9 ms·

Investors double down on stocks, pushing margin debt to record

90 points by prostoalex 6y ago

pjc50 6y ago
Let me check my historical correlation between massive margin borrowing and subsequent stock market prices ...
- JKCalhoun 6y ago
  I agree, but where are the cracks this time?
  - tomrod 6y ago
    Look for the industries laying people off. These are the industries facing new or ongoing stress. https://www.bls.gov/web/empsit/cpseea31.htm https://www.bls.gov/web/empsit/cpseea31.htm for November. See the unemployment rate for apples to apples stats. Should these firms survive, their labor costs may be depressed for a few years unless they were already paying their median worker at minimum wage (energy wasn't). Firms use labor in the short run to adjust for income gaps/overages. They tend to adjust capital in the long run, which is why hotels aren't yet all selling their properties.
- cycrutchfield 6y ago
  No, you see, This Time Is Different.
- Supermancho 6y ago
  I feel like I understand a bit about the current monetary policy (US and some of the world) vs the debt market. I was puzzled by the Fed's interest rate 0 until 2023 - until I realized that the LIBOR to SOFR transition had been pushed, in part, to 2023 (https://www.reuters.com/article/usa-fed-libor-idUSL1N2IG12W https://www.reuters.com/article/usa-fed-libor-idUSL1N2IG12W). Chances that it finishes out in 2023 is slim, but it's something. Stocks are not a replacement for bonds...and bonds with <1% (https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield https://www.treasury.gov/resource-center/data-chart-center/i...) aren't even a good investment anymore, pushing this stock bubble higher. The people tripling down on long-term trades like Tesla for retirement are idiots banking on the good times going on for decades. Remember 2000s when there was a media push for "Generation Equity" - WIRED frontpage? Yeah, that was the same thinking. There isn't enough money in the world or GDP for a generation to cover a 100Trillion debt market once it matures (which would be 100T+rate the purchased bonds bear). If you want to do short selling or short-term trading, that's great, but these are these infantile investors that are going to see their investments wiped out in a correction.
  - beezle 6y ago
    I think it is important to grok that what people today consider 'investing' is what most not that many years ago considered 'highly speculative trading.'
  - tomp 6y ago
    > There isn't enough money in the world or GDP for a generation to cover a 100Trillion debt market once it matures (which would be 100T+rate the purchased bonds bear). Not sure you're making a good case against equities here (unless I misunderstand)... if the world cannot produce GDP to cover $100T of debt, there's only one realistic solution: inflation. In case of inflation, equities make a good investment (as they represent real value, not nominal value such as debit).
    - Supermancho 6y ago
      Inflation has already taken hold in some areas of the markets, eg commodities and consumer goods (https://fred.stlouisfed.org/series/CPIAUCSL https://fred.stlouisfed.org/series/CPIAUCSL). That's why the world govt/banks (as if the govt's understand much of this) have enacted deflationary forces of 0% interest rates and bonds of sub 1% and it will fall until the bond market drops out and starts the cascade of defaults. That just manages to slow the current debt bubble and until the debt defaults start, inflation doesn't shrink it. The equity prices have never changed into an increase in consumer liquidity (people are still getting paid the same) while the purchasing power of the dollar has been halved since 2010. Eventually the equities will default or mature (depending on structure) and who has the cash to cover that? Institutions will continue to become insolvent as they are unable to collect on debt, to pay back debt. It's possible (like in Venezuela) the biggest and baddest will survive to remove a couple zeros and declare "the big reset" making it all reasonable again.
      - dash2 6y ago
        Now I'm confused. 0% interest rates should be inflationary, not deflationary, no? "Inflation doesn't shrink debt?" Surely it does. Equities will default or mature - erm, equities don't do either? To convince the reader you really know what's going on, it would help to be precise with your language.
- Youden 6y ago
