It started off as an innocent dinner conversation. My 14-year-old son, Kevin, started asking about the market. It was February 5th and both the Dow and S&P were rebounding from a late January sell-off and heading towards new highs. Because I work on the NYSE floor, I often get asked my thoughts on the market. When friends and family ask a lot of questions, you know the sentiment is getting quite bullish and maybe we need to pump the brakes a bit. When your kid asks you for the first time ever, so many emotions come over you.
“Dad, can I buy a stock?” The first emotion – PRIDE. Finally, one of my kids actually cares about what I do for a living. This is great! Then it hits me. Wait a second, what could he possibly be following? Oh, no… It dawns on me.
Please don’t say Tesla?
Well of course it was Tesla. The stock was trading at $350 at Thanksgiving. It climbed to just over $400 by New Year’s. Now it was closing in on $800 when he asks to buy it. All the kids were talking about it at school. Gamers and YouTubers everywhere sung its praises. Heck, even TikTok videos were being made about how easy it was to make money in Tesla. This Gen-Z kid was all-in.
I thought it would pass, but the kid was persistent. I figured it would be great to teach him about investing. What better way than to chase a stock already in the stratosphere. I will put up the money and he can keep the profits. It had to be profits because he told me it never went down. So on February 13th, I agreed to buy him one share of TSLA at the market.
And so it began—the stock had closed at $804 on February 12th. The next morning as I went to put in my market order, news of a secondary offering hit. The stock was getting hammered in the pre-market. The kid was going to buy it at a discount—well at least based on the prior days closing price. The stock opened at $741.84. It ticked lower for maybe 5 minutes and it was off to the races. Kevin was an owner of Tesla and now emotionally involved. How emotionally, you may wonder—let’s look at the texts.
Right away the kid was learning. First, basic math skills. Understanding where he bought it and how to calculate his profits. Then, a reference to one of the all-time great investors led him to research and learn of Warren Buffett. Not the exact reply I had hoped for, but funny nonetheless.
By midday the stock continued to climb. It never looked back. Now Kevin was tracking the stock on his Apple stock chart. It closed at $804.00 on his first day of ownership. A nice 8.4% gain. To him—normal.
The stock continued to climb all week. He was getting giddy and arrogant. He yelled at me on Saturday, Feb.15th because the stock was not up. Somehow he didn’t realize the market was closed on the weekends.
I guess he assumed I only got those days off while others traded in my place. He also started pointing out every Tesla vehicle on the road. Each time we would pass one, he would yell at it, “I own you!” Heck, he even read two articles about the stock. Negative ones—how dare people speak badly of his stock. He was a very proud shareholder.
I loved it. While I wanted him to learn a hard lesson, maybe he was on to something. Maybe I was the clueless one? Besides, how can you root for your kid to lose? I wanted to teach him a lesson, but was this it?
His euphoric texts got better and better. The kid is funny and boy was he happy. He was a self proclaimed “stock wizard”. I asked him if he wanted to sell and explained the tax ramifications. He didn’t like the idea of short term capital gains tax and giving up his earnings. He scoffed at the idea. The stock was going to $300,000.
On February 19th, the stock opened at $923.50. It traded as high as $944.78. The kid was up over 200 “buckaroonies” in less than a week. A 27.35% gain! Wizardry indeed. Sadly, this is where the story turns. This next text was his last happy text.
We finally hit the top, or was it just a pause? The stock proceeded to give back much of it’s gains and traded in the low to mid 800’s. On February 24th, I decided to check in with him as he had stopped texting me updates. The market was getting hammered as the DJIA fell 1,000 points, but Tesla was hanging tough given its recent run. The stock closed that day down $78 to $833.
He rationalized the loss and shook it off. It was his first tough day and he handled it well. Sadly, we know what’s coming next…
Now down three days in a row. The stock was giving back much of his gains and finished the day under that psychologically (in his mind) important $800 level. He was getting depressed. I asked if he was okay and he replied, “no”. Uh-oh. We’ve gone from euphoria to despair.
Then the bottom fell out. The market sold off for the fifth consecutive day and took most every stock with it. Tesla was no flight to safety and the selling pressure kept coming in waves. It now traded under his purchase price—not good. I checked in to see what he wanted to do. Was he still confident? If not, what had changed? His emotions got the best of him as the stock traded to $680. He was out $61 and he was done.
I didn’t sell the stock for him, but he never asked. We will hold this for a few more weeks and see where it goes. As for the experiment, I think it went better than planned. He got to ride the highs and learned some valuable lessons. He did research, learned about risk and took pride in being a shareholder. He also learned that it isn’t easy. Things don’t always go your way. Take a profit, stay grounded and have an exit strategy. These past two weeks have been extremes that can humble the most savvy traders. My hope is that it wasn’t too humbling and he’ll be back real soon.
He did hit me with one last text that brought it full circle. He gave me the title stock wizard and also the decision making authority to pick his stocks. However, he did mention he and his friends liked SPCE.