5 ms·

That's not really what I'm saying. I'm saying that there is too much speculation. The bets are too big. I don't care one lick if people lose their shirts. T

That's not really what I'm saying. I'm saying that there is too much speculation. The bets are too big. I don't care one lick if people lose their shirts. The problem is that if we put a lot of money into ventures that have a very low probability of success, then that money is not at all efficient. The idea that you have to bet big to win big could very well guide us into recession (or worse). It wouldn't be the first time it has happened ;-)

pas 7y ago
How much is too much? There are many regulations protecting people from investing accidentally too much. What's wrong with people with billions putting it wherever they thing might potentially make some more?
- mikekchar 7y ago
  Too much is when a stock market crash causes a depression ;-). Money can literally disappear. Especially when large investors are pension funds and insurance companies, there could be pretty massive damage if the stockmarket loses a significant portion of its value due to unrealistic expectations and extremely high risk speculation. Like I said, I don't care if an individual investor loses their shirt. I'm worried about the trend for the market as a whole to consider an IPO like zoom to be on the low end of their expectations.
  - pas 7y ago
    The market is full of large institutional investors. If they all collectively buy in on the madness, maybe, just maybe people shouldn't put their pensions into the hands of these very professional investors, huh? :) That said, worrying about how too much money will ruin the stock market is like worrying about how too much proportionality will ruin democracy.
- jfengel 7y ago
  "Too much" is that there's literally only so much value out there to buy. Publicly listed companies will earn $X over the next year or ten years. Buying a stock buys you a piece of that. If so much money flows in that your share of $X is worth less than some other investment, you're making a bad choice. The flood of money implies that you can get rich by selling your piece of $X to somebody else, but that's not real money. It's just a pyramid scheme that will collapse. There's always genuine uncertainty in the value of $X and even more uncertainty about how it will be distributed, so there's room for real speculation. But "too much" is reached where even a broad index fund would perform poorly because the price is bid up by speculation rather than investment.
  - pas 7y ago
    Buying a stock gets you expected earnings. Of course a lot of people bet that real earnings will grow a lot. Why do we have to tell them that they are making a bad bet? > If so much money flows in that your share of $X is worth less than some other investment, you're making a bad choice. Or not. Who knows. If it were that easy to know people wouldn't do this. Stocks are fickle, but liquid and with almost no transaction price. Buying and setting up a stop loss is easy. (Even if placing the limit order has a fee.) It's not a pyramid scheme. At best you might call it a pump-and-dump. But what's the problem with that? The people buying the share for its expected spot price rise are not dumb. They are just rich fools, with bad timing, because were they the first ones to buy and later sell, they would be very rich fools. Who cares how an index fund performs. If the price signal gets so bad people will stop pumping money into the stock market. Just let them play their idiotic games. It's just froth. Sloshing back and forth. The underlying economy is solid, it grows at a steady pace (minus the occasional recessions). The problem is of course that the benefits of that real growth take an awful long time to trickle down into meaningful changes due to ... sociopolitics.
    - jfengel 7y ago
      I think I may have appeared more anti-stock than I am. I'm an investor myself, and was just trying to give my opinion on your question about "how much is too much"? My intention was to point out the limits. The stock market can only hold so much money (for a given set of companies). Precisely how much, I can't say, and of course it's constantly growing (both from existing company growth and adding new companies. In particular I can't say if we're beyond that point or not. I do think we're getting close: the P/E ratio of the S&P 500 is over 23 at the moment. That corresponds to getting 3% interest on an investment. That's a crude measure, of course, but an indicator that new money coming into the market might be better invested elsewhere.
      - pas 7y ago
        I haven't read it as anti-stock :) In theory the market should/will optimize, maximizing opportunities, which in turn basically turns everything into the same risk-weighted-yield-wise. (After all, if there's enough information, depth, participants, liquidity, low transaction costs, then people will go after whatever market niche they may find.) So, yes, there's a limit of how much money should be in stocks, but my belief/theory is that the investing market is very good at figuring this out (in the grand scheme of things).

pas 7y ago

How much is too much? There are many regulations protecting people from investing accidentally too much. What's wrong with people with billions putting it wherever they thing might potentially make some more?

mikekchar 7y ago
Too much is when a stock market crash causes a depression ;-). Money can literally disappear. Especially when large investors are pension funds and insurance companies, there could be pretty massive damage if the stockmarket loses a significant portion of its value due to unrealistic expectations and extremely high risk speculation. Like I said, I don't care if an individual investor loses their shirt. I'm worried about the trend for the market as a whole to consider an IPO like zoom to be on the low end of their expectations.
- pas 7y ago
  The market is full of large institutional investors. If they all collectively buy in on the madness, maybe, just maybe people shouldn't put their pensions into the hands of these very professional investors, huh? :) That said, worrying about how too much money will ruin the stock market is like worrying about how too much proportionality will ruin democracy.
jfengel 7y ago
"Too much" is that there's literally only so much value out there to buy. Publicly listed companies will earn $X over the next year or ten years. Buying a stock buys you a piece of that. If so much money flows in that your share of $X is worth less than some other investment, you're making a bad choice. The flood of money implies that you can get rich by selling your piece of $X to somebody else, but that's not real money. It's just a pyramid scheme that will collapse. There's always genuine uncertainty in the value of $X and even more uncertainty about how it will be distributed, so there's room for real speculation. But "too much" is reached where even a broad index fund would perform poorly because the price is bid up by speculation rather than investment.
- pas 7y ago
  Buying a stock gets you expected earnings. Of course a lot of people bet that real earnings will grow a lot. Why do we have to tell them that they are making a bad bet? > If so much money flows in that your share of $X is worth less than some other investment, you're making a bad choice. Or not. Who knows. If it were that easy to know people wouldn't do this. Stocks are fickle, but liquid and with almost no transaction price. Buying and setting up a stop loss is easy. (Even if placing the limit order has a fee.) It's not a pyramid scheme. At best you might call it a pump-and-dump. But what's the problem with that? The people buying the share for its expected spot price rise are not dumb. They are just rich fools, with bad timing, because were they the first ones to buy and later sell, they would be very rich fools. Who cares how an index fund performs. If the price signal gets so bad people will stop pumping money into the stock market. Just let them play their idiotic games. It's just froth. Sloshing back and forth. The underlying economy is solid, it grows at a steady pace (minus the occasional recessions). The problem is of course that the benefits of that real growth take an awful long time to trickle down into meaningful changes due to ... sociopolitics.
  - jfengel 7y ago
    I think I may have appeared more anti-stock than I am. I'm an investor myself, and was just trying to give my opinion on your question about "how much is too much"? My intention was to point out the limits. The stock market can only hold so much money (for a given set of companies). Precisely how much, I can't say, and of course it's constantly growing (both from existing company growth and adding new companies. In particular I can't say if we're beyond that point or not. I do think we're getting close: the P/E ratio of the S&P 500 is over 23 at the moment. That corresponds to getting 3% interest on an investment. That's a crude measure, of course, but an indicator that new money coming into the market might be better invested elsewhere.
    - pas 7y ago
      I haven't read it as anti-stock :) In theory the market should/will optimize, maximizing opportunities, which in turn basically turns everything into the same risk-weighted-yield-wise. (After all, if there's enough information, depth, participants, liquidity, low transaction costs, then people will go after whatever market niche they may find.) So, yes, there's a limit of how much money should be in stocks, but my belief/theory is that the investing market is very good at figuring this out (in the grand scheme of things).