  I found an article on the topic [0] quite interesting. Taking its mapping of ratio to future returns and using the latest data [1], we should expect ~2% return over the next 10 years. [0]: http://www.philosophicaleconomics.com/2013/12/the-single-greatest-predictor-of-future-stock-market-returns/ http://www.philosophicaleconomics.com/2013/12/the-single-gre... [1]: https://fred.stlouisfed.org/graph/?g=qis https://fred.stlouisfed.org/graph/?g=qis
blantonl 6y ago
Early on in the pandemic I was convinced that the US economy was going to have an extremely tough year, and I placed options bets accordingly that were absolutely slaughtered. By July I realized a couple things (and adjusted my investments accordingly): 1) The shifts to online delivery of food and products was 10 years of change pulled forward in 6 months 2) Unprecedented liquidity of the money supply is giving any individual or business access to $$ to invest, spend, etc. It's unequal, but it's there and it's driving the economy right now. 3) We're witnessing one of the greatest wealth transfers in the history of our country, from the less fortunate to those with means, from stagnant businesses holding on to dear life to the quick and nimble, and from the legacy businesses to the already prepared distribution channels. 4) The fundamental shift of where people work has been upended, resulting in massive dislocation of where dollars flow to residential and commercial real estate. Those that study economics must have thought they stumbled into a gold mine of topics to study this year. It's absolutely fascinating and heartbreaking at the same time.
- trebligdivad 6y ago
  There's some odd things about what you might have thought would have been a straight economic dump (and which might still be); a) House prices in the UK have gone up a lot - because being forced to work from home people want to work from somewhere nice, and they may as well get out of the city - I didn't expect a big house price rise! b) Plenty of low paid sectors are busy; things like those food delivery etc are all busy and the people working for them are - but then again the pubs/resteraunts are doomed. c) There's a lot of pent-up demand for when it's safe; people who want repair work done just as soon as you're prepared to let workmen into your house, holidays to be taken, special meals to be had at restaurants I'm assuming (b) & (c) will soften the outcome when the governments stop pumping money into the economy.
- halflings 6y ago
  > By July I realized a couple things (and adjusted my investments accordingly) You're definitely making valid points, but this sounds like a whole lot of hindsight bias: you're rationalizing something that was rather unpredictable (the full impact of the pandemic on the economy, and whether that would surpass the market's expectations or not). How did you possibly adjust your investment strategy based on these "learnings"? It sounds like this can only lead to the same forms of losses you've had with your initial risky investment (overly confident that pandemic = stock market crashing).
janmo 6y ago
The stock market is turning more and more into a casino. Investing is being gamified causing an addiction that is similar to what you see with gambling addicts. People just can't stop putting their money on risky bets in order get an adrenaline kick. Brokers are also incentivized to sell risky products such as options as those are the ones that generate the highest revenues.
- waketheFup 6y ago
  was just about to say the same. casino "winners" are those who walk away after hitting a lucky streak.
- gogopuppygogo 6y ago
  It was always a casino. It was also always rigged.
  - janmo 6y ago
    I think it has reached a whole new level
- deleted 6y ago
  [deleted]
- dkislyuk 6y ago
  An idea as old as the stock market itself. And yet, decades later, it is still the engine for raising capital. (1978) The Gambling Fever On Stock Exchanges [1] (1986) Capitalism's Casino [2] (1989) THE STOCK MARKET FROM THE ROARING '80S TO THE SOBER '90S [3] (1993) How Clinton's Stimulus Plan Cuts Into Deficit; Stock Market Casino [4] (1995) Are Stock Markets Costly Casinos? [5] (1999) The Wall Street Casino [6] (2002) Nasdaq 'Casino' Had Few Safeguards [7] (2011) Gambler or Investor? The Truth About Why We Trade [8] (2014) The Big Casino [9] (2015) The stock market is a 'dangerous casino' that's disconnected from the real economy [10] (2020) When Did the Stock Market Become a