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It's not worth discussing BTC, TSLA, GME, or HTZ. That is missing the forest for the trees. The degradation of even the appearance of an orderly market is the

It's not worth discussing BTC, TSLA, GME, or HTZ. That is missing the forest for the trees. The degradation of even the appearance of an orderly market is the story. The money movement (volume of excess trades X magnitude of price change) seems out of reach of unleveraged retail. Faith in private and public institutions is justifiably poor, but also under organized attack. This is going to end badly for everyone, except perhaps for China.

jl2718 6y ago
Book: “The Bubble that Broke the World” - Garrett 1931.
ksdale 6y ago
I think in regards to finance, the only thing that's under attack is the idea of "stock market as source of knowledge about value." But I'm not sure that the stock market has actually served that purpose for decades. IMO, it's good that people are beginning to see the stock market as a casino. If people want to "invest," they'll figure out more pro-social ways to do it than the stock market, and if they want to gamble, well, there's always the stock market.
- jboog 6y ago
  Ben Graham said many decades ago that over the short term the market is like a voting machine but over the long term it's a weighing machine. There have always been periods of irrationality in the markets but there's no reason to believe that equities are fundamentally untethered from their inherent value in perpetuity. Eventually most of the overnight WSB stock picking geniuses are all going to lose their shirts and we'll see less of this GME nonsense. They make up a tiny fraction of trading volume anyway. It happened in '07-08, late 90s dot-com bubble and about every decade or so before that for different reasons
  - ksdale 6y ago
    I like that Graham quote, and you make good points. I guess when I say "investing," I mean more like - Purchasing an equity entitles you to a share of that business' income and potentially assets, but if you buy the equity on the stock market, you're not actually investing in capacity, the way you would be if you bought an IPO or even just a piece of equipment you could use to make something. And I think people have always given the stock market more credit than it's due as being "the economy," when really the stock market is a set of signals about the economy. The economy is the people and machines and the buildings that do stuff and make things, and the economy remains regardless of what's happening in the stock market. If a bunch of silliness happens around a certain stock, or if the stock market becomes wildly detached from reality, it doesn't have anything to do with peoples' ability to produce value.
    - chii 6y ago
      > you're not actually investing in capacity, the way you would be if you bought an IPO or even just a piece of equipment you could use to make something. while you are not directly investing in capacity like you might in an IPO, purchasing stock does create the same outcome. It's just not _you_ who is doing the capacity investing directly, but someone else who does so, as a result of the chain of investments.
      - ksdale 6y ago
        It doesn't necessarily though. When I buy an IPO, my dollars go straight (kind of) into a company's bank account. When I buy stock on the market, my dollars go to whoever I bought the stock from, who will probably use those dollars to buy more stock. The only time a company ever receives dollars it can use is when it sells stock to the public or gets a loan, and the vast, vast majority of transactions on the stock market do not involve dollars going to anyone who will use them to invest in capacity.
        chii 6y ago
        > vast majority of transactions on the stock market do not involve dollars going to anyone who will use them to invest in capacity. If you could _only_ invest directly into capacity, the amount of dollars that people would be willing to put in would be much smaller than today's. That's because the risk profile is singular in direct capacity investment. The reason the stock market can fund IPOs is because it allows the different stratas of risk to be separated, and taken on by different parties that want those risks. So without your dollar buying an existing stock, thus letting early investors for an IPO an exit, they would unlikely to want to invest in the IPO in the first place!
  - nootropicat 6y ago
