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If you take a look at 10 or 30 year trends then it's not really that optimistic at all. For instance, Detla Airlines was at 60 bucks a share before things tanke

If you take a look at 10 or 30 year trends then it's not really that optimistic at all. For instance, Detla Airlines was at 60 bucks a share before things tanked. There was talk about airline bailouts etc. I bought it at around 20 dollars a share. This was the riskiest stock I purchased as it was theoretically possible they'd completely dissolve. But, at 20 dollars a share Delta should eventually go back up to 60. It might take 10 years for Delta to get back to 40 but it'd still be profit. Anyone trading on a time scale of less than a few years is basically always optimistic. Buy and hold is generally the safest strategy. And the famous quote is timing in market beats timing into the market. In March you were able to effectively get on both trains simultaneously.

vsareto 6y ago
To me, this is the kind of thinking that justifies today's blinders about it: it basically can never go down for extended periods because people always buy the dip, but also the government will also always support struggling companies if a crisis happens and companies traded on the stock market have no risk to be dissolved. Essentially that means there's not any real risk to investing now apart from options or penny stocks. I mean, congrats, we might've eliminated risk, but surely something else has to give to support that.
- JakeTheAndroid 6y ago
  Well, with things like inflation these stocks HAVE to go up. A dollar in 2022 is stronger than a dollar in 2020 so stocks need to AT LEAST outpace inflation to make it worthwhile at all. Now, government bailouts is a different can of worms and I am not entirely sure my opinion on that. Generally I would have to say I am against it, as it doesn't actually favor businesses that can properly adapt to the markets and new blockers. But, things like dropping the fed rate to encourage consumer spending does seem okay to me. If we removed bailouts then there would be risk involved. And there is still risks involved in stocks. Not all stocks only go up. Nikola is basically a pump and dump scheme that likely wont be around in 3 years to grow with the rest of your portfolio. Plenty of companies seem flash growth and then equalize down to something more reasonable. However, in general, if you buy diverse stocks and ETFs or index funds you should only see it go UP over 10-20 years. You will have dips, and you can even have a recession. The people most impacted by dips in stocks are people trying to retire during that retraction period. What you described seems to be like intuition though. Stocks are high, people can't afford them and they cannot see a lot of growth. When stocks drop you can capture more growth potential for cheaper. So it seems like a natural progression that people would buy back into the markets, thus helping the markets stabilize.
  - jessaustin 6y ago
    Well, with things like inflation these stocks HAVE to go up. A dollar in 2022 is stronger than a dollar in 2020... This isn't what the word "inflation" means? Besides inflation is not that high now. (Admittedly, it's not as low as we pretend it is...)
    - JakeTheAndroid 6y ago
      Yeah, someone else corrected me here as I inverted inflation in the wrong direction. It doesn't change the logical premise of the strength of money changing is what will motivate increased value in stocks either way. I was tired and only half paying attention, but I should have vetted this better before posting it. My bad.
      - jessaustin 6y ago
        No worries, but I remain unconvinced. There are nations that have seen high inflation, and that hasn't been so good for their stock markets.
        lkjaero 6y ago
        Low inflation and high inflation are entirely different things, especially if you mean hyperinflation. During high inflation, monetary transactions break down because nobody wants to hold cash. Why would you sell things today if you would be better off selling tomorrow? Business breaks down, and that's reflected in the stock market.
baron_harkonnen 6y ago
> Anyone trading on a time scale of less than a few years is basically always optimistic. Buy and hold is generally the safest strategy. I find it mind boggling that people can still believe so deeply that infinite growth is possible on a finite planet. Just looking at climate change as one example, in 20 years or so we're looking a serious portion of the planet being uninhabitable. We'll be having trouble producing enough food to feed people. And climate change is just one of the many systemic problems that we're facing.
- 1996 6y ago
  > I find it mind boggling that people can still believe so deeply that infinite growth is possible on a finite planet. I find it mind boggling that people still can't believe infinite growth is possible when all it takes is combinatorial explosion from the outputs becoming inputs in new products (CPU -> computers -> AWS -> SAAS -> some app, etc) > We'll be having trouble producing enough food to feed people. The 1970s called and they want the Club of Rome limit to growth/Malthusianism back
  - edoceo 6y ago
    This cat is catching downvotes but that Club of Rome thing and (Limits of Growth, which is a paper this group published) is interesting economic stuff I learned just a few seconds ago - interesting click-hole starts (as always) on Wikipedia https://en.m.wikipedia.org/wiki/Club_of_Rome https://en.m.wikipedia.org/wiki/Club_of_Rome It's worth two minutes of reading
    - 1996 6y ago
      > This cat is catching downvotes but that Club of Rome thing and (Limits of Growth, which is a paper this group published) is interesting economic stuff I'm used to downvotes here since facts are not popular (bitcoin ...) The "infinite growth in a finite world" is a traditional line from the school of thought this Club of Rome started. However, as you correctly found out in the wikipedia article, it's dubious at best "the forecasts of the world's future are very sensitive to a few unduly pessimistic key assumptions. The Sussex scientists also claim that the Meadows et al. methods, data, and predictions are faulty, that their world models (and their Malthusian bias) do not accurately reflect reality" I gave a very simple example (combinatorial explosion) that shows how the whole thing is wrong, and why (here, attacking a key assumption) - but there are many many more holes. It's not really redeemable, after having been proved wrong more than wrong - just like Malthusianism actually. > It's worth two minutes of reading Indeed, in just 2 minutes you can notice even more holes - I just pointed to the most glaring one for people used to algorithm. Hopefully you will not fall prey to ideological arguments based on a castle of cards with such a flimsy base
john_b 6y ago
If your bear case is a 10-year recovery to 40 from 20 that's a CAGR of 7.18%, about the same as the long-term average CAGR of the S&P. The difference is that the S&P doesn't have bankrupty risk, whereas airlines do [1]. So on a risk-adjusted basis, that kind of trade isn't too appealing unless you'd done significant research to show that the risk of bankruptcy or a buyout by a competitor at a reduced valuation was unlikely. While you might have done that kind of research, the article implies (correctly, in my view) that the typical Robinhood user did not. No surprise; that sort of research is time consuming and requires significant familiarity with the industry. Yet airlines, cruise companies, and other risky assets were preferred by Robinhood users throughout the pandemic. [1] https://en.wikipedia.org/wiki/List_of_airline_bankruptcies_in_the_United_States https://en.wikipedia.org/wiki/List_of_airline_bankruptcies_i.... These lists omit airlines that get bought up for pennies on the dollar by competitors.
- raziel2701 6y ago
  I think they bought those stocks(options) because they knew that of course those industries would be bailed out and thus there would be a huge catalyst event that would increase the implied volatility and thus the profits they make. And the other and perhaps more important factor was that those stocks were simply much cheaper than spy shares, and therefore their options would be cheaper too.
  - derivagral 6y ago
    >of course those industries would be bailed out This is exactly the point; be careful of thinking like this. Some of the biggest profits come from being contrarian to the market view. SK: https://www.reuters.com/article/us-hanjin-shipping-debt/banks-halt-support-to-south-koreas-top-shipping-firm-hanjin-idUSKCN11512J https://www.reuters.com/article/us-hanjin-shipping-debt/bank... USA: https://www.nytimes.com/2014/09/30/business/revisiting-the-lehman-brothers-bailout-that-never-was.html https://www.nytimes.com/2014/09/30/business/revisiting-the-l... UK: https://en.wikipedia.org/wiki/Black_Wednesday https://en.wikipedia.org/wiki/Black_Wednesday
jjeaff 6y ago
Maybe you know something Buffet doesn't. I believe he fully divested from the airlines recently.