Casino? [11] --- [1] https://www.washingtonpost.com/archive/business/1978/09/07/the-gambling-fever-on-stock-exchanges/cb825bf2-f0e5-4bf3-96c3-a61579b2f3fa/ https://www.washingtonpost.com/archive/business/1978/09/07/t... [2] https://www.washingtonpost.com/archive/business/1986/10/08/capitalisms-casino/ff1d40c8-b84f-448a-a1ab-0a9c7ff5a6fd/ https://www.washingtonpost.com/archive/business/1986/10/08/c... [3] https://www.washingtonpost.com/archive/business/1989/12/31/the-stock-market-from-the-roaring-80s-to-the-sober-90s/8f5858ec-18eb-4eb0-a822-3ba2bc2c0cdf/ https://www.washingtonpost.com/archive/business/1989/12/31/t... [4] https://www.nytimes.com/1993/02/28/opinion/l-how-clinton-s-stimulus-plan-cuts-into-deficit-stock-market-casino-123593.html https://www.nytimes.com/1993/02/28/opinion/l-how-clinton-s-s... [5] https://core.ac.uk/download/pdf/80562055.pdf https://core.ac.uk/download/pdf/80562055.pdf [6] https://www.nytimes.com/1999/08/23/opinion/the-wall-street-casino.html https://www.nytimes.com/1999/08/23/opinion/the-wall-street-c... [7] https://www.washingtonpost.com/archive/politics/2002/11/11/nasdaq-casino-had-few-safeguards/fe3b07d3-e400-41ce-9a0f-8f27d765d84d/ https://www.washingtonpost.com/archive/politics/2002/11/11/n... [8] https://www.wsj.com/articles/SB10001424052702303499204576388151661037330 https://www.wsj.com/articles/SB10001424052702303499204576388... [9] http://www.dollarsandsense.org/archives/2014/0514orr.html http://www.dollarsandsense.org/archives/2014/0514orr.html [10] https://www.businessinsider.com/the-stock-market-is-a-dangerous-casino-2015-10 https://www.businessinsider.com/the-stock-market-is-a-danger... [11] https://stocksandcoffee.com/stock-market-casino/ https://stocksandcoffee.com/stock-market-casino/
inv13 6y ago
I feel like every 2nd man on planet earth bought TSLA at this point. When they did a 5to1 split, the price just doubled, giving birth to around 250bn$, just like that. Seemingly without anything significant happening around Tesla. I cant help but think that people only want more, and the amount of people who feel the same way are reached another peak. The last time splitting has this big of an effect on the price, was in the dot com bubble. I hope I'm wrong.
- AndrewBissell 6y ago
  > I feel like every 2nd man on planet earth bought TSLA at this point. Now that it's been added to SPY you might not be wrong, it's very possible more than half of investors own shares in TSLA one way or another.
  - paulgb 6y ago
    I wonder if there's a market for a financial product that looked at your ETF holdings and allowed you to cancel out a particular instrument. I don't have the appetite to be net short, but there are stocks I'd like to negate my ownership of.
    - AndrewBissell 6y ago
      This is a really intriguing idea! You would of course run into the issue that that product would appear to have horrible returns right up until the rug gets pulled out, and liquidity might be an issue (margin for the short would have to be provided and presumably could not be directly provided by the long positions). But at the very least one could theoretically write something which could take in a portfolio of ETF positions and output "short this much ABC and XYZ to be net flat in those stocks."
    - wcoenen 6y ago
      Thanks to automation, fractional shares and zero commissions, "direct indexing" is a thing now. You can track an index of your own design instead of trying to cancel out positions.
traceroute66 6y ago
I take issue with dumb journalists who blatantly abuse the term "investors". Its not rocket science. If you use margin and/or engage in derivatives, you're not an investor, you're a speculator. An investor is someone who has a long-term interest in the market and takes time to make reasoned decisions as to their actions in the markets. If you're just jumping in and out of the market in the hope of making a quick buck here and there, you're not an investor, you're a speculator.
- boh 6y ago
  That's a little nitpick-y. Institutional investors, that make up the bulk of the market, allocate their investments based on a chosen strategy. So even index funds jump "in and out" of markets to balance their portfolios. Stock trading is speculative by default--no one knows the future.
  - ketamine__ 6y ago
    But how often do institutional investors sell all their holdings of a security in one go? Sure there is rebalancing but that is nothing compared to a RH trader that liquidates his entire position at the end of the day.
