbital flights. And the difference is huge. The Virgin Galactic "Spaceship Two" will be able to go straight up to the edge of space, then float for a few minutes and then come screaming back to earth. That's it. No orbital flight, no rendezvous with the Space Station, no trips to the moon.
Suborbital flight doesn't require 1/10th the effort and technology of orbital flight. To get into orbit, you need a lot more fuel for starters - far more than Spaceship Two could ever hold, internally or externally. Look at the Space Shuttle sometime - the largest part of it was the external fuel tank. Once you have reached "escape velocity" you are hauling ass around the planet. The problem then is getting back, which means you'd have to have an equal amount of fuel to slow down (impractical) or use aero-braking in the atmosphere to slow down. This requires a heat shield - either ablative or some sort of tiles like in the Space Shuttle (and we know how that worked out).
So Virgin Galactic is a one-trick pony, in my opinion. Go straight up, show people the edge of space, and then come back to Earth and not come crashing apart in the process as the prototype tragically did. They are counting on a stream of rich people who want to go into space for a few minutes as a novelty. They claim to have a huge waiting list of people willing to pay $250,000 for a ninety-minute thrill ride. Maybe this is true, but what happens when all those people take their ride? Will there be an endless stream of folks willing to go?
It is like the Concorde, without any particular destination in mind. Many folks flew the Concorde for the novelty of going Mach 2. But they also flew it to get somewhere, not just go up and down. As a sustainable business model, Virgin Galactic seems kind of thin to me, and that's assuming they can build the commercial version of the craft without too many more delays. And it goes without saying that one more crash, particularly with paying customers aboard, will pretty much put the nail in the coffin of Virgin Galactic.
Space travel - even suborbital flight - isn't risk-free and never will be. It is hubris to think that it could be so - we went through this with the Challenger and Christa McAuliffe, the "first teacher in space!" that was supposed to be a P.R. milestone. The Space Shuttle was like a city bus, or an airliner - just routine, ma'am, flying into space. But the incredible complexity of these machines became quite evident in a hurry. There is a reason why we retired the Space Shuttle fleet and never built new ones.
While Spaceship Two may not be a practical vehicle for going into space, it is an ideal vehicle for a pump-n-dump scheme with retail investors. Retail investors - the starry-eyed "true believers" who troll Reddit's Wall Street Bets are convinced that high-technology is the way to go. Get on board with the "Next Big Thing!" on the ground floor, and you'll be a billionaire many times over.
As I have noted time and time again, this is nearly impossible to do. Even if you can identify "The Next Big Thing!" you have to correctly identify the correct company to invest in - and often the first-to-market is last in the marketplace. After World War II, it seemed that the British, and DeHavilland in particular, had taken a huge lead in the development of turboprop and turbojet airliners. Boeing was still making its wholly unreliable, slow, and expensive to maintain "Stratocruiser" which was a double-decker airliner built on the bones of the B-29/B-50 bomber. Pistons, how quaint!
If you made your bet back then on "The Next Big Thing!" you would have lost your shirt on DeHavilland. After the Comet crashes, the company was struggling. And it turned out, the limited range of the Comet meant it was never a serious contender for the jet age. A few short years later, Boeing makes history with the 707.
Trying to pick winners is hard. If you're lucky, you'll break even, as happened with the "investors" in Airspeed. Back in the 1930's, air travel was looked at like space travel is today - and there were many contenders, and only a few succeeded. Others were utter ripoffs just using the latest technology to snooker investors.
But people eat this shit up. The Motley Fool teased that 3-D printers would "Put China Out of Business!" but of course, most of these printers are made in China and they haven't really changed the world as dramatically as all that. In fact, while they are an interesting piece of machinery, they are not really changing the world all that much. And yes, some of the early competitors in this field went bust. It isn't enough to identify a new trend, you have to identify the ultimate winner as well. And that is hard to do, without a time machine.
Sadly, pump-n-dump and celebrity endorsements are not just limited to SPACs. The "Sooze" Orman is now hyping Bitcoin, sort of. She admits that it will never be a real "currency" used to buy and sell things (unless you have an hour to wait and $20 to spend on transaction fees) but says it may replace gold as an "investment". Gold is a crappy "investment" as I have noted many times before, but at least when you buy gold, you are buying something, not merely an abstract concept of scarcity. Bitcoin is worth something only because people perceive it to be so. It has no real uses, other than for paying ransoms or buying and selling illegal arms, drugs, or children. Some fun. How long before the government cracks down on that? Oh, wait, they already are.
So, how do you navigate these treacherous waters? How do you spot "The Next Big Thing!" without being snookered and ripped-off, and how do you spot which company will be with it for the long haul? Short answer: You can't, so stop trying.
Starry-eyed optimists are always vulnerable to scams. Whenever you read about a "perpetual motion machine" or "free energy" or "cold fusion" scams (and they are all scams, and no, this isn't up for discussion) the people who lose all their money in these things are raging true believers who think they are going to be fantastically rich with "the next big thing!" These seem like stupid investments to the rest of us, but is a SPAC any different, really?
Never invest in things you don't understand. Trying to get-rich-quick only means you get poor. Most of the money you end up with in life you will earn. If you are lucky, you might double or triple that amount - or more - over the decades just investing in normal things.
But then again, this advice always falls on deaf ears - which is why I don't give advice. What concerns me is that these things blow up - and they always blow up - and often take out the rest of the market in the process. I made money on rational real estate investments in the early 2000's. Then the speculators jumped in and drove prices through the roof. Huge loans - that could never realistically be paid back - were bundled into "next big thing!" investments, and they crashed, taking the rest of the market, and the economy, with them, in 2008.
If people want to waste their hard-earned money on stupid scams and "investments" so be it. The problem is, when these things get out of control, they can affect the rest of us, even though we walked away from that nonsense.
And like clockwork, the people who wasted their money on these schemes will ask for a Federal bailout, because, hey, none of this was their fault, right?
UPDATE: This article argues that the SEC should more closely regulate these SPACs and particularly these "Space SPACs" as they are highly speculative investments, being offered as back-door IPOs to retail customers who are ill-informed. You know, this whole economy just smells market-crash.
