tastytrade logo
uploaded image

Jun 4, 2021

But This One Goes to Eleven

By:Dylan Ratigan

Dylan’s Weekly Notes:

Texas State Highway has the fastest speed limit in the United States at 85 mph. Yet most cars have the ability to go well over 100 mph. Why? Because at some point, most of us have pushed that 100 mph or more. We want to feel that adrenaline rush. We want to feel that power. We want to tempt fate just a little. 

Humans are risk-takers by nature. Whether it’s pushing the speed of a car, skydiving, drinking expired milk, or with our money, we want some risk. We inherently recognize the thrill in not crashing the car, landing safely on the ground, not getting sick or multiplying the returns of an investment. There are psychological reasons for this that I’m not qualified enough to speak to, but I understand they exist and the proof of their existence is evident in the simple fact that cars go over 85; people keep jumping out of planes despite horrible accidents; my milk expired last week; and, the appeal of crypto assets or meme stocks.

Since the implementation of quantitative easing (QE) in the aftermath of the 2008 recession, bonds have yielded nothing to next-to-nothing. It forced investors looking to generate returns into equities. Stocks, like FAANGs (Facebook, Amazon, Apple, Netflix and Google) generated massive returns. But over the past year, three of these stocks have done nothing but trade sideways. That opened the door. Enter meme stocks and crypto assets.

The hive of volatility seekers in the marketplace are not complacent with 3 - 5% returns. They have no interest in dividends. Their thinking isn’t boxed in by old school finance theories like value investing. They want alpha. They’re the first in line to ride the latest and craziest roller coaster. For them, risk isn’t a four letter word, well, not a bad four letter word. 

Sector rotation is no longer about moving from growth companies to utilities. It’s not buying bonds and selling stocks. It’s an alpha rotation. It’s a volatility rotation. It’s a search for higher levels of risk with their inherent higher potential reward. That’s a good thing. That’s how entrepreneurs with the craziest of crazy ideas get funding. 

We need investors willing to invest in those crazy, volatile ideas because that’s how innovation happens. Does it always work out? No. Will some people lose a lot of money? Absolutely. But will more money be made than lost? Definitely. Along the way, new ideas will make it out of garages and into manufacturing facilities that create jobs, money and a greater pool of potential investors willing to take some risk. And maybe someone will even make a guitar that goes to eleven. 

Be sure to catch Dylan Ratigan & Tom Sosnoff every Wednesday at 1pm CT for a new episode of Truth or Skepticism live on tastytrade.com.

Listen to previous episodes on Spotify, Apple Podcasts or on tastytrade.com.

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Related Posts

tastytrade content is provided solely by tastytrade, Inc. (“tastytrade”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, transaction or investment strategy is suitable for any person. Trading securities can involve high risk and the loss of any funds invested. tastytrade, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors, and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastytrade is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparison, statistics, or other technical data, if applicable, will be supplied upon request. tastytrade is not a licensed financial advisor, registered investment advisor, or a registered broker-dealer. Options, futures and futures options are not suitable for all investors. Prior to trading securities products, please read the Characteristics and Risks of Standardized Options and the Risk Disclosure for Futures and Options found on tastyworks.com. 

tastytrade is a trademark/servicemark owned by tastytrade.

tastyworks, Inc. ("tastyworks") is a registered broker-dealer and member of FINRA, NFA and SIPC. tastyworks offers self-directed brokerage accounts to its customers. tastyworks does not give financial or trading advice nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastyworks’ systems, services or products. tastyworks is a wholly owned subsidiary of tastytrade, Inc (“tastytrade”).

tastyworks, Inc. (“tastyworks”) has entered into a Marketing Agreement with tastytrade (“Marketing Agent”) whereby tastyworks pays compensation to Marketing Agent to recommend tastyworks’ brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastyworks. tastytrade is the parent company of tastyworks. tastyworks and Marketing Agent are separate entities with their own products and services. tastytrade has different privacy policies than tastyworks.

Quiet Foundation, Inc. (“Quiet Foundation”) is a wholly-owned subsidiary of tastytrade The information on quietfoundation.com is intended for U.S. residents only. All investing involves the risk of loss. Past performance is not a guarantee of future results. Quiet Foundation does not make suitability determinations, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of Quiet Foundation’s systems, services or products.

© copyright 2013 – 2022 tastytrade. All Rights Reserved. Applicable portions of the Terms of use on tastytrade.com apply. Reproduction, adaptation, distribution, public display, exhibition for profit, or storage in any electronic storage media in whole or in part is prohibited under penalty of law, provided that you may download tastytrade’s podcasts as necessary to view for personal use.