    - boh 6y ago
      More often than you think. Entire funds go in and out of existence constantly.
      - ketamine__ 6y ago
        I'm talking about solvent funds like ARK.
        boh 6y ago
        ARK funds actually have a pretty high turn-over rate.
throwaway4good 6y ago
People bored at home with excess cash from saved discretionary speding engage into online speculative investment. Ditto with cryptocurrencies.
tinyhouse 6y ago
Some companies did 600%+ in less than a year. Everyone wants a piece of that.
JohnJamesRambo 6y ago
If this article isn’t this, I don’t know what is. I don’t know why people aren’t more dumbfounded that the market is at all time highs when the world is dying and no one has worked for a year. > As the story goes, one day in 1929, Joe Kennedy is getting his shoes shined. The boy began to give stock tips as he polished Kennedy's oxfords. In that moment, it struck Joe that he needed to leave the market. He reasoned, famously, if shoeshine boys have an opinion on stocks, the market is clearly, dangerously popular. Supposedly, he pulled out not long before the stock market crash that led to what we know today as the Great Depression.
api 6y ago
The actual headline should be: record low interest rates continue to fuel bubbles in stocks, bonds, real estate, and speculative assets like cryptocurrency.
- lifty 6y ago
  We’re all getting rich. Only we aren’t.
- beezle 6y ago
  Indeed. When there is no cost of money (to pretty much anyone) bad things are not far away. Less talked about and also fueling the rise over a longer time horizon has been the great reduction in the number of listed companies. That is more of a driver on the fund/etf composition side than the mom and pop TSLA/AAPL day trader.
syntaxing 6y ago
Seems like a great depression-like downturn is imminent(?). Any advice on the best way to weather the storm? I'm not looking for huge gains or getting rich through it. I just want to make sure my money isn't worth 10X less and/or my family doesn't starve.
- seibelj 6y ago
  Gold / silver / bitcoin / ethereum / real estate (non-commercial) Anything desirable that can’t be created easily, as newly printed money will flow directly to it.
- bla3 6y ago
  Unless you're planning on retiring soon, same thing as always: don't touch your stuff. The same mindset you have right now would've made you stop buying your monthly N stocks this March, and then you would've missed out on all the gains this year. Every month, invest some portion of your income in a low-fee broad market index fund and don't think about it. In a few short decades, chances are you'll come out fairly ahead.
  - dash2 6y ago
    When Tesla got hyped right into the S&P 500, index funds were forced to buy. The old advice of "just buy an index fund" may not be an eternal verity.
    - lotsofpulp 6y ago
      Assuming you think the public equity markets have the backing of the US federal government, why would you ever bet against an index fund? I consider a broad market equity index fund to be a risk free asset on a 5+ year timeframe. State and local government defined benefit pension obligations are invested in them, individuals' 401k and IRA accounts are invested in them, and the most influential members of society are invested in them. There is no political will to let the price of stocks fall (or even stagnate), and so either the US government keeps stock prices chugging along, or the USD has lost its buying power, in which case you have a bigger problem than your stock market holdings (if you're American).
deleted 6y ago
[deleted]
boh 6y ago
Often when you see a ballooning of asset values--regardless if it's securities, real estate etc.--what it really winds up being is a ballooning of debt. Allowing retail investors to trade on margin is just asking for trouble. When you involve debt in trades even slight decreases in a asset values can completely clean you out. It may take another six months, but this probably won't end well.
RivieraKid 6y ago
My overwhelming impression from articles and discussions like this is that almost nobody really understands what's happening. It's mostly superficial correlations and gut reactions. This is not surprising because the economy and capital markets is a complex, chaotic, partially observed system. And revealing information and predictions about this system can affect it.
neonate 6y ago
https://archive.is/gNaJM https://archive.is/gNaJM

