“In our travels over the past few months we continuously get asked about investing in bitcoin or the cannabis stocks. In our career we have seen many fads, manias, and bubbles. There was the great garbage market of the mid/late-1960s where any company whose name ended with “onix,” or “onics,” had its stock price soar and that soaring did not end well. Other manias include the Tulip Bulb mania (1634 – 1637), the South Sea bubble (1716 – 1720), the British Railway Bubble, the Florida real estate mania, etc. (Manias). More recently we experienced the Hula Hoop frenzy, the CB radio craze fostered by the oil embargo and the concurrent 55 mile per hour speed limit, the computer timesharing mini-fad, Japan’s Nikkei mania, the Shanghai Stock Exchange bubble, etc. The seminal book on such subjects was written by Charles P. Kindleberger and titled Manias, Panics, and Crashes: A History of Financial Crises.

As our departed friend Ray DeVoe wrote in an era gone by:

‘These [fads] were all over quickly – but analysts sought “plays,” stocks to benefit from those trends as if they were to go on indefinitely. Nothing wrong with profiting from a temporary surge in a product’s popularity as long as it is recognized as a short-term phenomenon and a stock is bought to be traded. Looking for stocks to benefit from a trend brought to mind the sequence in Adam Smith’s book Paper Money. An aggressive money manager is told that half the young workers at General Motor’s Lordstown, Ohio assembly plant were hooked on heroin. The money manager’s eyes light up, and he immediately ask, “Wow, who makes the needles?!” I’ve been involved with this as well. During the 1968 rioting in the Watts section of Los Angeles I was repeatedly asked which stocks would benefit from the rioting taking place there – and also taking place in many American cities.'”

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