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Welcome Back to RV Classics

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This is RV Classics, a monthly newsletter where we’ll take you on a journey deep into the Real Vision vault. We’ve spent the last 8 years learning from some of the greatest investors of our time, and we’ve got thousands of hours of analysis to show for it. Well, now it’s time to revive the most electric insights.

Consider this our tales from the crypt — the greatest hits handpicked by Raoul Pal to help you learn how past cycles are shaping the world today.

Real Vision Classics Newsletter

A decade of the best financial interviews, compressed into a 5-minute read.

This Week…

We’re looking back at the moment that retail investors, social media, options trading, and frauds collided to create pandemonium in markets.

Why? Because the meme stock craze is back. So far this year, message board darlings such as $BBBY, $AFRM, and $CVNA are surging higher as growth stocks lead a rally that’s beginning to show signs of sputtering out. But what are those signs? And how do we know when momentum is built to last?

In October 2021, Real Vision contributor Mike Green led a roundtable examination of how retail traders created a cult-like market environment that still reverberates today. Famed short seller Carson Block, quant researcher Lily Francus, and viral TikTok educator Kyla Scanlon joined Mike to discuss how the meme stock phenomenon was born — and what it means for the future of markets.

If you’re looking for a reliable way to elevate your investing education, look no further. Now you can access The Real Investing Course — part of the Real Vision Academy — without committing to an annual membership… and at 40% discount.

With thousands of hours of expert insights distilled into one 10-hour workshop, the course gives you all the tools you’ll need to navigate markets no matter the environment — with lessons from trading legends like Peter Brandt, Lyn Alden, Mike Green, Raoul Pal, and many more.

Bonus Point

Before we get into it, here’s a 5-minute clip with some useful context to this week’s issue. In conversation with Real Vision, Carson discusses how greed works as a driver for financial markets and how the amoral nature of investing can lead to immoral outcomes. WATCH FOR FREE

The Highlight Reel

Here are the 5 key takeaways from the conversation between Carson, Lily, Kyla, and Mike:

  1. Precedent: Less than 15 years ago, in October 2008, shares of Volkswagen nearly quadrupled during a 2-day technical short squeeze. But after the stock’s peak on Oct. 28, 2008, it plunged 58% in 4 days and, by September 2009, the whole move had been erased.
  2. The Options Ethos: What made the meme stock craze unique was the role of options trading… particularly how retail traders approached markets with an era-defining, punk rally cry that saw a new breed of young trader pile into markets despite limited access to advanced tools and data. But they understood momentum and they had a burning distrust of traditional Wall Street that ultimately moved markets.
  3. Round 2: After a rough 2022, this year’s recent equity rally has been led by many of the same high beta tickers of 2020. Bed Bath & Beyond ($BBBY) and Carvana ($CVNA) are both up more than 100% in the last month, while larger retail favorites like Tesla ($TSLA), GameStop ($GME), and the ARK Innovation ETF ($ARKK) are rebounding strongly.
  4. So What: Studying prior cycles of narrative-driven momentum can help us understand whether these moves are valid. It’s not enough to know why a stock’s moving. Understanding key levels and momentum indicators such as RSI can help traders avoid the next rug pull… or take advantage of a tasty entry point.
  5. Lotto Tickets: Aggressive options behavior is no longer limited to meme stocks. Today, the asymmetric risk-reward ratio of options contracts is a feature of the market, not a bug. Traders can play daily and weekly expiry options across all tickers and indices — and the accrescent volume of daily options trades now literally fuels broader market positioning. This leads to choppier intraday markets and the looming potential of huge volatility spikes.

On Education

History never repeats, but these periods of overwhelming liquidity in the market do seem to rhyme. When momentum builds, a new wave of hope and actors willing to exploit it aren’t far behind. At some point in the coming years, the global money supply tide will turn and another sustained swoon will roll in — this time with options trading a well-known path for retail traders.

In order to avoid many of the pitfalls of this recent boom and bust, continued education of the retail trader will be key. And that’s exactly what Real Vision is here for. Understanding core concepts like how and why a market functions, or what trading style best fits your own personality, can go a long way toward developing sustainable investment skills.

As accessible financial education continues to evolve, the retail traders who put in the work might not feel so lost the next time a moment of mania sets in.

Watch Now

Beware the paywall: This video is available to Real Vision Essential members and above.

Thanks for reading. In our next issue, we’re running all the way back to 2015 for a conversation between Tim Ferris, Raoul, and the investor Mark Hart about life optimization and the currency they value most: time.

Real Vision Classics Newsletter

A decade of the best financial interviews, compressed into a 5-minute read.

RELATED CATEGORIES: Investing, Learning, Market Analysis