90 points by prostoalex 6y ago

pjc50 6y ago

Let me check my historical correlation between massive margin borrowing and subsequent stock market prices ...

JKCalhoun 6y ago
I agree, but where are the cracks this time?
- tomrod 6y ago
  Look for the industries laying people off. These are the industries facing new or ongoing stress. https://www.bls.gov/web/empsit/cpseea31.htm https://www.bls.gov/web/empsit/cpseea31.htm for November. See the unemployment rate for apples to apples stats. Should these firms survive, their labor costs may be depressed for a few years unless they were already paying their median worker at minimum wage (energy wasn't). Firms use labor in the short run to adjust for income gaps/overages. They tend to adjust capital in the long run, which is why hotels aren't yet all selling their properties.
cycrutchfield 6y ago
No, you see, This Time Is Different.
Supermancho 6y ago
I feel like I understand a bit about the current monetary policy (US and some of the world) vs the debt market. I was puzzled by the Fed's interest rate 0 until 2023 - until I realized that the LIBOR to SOFR transition had been pushed, in part, to 2023 (https://www.reuters.com/article/usa-fed-libor-idUSL1N2IG12W https://www.reuters.com/article/usa-fed-libor-idUSL1N2IG12W). Chances that it finishes out in 2023 is slim, but it's something. Stocks are not a replacement for bonds...and bonds with <1% (https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield https://www.treasury.gov/resource-center/data-chart-center/i...) aren't even a good investment anymore, pushing this stock bubble higher. The people tripling down on long-term trades like Tesla for retirement are idiots banking on the good times going on for decades. Remember 2000s when there was a media push for "Generation Equity" - WIRED frontpage? Yeah, that was the same thinking. There isn't enough money in the world or GDP for a generation to cover a 100Trillion debt market once it matures (which would be 100T+rate the purchased bonds bear). If you want to do short selling or short-term trading, that's great, but these are these infantile investors that are going to see their investments wiped out in a correction.
- beezle 6y ago
  I think it is important to grok that what people today consider 'investing' is what most not that many years ago considered 'highly speculative trading.'
- tomp 6y ago
  > There isn't enough money in the world or GDP for a generation to cover a 100Trillion debt market once it matures (which would be 100T+rate the purchased bonds bear). Not sure you're making a good case against equities here (unless I misunderstand)... if the world cannot produce GDP to cover $100T of debt, there's only one realistic solution: inflation. In case of inflation, equities make a good investment (as they represent real value, not nominal value such as debit).
  - Supermancho 6y ago
    Inflation has already taken hold in some areas of the markets, eg commodities and consumer goods (https://fred.stlouisfed.org/series/CPIAUCSL https://fred.stlouisfed.org/series/CPIAUCSL). That's why the world govt/banks (as if the govt's understand much of this) have enacted deflationary forces of 0% interest rates and bonds of sub 1% and it will fall until the bond market drops out and starts the cascade of defaults. That just manages to slow the current debt bubble and until the debt defaults start, inflation doesn't shrink it. The equity prices have never changed into an increase in consumer liquidity (people are still getting paid the same) while the purchasing power of the dollar has been halved since 2010. Eventually the equities will default or mature (depending on structure) and who has the cash to cover that? Institutions will continue to become insolvent as they are unable to collect on debt, to pay back debt. It's possible (like in Venezuela) the biggest and baddest will survive to remove a couple zeros and declare "the big reset" making it all reasonable again.
    - dash2 6y ago
      Now I'm confused. 0% interest rates should be inflationary, not deflationary, no? "Inflation doesn't shrink debt?" Surely it does. Equities will default or mature - erm, equities don't do either? To convince the reader you really know what's going on, it would help to be precise with your language.
Youden 6y ago
I found an article on the topic [0] quite interesting. Taking its mapping of ratio to future returns and using the latest data [1], we should expect ~2% return over the next 10 years. [0]: http://www.philosophicaleconomics.com/2013/12/the-single-greatest-predictor-of-future-stock-market-returns/ http://www.philosophicaleconomics.com/2013/12/the-single-gre... [1]: https://fred.stlouisfed.org/graph/?g=qis https://fred.stlouisfed.org/graph/?g=qis

