4 ms·

This trend, imo, is connected up with the deeper issue of ever-widening rift between the (shrinking) middle class and the calcifying wealth of the upper classes

This trend, imo, is connected up with the deeper issue of ever-widening rift between the (shrinking) middle class and the calcifying wealth of the upper classes -- there isn't a lot of opportunity for folks in the middle class to invest in quality 'fast-rising upstart' stocks (like the article talks about) today relative to, say, a couple decades ago -- the barrier of entry has become unbelievably steep. How about the "accredited investor" limitation? In order to invest in something that can generate great wealth (eg., a startup, I believe futures, a number of securities), you need the accreditation, which means either making 200K+ US two years in a row, or having 1 mil US in non-primary-household wealth. Now, one could argue that it's intended to protect people from themselves - the guy or gal mortgaging their house because a snake oil salesman convinced them to invest in something shady. But doesn't it also block off a whole set of possibilities to a select few in the name of protecting the little guy?

prostoalex 8y ago
Not really. Private market valuations depend on the scarcity of funding sources. If everybody suddenly has a chance to invest in a round, investors will compete on price, bidding up those early-stage valuations and compressing future returns.
- chrisco255 8y ago
  Some of this can be attributed to the relatively few opportunities raising money last year. Some of it is due to uncapped raises, which should not be done, in my opinion.
pembrook 8y ago
Laws and regulations are intended to create a greater good. Sometimes we have to stifle a few exceptional people for the good of everyone else. Preventing small time retail investors from buying into high risk startups is a good thing. Unfortunately the general public has proven over and over again that they lack the financial sophistication to comprehend the difference between a scam and an investment opportunity. Remember even VCs lose money on a vast majority of deals. The ICO mania over the last year provided an excellent reminder of why these regulations exist and why they are important.
- chrisco255 8y ago
  No the ICO mania just underscored a point: people want access to capital markets. They're so hungry for it that they're willing to accept tokens backed by nothing. If companies could issue security tokens without excessive regulatory burden they would do so, and we could use classical evaluation models for arriving at fair market value for said tokens.
  - pembrook 8y ago
    I think you just proved my point. These people were so enticed by the idea of “getting rich quick” that they bought worthless tokens that gave them ownership rights to nothing. Since they lack the sophistication to understand they were being scammed...why do you think they would have any understanding of classical valuation models?
    - chrisco255 8y ago
      Nobody understands cryptocurrency valuation, this is a brand new asset class. Whereas, stock investing is pretty mature at this point. People bought and flipped real estate in the 00's in a bull market only to see it all crash in 2008. Bubbles happen. Doesn't mean you cut out everyone who doesn't have $1 million in the bank. That's like only letting skinny people eat healthy food.
- catcow 8y ago
  I find your comment offensive. This is a condescending attitude that keeps people outside the financial class on the fringe and destroys their ability to take control of their lives. If you treat people like children they will forever remain children. As a struggling low-income millennial, FATCA and accredited investor requirements have easily set me back a decade.
  - mrep 8y ago
    > As a struggling low-income millennial, FATCA and accredited investor requirements have easily set me back a decade. How? Are you wanting to be one of the scammers because those are practically the only people that would get rich if we got rid of these laws? Almost everyone would make less returns than an index fund and a lot would even lose more money to the scams than they would make from the good investments. There would be a few outliers who just got plain lucky but if you want to be one those people, just play the lotto or go to vegas where your odds would be better.

prostoalex 8y ago

Not really. Private market valuations depend on the scarcity of funding sources. If everybody suddenly has a chance to invest in a round, investors will compete on price, bidding up those early-stage valuations and compressing future returns.

chrisco255 8y ago
Some of this can be attributed to the relatively few opportunities raising money last year. Some of it is due to uncapped raises, which should not be done, in my opinion.

pembrook 8y ago

Laws and regulations are intended to create a greater good. Sometimes we have to stifle a few exceptional people for the good of everyone else. Preventing small time retail investors from buying into high risk startups is a good thing. Unfortunately the general public has proven over and over again that they lack the financial sophistication to comprehend the difference between a scam and an investment opportunity. Remember even VCs lose money on a vast majority of deals. The ICO mania over the last year provided an excellent reminder of why these regulations exist and why they are important.

chrisco255 8y ago
No the ICO mania just underscored a point: people want access to capital markets. They're so hungry for it that they're willing to accept tokens backed by nothing. If companies could issue security tokens without excessive regulatory burden they would do so, and we could use classical evaluation models for arriving at fair market value for said tokens.
- pembrook 8y ago
  I think you just proved my point. These people were so enticed by the idea of “getting rich quick” that they bought worthless tokens that gave them ownership rights to nothing. Since they lack the sophistication to understand they were being scammed...why do you think they would have any understanding of classical valuation models?
  - chrisco255 8y ago
    Nobody understands cryptocurrency valuation, this is a brand new asset class. Whereas, stock investing is pretty mature at this point. People bought and flipped real estate in the 00's in a bull market only to see it all crash in 2008. Bubbles happen. Doesn't mean you cut out everyone who doesn't have $1 million in the bank. That's like only letting skinny people eat healthy food.
catcow 8y ago
I find your comment offensive. This is a condescending attitude that keeps people outside the financial class on the fringe and destroys their ability to take control of their lives. If you treat people like children they will forever remain children. As a struggling low-income millennial, FATCA and accredited investor requirements have easily set me back a decade.
- mrep 8y ago
  > As a struggling low-income millennial, FATCA and accredited investor requirements have easily set me back a decade. How? Are you wanting to be one of the scammers because those are practically the only people that would get rich if we got rid of these laws? Almost everyone would make less returns than an index fund and a lot would even lose more money to the scams than they would make from the good investments. There would be a few outliers who just got plain lucky but if you want to be one those people, just play the lotto or go to vegas where your odds would be better.