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Reddit and Robinhood gamified the stock market, and it’s going to end badly
- jiggunjer 6y agothis whole issue can be summed up with one word: hypocrisy.
- laurent92 6y agoI’m fully with your idea. However we need to acknowledge 1928. It was a sum of little carriers, newbies, who provoked a big crisis. How can we also avoid falling into the 1928 situation?
- dukoid 6y agoCitation needed. Regardless, shouldn't the rules of the game be fixed -- opposed to pointing at entities exploiting loopholes?
- zd123 6y agoWhat about 2008? That was the result of institutional money’s recklessness. Either you give everyone equal access to the market, or you acknowledge that the game is rigged against the little folks. Otherwise you are just cherry picking history.
- hhjj 6y agoYou can make a parallel with OSes and computer worms. Your choice is to outlaw computer worms or to fix your buggy OS. Do you want technical or legalese barriers?
- seba_dos1 6y agoDon't you usually want both?
- reallymental 6y agoI think the comparison to 1928, and 2021 may be incorrect. If we were to assume they're both very similar, there would have been a bailout of banks around 1916 leading to QE and the rise in tide after. There was even a pandemic + war around 1918, so a crash should have occurred around then. And the "fundamental" drivers seemed to have been people buying stocks on credit (now margin) and the easy availability of credit. I don't really see the easy availability of credit now, except for the stimulus checks, and they're a write-off, not a liability for the gov. If anything, we're in for another roaring 20's. But we must all buy raincoats in these 20's as we know what came after. I'm not a historian, nor am I right about many things, so please correct me if I'm wrong.
- chrisco255 6y agoYou think QE and MMT isn't going to end soon in disaster? I do.
- RobertoG 6y agoThere we go. I will repeat again what has been said many times before: MMT is not a policy, it's a (better) description of how the system works already. Also, MMT predicted that QE would not be inflationary but it also predict that it's not a proper way of stimulate the economy.
- chrisco255 6y agoYeah, I've listened to the arguments from Kelton and others. Snarky responses do the theory no favors. Economic Theory is not some clearcut thing that anyone's nailed with any sort of comprehensive frame work in the past several hundred years so my apologies if I remain skeptical of the latest one to come down the pipeline and into vogue. MMT may even be right in theory but in practice may be entirely unrealistic. QE remains a possible systemic risk, and the jury is very much still out, because although those dollars haven't entered the broader marketplace and just sit on bank balance sheets, they may find their way trickling in at some point. QE in USD is also partly propped up the US's reserve currency status, which causes deflationary pressure that many countries don't benefit from. And how does MMT solve for the various asset bubbles ongoing including the real estate bubble in Australia or perhaps the stock bubble in the U.S.
- ameister14 6y agoThe new investors magnified the scope of the crisis, they didn't cause it. Even then, restrictions on margin would have stopped a lot of that.
- imtringued 6y agoDemand side stimulus.
- mhh__ 6y agoIs there even close to enough money here for that to actually happen? Obviously things can cascade but currently I'm not seeing the path to detonation, so to speak.
- smitty1e 6y ago"Finally off the hook!" squealed 'scapegoating'.
- raspyberr 6y agoIsn't this the message being spread by the hedgefund managers who shorted 139% of GME?
- laurent92 6y agoThey have a few billions at risk, that they’d better spend on preventing the new entrants from having a share of « public companies ».
- micmike 6y agoIt's the message by any hedge fund manager that wants to short any stocks in bulk in the future. Now that they know that wsb will be watching any opportunity to squeeze, they'll want to ensure that it does not happen again by any means necessary.
- midjji 6y agoSince this is possible to do by other large scale investors too, why wouldnt they be prepared for it regardless?
- riffraff 6y agowe also have plenty of hedgefunds who are long GME, as noted by Matt Levine[0] retail investors have been _net sellers_ of GME last week. [0] https://www.bloomberg.com/news/newsletters/2021-01-29/reddit-traders-on-robinhood-are-on-both-sides-of-gamestop-kkijh28u https://www.bloomberg.com/news/newsletters/2021-01-29/reddit...
- Dolores12 6y agoMoney should be fun, not a struggle you chase your whole life.
- dannyw 6y agoHaving lots of money = financial independence = no longer being forced to slave away for 40 hours a week. Money ~= fun.
- cblconfederate 6y ago> from the uninformed to the informed Who's the uninformed here? In this case reddit broke the information asymmetry. This (total transparency) is the default in crypto(currency), and judging by history, people are not losing their money there.
- ganafagol 6y agoI suppose you mean "crypto currencies" by "crypto". Usually "crypto" for "cryptography" is the exact opposite of total transparency by being the craft of secret keeping. But moving past talking semantics .. let's just see what happens when a bunch of crypto currency bubbles burst. Then re-evaluate your statement that people are bot losing their money there. (To be fair, it will happen in the open, and not because of intransparency, which was likely your point.)
- imtringued 6y agoThe bitcoin bubble has burst so many times and every single time people declared bitcoin dead afterwards. It's getting boring. Just hold your bitcoin. The long term fundamentals are there.
- sub7 6y agoI dunno, that $21 double spend on 1/21/21 was pretty concerning. In addition, the fundamentals of Madoff were there too for very long while a greater fool existed. This "asset" doesn't produce anything, doesn't help produce anything, and can never pay a dividend. So IMO it's worth 0.
- ganafagol 6y agoBitcoin has fundamentals? GPU silicon?
- NicoJuicy 6y ago> judging by history, people are not losing their money there. Euh, Tether and dropping from 20 k to 4 k is "not losing money"?
