Do You Know These 12 Investing Acronyms?

Yeah, the idea of spending millions of dollars on just a digital image was always interesting to me 'cause I'm like, "Couldn't I just right click this on Google image search and just download it and print it out and have the exact same thing?" And they're like, "No, but you're not understanding the proposition." I was like, "I guess not. I'm the dumb guy here." Welcome to "The Informed Investor" where we break down the latest financial headlines, bringing in research and insights to help you separate the news from the noise. Welcome to "The Informed Investor." Today we are talking SPACs, NFTs, FANGs, BRICS, PIGS, all things acronyms. I'm Mark Gochnour. I'll be joined today by Jake DeKinder and Wes Crill. And guys, there is no shortage of acronyms and jingles and everything else out there when it comes to our investments. That was one of the best intros I think you've ever had, Goch when you're like FANGs and PIGS and SPACs and I was giggling on that one, I'll be honest with you. It already sounds like an eye chart. I don't know if I can handle this episode. All right, I'm gonna do headlines and then we're gonna get into it. Let's see here. Kinda mention this one. Ready? "From FANG to BATMMAAN, BRICS to PIGS, why Investors Obsess over Acronyms and Monikers." And then here's one. "We are suffering from TMAs: too many acronyms." I would agree. I would totally agree. I mean, it's simplifying the world down and quite frankly, one word, it's marketing. Yeah. It's been one of the many constants really since I've been working in finances. There's always a new one and it's kind of fun to try and stay on top of. You know, I think it contributes to this concept we've spoken about often, which is the level of jargon in the industry. And, you know, to the extent that this stuff matters to investors, I mean, it is sort of a buffer to them really understanding what's going on. It sort of shrouds the industry in even more mystique because you're like, "Ooh, what's this new acronym? Like, do I know about this? Is this something I should be investing in?" And just adds to the complication of the industry as a whole. It's intimidation, right? I mean, think about yourself before you got into this industry, like you're coming up through school, you don't know this stuff, you hear people talking about it, you're like, "Oh my gosh, this sounds so complicated. And then you really start to break it down and you're like, "God, that's so basic." Well, I go back, your comment on marketing. You know, everyone loves a good jingle or an acronym 'cause you can remember it. And we were kind of joking, you remember the old Wendy's commercial? Like, "Where's the beef?" I remember that one. I mean, that'll stick with me for the rest of my life. Yep, and you just lost like 50% of our viewers 'cause they're like, "I have no clue what you're talking about. "Mikey ate it." Remember that one? Oh yeah. One of those cereals? Half these things are probably not even around anymore. Yeah, the products, yeah, probably not but the jingle is. Shoot, I brought up a payphone to my kids and they're like, "A what?" Well, you go back to the acronyms though. But they do help remembering some things in some of these different cases. The military uses them in a big way and my son-in-law, he's in the military and he'll say an acronym and I just kinda look at 'em. He's like, "Oh, it means this, this and this." So there is a form of benefit there in terms of efficiency around communication. Yeah, absolutely, I mean, when you're on your way and, you know, you say, "Well, my ETA is X, Y, and Z," I mean, all of these things are meant to convey information more rapidly. So there's definitely a time and a place for these things. I just think it gets back to this idea that it is another layer of sort of obfuscation when it comes to understanding what's going on in markets. That was a big word, really big word. I don't know what that means. Not a clue. Can you get a acronym instead of a long word? Obs. Don't ask me to spell it. Let's put it that way. All right, let's go back to some of those that we just read about and we'll try to keep it, I'll say current so we don't go too far back in time. But let's talk about this century. And it goes 2001, the concept of the BRICS came about. So maybe Jake, walk us through a little bit of that idea, the BRICS. Brazil, Russia, India, China. You basically are in the early 2000s, you've got this anticipation of strong growth in some of these countries that are coming on the scene. And so you've got someone at a large organization who coined the term BRIC of this is where you want to explore very strong investment opportunities as we move through the 2000s. The reality is is it didn't exactly pan out that way, both for the investment opportunity and for some of those economies. And I think, you know, that's the hard part too is is that you're taking something that seems good on paper, it is a good story. Here are four countries, I can make a plausible argument for it. Let me package it in something like BRICS that is easy to say and easy to sell and I'll put out some strong reports on it. That sells and that's what happens. It's very catchy. The other one you reminded me of that I totally forgot about was PIIGS, Portugal, Ireland, Italy, Greece, Spain. I don't know if I got that right. And, you know, you have all these things that sound exciting because then people interpret it as like a trade they need to be on or this is the new area of investing or this is what's hot and innovative. And I think that's the risk with some of these things is when you add excitement, sometimes we say that's sort of antithetical to sound investments. Well, the PIGS was interesting too 'cause that really had more negative connotations, right? And so you do get it on on both sides. Yeah. What's interesting on all of that is you then have to sort of look after the fact and say, "How did a lot of that play out?" Nobody pays attention to that and we've talked about it