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NYT calling for more regulation as usual. Fools will always find ways to lose their money. The way the market is regulated now, it is hard for honest people to

NYT calling for more regulation as usual. Fools will always find ways to lose their money. The way the market is regulated now, it is hard for honest people to raise money on the markets (the original purpose of stock markets), but scammers are still there. If stock markets weren't horribly over-regulated, would the VC industry even need to exist? Why must every part of the world be regulated into safety for the common man? Stock markets were once powerful tool. With power comes the ability to help, but also hurt one's self greatly.

css 6y ago
> If stock markets weren't horribly over-regulated, would the VC industry even need to exist? It's not just the stock market, its almost everything about corporate finance. The straitjacket bank regulators have placed around the ability of banks to go outside of the government defined process of evaluating credit-worthiness is a big factor. These rules (mainly FDIC insurance requirements) make it near-impossible for many companies to get loans. This problem incentivizes companies to play financial games (e.g., Adjusted EBITDA) to get around the crazy restrictions. This is why there is an emerging trend of non-traditional lenders (e.g. some VCs and PE firms). I’m sure the government will find a way to regulate them eventually.
loceng 6y ago
I mean, this is the only reason Bitcoin has made it mainstream, no? The hype has onboarded tens of millions of layperson speculators who are now financially invested in the MLM-Ponzi scheme - and they're all hoping, the army of HODLers, to get the rest of society to adopt - so it's the latest adopters left holding the bag - meanwhile then in the structure, the agreement that wealth is unnecessarily, unreasonably, transferred to the earlier adopters (via the "current price" being higher than their buy price).
- seibelj 6y ago
  For a relatively quick read with an alternative perspective, check out The Bitcoin Standard https://www.amazon.com/Bitcoin-Standard-Decentralized-Alternative-Central/dp/1119473861 https://www.amazon.com/Bitcoin-Standard-Decentralized-Altern... There is a logical explanation as to why bitcoin could be very valuable in our current world. It is because it cannot be inflated beyond the 21 million cap. If you have an open mind, give it a read!
  - loceng 6y ago
    Thanks for sharing. There are other viable better options that simply don't get exposure, or thought by pro-Bitcoiners, as they aren't financially aligned with their investment - though better because they would use blockchain but would be leveraging real life trust networks like of those of governments of democratically elected governments agreeing to use a specific system with other democratic nations.
    - cmoscoso 6y ago
      blockchain tech is definitely the future. /s
mancerayder 6y ago
It's the now-routine elitism of the center-left liberal elites. I know it comes off as left regulatory demands, but it's a sort of call for the Clever to protect the Little People from themselves.
- cma 6y ago
  Isn't that what unchecked capital accumulation is too, where trickle down is supposed to protect the little people who would mess things up if they had more decision power (represented by capital)?
- sosuke 6y ago
  I'm not actually thinking anything about your comment or the parent comment. But I wanted to share that the characterization of the "elitism of center-left liberal elites" makes my gut reaction to dismiss your comment. The same thing happens with I see something like "right extremist Q" or whatever the vernacular is. Is there a better, perhaps more clinical, way to more narrowly describe these kinds of groups? Or is that the right way to say it and my own bias is being applied?
  - ceilingcorner 6y ago
    I think it’s mostly accurate, but you’d probably want to add a few more adjectives like East Coast, Ivy League, pro-Establishment (as in, not “punk”), neoliberal, etc.
  - JKCalhoun 6y ago
    Well, he/she did use the word elite twice in the same sentence....
- undefined1 6y ago
  it's more the ruling class, that includes both left and right.
Craighead 6y ago
Yes yes the boring and repeated argument of "why improve anything when things will fail on their own" Please try something new, I'm so curious as to why this logical fallacy gets repeated ad nauseam
- fractionalhare 6y ago
  I don't agree with the parent comment either. But if you're going to critique it, you might as well levy a substantive criticism rather than a driveby dismissal calling it a "logical fallacy"...
paulryanrogers 6y ago
Financial regulation has many goals. At least two of them are protecting the naive from thinly veiled fraud and mitigating tax evasion. Even if governments had no other objectives I imagine those are enough to produce a lot of regulation. Tax evasion alone looks like a continuous game of cat and mouse. Where governments are always playing catch up as less ethical legislators slip more loopholes and pork into incomprehensively large budget proposals.
