Don't Roll the Dice on GameStop

With meme stocks like AMC and GameStop back in the headlines, enjoying meteoric gains of 75% yesterday and pushing yet higher today, it can be tempting to jump on the bandwagon and try to make a few quick bucks before the current frenzy dies.

Especially for those who missed the last rallies in 2021.

But if you leave these stocks alone, you're actually the smart one. As Warren Buffet likes to famously say, "Stick to what you know." His stance is always, "I just need to know how a business makes its money. Once I know that, I can understand the business and determine if it is worth owning."

That's really key when understanding why it is so dangerous to play along in something like these meme stocks. They aren't rallying because these are solid companies making massive profits with strong fundamentals to back up their share prices and the current surges. They are rallying because the same man who fueled the last big surge has resurfaced for a second round of squeezing the shorts.

In other words, the rally won't hold and when the smoke clears the same as it did last time, it will be a swift and strong pullback, and the reality is that most people won't get out soon enough before their money is all gone.

It's gambling, pure and simple. Something that is never appropriate to do in the stock market. 

It's that temptation to wonder, "But what if it jumps another 50% today?" That's the same mentality of someone sitting at a slot machine wondering, "What if the very next pull is the one that hits the jackpot?" 

I'm a bit of a seasoned guy. I feel like I could smartly navigate the rallies and make some money. But it's just a game I refuse to play—because it doesn't make sense. It defies all of the logic I have learned over the years regarding share prices and why stocks move. Or more importantly, why they should move.

If it doesn't make sense, I'm going to leave it alone. 

Granted, some part of it makes sense. For example, we know that the short positions of GameStop were around 24% of the total of outstanding shares. So basically, buyers of the stock are running up the price through a frenzy of buying essentially forcing the short sellers to have their short positions squeezed and forcing them to sell their shorts to cover their positions.

But again, it's an artificial move. There's nothing to back up the share prices. Therefore, the prices are doomed to fall back sharply. The question is exactly when, and no one, even the most seasoned of investors, can time the markets.

I say hold onto your money and continue putting it into long-term investments that make sense. Like I said, it is tempting. Some may experience a sense of FOMO. But it's a fool's game to be sure. And the old saying that a fool and his money will soon be parted holds very much true in this case.

If one is going make a play, you have to consider it in the same way a responsible gambler would consider it. "This is money I can afford to lose and that I am willing to wager knowing I may walk away empty handed."

And, "I'm okay if I walk away empty handed." Because more people will likely walk away with nothing than will cash in on a big prize.

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© 2024 Jim Bauer

This blog post is for informational or entertainment purposes only and does not substitute for seeking advice from a licensed professional before making any investment decisions. 

Playing the Powerball is a Bet on the Impossible, But It's Still Kind of Possible

Let's face it. Winning the lottery is the pipe dream of pipe dreams. But I still play because as the old saying goes, you can't win if you don't play. Besides, at least when it comes to the Powerball and the MegaMillions games, a ticket only costs $2, and it only takes one to win.

Granted, you need the right one, and when it comes to the Powerball, which is going for a whopping $1.23 billion for Saturday's drawing, depending on which payout option you choose, the odds of holding the right ticket are 1 in 292,201,338.

In other words, it's nearly impossible to win. But of course, someone will.

Sure, you can try to buy multiple tickets, but it only fractionally increases your odds and is so insignificant it probably isn't worth doing. But you just never know. When jackpots are this high, I might be okay with shelling out $10 or $20 for a few extra shots at it.

Why not? Besides. It's fun to dream, right? And I suppose I have wasted $20 on worse things? Hell, there was that time I bought a drone only to take it outside, hit one button, and watch it whizz straight up into the air and into the atmosphere never to be seen again.

Besides just being gosh darn lucky to win the thing, here are some fun other things that are far more likely to happen to you other than winning the big one which may help to put the odds into a bit of perspective.

You have a 1 in 2 million chance, for example, of finding a blue lobster in the ocean. 1 in roughly 2.5 million have a chance to be attacked by a grizzly bear in Yellowstone National Park. There's a 1 in 9 million chance you will be struck by lightning twice.

Odds are even better you might find a four leafed clover which is 1 in 10,000. You even have a better chance at winning an Olympic medal which is 1 in 660,000. 1 in 6.5 million have a better chance of dying from a bee sting than hitting the big jackpot. 1 in 10 million stand a chance of being struck by a piece of an airplane falling from the sky for Heaven's sake.

Even 1 in 3,800 have a shot at living to be 100 years old. 1 in 11 million are likely to be attacked by a shark. You could walk into a casino and have a 1 in 649,000 chance of sitting down at the poker table and having the very first hand dealt to you be a royal flush.

Odds are that not even one of these things will ever happen to you. But again, they are more likely to happen to you than winning the lottery.

I think the key with it is just to have fun. Let the dream fly, but not to get carried away and shelling out big bucks that won't really impact your chances of winning at all. I think we have all sat down and done some of the math just to see how much we might actually take home.

For example, most people choose the cash option, and that immediately takes a sizeable chunk of cash off the table right away since the published prize is not the actual total prize pool, but instead is the prospective value of the annuity that the prize pool would be invested in if you decided to choose to receive payments over 29 years.

The cash option in the next drawing on Apil 6th is estimated to be $595.1 million. Depending on the state where you live you could probably expect to take home about $357.06 million after taxes. It's a lot less than $1.23 billion, but nothing not to write home about and forever change your life.

Consider there is also a 1 in 584.4 million chance you may have to share you prize with someone else. And when jackpots are this high, it is more probable you will have to share it since more people tend to buy tickets.

Either way, $178.53 million after taxes is still a sizeable chunk of dough.

