The Truth About Lemmings

Humans love to tell stories... The lemming myth... Running off a financial cliff... The truth is more complex... The road to wealth... Beware of toxic waste... Write your own story...

Humans love to hear and tell stories...

It's an easy way to inform, educate, and entertain... often in a single narrative.

But one problem with stories is that you hear only what the storyteller wants you to hear. You often don't get the full truth.

Take, for example, the popular story that lemmings commit suicide by running off of cliffs in large groups.

This is, of course, a myth.

But many years ago, someone told the lemming story in such a compelling way that it convinced people it was true. The story has been repeated many times since.

Today, when you say the word "lemming," unless you're a biologist studying rodent behavior in the wild, the connotation is that a group of people are mindlessly moving toward their own doom.

This story was manufactured by a company in the business of spinning fantasies to the delight of millions of children...

I'm talking about Disney.

Between 1948 and 1960, Disney produced a series of films about animals in the wild. It was called True-Life Adventures. Of course, like everything else Disney is good at, much of it was made up.

It's just too tedious and difficult to sit hour after hour, day after day, waiting for animals to behave in entertaining ways.

So scenes involving small creatures like insects and spiders were shot in studios. Trained animals were brought in to exhibit specific behaviors. And the footage was edited to create storylines, anthropomorphizing the animals to convince the audience that they behaved like people, even if they really weren't behaving that way at all.

By far the most egregious (and now popular) example was from the 1958 True-Life Adventures documentary White Wilderness.

The film shows a group of lemmings running off a cliff into the ocean as the narrator explains what is reportedly happening on screen (and apparently reading the rodents' minds):

A kind of compulsion seizes each tiny rodent and, carried along by an unreasoning hysteria, each falls into step for a march that will take them to a strange destiny...

They've become victims of an obsession – a one-track thought: Move on! Move on!

[As they reach the cliff edge] This is the last chance to turn back. Yet over they go, casting themselves out bodily into space.

The story has everything: Compulsion... unreasoning hysteria... and obsession. The only problem? It's all lies.

For starters, Alberta, Canada, where the film was shot, is landlocked – not next to the ocean as portrayed in the film.

Lemmings also don't live in the area where they shot the film. The producers brought them in from other places.

And since the animals don't exhibit the behavior the producers needed, they had to force them to do it.

According to a Canadian Broadcasting investigation, the producers set the rodents on a spinning turntable to film them running. Then, they herded them off a cliff into a river. So the gruesome final shot of the lemming "herd" drowning to death in the "ocean" was all staged – and, yes, the poor creatures really died.

The lies were convincingly told through tightly shot, deceptively edited footage and lively narration.

The truth about lemmings is more complex...

Lemming populations can fluctuate widely depending on food, predators, and climate (among other factors). And just like many other animals, they leave an area when the food supply is exhausted.

Lemmings can swim, so they occasionally cross bodies of water in search of a new food supply. At times, large groups of them gather along the shore of a river or lake and try to cross. But if a lemming gets too wet and waterlogged, it will drown. So there are stories of dead lemmings piled along shorelines. But it's an accident, not suicide. Lemmings like living just as much as any other animal.

Investors are often accused of behaving like lemmings...

The accusation is most often hurled when they're said to be confidently buying into a speculative frenzy – just before the bubble bursts. In short, they're said to be running off a financial cliff.

It's true that most investors are the most optimistic at the top of great financial bubbles. I've peppered my Digests over the last few years with plenty of anecdotal "signs of the top."

But just like lemmings, investors aren't suicidal. They buy at the top by accident. How could they do otherwise? Nobody can possibly know it's the top until it's long past.

Just like lemmings, the real story is more complicated...

Take the dot-com bubble. As I've pointed out before, the stock market was correct about the Internet. Its value was incalculable. So buying at the top of the bubble wasn't nearly as irrational as folks might think.

According to data compiled by Bloomberg and my estimates, the S&P 500 Index roughly tripled during the period between 1995 and 2000. The peak dot-com era market cap was nearly $14 trillion. So it added a little more than $9 trillion in market value during the late 1990s tech, telecom, and Internet boom.