vsareto 6y ago

To me, this is the kind of thinking that justifies today's blinders about it: it basically can never go down for extended periods because people always buy the dip, but also the government will also always support struggling companies if a crisis happens and companies traded on the stock market have no risk to be dissolved. Essentially that means there's not any real risk to investing now apart from options or penny stocks. I mean, congrats, we might've eliminated risk, but surely something else has to give to support that.

JakeTheAndroid 6y ago
Well, with things like inflation these stocks HAVE to go up. A dollar in 2022 is stronger than a dollar in 2020 so stocks need to AT LEAST outpace inflation to make it worthwhile at all. Now, government bailouts is a different can of worms and I am not entirely sure my opinion on that. Generally I would have to say I am against it, as it doesn't actually favor businesses that can properly adapt to the markets and new blockers. But, things like dropping the fed rate to encourage consumer spending does seem okay to me. If we removed bailouts then there would be risk involved. And there is still risks involved in stocks. Not all stocks only go up. Nikola is basically a pump and dump scheme that likely wont be around in 3 years to grow with the rest of your portfolio. Plenty of companies seem flash growth and then equalize down to something more reasonable. However, in general, if you buy diverse stocks and ETFs or index funds you should only see it go UP over 10-20 years. You will have dips, and you can even have a recession. The people most impacted by dips in stocks are people trying to retire during that retraction period. What you described seems to be like intuition though. Stocks are high, people can't afford them and they cannot see a lot of growth. When stocks drop you can capture more growth potential for cheaper. So it seems like a natural progression that people would buy back into the markets, thus helping the markets stabilize.
- jessaustin 6y ago
  Well, with things like inflation these stocks HAVE to go up. A dollar in 2022 is stronger than a dollar in 2020... This isn't what the word "inflation" means? Besides inflation is not that high now. (Admittedly, it's not as low as we pretend it is...)
  - JakeTheAndroid 6y ago
    Yeah, someone else corrected me here as I inverted inflation in the wrong direction. It doesn't change the logical premise of the strength of money changing is what will motivate increased value in stocks either way. I was tired and only half paying attention, but I should have vetted this better before posting it. My bad.
    - jessaustin 6y ago
      No worries, but I remain unconvinced. There are nations that have seen high inflation, and that hasn't been so good for their stock markets.
      - lkjaero 6y ago
        Low inflation and high inflation are entirely different things, especially if you mean hyperinflation. During high inflation, monetary transactions break down because nobody wants to hold cash. Why would you sell things today if you would be better off selling tomorrow? Business breaks down, and that's reflected in the stock market.