on the show before is is that there is very low accountability in this industry of I come out with the acronym, I come out with a prediction, I go out and I sell these things but nobody really looks back, and guess what? It just keeps happening over and over and over again. Well, and we've talked about this on our prediction show of hey, somebody going out there making a prediction and holding themselves out there, you know, they have courage to do that. It's hard to make predictions 'cause nobody knows necessarily the future. But I go back to that, the BRIC one and it stuck. And I think Morningstar even made a category for BRIC or BRICS as I think later they thought about adding South Africa to that. So it can have permanence but what you were saying there where some of these might be about countries and a little more predictive in nature, some of them are looking in the past, which was the PIGS of just saying, "Man, some of these had really, really tough times there with some of the bank failures and things like that." So some are prediction, some are looking past. Now, one of them that looked past that became a little more recent is all the FANG stuff. So let me just walk through all of these because we got all kinds of acronyms coming from some of that one. So it started with FANG, that was back in 2013 if you can believe it, that long ago. And that was Facebook, Amazon, Netflix and Google. And then they made FANG AA, which added Apple. And then a little bit later that became MAMAA, which was adding Microsoft and removed Netflix on that one. And then of course he changed Facebook and Google went to Meta and Alphabet. And then we had our colleague Court, Courtney Scott came up with the TAN MAMAA. Yeah, that was hers. I was wondering who originated that one. Yeah, Court came up with TAN MAMAA. That's very cool. I know. It never stuck. I like that one. Stuck for me. That's the way we know it. It's the only way I can remember. And, you know, you go back to, okay, what's the purpose of these acronyms? In this case, you know, the group of stocks that we often talk about is the Magnificent 7. This is a good memory device so you can remember what these companies actually are in case someone actually pushes you on it. Well, and the TAN MAMAA added Tesla and Nvidia, right? Going back and looking at excellent performance and that effectively was the Mag 7. Well, now we got what? BATMMAAN. That's the newest one. So you gotta add Broadcom in there. Yes. BATMMAAN with all the As. That was really good. Yeah. Yeah 'cause you got broadcom. Yeah, you got two Ts and two Ms, that's right. You know, it's funny, as we have like more and more I guess, or less concentration in terms of returns in the market, if you had like a broader, I don't know, set of returns across the market, I can imagine this thing getting to like 40 or 50 letters, but it'd be very hard to pronounce at that point. Well, it did help though, right? For us, we were talking about the performance of, you know, US market these last handful of years. And it did make it easier to say. Well, the Mag 7 had such spectacular results and we talked a lot about that in the past, you know, unexpectedly good results for an investor's perspective. But it did help in communication, simplifying some of those things. But you also saw a dispersion in returns even within some of those stocks if you look year to year, right? It doesn't mean that they're gonna perform as an asset. And I think that's the hard part is I'm taking things that can be somewhat different. I'm grouping them into an acronym and then I think the expectation is almost like I've created an asset class, right? I mean, let's go back to BRICS and let's look look more recently. Okay, so China, meh performance, Brazil, meh. If you look over the last 10, 15 years, right? Brazil, meh, China, meh, Russia, can't invest. India did pretty well. So you get a dispersion of returns and even when you go to the individual country or a company level, it's the same thing. And so I think you have to be careful there of saying I've created this group and therefore the behavior of this group is going to be the same where you have the same sector, maybe same general types of companies, but they're different business models and they're different companies and they're gonna be run differently and their stock returns are likely going to look different. Yeah, it's analogous to even with ESG investing where people talk about that as if it's like one particular style of investing and one particular set of characteristics, but clearly, it's three distinct ones. You have environmental, social and governance. And so those are measured in different ways. They have different implications for investments and so on and so forth. And so I think that's a really good point you make about how we shouldn't necessarily lump these things together as if they're one entity, even if we do so with the acronym. I do think that's one that there's been a lot of confusion around ESG. I think it's been marketed very differently by different companies over time. So it's been hard for investors to really get a feel of exactly what that is 'cause like you said, it's three different things built in there, you know? But some of these acronyms go to investment product as well. And if folks remember, around that COVID, 2020, 2021, the term SPACs was out there in full force. And I'll just highlight an episode we did with Kevin Green on IPOs. We talked a little bit about the SPACs, but SPACs, special purpose acquisition companies. Good job. Where I think you have a public company and what they do is they take money coming in and then they go look for a private company to buy. And once you buy it, you merge it in and now you're public. So supposedly it was an easier way to get a private company public. And if you look at the volume of SPACs in that 2020, 2021 time period, it was massive. And then I haven't heard the word SPAC in probably two years. Yeah, you don't hear much about 'em anymore, do you? No, it's