4 ms·

I find that most people don't realize they are always betting. Keeping your wealth tucked under your mattress in USD is still a bet. Everything is a bet and eve

by toolz 6y ago

I find that most people don't realize they are always betting. Keeping your wealth tucked under your mattress in USD is still a bet. Everything is a bet and everything has different risk profiles. If someone sees that shorts in GME are over leveraged, well in hindsight they were absolutely right to buy in to this "gambling". I find the most irrational actors with regards to investing are the people who only do "safe" bets and feel like that carries zero risk profile.

nytesky 6y ago
I remember for me during 2008 I finally understood how NOTHING has intrinsic value, it’s always about what others perceive in the market. Real estate, dollars, gold, stock all arbitrary in a way I never considered. All built on sand.
- jimbokun 6y ago
  With real estate, you may have a place to sleep even if it's market value goes to 0.
  - rightbyte 6y ago
    Ye many things has intrisic value. If your house is worth (about) zero it is probably on some cliff about to fall into the sea or there is posion in the ground, though.
  - deleted 6y ago
    [deleted]
- mlyle 6y ago
  Some things have utility distinct from what people are willing to pay for them. My cheeseburger with one bite out of it has a market value of 0.
  - Layke1123 6y ago
    Ha ha I love this comment. So simple and yet illustrates the point exactly. Although if I were starving and you said I could have it for one dollar and I wouldn't be able to eat for the next 72 hours, you'd probably have my dollar.
- FabHK 6y ago
  > NOTHING has intrinsic value. [...] All built on sand. That's... just not true? Many things have non-arbitrary value. You need dollars to pay taxes. You need real estate to sleep and work. You can make pretty things that last a long time from gold.
fbelzile 6y ago
This was me. I lost money on GME betting on the fact that more shorted shares still had to be covered. The short squeeze wasn't a complete failure. It happened, it was just much smaller than many predicted. I still wonder what would've happened if Robinhood didn't shut off demand by preventing people from buying shares. My investment thesis didn't foresee this happening. I don't think anyone did. The other large part of the problem was that a lot of people, including myself, were going off of stale short interest data. Updated estimates for GME were reported to be 39% of float vs +100% on 1 Feb [1]. Hedge funds pay for more accurate data which us retail investors don't get visibility on. It's over for now, but please bear this in mind when talking to people that may have lost money on this. Some people did some research, knew the risk and allocated money they were willing to lose. I learned a lot along the way, it might make some hedge funds think twice about aggressively shorting a stock, and it was just plain fun to be part of it. [1] https://www.bloomberg.com/news/articles/2021-02-01/gamestop-short-interest-plummets-in-a-sign-traders-are-covering https://www.bloomberg.com/news/articles/2021-02-01/gamestop-... Edit: updated short interest data stats and link.
- acover 6y ago
  Note that is the short interest ratio which is different than short interest. Your link shows no data available for short interest.
- cwyers 6y ago
  Can I suggest that if you couldn't foresee the chance of a trading halt in a massive short squeeze like this, then your risk modelling wasn't as sophisticated as you seem to think it was?
- compiler-guy 6y ago
  That a small-time broker (as is Robin Hood) wouldn't have enough capital to cover a giant short-squeeze was entirely foreseeable by people who understand what it takes to successfully execute one. Big players know that when they plan big market moves, they need to notify their brokers in advance, so the broker can prepare. What we had here was a bunch of retail investors who are somewhat more informed than the average retail investor, but not well versed in the nuts and bolts of the maneuver they were involved in, and therefore the executed it without sufficient planning.
dougmwne 6y ago
I agree there is some amount of risk in everything. When I say bet, I mean a zero-sum game like in a casino. Somone needs to lose money in order for you to gain money. No new money is being created in an options play or a GameStop squeeze. For you to gain 10 dollars, ten people must lose a dollar. The best you can do is encourage more players to join the bet to increase the size of the pot and the less they know the rules of the game the better. That scenario is pretty dissimilar to something like the value of a currency, which has value in proportion to the participants' trust in its stable value and how easily they can trade it for goods and services. So to standardize on terms, I mean "bet" like I am betting on roulette, not "bet" as in I bet my bank will still be solvent tomorrow.
- philihp 6y ago
  Short term investing is for sure a bet. Long term investing is a bet with the house edge in your favor, because of corporate buy-back and dividends.
  - dougmwne 6y ago
    Yes, I'd agree that the longer the timescale, the more you can capture new value that is being created as companies grow, make money and pay dividends.