baron_harkonnen 6y ago

> Anyone trading on a time scale of less than a few years is basically always optimistic. Buy and hold is generally the safest strategy. I find it mind boggling that people can still believe so deeply that infinite growth is possible on a finite planet. Just looking at climate change as one example, in 20 years or so we're looking a serious portion of the planet being uninhabitable. We'll be having trouble producing enough food to feed people. And climate change is just one of the many systemic problems that we're facing.

1996 6y ago
> I find it mind boggling that people can still believe so deeply that infinite growth is possible on a finite planet. I find it mind boggling that people still can't believe infinite growth is possible when all it takes is combinatorial explosion from the outputs becoming inputs in new products (CPU -> computers -> AWS -> SAAS -> some app, etc) > We'll be having trouble producing enough food to feed people. The 1970s called and they want the Club of Rome limit to growth/Malthusianism back
- edoceo 6y ago
  This cat is catching downvotes but that Club of Rome thing and (Limits of Growth, which is a paper this group published) is interesting economic stuff I learned just a few seconds ago - interesting click-hole starts (as always) on Wikipedia https://en.m.wikipedia.org/wiki/Club_of_Rome https://en.m.wikipedia.org/wiki/Club_of_Rome It's worth two minutes of reading
  - 1996 6y ago
    > This cat is catching downvotes but that Club of Rome thing and (Limits of Growth, which is a paper this group published) is interesting economic stuff I'm used to downvotes here since facts are not popular (bitcoin ...) The "infinite growth in a finite world" is a traditional line from the school of thought this Club of Rome started. However, as you correctly found out in the wikipedia article, it's dubious at best "the forecasts of the world's future are very sensitive to a few unduly pessimistic key assumptions. The Sussex scientists also claim that the Meadows et al. methods, data, and predictions are faulty, that their world models (and their Malthusian bias) do not accurately reflect reality" I gave a very simple example (combinatorial explosion) that shows how the whole thing is wrong, and why (here, attacking a key assumption) - but there are many many more holes. It's not really redeemable, after having been proved wrong more than wrong - just like Malthusianism actually. > It's worth two minutes of reading Indeed, in just 2 minutes you can notice even more holes - I just pointed to the most glaring one for people used to algorithm. Hopefully you will not fall prey to ideological arguments based on a castle of cards with such a flimsy base

john_b 6y ago

If your bear case is a 10-year recovery to 40 from 20 that's a CAGR of 7.18%, about the same as the long-term average CAGR of the S&P. The difference is that the S&P doesn't have bankrupty risk, whereas airlines do [1]. So on a risk-adjusted basis, that kind of trade isn't too appealing unless you'd done significant research to show that the risk of bankruptcy or a buyout by a competitor at a reduced valuation was unlikely. While you might have done that kind of research, the article implies (correctly, in my view) that the typical Robinhood user did not. No surprise; that sort of research is time consuming and requires significant familiarity with the industry. Yet airlines, cruise companies, and other risky assets were preferred by Robinhood users throughout the pandemic. [1] https://en.wikipedia.org/wiki/List_of_airline_bankruptcies_in_the_United_States https://en.wikipedia.org/wiki/List_of_airline_bankruptcies_i.... These lists omit airlines that get bought up for pennies on the dollar by competitors.

raziel2701 6y ago
I think they bought those stocks(options) because they knew that of course those industries would be bailed out and thus there would be a huge catalyst event that would increase the implied volatility and thus the profits they make. And the other and perhaps more important factor was that those stocks were simply much cheaper than spy shares, and therefore their options would be cheaper too.
- derivagral 6y ago
  >of course those industries would be bailed out This is exactly the point; be careful of thinking like this. Some of the biggest profits come from being contrarian to the market view. SK: https://www.reuters.com/article/us-hanjin-shipping-debt/banks-halt-support-to-south-koreas-top-shipping-firm-hanjin-idUSKCN11512J https://www.reuters.com/article/us-hanjin-shipping-debt/bank... USA: https://www.nytimes.com/2014/09/30/business/revisiting-the-lehman-brothers-bailout-that-never-was.html https://www.nytimes.com/2014/09/30/business/revisiting-the-l... UK: https://en.wikipedia.org/wiki/Black_Wednesday https://en.wikipedia.org/wiki/Black_Wednesday

jjeaff 6y ago

Maybe you know something Buffet doesn't. I believe he fully divested from the airlines recently.