blantonl 6y ago

Early on in the pandemic I was convinced that the US economy was going to have an extremely tough year, and I placed options bets accordingly that were absolutely slaughtered. By July I realized a couple things (and adjusted my investments accordingly): 1) The shifts to online delivery of food and products was 10 years of change pulled forward in 6 months 2) Unprecedented liquidity of the money supply is giving any individual or business access to $$ to invest, spend, etc. It's unequal, but it's there and it's driving the economy right now. 3) We're witnessing one of the greatest wealth transfers in the history of our country, from the less fortunate to those with means, from stagnant businesses holding on to dear life to the quick and nimble, and from the legacy businesses to the already prepared distribution channels. 4) The fundamental shift of where people work has been upended, resulting in massive dislocation of where dollars flow to residential and commercial real estate. Those that study economics must have thought they stumbled into a gold mine of topics to study this year. It's absolutely fascinating and heartbreaking at the same time.

trebligdivad 6y ago
There's some odd things about what you might have thought would have been a straight economic dump (and which might still be); a) House prices in the UK have gone up a lot - because being forced to work from home people want to work from somewhere nice, and they may as well get out of the city - I didn't expect a big house price rise! b) Plenty of low paid sectors are busy; things like those food delivery etc are all busy and the people working for them are - but then again the pubs/resteraunts are doomed. c) There's a lot of pent-up demand for when it's safe; people who want repair work done just as soon as you're prepared to let workmen into your house, holidays to be taken, special meals to be had at restaurants I'm assuming (b) & (c) will soften the outcome when the governments stop pumping money into the economy.
halflings 6y ago
> By July I realized a couple things (and adjusted my investments accordingly) You're definitely making valid points, but this sounds like a whole lot of hindsight bias: you're rationalizing something that was rather unpredictable (the full impact of the pandemic on the economy, and whether that would surpass the market's expectations or not). How did you possibly adjust your investment strategy based on these "learnings"? It sounds like this can only lead to the same forms of losses you've had with your initial risky investment (overly confident that pandemic = stock market crashing).

janmo 6y ago

The stock market is turning more and more into a casino. Investing is being gamified causing an addiction that is similar to what you see with gambling addicts. People just can't stop putting their money on risky bets in order get an adrenaline kick. Brokers are also incentivized to sell risky products such as options as those are the ones that generate the highest revenues.