    >but there's no reason to believe that equities are fundamentally untethered from their inherent value in perpetuity. Yes, but human lives are finite. Of course the current market is mostly a ponzi, but what if it lasts yet another decade? That's a major fraction of anyone's lifespan. Fundamentally the ponzi started to collapse in 2007/2008, but it was bailed out by the government. Increasingly it looks like the only way the ponzi can actually collapse is by dollar inflating, everyone getting poorer and ponzi games collapsing in real terms, but not nominal terms. Unfortunately, probably the best thing to do in the meantime is to try to win at ponzi games and try to leave others with bags.
- rchaud 6y ago
  > If people want to "invest," they'll figure out more pro-social ways to do it than the stock market, Will they? Is there any such thing as a pro-social 401K or Roth IRA? If money is going from your paycheque into your retirement fund, bypassing you entirely, it adds significant friction to moving it out into something with more direct impact.
- pbourke 6y ago
  > If people want to "invest," they'll figure out more pro-social ways to do it than the stock market Here are 99% of the things you can invest in as a person without a very large amount of capital: - real estate (your own home or rental units) - bonds (another security - same issue as equities in your analysis) - private business Are any of those inherently more pro-social than equities? The stock market encompasses both WSB speculators and “buy and hold forever” investors.
MrMan 6y ago
Please whomever has the power to downvote don't allow this to be the top comment, or China wins
- Red_Leaves_Flyy 6y ago
  >or China wins Could you elaborate?
  - willis936 6y ago
    I think their point is that the top commenter engaged in an informal fallacy by painting a jaded picture then saying at the end of it China somehow wins, without any amount of narrative/justification. To me it seems like you could skip all but the last two words of top commenters comment to see their message.
superbcarrot 6y ago
Seriously, what are the possible outcomes (positive or negative) that we can see play out? By what mechanisms can the currently inflated markets end and how will that impact the rest of the economy?
AniseAbyss 6y ago
In the last 500 years my country has gone through economic Armageddons. In fact we invented the stock market crash. Things never ended.
cwhiz 6y ago
What’s happening is that the masses now have access to do the same absurd gambling that the “experts” have been doing for a century. The only way out is to remove the gambling functions from the market. But then that would require that traders go get actual jobs, and produce actual value. I think these people would rather see the US burn than do that.
- throwaway5752 6y ago
  That's pretty cynical and optimistic at the same time. Cynical because it doesn't acknowledge the value that a well functioning and regulated financial system can create. Efficient flow of capital only sounds bad if you haven't seen the absence of it, like projects failing for lack of funding while bad ones are burning money. Optimistic for thinking that the masses have anything approaching the same level of access. I was hoping anyone with fintech experience could chime in disabuse others of this, but the masses don't have anything. It's depressing to watch so many people (on average) just destroying their savings while they're young and can make the biggest impact on their future savings.
  - cwhiz 6y ago
    >Cynical because it doesn't acknowledge the value that a well functioning and regulated financial system can create. You don’t need gambling to have a well functioning financial system. The price of goods at Walmart is not based on what uninterested bettors think the price should. It’s just based on supply and demand. We don’t need gambling to have a functioning financial market.
    - chii 6y ago
      The reason walmart's prices are stable is _because_ of the gambling of the market! The financial engineering of modern day has managed to separate risk (which is what causes price fluctuations) from their underlying commodity/goods/etc, and sell that risk away to people who want to take it. This allows those who want to not have risk (and thus stable prices) to have it - albeit yes, they pay a small premium for that. But ask any farmer and they prefer a lower, but stable price for many years, rather than the fluctuating price of produce. So the gamblers, who by definition, want risk, take on all the risk. Thus, a functioning financial market is how this is all conducted.
horsemessiah 6y ago
Americans always love tying things back to attacking China.