The S&P 500 is around $60 trillion today – a gain of $46 trillion since the peak of the dot-com boom. And we can assume the overwhelming bulk of that came from the rise of the Internet. The market cap of the S&P 500's top seven companies (which all rely on the Internet) alone exceeds $21 trillion today.

If you bought a big S&P 500 or Nasdaq index fund in the 1990s and waited a couple of decades, you made a ton of money.

However, buying a bunch of dot-com stocks in the late 1999s and early 2000s was a recipe for financial disaster. Dozens of these companies failed to earn profits. Some even failed to generate revenue. Many of them went bust, delisted, and left investors holding empty bags.

The bottom line is, even though it didn't work out for the great herd of investors, buying stocks at the top of the dot-com bubble wasn't crazy or irrational. In the long term, it even made sense. Investors got the trend right. Many just bet on it all wrong.

Today, investors are obsessed with stock market stories...

The U.S. stock market is seen as the No. 1 no-brainer, guaranteed way to get rich. It's impossible to escape stock quotes and price charts on the Internet and TV news shows. Entire networks are devoted to commenting on every market move. Stock tickers move across the bottom of the screen, keeping viewers up to date minute by minute.

So when it comes to building wealth, it's easy to pitch the stock market as the way to go. The latest example is from a recent Wall Street Journal opinion piece, in which Ohio gubernatorial candidate Vivek Ramaswamy asked:

If AI displaces the white-collar entry-level positions traditionally filled by college graduates, how can young Americans build wealth?

Ramaswamy says the answer is simple: Just buy the S&P 500...

It isn't unrealistic to expect persistently high stock-market returns owing to enhanced corporate productivity, even while employment and wages stagnate for the next generation.

This is a formula for social unrest, but there's a simple solution to the problem: equity participation for America's youth. Instead of viewing AI as competition, the next generation should own a stake in improving America's economic productivity. If every child has $10,000 invested in the S&P 500, every one of them would be a millionaire well before retirement.

Ramaswamy is an entrepreneur for whom the stock market played a big role in his wealth. He made millions working for a hedge fund and much more by founding a publicly traded biotech company called Roivant and an asset management company called Thrive. Forbes estimates his net worth at $1.3 billion.

Still, Ramaswamy's wealth wasn't created in the market... it was only realized there. He created most of his wealth by being an entrepreneur. So I would have expected him to urge young folks to become entrepreneurs, to study what they love, and to make the best use of their unique talents and capabilities. Instead, he's telling them to put their money in the stock market and leave it there... because AI is making them worthless

It's hard for me to completely disagree with him...

After all, I've just explained how you could have made a lot of money from the Internet boom – as long as you held a bunch of great stocks for the long term.

But Ramaswamy is wrong about AI. It won't make humans worthless and unable to find a job. Like all transformational technologies before it, AI will spawn new industries and make us more efficient and valuable, not less.

I also disagree that buying stocks is an easy road to wealth. It's simple, but not at all easy. Yes, if you hold an S&P 500 fund for a few decades, history suggests you'll compound wealth at an excellent rate. But history also shows that high stock market returns are an unrealistic expectation from currently elevated valuations.

History is loaded with examples of markets crashing after big speculative episodes like the one we're in... then going sideways for decades at a time. I've mentioned them many times before: 1929 to 1954, 1966 to 1982, the Nasdaq from 2000 to 2015, and Japan from 1989 to 2024. Each of these periods started with extreme peaks followed by steep bear markets and a failure to make new all-time highs for more than a decade.

They took investors from the heights of optimism to the depths of despair. Whole generations swore off the stock market for the rest of their lives. So I wouldn't be too quick to tell young folks that the stock market is the guaranteed path to wealth. If the market goes sideways for a decade or two, they'll feel even more left out in the cold than they already do.

Like fake documentaries, the stock market is loaded with ways to exploit our gullibility...