- solosoyokaze 6y ago
  It's funny how only when it comes to investments does the government care to "protect" people from their own free will. I present a sample list of fraudulent activities either not discouraged by the government or actively promoted: * State lotto * Psychic hotlines * Supplements/vitamins of dubious value * Regular stocks with wildly ridiculous P/E ratios * Various forms of "insurance" Which is to say, it's never been about protecting people from fraud and it's always been about limiting who's allowed to participate in the capital class activities.
  - JumpCrisscross 6y ago
    > State lotto Heavily regulated. > Psychic hotlines Have large numbers of people historically lost fortunes to these? > Supplements/vitamins of dubious value Fair. > Regular stocks with wildly ridiculous P/E ratios Literally the thing you're criticizing. > Various forms of "insurance" Heavily regulated.
    - solosoyokaze 6y ago
      Stocks are heavily regulated as well. Regulation and fraud are orthogonal to each other.
      - JumpCrisscross 6y ago
        > Regulation and fraud are orthogonal to each other This is a heady statement. It goes against all the research I've seen about international markets, though I'm open to changing my view.
ceilingcorner 6y ago
Once I realized that The NY Times represents the establishment class, their writings suddenly made sense to me. Heck, they own a skyscraper in one of the most expensive cities in the world. How could they not be the establishment? Established entities always prefer regulations, as it makes it harder for new competitors to join the market.
- 2OEH8eoCRo0 6y ago
  Yearly revenue is under $2bn though. I'd like to see more print media do well- the NYT still needs competition. Everyone cries about ads and tracking. Put your money where your mouth is and buy print from a source that you enjoy.
  - psychiatrist24 6y ago
    Any suggestions?
    - 2OEH8eoCRo0 6y ago
      I enjoy NYT and New Yorker.
- totalZero 6y ago
  > Established entities always prefer regulations, as it makes it harder for new competitors to join the market. Depends on the regulations. Comcast opposed Net Neutrality, for example. Goldman Sachs didn't like the Volcker Rule. Devon Energy pushed for weaker regulations on methane venting and flaring.
  - nostrademons 6y ago
    Note that the first two are regulations designed to encourage competition and enforce a clear separation between industries. The last one is the rectification of an externality. Perhaps this suggests a useful principal for government regulation: regulations that promote competition and divestiture, or that force companies to bear the true costs of their actions, are good. Regulations meant to mandate a specific way of doing things are bad, and should instead be structured so that they incentivize entrepreneurs to find the best way of doing things and allow them to bring it to market. Regulate market structure, not markets.
icedchai 6y ago
It would be like 1999 again, where a junk company goes public and raises $20+ million, the collapses in 2 to 3 years.
- beambot 6y ago
  Substitute "SPAC" for "junk company" and you basically described the current situation. There are some that are legit, but many of them are "greater fool" scenarios -- and that ratio is getting worse as acquisition targets dry up. No one wants to give their SPAC money back, less the music stops...
api 6y ago
This isn't wrong, but there is a counterargument: bad chases out good. If you let scams run rampant, eventually the whole ecosystem becomes associated with scams and the good money and good players just leave. This is the #1 risk to the largely unregulated cryptocurrency ecosystem. Many people already associate anything cryptocurrency with scams, or even equate the two. Legitimate value creating industries and legitimate players tend to avoid the whole space. Many people refuse to even look at cryptocurrency and block chain oriented technology for fear that being linked with the term will make them look "scammy." A major objective of all this regulation is to retain US dominance in global finance by protecting US markets' reputation as (relatively speaking) solid and safe. A good analogy is a "bad neighborhood." It takes only a small percentage of residents in a neighborhood committing street crime (far less than 1%) coupled with police neglect to label a neighborhood "high crime" and "bad," a label that will stick for decades and depress the whole area. Once a neighborhood carries such a label it often takes heavy handed police action or a complete tear-down / rebuild of the area to shake it.
- newsclues 6y ago
  The illegal drug market is a great example of bad chases out good. Organized criminals who are willing to be violent displace outlaw entrepreneurs who are peaceful.