waketheFup 6y ago
was just about to say the same. casino "winners" are those who walk away after hitting a lucky streak.
gogopuppygogo 6y ago
It was always a casino. It was also always rigged.
- janmo 6y ago
  I think it has reached a whole new level
deleted 6y ago
[deleted]
dkislyuk 6y ago
An idea as old as the stock market itself. And yet, decades later, it is still the engine for raising capital. (1978) The Gambling Fever On Stock Exchanges [1] (1986) Capitalism's Casino [2] (1989) THE STOCK MARKET FROM THE ROARING '80S TO THE SOBER '90S [3] (1993) How Clinton's Stimulus Plan Cuts Into Deficit; Stock Market Casino [4] (1995) Are Stock Markets Costly Casinos? [5] (1999) The Wall Street Casino [6] (2002) Nasdaq 'Casino' Had Few Safeguards [7] (2011) Gambler or Investor? The Truth About Why We Trade [8] (2014) The Big Casino [9] (2015) The stock market is a 'dangerous casino' that's disconnected from the real economy [10] (2020) When Did the Stock Market Become a Casino? [11] --- [1] https://www.washingtonpost.com/archive/business/1978/09/07/the-gambling-fever-on-stock-exchanges/cb825bf2-f0e5-4bf3-96c3-a61579b2f3fa/ https://www.washingtonpost.com/archive/business/1978/09/07/t... [2] https://www.washingtonpost.com/archive/business/1986/10/08/capitalisms-casino/ff1d40c8-b84f-448a-a1ab-0a9c7ff5a6fd/ https://www.washingtonpost.com/archive/business/1986/10/08/c... [3] https://www.washingtonpost.com/archive/business/1989/12/31/the-stock-market-from-the-roaring-80s-to-the-sober-90s/8f5858ec-18eb-4eb0-a822-3ba2bc2c0cdf/ https://www.washingtonpost.com/archive/business/1989/12/31/t... [4] https://www.nytimes.com/1993/02/28/opinion/l-how-clinton-s-stimulus-plan-cuts-into-deficit-stock-market-casino-123593.html https://www.nytimes.com/1993/02/28/opinion/l-how-clinton-s-s... [5] https://core.ac.uk/download/pdf/80562055.pdf https://core.ac.uk/download/pdf/80562055.pdf [6] https://www.nytimes.com/1999/08/23/opinion/the-wall-street-casino.html https://www.nytimes.com/1999/08/23/opinion/the-wall-street-c... [7] https://www.washingtonpost.com/archive/politics/2002/11/11/nasdaq-casino-had-few-safeguards/fe3b07d3-e400-41ce-9a0f-8f27d765d84d/ https://www.washingtonpost.com/archive/politics/2002/11/11/n... [8] https://www.wsj.com/articles/SB10001424052702303499204576388151661037330 https://www.wsj.com/articles/SB10001424052702303499204576388... [9] http://www.dollarsandsense.org/archives/2014/0514orr.html http://www.dollarsandsense.org/archives/2014/0514orr.html [10] https://www.businessinsider.com/the-stock-market-is-a-dangerous-casino-2015-10 https://www.businessinsider.com/the-stock-market-is-a-danger... [11] https://stocksandcoffee.com/stock-market-casino/ https://stocksandcoffee.com/stock-market-casino/

inv13 6y ago

I feel like every 2nd man on planet earth bought TSLA at this point. When they did a 5to1 split, the price just doubled, giving birth to around 250bn$, just like that. Seemingly without anything significant happening around Tesla. I cant help but think that people only want more, and the amount of people who feel the same way are reached another peak. The last time splitting has this big of an effect on the price, was in the dot com bubble. I hope I'm wrong.

AndrewBissell 6y ago
> I feel like every 2nd man on planet earth bought TSLA at this point. Now that it's been added to SPY you might not be wrong, it's very possible more than half of investors own shares in TSLA one way or another.
- paulgb 6y ago
  I wonder if there's a market for a financial product that looked at your ETF holdings and allowed you to cancel out a particular instrument. I don't have the appetite to be net short, but there are stocks I'd like to negate my ownership of.
  - AndrewBissell 6y ago
    This is a really intriguing idea! You would of course run into the issue that that product would appear to have horrible returns right up until the rug gets pulled out, and liquidity might be an issue (margin for the short would have to be provided and presumably could not be directly provided by the long positions). But at the very least one could theoretically write something which could take in a portfolio of ETF positions and output "short this much ABC and XYZ to be net flat in those stocks."
  - wcoenen 6y ago
    Thanks to automation, fractional shares and zero commissions, "direct indexing" is a thing now. You can track an index of your own design instead of trying to cancel out positions.

traceroute66 6y ago

I take issue with dumb journalists who blatantly abuse the term "investors". Its not rocket science. If you use margin and/or engage in derivatives, you're not an investor, you're a speculator. An investor is someone who has a long-term interest in the market and takes time to make reasoned decisions as to their actions in the markets. If you're just jumping in and out of the market in the hope of making a quick buck here and there, you're not an investor, you're a speculator.

