Good morning.

Hodling — originally a typo for holding that has come to stand for "holding on for dear life" — is a term that some folks use to signal their belief that they will never sell, no matter how much money they might lose.

People who own Bed Bath & Beyond stock say they're going to hodl, even though the home-goods company is in bankruptcy and expects its shareholders to be wiped out.

People who own shares of AMC Entertainment or GameStop say they're going to hodl, even though both companies are struggling and scenarios for their recovery rely largely on conspiracy theories.

And people who own cryptocurrencies often say they're going to hodl, even though dogecoin and many other digital tokens are 90% or more below their peak prices.

One reason for hodling: Bailing out at the bottom after you bought at the top would make you feel like a fool.

By hodling, you get to tell yourself you weren't wrong; you were just early. An unrealized loss doesn't feel like a real loss.

If you bought AMC during the meme-stock mania of 2021, hanging onto it enables you to feel you didn't make a mistake. Someday, sooner or later — maybe much later, even if you're on your deathbed — you'll turn out to be right. So long as you still own it, nobody can prove you wrong. The future hasn't happened yet!

This sort of hodling by non-professional investors isn't new, of course.

In the South Sea bubble in 1720, a wave of wild speculation drove up the share prices of financial stocks in London. 

Then the bubble stocks crashed. London Assurance's stock chart from 303 years ago looks a lot like AMC's today:

New research by scholars Graeme Acheson, Michael Aldous and William Quinn shows something fascinating.

From the end of 1719, shares of London Assurance rose 5,900% to a peak of £135 in August 1720. Then they imploded, falling 91% in three months.

Most insiders bailed out near the top, much as the sponsors of SPACs and various "crypto pumps" have done in recent years.

What about investors who didn't get in on the ground floor?

Many of the people who ended up owning London Assurance shares the longest — the hodlers — were those who paid the highest prices and incurred the deepest losses.

The closer to the peak that people bought the stock, the more likely they were to end up hodling it. How much they lost determined how long they clung to the shares.

Fully 26% of the people who owned the stock in August 1720, when it was at its peak, ended up keeping their shares for at least five years.

And the farther away from London they lived, making them more likely to be amateur investors, the longer they hodled.

It didn't work out. London Assurance's share price never got back remotely close to its highs of 1720, averaging about £12.50 for the next three quarters of a century.

The history suggests it's always been this way: The more money you lose, the less capable you become of making peace with your losses. The amount of cash you can raise by selling keeps shriveling, making it seem barely worth the bother. And the amount of crow you have to eat keeps growing.

So you hodl.

You're probably thinking right now, Hey, wait a minute. Isn't Zweig the same guy who recently wrote a glowing column about college kids who picked stocks they're going to own until the year 2048?

That's right.

I'd argue that the difference between hodling and buying-and-holding is that hodling means hanging on no matter what happens, even if hanging on no longer makes objective sense.

In that case, you don't own the stock. It owns you.

Here are a few guidelines for figuring out whether that's happened to you.

• Do you get angry at anyone who casts doubt on the company's future? If you've done your homework, you should be comfortable -- not touchy -- when you face criticism.
• Do you think anybody who disagrees with you must be either crazy or crooked? You should be trying to learn from people who disagree, not seeking to discredit them.
• Have you retroactively restated your original reasons for buying? You should have made a note of them at the time. Go back and re-read it to make sure your memory isn't playing tricks on you: Is your original rationale still valid?
• Can you describe the types of facts or data that would disprove your current thesis? What evidence would it take for you to admit you were wrong? "That's impossible! I know I'm right!" is not evidence. More likely, it's evidence that you're wrong.
• Have you been ignoring the tax consequences? By selling out at a loss, you turn the ugly liability of a mistake into the valuable asset of a tax benefit.

Be well and invest well,

Jason

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