Invest for the long term to avoid short term risks
CNBC’s Jim Cramer on Monday warned younger investors to stay in the market for the long term despite recent turbulent events including the forced liquidation of positions in the multi-billion dollar family office Archegos Capital Management.
“We don’t want it to be 2000 when we lost a quarter of the people who were there,” Cramer said on Squawk Box, referring to the bursting of the dot-com bubble and a sense of disillusion among those who did had lost money. “It just can’t be like that.”
A wave of young people during the coronavirus pandemic have bought stocks for the first time, and Cramer admitted they may not want advice on how to manage turbulent trading based on long-standing Wall Street numbers.
“But the only thing we really have for you is the story, and you have to hear it: Stay in the game. Don’t let yourself be disturbed,” said the hosts of Mad Money, whose career took part in the Wall Street joined Goldman Sachs in the mid-1980s. He later ran a hedge fund before becoming a financial journalist. He reported on the stock market’s ability to create long-term wealth and the risks of short-term trading for retail investors.
After gaining weeks of growth in ViacomCBS and Discovery, they came under heavy selling pressure late last week, along with several Chinese internet stocks – in part combined with forced sales of Archegos, founded and operated by Julian Robertson, a former equity analyst at Tiger Management’s Bill Hwang.
On Monday, two investment banks – Swiss Credit Suisse and Japanese Nomura – warned of “significant” financial losses in connection with Archegos’ situation, even though the companies did not name the fund.
Archegos is hardly the first fund to land on the wrong side of a trade, Cramer said, noting that some suffered huge losses during the Reddit-fueled GameStop trading frenzy.
“I think a lot of non-boomers should be asking, ‘Well, what do you think happened to GME? What do you think happened? It’s the same as what happened to this fund,” Cramer said, referring to on how another hedge fund, Melvin Capital, came under brief pressure that skyrocketed GameStop before collapsing later. Many private investors suffered large losses after buying them at the top.
“It’s considered scary by this younger cohort and they are going to go home and what a shame but they are going to go home. They are not staying here. They are short timers. It really is a shame because they were smoked.” . “”