by toolz 6y ago

nytesky 6y ago

I remember for me during 2008 I finally understood how NOTHING has intrinsic value, it’s always about what others perceive in the market. Real estate, dollars, gold, stock all arbitrary in a way I never considered. All built on sand.

jimbokun 6y ago
With real estate, you may have a place to sleep even if it's market value goes to 0.
- rightbyte 6y ago
  Ye many things has intrisic value. If your house is worth (about) zero it is probably on some cliff about to fall into the sea or there is posion in the ground, though.
- deleted 6y ago
  [deleted]
mlyle 6y ago
Some things have utility distinct from what people are willing to pay for them. My cheeseburger with one bite out of it has a market value of 0.
- Layke1123 6y ago
  Ha ha I love this comment. So simple and yet illustrates the point exactly. Although if I were starving and you said I could have it for one dollar and I wouldn't be able to eat for the next 72 hours, you'd probably have my dollar.
FabHK 6y ago
> NOTHING has intrinsic value. [...] All built on sand. That's... just not true? Many things have non-arbitrary value. You need dollars to pay taxes. You need real estate to sleep and work. You can make pretty things that last a long time from gold.

fbelzile 6y ago

This was me. I lost money on GME betting on the fact that more shorted shares still had to be covered. The short squeeze wasn't a complete failure. It happened, it was just much smaller than many predicted. I still wonder what would've happened if Robinhood didn't shut off demand by preventing people from buying shares. My investment thesis didn't foresee this happening. I don't think anyone did. The other large part of the problem was that a lot of people, including myself, were going off of stale short interest data. Updated estimates for GME were reported to be 39% of float vs +100% on 1 Feb [1]. Hedge funds pay for more accurate data which us retail investors don't get visibility on. It's over for now, but please bear this in mind when talking to people that may have lost money on this. Some people did some research, knew the risk and allocated money they were willing to lose. I learned a lot along the way, it might make some hedge funds think twice about aggressively shorting a stock, and it was just plain fun to be part of it. [1] https://www.bloomberg.com/news/articles/2021-02-01/gamestop-short-interest-plummets-in-a-sign-traders-are-covering https://www.bloomberg.com/news/articles/2021-02-01/gamestop-... Edit: updated short interest data stats and link.

acover 6y ago
Note that is the short interest ratio which is different than short interest. Your link shows no data available for short interest.
cwyers 6y ago
Can I suggest that if you couldn't foresee the chance of a trading halt in a massive short squeeze like this, then your risk modelling wasn't as sophisticated as you seem to think it was?
compiler-guy 6y ago
That a small-time broker (as is Robin Hood) wouldn't have enough capital to cover a giant short-squeeze was entirely foreseeable by people who understand what it takes to successfully execute one. Big players know that when they plan big market moves, they need to notify their brokers in advance, so the broker can prepare. What we had here was a bunch of retail investors who are somewhat more informed than the average retail investor, but not well versed in the nuts and bolts of the maneuver they were involved in, and therefore the executed it without sufficient planning.

dougmwne 6y ago

I agree there is some amount of risk in everything. When I say bet, I mean a zero-sum game like in a casino. Somone needs to lose money in order for you to gain money. No new money is being created in an options play or a GameStop squeeze. For you to gain 10 dollars, ten people must lose a dollar. The best you can do is encourage more players to join the bet to increase the size of the pot and the less they know the rules of the game the better. That scenario is pretty dissimilar to something like the value of a currency, which has value in proportion to the participants' trust in its stable value and how easily they can trade it for goods and services. So to standardize on terms, I mean "bet" like I am betting on roulette, not "bet" as in I bet my bank will still be solvent tomorrow.

philihp 6y ago
Short term investing is for sure a bet. Long term investing is a bet with the house edge in your favor, because of corporate buy-back and dividends.
- dougmwne 6y ago
  Yes, I'd agree that the longer the timescale, the more you can capture new value that is being created as companies grow, make money and pay dividends.