interesting. It's just funny. It's like, "Oh yeah, here, just give me a bunch of money and I promise I'll go find something good to invest in." And be like, "Oh okay, that sounds good." You didn't know the company, you didn't know what it would be. Remember you had movie stars and athletes, you know, starting a SPAC as if they know how to go out there and properly evaluate a private company. Yeah, well, again it goes back to it probably... It was a marketing thing, right? Maybe I'm an investor, maybe I have a substantial amount of money, maybe I think that this thing is cool, it sounds unique, there's a mystique to it, right? And so I'm gonna go into it and to your point, it was really popular and I literally don't know the last time I got a question about SPACs. And by the way, it'd been around for a long period of time. Oh yeah. I mean SPACs had been out there. Yeah. And they still are. It was just really, really highlighted in that two-year time period and then it just kind of went away from day-to-day conversations. I'll tell you another one that was super popular, NFTs. Oh yeah. Was that the non-fungible? Non-fungible tokens. Tokens. Yep. And was that mostly, or a lot of them I should say, were the monkey or the ape-- Yeah, the bored ape. Right. Yeah, the idea of spending millions of dollars on just a digital image was always interesting to me 'cause I'm like, "Couldn't I just right click this on Google image search and just download it and print it out and have the exact same thing?" And they're like, "No, but you're not understanding the proposition." I was like, "I guess not. I'm the dumb guy here." Well, in theory, it was on blockchain, so you could use it to authenticate, I guess the creator and things like that. But what was it that jumped out to me? There was one, a picture of a rock, I think over a million dollars was paid for that. And then I wonder what it's worth today, if that owner tried to go sell that thing. Well, to your point, I mean, it was funny, it was almost like what is it and why do people want it? And could you even explain like what it is and why people would value it? It reminds me of actually going back to the '08/'09 time period. I had a good buddy who was in business school and he had an older mentor and he gave him really good advice around all of these things that were being sort of packaged up and the whole subprime thing and, you know, everything that was going on. He's like, "Listen, if you can't explain it, don't put your clients in it." And I think that's a good lesson as an investor of if you don't understand it, be cautious going into it or find a professional who can explain it to you and see if that's actually what you need to be invested in. And if they're explaining it with additional acronyms, alarm bells should be going off. You know, I think we talked at one point about, there was a poll in one of the media outlets that was asking professional investors if they knew what ETFs stood for. And it was like more than half of 'em couldn't answer the question accurately. So I even think about, you know, when we first started having more and more conversations around ETFs, a lot of people would use that term, an EFT mistakenly interchangeably, which was EFT, much different thing. Electronic funds transfer rather than exchange traded fund. And so I think even some of these acronyms that we think of as being very basic, being something we discuss every day, we shouldn't assume everyone knows exactly what they mean and what that implication is. That's right. Good point on jargon. And you think about some of these acronyms though that there's good acronyms as well, like an ETF, an IPO. ROI, ROI, you always make that joke at conferences. ROI, return on investment. That's a good one. ATM, it gives you cash. Do you know what ATM stands for? Automated Teller Machine. You were just checking me on that one. Yes, I was. GPS, global positioning system. Boom. Super helpful. Yeah. So there are a lot of good acronyms out there that have a lot of value in our day-to-day communications for sure. And again, some of these, like an NFT, you go back there again, there's value in that blockchain and again, a way to authenticate authorship and stuff like that, but all of a sudden how that becomes an investment, and I liked what you said there about if you can't explain it properly and what's gonna drive that value, that's kind of a red flag and the hope of, "I hope somebody pays me more down the road than what I paid for it," that's probably not the best reason to go acquire something. You know, the example that I gave from my buddy back then, right? I mean, what was the acronym to them? It was a CDO, Collateralized Debt Obligation, right? So there was a new one people figured out or didn't figure out and probably got burned on it. Yeah, so for the audience, just go out there, go onto to YouTube, do a quick search on some of these different acronyms. You'll get a little 10, 15 minute video of the history on some of these, like the SPACs and the NFTs. And it really is fascinating to see, you know, the energy and the hype around some of this and just how quickly it just sort of to went away as an investment vehicle. So a couple of these key things I just come back to is acronyms are great, but just be careful as an investor if you can't explain it properly. Know all the intricacies without that. And if there's some stuff out there that has a little bit of FOMO and you wanna be a part of it, just be very clear with the objective. That was good. That was a good one. Did you see how I worked that in there? Oh, I saw it. WTF, man. Oh, there we go. Just close on that. Yeah, we'll keep this PG for sure. I don't know what that stands for. All right, well, thanks, everybody for joining "The Informed Investor." We appreciate your time here today. And we are going to come back on a future episode and talk about trading and all the costs you gotta think about when you go buy and sell a stock or a bond. So thanks, everybody, have a fantastic rest of the day.