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There’s a lot of anger against the financial system but unfortunately not much financial education to understand why it is working so poorly for average investo

There’s a lot of anger against the financial system but unfortunately not much financial education to understand why it is working so poorly for average investors. That anger makes people lash out to try to change the status quo, which in this case caused Redditors to buy GME in spite of its ridiculously high valuation. But because they don’t actually understand the mechanics of the market the hedge funds will easily out maneuver them. Melvin Capital was a big loser with their fund down 50%, but the funds that held GameStop made out fine. A lot more of the volatility was probably driven by hedge funds than people think, and a lot less driven by Redditors. A billion dollars is an insane amount of money and even 6 million wallstreetsbets members working together can barely make a dent in these prices. At the end of the day hedge funds will be fine and retail investors will be left holding the bag. Their very real anger is valid, but should be turned toward the actual causes of financial injustice and not playing into the hand of hedge funds. Ironically, the shorts who have been blamed for much of this mess are the only ones screaming about the broken regulatory system, including the toothless SEC, and warning about asset bubbles driven by low interest rates that are making it very difficult to responsibly invest. If average investors would listen to these contrary voices instead of breathless longs on CNBC they would have a more complete view of what’s happening in markets today.

JumpCrisscross 6y ago
> That anger makes people lash out to try to change the status quo, which in this case caused Redditors to buy GME in spite of its ridiculously high valuation Is it anger motivating people to buy? I get mixing anger in with the greed and hysteria. Were I to play blackjack with the house being, I don't know, the Sackler family, I'd certainly get a high out of it and I'd certainly bet more. But I wouldn't be at the table because of the anger. The anger would just amplify the other motivations.
- WJW 6y ago
  > Were I to play blackjack with the house being ... the Sackler family, I'd certainly get a high out of it and I'd certainly bet more. You playing at a gambling game with negative expected value against people you hate and you want to give them MORE money? I'm sure they'd love that. Any casino prefers irrational customers over the ones that can do math. (The ones that can do math are still welcome, just not as appreciated)
  - KMag 6y ago
    > You playing at a gambling game with negative expected value The GP used to be a professional options trader. I know several professional traders who are very good at counting cards. I wouldn't be so quick to assume they have negative expectation in blackjack.
- tedunangst 6y ago
  I think this analogy would be better as playing poker with an enemy and a seasoned pro. You relentlessly raise, trying to draw your enemy into over bidding, even as you both lose money to the pro.
ska 6y ago
many hedge funds live off volatility, it's hard to imagine a system like this where they wouldn't on average do well. That same volatility is brutal to small investors, again on average - lack of information and high latency isn't your friend here.
flatline 6y ago
> it is working so poorly for average investors Is it? I've heard a lot of talk like this. The last decade has been spectacular in the markets. I know plenty of average investors who've outperformed the S&P by investing in tech, TSLA, etc. Real estate is on fire. I think a lot of average people are in dire straights right now, while a lot of average investors are doing quite well. And then there are the top 0.1+% who are doing disproportionately well, perhaps that is the larger source of the problem?
crocodiletears 6y ago
Is there actually a way to target the financial system? Seems to me the best anybody could have hoped for was to make a hedgefund bleed. So far as I can tell, there's no political way to meaningfully touch that segment of society. Politicians can't be trusted to regulate such a complex system, even if they could be trusted not to be bribed into compliance. The existing regulatory institutions seem captured. Even poking at the hive with $gme seemed to cause institution involved to close ranks, and try to delegitimize retail traders, even discounting all brokerage's decision to limit trading on the stocks. A lot of people want their pound of flesh for '08, especially young folk who's families lost everything.

JumpCrisscross 6y ago

> That anger makes people lash out to try to change the status quo, which in this case caused Redditors to buy GME in spite of its ridiculously high valuation Is it anger motivating people to buy? I get mixing anger in with the greed and hysteria. Were I to play blackjack with the house being, I don't know, the Sackler family, I'd certainly get a high out of it and I'd certainly bet more. But I wouldn't be at the table because of the anger. The anger would just amplify the other motivations.

WJW 6y ago
> Were I to play blackjack with the house being ... the Sackler family, I'd certainly get a high out of it and I'd certainly bet more. You playing at a gambling game with negative expected value against people you hate and you want to give them MORE money? I'm sure they'd love that. Any casino prefers irrational customers over the ones that can do math. (The ones that can do math are still welcome, just not as appreciated)
- KMag 6y ago
  > You playing at a gambling game with negative expected value The GP used to be a professional options trader. I know several professional traders who are very good at counting cards. I wouldn't be so quick to assume they have negative expectation in blackjack.
tedunangst 6y ago
I think this analogy would be better as playing poker with an enemy and a seasoned pro. You relentlessly raise, trying to draw your enemy into over bidding, even as you both lose money to the pro.

ska 6y ago

many hedge funds live off volatility, it's hard to imagine a system like this where they wouldn't on average do well. That same volatility is brutal to small investors, again on average - lack of information and high latency isn't your friend here.

flatline 6y ago

> it is working so poorly for average investors Is it? I've heard a lot of talk like this. The last decade has been spectacular in the markets. I know plenty of average investors who've outperformed the S&P by investing in tech, TSLA, etc. Real estate is on fire. I think a lot of average people are in dire straights right now, while a lot of average investors are doing quite well. And then there are the top 0.1+% who are doing disproportionately well, perhaps that is the larger source of the problem?

crocodiletears 6y ago

Is there actually a way to target the financial system? Seems to me the best anybody could have hoped for was to make a hedgefund bleed. So far as I can tell, there's no political way to meaningfully touch that segment of society. Politicians can't be trusted to regulate such a complex system, even if they could be trusted not to be bribed into compliance. The existing regulatory institutions seem captured. Even poking at the hive with $gme seemed to cause institution involved to close ranks, and try to delegitimize retail traders, even discounting all brokerage's decision to limit trading on the stocks. A lot of people want their pound of flesh for '08, especially young folk who's families lost everything.