It preys on people looking for an exciting story – and sells them toxic waste that makes it easier to speculate.

For example, ETF Database lists more than 260 single stock exchange-traded funds ("ETFs"), most of them leveraged. ETF issuer Direxion alone offers 118 leveraged and inverse ETFs, many on single stocks. Forty of those funds apply three times leverage. There are even a few 4X ETFs for the most swashbuckling riverboat gamblers in the market.

Bloomberg recently reported that there are currently more than 4,300 ETFs, eclipsing the number of listed U.S. companies at roughly 4,200. ETF issuers have launched 640 new funds so far this year. There are about 16,000 ETFs, closed-end funds, and mutual funds in existence today.

There are way too many cryptocurrencies, too. According to CoinMarketCap, there are more than 22 million different crypto tokens of various types. The site actively tracks more than 39,000 tokens trading on 853 exchanges. The total market cap of all cryptos today is more than $4 trillion.

Of course, much of what's being offered is pure speculative garbage that will lead to more losses than gains. The ETF and crypto issuers are serving the speculator, not the long-term investor.

As hedge-fund manager and author Mark Spitznagel recently pointed out:

The markets are perverse. They exist to screw people.

Spitznagel has made a living helping his clients avoid getting screwed by unpredictable "black swan" events. His firm earned $1 billion in a single day from the August 24, 2015 "flash crash."

I'm not saying all these funds and cryptos shouldn't exist. On the contrary, the more cryptos and funds there are, the more likely it is someone will hit on something truly valuable. Unfortunately, there's a lot of trash to sift through if you want to find gold.

Write your own story...

I deeply believe that AI will change our lives at least as much as the Internet did. And I think you can make a ton of money if you play this trend right.

Take your time and learn about the real businesses behind the AI revolution. Study what they're doing and whether they have a prayer of ever making a dime from it. That's how you preserve and grow your wealth.

Many folks won't do that... and they'll lose their shirts trying to pick the most exciting AI stocks. They'll speculate on a bunch of experimental, cash-burning companies like they did in the dot-com boom... and lose money.

As usual, people don't want to tell you the real story, because it's not as fun and compelling. But don't let the market throw you on a turntable and push you off a cliff. Write your own story.

New 52-week highs (as of 10/2/25): ABB (ABBNY), Applied Materials (AMAT), ASML (ASML), iShares MSCI BIC Fund (BKF), Alpha Architect 1-3 Month Box Fund (BOXX), Constellation Energy (CEG), Ciena (CIEN), Crispr Therapeutics (CRSP), Donaldson (DCI), DXP Enterprises (DXPE), iShares MSCI South Korea Fund (EWY), SPDR Euro STOXX 50 Fund (FEZ), iShares Biotechnology Fund (IBB), iShares Convertible Bond Fund (ICVT), iShares U.S. Aerospace & Defense Fund (ITA), KraneShares CSI China Internet Fund (KWEB), Lynas Rare Earths (LYSDY), Monster Beverage (MNST), VanEck Morningstar Wide Moat Fund (MOAT), New Gold (NGD), Palo Alto Networks (PANW), Invesco WilderHill Clean Energy Fund (PBW), Ryder System (R), Roivant Sciences (ROIV), Roku (ROKU), ProShares Ultra Technology (ROM), Torex Gold Resources (TORXF), Travelers (TRV), ProShares Ultra Semiconductors (USD), Veeva Systems (VEEV), Vanguard FTSE Europe Fund (VGK), Vanguard S&P 500 Fund (VOO), and SPDR S&P Semiconductor Fund (XSD).

In today's mail, feedback on yesterday's Digest, which included a look at recent trends over the past year in layoffs (up) by U.S. companies and hiring (down)... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"Regarding the employment picture, after the massive COVID layoffs, there must have been a rehiring over the succeeding few years. Comparing the current situation to the post-COVID years should incorporate an estimate of this rehiring." – Subscriber David S.

Good investing,

Dan Ferris
Medford, Oregon