boh 6y ago
That's a little nitpick-y. Institutional investors, that make up the bulk of the market, allocate their investments based on a chosen strategy. So even index funds jump "in and out" of markets to balance their portfolios. Stock trading is speculative by default--no one knows the future.
- ketamine__ 6y ago
  But how often do institutional investors sell all their holdings of a security in one go? Sure there is rebalancing but that is nothing compared to a RH trader that liquidates his entire position at the end of the day.
  - boh 6y ago
    More often than you think. Entire funds go in and out of existence constantly.
    - ketamine__ 6y ago
      I'm talking about solvent funds like ARK.
      - boh 6y ago
        ARK funds actually have a pretty high turn-over rate.

throwaway4good 6y ago

People bored at home with excess cash from saved discretionary speding engage into online speculative investment. Ditto with cryptocurrencies.

tinyhouse 6y ago

Some companies did 600%+ in less than a year. Everyone wants a piece of that.

JohnJamesRambo 6y ago

If this article isn’t this, I don’t know what is. I don’t know why people aren’t more dumbfounded that the market is at all time highs when the world is dying and no one has worked for a year. > As the story goes, one day in 1929, Joe Kennedy is getting his shoes shined. The boy began to give stock tips as he polished Kennedy's oxfords. In that moment, it struck Joe that he needed to leave the market. He reasoned, famously, if shoeshine boys have an opinion on stocks, the market is clearly, dangerously popular. Supposedly, he pulled out not long before the stock market crash that led to what we know today as the Great Depression.

api 6y ago

The actual headline should be: record low interest rates continue to fuel bubbles in stocks, bonds, real estate, and speculative assets like cryptocurrency.

lifty 6y ago
We’re all getting rich. Only we aren’t.
beezle 6y ago
Indeed. When there is no cost of money (to pretty much anyone) bad things are not far away. Less talked about and also fueling the rise over a longer time horizon has been the great reduction in the number of listed companies. That is more of a driver on the fund/etf composition side than the mom and pop TSLA/AAPL day trader.

syntaxing 6y ago

Seems like a great depression-like downturn is imminent(?). Any advice on the best way to weather the storm? I'm not looking for huge gains or getting rich through it. I just want to make sure my money isn't worth 10X less and/or my family doesn't starve.

seibelj 6y ago
Gold / silver / bitcoin / ethereum / real estate (non-commercial) Anything desirable that can’t be created easily, as newly printed money will flow directly to it.
bla3 6y ago
Unless you're planning on retiring soon, same thing as always: don't touch your stuff. The same mindset you have right now would've made you stop buying your monthly N stocks this March, and then you would've missed out on all the gains this year. Every month, invest some portion of your income in a low-fee broad market index fund and don't think about it. In a few short decades, chances are you'll come out fairly ahead.
- dash2 6y ago
  When Tesla got hyped right into the S&P 500, index funds were forced to buy. The old advice of "just buy an index fund" may not be an eternal verity.
  - lotsofpulp 6y ago
    Assuming you think the public equity markets have the backing of the US federal government, why would you ever bet against an index fund? I consider a broad market equity index fund to be a risk free asset on a 5+ year timeframe. State and local government defined benefit pension obligations are invested in them, individuals' 401k and IRA accounts are invested in them, and the most influential members of society are invested in them. There is no political will to let the price of stocks fall (or even stagnate), and so either the US government keeps stock prices chugging along, or the USD has lost its buying power, in which case you have a bigger problem than your stock market holdings (if you're American).

deleted 6y ago

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boh 6y ago

Often when you see a ballooning of asset values--regardless if it's securities, real estate etc.--what it really winds up being is a ballooning of debt. Allowing retail investors to trade on margin is just asking for trouble. When you involve debt in trades even slight decreases in a asset values can completely clean you out. It may take another six months, but this probably won't end well.

RivieraKid 6y ago

My overwhelming impression from articles and discussions like this is that almost nobody really understands what's happening. It's mostly superficial correlations and gut reactions. This is not surprising because the economy and capital markets is a complex, chaotic, partially observed system. And revealing information and predictions about this system can affect it.

neonate 6y ago

https://archive.is/gNaJM https://archive.is/gNaJM