jl2718 6y ago

Book: “The Bubble that Broke the World” - Garrett 1931.

ksdale 6y ago

I think in regards to finance, the only thing that's under attack is the idea of "stock market as source of knowledge about value." But I'm not sure that the stock market has actually served that purpose for decades. IMO, it's good that people are beginning to see the stock market as a casino. If people want to "invest," they'll figure out more pro-social ways to do it than the stock market, and if they want to gamble, well, there's always the stock market.

jboog 6y ago
Ben Graham said many decades ago that over the short term the market is like a voting machine but over the long term it's a weighing machine. There have always been periods of irrationality in the markets but there's no reason to believe that equities are fundamentally untethered from their inherent value in perpetuity. Eventually most of the overnight WSB stock picking geniuses are all going to lose their shirts and we'll see less of this GME nonsense. They make up a tiny fraction of trading volume anyway. It happened in '07-08, late 90s dot-com bubble and about every decade or so before that for different reasons
- ksdale 6y ago
  I like that Graham quote, and you make good points. I guess when I say "investing," I mean more like - Purchasing an equity entitles you to a share of that business' income and potentially assets, but if you buy the equity on the stock market, you're not actually investing in capacity, the way you would be if you bought an IPO or even just a piece of equipment you could use to make something. And I think people have always given the stock market more credit than it's due as being "the economy," when really the stock market is a set of signals about the economy. The economy is the people and machines and the buildings that do stuff and make things, and the economy remains regardless of what's happening in the stock market. If a bunch of silliness happens around a certain stock, or if the stock market becomes wildly detached from reality, it doesn't have anything to do with peoples' ability to produce value.
  - chii 6y ago
    > you're not actually investing in capacity, the way you would be if you bought an IPO or even just a piece of equipment you could use to make something. while you are not directly investing in capacity like you might in an IPO, purchasing stock does create the same outcome. It's just not _you_ who is doing the capacity investing directly, but someone else who does so, as a result of the chain of investments.
    - ksdale 6y ago
      It doesn't necessarily though. When I buy an IPO, my dollars go straight (kind of) into a company's bank account. When I buy stock on the market, my dollars go to whoever I bought the stock from, who will probably use those dollars to buy more stock. The only time a company ever receives dollars it can use is when it sells stock to the public or gets a loan, and the vast, vast majority of transactions on the stock market do not involve dollars going to anyone who will use them to invest in capacity.
      - chii 6y ago
        > vast majority of transactions on the stock market do not involve dollars going to anyone who will use them to invest in capacity. If you could _only_ invest directly into capacity, the amount of dollars that people would be willing to put in would be much smaller than today's. That's because the risk profile is singular in direct capacity investment. The reason the stock market can fund IPOs is because it allows the different stratas of risk to be separated, and taken on by different parties that want those risks. So without your dollar buying an existing stock, thus letting early investors for an IPO an exit, they would unlikely to want to invest in the IPO in the first place!
- nootropicat 6y ago
  >but there's no reason to believe that equities are fundamentally untethered from their inherent value in perpetuity. Yes, but human lives are finite. Of course the current market is mostly a ponzi, but what if it lasts yet another decade? That's a major fraction of anyone's lifespan. Fundamentally the ponzi started to collapse in 2007/2008, but it was bailed out by the government. Increasingly it looks like the only way the ponzi can actually collapse is by dollar inflating, everyone getting poorer and ponzi games collapsing in real terms, but not nominal terms. Unfortunately, probably the best thing to do in the meantime is to try to win at ponzi games and try to leave others with bags.
rchaud 6y ago
> If people want to "invest," they'll figure out more pro-social ways to do it than the stock market, Will they? Is there any such thing as a pro-social 401K or Roth IRA? If money is going from your paycheque into your retirement fund, bypassing you entirely, it adds significant friction to moving it out into something with more direct impact.
pbourke 6y ago
> If people want to "invest," they'll figure out more pro-social ways to do it than the stock market Here are 99% of the things you can invest in as a person without a very large amount of capital: - real estate (your own home or rental units) - bonds (another security - same issue as equities in your analysis) - private business Are any of those inherently more pro-social than equities? The stock market encompasses both WSB speculators and “buy and hold forever” investors.

MrMan 6y ago

Please whomever has the power to downvote don't allow this to be the top comment, or China wins

Red_Leaves_Flyy 6y ago
>or China wins Could you elaborate?
- willis936 6y ago
  I think their point is that the top commenter engaged in an informal fallacy by painting a jaded picture then saying at the end of it China somehow wins, without any amount of narrative/justification. To me it seems like you could skip all but the last two words of top commenters comment to see their message.

superbcarrot 6y ago

Seriously, what are the possible outcomes (positive or negative) that we can see play out? By what mechanisms can the currently inflated markets end and how will that impact the rest of the economy?

AniseAbyss 6y ago

In the last 500 years my country has gone through economic Armageddons. In fact we invented the stock market crash. Things never ended.

cwhiz 6y ago

What’s happening is that the masses now have access to do the same absurd gambling that the “experts” have been doing for a century. The only way out is to remove the gambling functions from the market. But then that would require that traders go get actual jobs, and produce actual value. I think these people would rather see the US burn than do that.

throwaway5752 6y ago
That's pretty cynical and optimistic at the same time. Cynical because it doesn't acknowledge the value that a well functioning and regulated financial system can create. Efficient flow of capital only sounds bad if you haven't seen the absence of it, like projects failing for lack of funding while bad ones are burning money. Optimistic for thinking that the masses have anything approaching the same level of access. I was hoping anyone with fintech experience could chime in disabuse others of this, but the masses don't have anything. It's depressing to watch so many people (on average) just destroying their savings while they're young and can make the biggest impact on their future savings.
- cwhiz 6y ago
  >Cynical because it doesn't acknowledge the value that a well functioning and regulated financial system can create. You don’t need gambling to have a well functioning financial system. The price of goods at Walmart is not based on what uninterested bettors think the price should. It’s just based on supply and demand. We don’t need gambling to have a functioning financial market.
  - chii 6y ago
    The reason walmart's prices are stable is _because_ of the gambling of the market! The financial engineering of modern day has managed to separate risk (which is what causes price fluctuations) from their underlying commodity/goods/etc, and sell that risk away to people who want to take it. This allows those who want to not have risk (and thus stable prices) to have it - albeit yes, they pay a small premium for that. But ask any farmer and they prefer a lower, but stable price for many years, rather than the fluctuating price of produce. So the gamblers, who by definition, want risk, take on all the risk. Thus, a functioning financial market is how this is all conducted.

horsemessiah 6y ago

Americans always love tying things back to attacking China.