Ultimately, if I had one strong piece of advice for you on what to do, I'd say not to bother getting your own ticket. After all, I already have the winning ticket. I am pretty sure of that. I wonder what the odds are of finding a four leafed clover in a paved parking lot?

Like the way I write or the things I write about? Follow me on Facebook or on X to keep up with the latest writings wherever I may write them. Looking for a place to find the $2 you need to buy a lottery ticket, have a look at the Discover card, the card that pays you back 1% to 5% on your purchases.

Michigan Has A Powerball Winner

If there's one question I think most people ponder at least a few times in their lives, it is the question of what would one do if they were lucky enough to win the lottery? I know this is a question I have pondered more than a few times. One idea I have thought about is a way to pay it forward in a way that helps out hard working people. Working charity is the term I like to use for this.

One woman in Michigan has the lucky luxury to ponder this question in real time after realizing that she was the single winner of the most recent Powerball jackpot worth $310.5 million. She chose the cash option and after taxes took home $140 million. Not at all bad for a simple $2 investment.

She was having a bad day at work, which made the win especially more fun to hear about.

We all have those moments at work, or other times in our lives when we are simply fed up. We've had enough. Most of the time when that happens I simply pay myself to sort of buy myself out of my situation. Granted, it's not really what's happening. But in my mind, adding money, for example, to my investment portfolio after a bad day at work feels like I just might be accomplishing something.

Sometimes I'll even buy an extra lottery ticket.

I say extra because if there is one thing about me, it is that while I don't intend to ever actually win the lottery, I do intend to at least have a shot at winning, and that's not going to happen if I don't have a ticket in my hand.

Of course I wish the big win would have come my way. But somebody has to win, and even if it is not me, I like having at least the opportunity.

Congratulations to the latest Powerball jackpot winner.

You Can Win The Powerball Jackpot

Sometimes the fun of life is simply taking a moment to dream about what is possible. Like winning the Powerball jackpot which tonight could make some lucky individual $317 million richer. Granted, the odds are terrible. I will readily admit that, and anyone with half a bit of sense is quite aware of this fact as well. In fact I once sat down and compared the odds of either winning the Powerball jackpot or being struck by lightning. It turns out I am more likely to be struck 43 times in my lifetime by a bolt of lightning than win the Powerball jackpot once.

But the truth is, you can win the Powerball jackpot only if you have a ticket in your hand when the drawing occurs.

But it's such a waste of money, you say. I get that. And the Powerball, unlike most other lottery games, is twice the cost at $2 per play. Still, when I think of all of the money I waste (and I really don't waste that much money. I am quite frugal actually), a mere $2 for a chance at $317 million, or even a mediocre return is still a great opportunity to have, and I think it's $2 wasted that is worth the chance.

Somebody must win. It's the name of the game.

And people do in fact win. It was reported by the makers of the popular docuseries which chronicles the lives of those who have won the lottery that roughly 1,600 new millionaires are created every single year simply by winning the lottery. That's about 4 new millionaires each and every day of the year.

You probably won't win. The odds are simply stacked too much against the player. But again, somebody must win, and that person absolutely cannot be you unless you have a ticket in your hand when the drawing occurs.

I will certainly be buying a ticket for tonight's drawing. All I have to lose is the jackpot, right? Or, of course my $2. But just to have a chance? Just to have a long shot? Yep. I'll take my chances. If I were to win the Powerball jackpot, I would choose the annuity. The cash option is only worth about half the total prize amount, and then when you take out for taxes, it's about half of that. If I take the annuity I still get paid somewhere around (after taxes) $6,340,000 a year for 30 years.

I think that be just enough to cover the groceries to be sure.

Also by Springboard about the lottery: Winning the Lottery: The Dream of the Big Win

MegaMillions At $172 Million

The lottery is one of those things that people either love, or hate, or perhaps even love to hate. The fact is that the odds are terribly stacked against the average player. Still, I have to look at a couple of things whenever I consider whether or not it is worth forking over a buck or two and playing. One big one for me is the fact that somebody has to win. And in many ways, despite the terrible odds against me, it causes me to consider that playing is indeed worth my money, and worth my time.

Of course, like anything having to do with gambling, or even socking money into a speculative stock market investment, the risk can only be taken if it happens to be money you can afford to lose. If it's down to putting gas in the tank, or food on the table versus buying a lottery ticket, of course you choose the former over the latter.

Another fact I consider are statistics that were compiled by TLC's docuseries How The Lottery Changed My Life. It happens to be a fascinating thing to watch by the way, especially when you see certain people who wound up winning a fortune, only to wind up broke due to a variety of factors, but mostly due to poor money management.

That goes in hand with something I have always believed, and that is that the rich get richer because they know how to be rich, and the poor get poorer because they don't know how to get rich. That is sometimes thought to be a bit of a controversial statement. But think of all of the rich who lost it all on a bad business deal, only to make millions on a good one? Or how about all of the musicians and sports players who made fortunes, only to wind up broke in the end? If you don't know what you are doing when it comes to money, any amount of money will not make a bit of difference in the end.

What did TLC find? The fact is that the lottery, for all its naysayers, creates roughly 1,600 new millionaires every single year. Breaking the math down a bit further that is roughly 4 new millionaires created every single day of the year.

Granted, billions of tickets are sold each year, and so while that does make 1,600 millionaires seem like a pittance compared, that's still a lot of people coming into new money just because they forked over a dollar or two to play the lottery.

The MegaMillions next drawing is worth $172 million. Even the Powerball is worth $110 million in tonight's drawing. You can bet I'll be playing. And of course, I don't expect to win. But since somebody must win, if there is any chance that that someone could be me, I have to have a ticket in my hand to be a possible winner. As the old saying goes, you cannot win if you do not play. And after all, what's a buck?