- ganafagol 6y agoThe author or whoever created that headline needs to look up what "gamification" means. It's the result of a design process. Reddit and Robbinhood did not change the design of the stock market. They just participated within the rules that already existed. If the stock market is gamified, which could easily be argued, then it has been for a long time. One could even say that it's its essence. Claiming that something new happened in that regard is pure hypocrisy by the big guys who got duped by the little guys.
- pfortuny 6y agoActually, the Bloomberg terminal is probably the greatest gamification of the Stock Market since its inception. It gives a sense of control and "live information" akin to any First-Person Shooter or even something more arcane (like Dwarf Fortress). Technical Analysis is just a way of trying to play and win, with no relation to the real world. But with a sense of control. And, of course, the huge amount of data is hooking.
- deleted 6y ago[deleted]
- sub7 6y agoLiterally 1 big guy got fucked. There's 10s of 1000s of little guys that will get fucked when the price is back to 5. If you can halt trading whenever you want, you can't lose. Wall St big winners here.
- napier 6y agoWSB just picked up on games that hedge funds have been more or less exclusively been making bank on at the expense of everyone else.
- zby 6y agoWith the internet is is easy to get many people do something for fun - this is the essence of flashmob. It works only as long as there arn't too many serious consequences - because serious consequences throw people off the mood. So it is kind of self-limiting - but there are workarounds - like Quannon and I am afraid the most obvious one is to mislead people about the consequences: https://zby.medium.com/gamestop-capitol-hill-riots-flashmobs-everywhere-3c1df6333328 https://zby.medium.com/gamestop-capitol-hill-riots-flashmobs...
- zed88 6y agoI would replace 'gamified ' with 'democratized'.
- mysterydip 6y agoMaybe the hedge funds should've read the fine print: "All investments carry risk. Past performance is no guarantee of future results."
- izietto 6y agoCan anyone explain what's going on here to a six-years-old kid? I'm not a native English speaker and I don't know anything about trading, I'm just seeing all this Robinhood stuff passing through HN but I haven't got what's the point yet :-/
- mhh__ 6y agoSome funds got caught with their pants down. Some people on Reddit made some money off of it, the big boys have now taken over, but the media and online-people are trying to either say it's Reddit vs. Wall Street or some other eye catching battle. There is obviously the question of Wall Street leaning on Robinhood and Discord etc. Etc., But I have seen convincing arguments both ways so we have to wait a bit longer to really work out what the chronology is there.
- nefitty 6y agoSome people on Reddit found out that big investors were making bets that the company GameStop would fail. This type of bet is called shorting. The people on Reddit started betting the opposite way, which means the big investors might start losing on their shorts. The price of GameStop stock went up dramatically. Robinhood is the main app that the Redditors used because it doesn’t charge a fee to make trades. Robinhood has some legal obligations that it could no longer meet because of the amount of trading happening. They stopped people from buying GameStop, which means people could no longer bet against the big investors. Some people think Robinhood and other companies stopped buys in collusion with the big investors. I doubt that is the case, but the situation is functionally the same as if Robinhood had engaged in a conspiracy to help the big investors.
- izietto 6y agoThank you so much, this is the kind of summary I needed to understand what's going on!
- holstvoogd 6y agoMy god there are may bad takes going around this weekend
- mhh__ 6y agoHonestly, to my eye at least, I'd much rather have people betting on stocks in a regulated fashion than sports - at least with stocks on average you can make money with a decent strategy, rather than on the plethora of online betting websites.
- tomcam 6y ago> Robinhood and other zero-cost brokerages monetize their hold on active traders who are decidedly uninformed. What the Redditors did what is the exact opposite of uninformed. The author of the article appears to be, well, decidedly uninformed.
- midjji 6y agoCaused a crowd surge by memes might be more accurate, and yeah almost everyone will lose alot, more than the serious investors to be sure, though a few individual investors from both camps will make a fair bit. But more generally and long term there is a great argument to be made that the apps improving ease of access to investment will massively improve overall stock market investment efficiency in the long term. Especially as smaller and smaller companies can meaningfully seek investment by public listing. At the end of the day, there are millions of tiny ventures that could reliably provide 10x returns, yet the market cap is so small that the due diligence cost for a major investor is prohibitive. But as the sheer number of investors increases, the spread of investment to smaller companies will increase. Smaller investors also have far lower diversity of knowledge, which is likely a good thing, as the stock market is notorious for underfunding longshots in median, and if you have diversity in knowledge, you are more likely to have atleast one person with good knowledge of the common if wrong consensus regarding a prior for something. We still need to improve regulation, especially with regards the amount of work to become publicly listed, and develop memes which protect against common scams and bubbles.
- rich_sasha 6y agoYou kind of say it yourself. Going public needs a huge amount of reporting work, and for the most part, it’s not just red tape. If a company is public, all its information has to be dealt with in a proper, open way. It is just prohibitive for small businesses. The scope for abuse of investors in such nano caps would be huge, just think penny stocks right now.
- danielrpa 6y agoI find incredible how this story is generally framed as the small guy beating the big guy. Sure, a couple of big guys got in trouble, but most of the big guys steered clear. The small guys, however, are laughing out loud while holding worthless or epically overvalued securities. These securities aren't bitcoin. They have none of the properties of cryptocurrencies and can't be used as one. So we can't just expect GME, AMC etc stay at the levels they are. These are troubled companies, many of which losing money. When the music stops playing, the big guys in Wall Street will say goodbye to the little guys on their way down.
- cudgy 6y agoStock market was already “gamified” when the alternative to invest in bonds and cash savings was virtually eliminated by the Fed and the bailouts of large financial companies by the US government. Now, real estate has been equally affected, leaving investors with the impression that the stock market is the only way to achieve reasonable returns. Be careful out there.