  - api 6y ago
    Sure, and this is a major factor behind the number of deaths among drug users too. Bad product such as opiates cut with fentanyl or "bath tub crank" methamphetamine with nasty contaminants chases out purer (and thus lower margin because it's harder to make) product. (I'm not advocating use of these drugs, just pointing out that less harm would be done if they were pure instead of nasty street jank.)
mixedbit 6y ago
ICOs were much less regulated, but I don't think this significantly helped honest people to raise money. Scam to honest company ratio was simply to high in such an environment.
- makomk 6y ago
  ICOs were regulated - they were covered by the same regulations that applied to stock sales. The only real way to avoid the consequences of that was for US Government not to be able to track down the people involved in creating and promoting them. Naturally, this didn't encourage the creation of honest and non-scammy ICOs.
  - JumpCrisscross 6y ago
    > ICOs were regulated - they were covered by the same regulations that applied to stock sales Theoretically, yes. But enforcement was practically nonexistent.
uniqueid 6y ago
NYT calling for more regulation as usual. Deregulation sounds inspiring in theory https://youtu.be/qXBswFfh6AY https://youtu.be/qXBswFfh6AY but, in practice: https://www.nytimes.com/interactive/2017/08/07/opinion/leonhardt-income-inequality.html?smid=tw-share https://www.nytimes.com/interactive/2017/08/07/opinion/leonh...
- shawnz 6y ago
  What does the latter link have to do with deregulation?
  - uniqueid 6y ago
    If the question is 'what does two terms of Reagan have to do with deregulation?': https://daily.jstor.org/why-reagan-became-the-great-deregulator/ https://daily.jstor.org/why-reagan-became-the-great-deregula... If the question is a challenge for me to provide an unassailable proof that deregulation hurt most Americans: it's economics so I can't provide one.
    - shawnz 6y ago
      It's not just comparing pre-Reagan to post-Reagan though, but also the 25 years following that. If you look at the animation, the biggest changes happen after 2000.
MattGaiser 6y ago
> Why must every part of the world be regulated into safety for the common man? The common man will end up demanding something more extreme when they lose.
- JKCalhoun 6y ago
  Yep. Better to regulate now than have to bail out with taxpayer dollars later.
  - ghaff 6y ago
    I'm willing to bet that there are a lot of people here who simultaneously believe two things: - People should be able to put their money into anything they want - There should be strong safety nets to protect people who have lost their money/income
    - Karunamon 6y ago
      Those stances are not mutually incompatible. The safety net is there because it leads to worse outcomes for everyone to not have it, not as a statement on what people should and shouldn't be spending their money on. Putting your entire net worth (to the point where you're out of room and board) into any investment instrument is unwise. I'd even support regulations at that point, i.e. you may not directly invest more than X% of your income ...but this applies to penny stocks and cryptocurrencies just as much as it applies to an S&P index fund or treasury bonds.
cblconfederate 6y ago
And who will pick the winners?
nkozyra 6y ago
Wouldn't that preclude investment until a company went public?
anotherman554 6y ago
NYT says Penny stocks are filled with fraud. This is a factual claim, but your response is not to say that the NYT has the facts wrong, but instead to imply they shouldn't report on facts and imply they have a secret agenda for doing so.
- rcoveson 6y ago
  That's not a factual claim, it's a subjective statement. "Some penny stock transactions are fraudulent" is a factual claim, though not a very interesting one. "The SEC estimates that X% of penny stock transactions are fraudulent" is a stronger factual claim.
  - JumpCrisscross 6y ago
    The growing frequency and magnitude of fraud in the penny stock market is absolutely a factual claim. It would be better if the article made it explicitly. But it's implicitly there, albeit only anecdotally substantiated. The SEC is chronically underfunded. A compelling anecdote in the press isn't an uncommon way for an investigation to start. In that light, this article is an expression of a hypothesis.
    - rcoveson 6y ago
      > The frequency and magnitude of fraud in the penny stock market is absolutely a factual claim. Yes, that's exactly what I said. However, the article doesn't make any such claim. Or maybe I missed it, because it was "implicit". What frequency or magnitude of fraud was claimed by the article? "A lot" doesn't cut it. That can mean anything to anyone.
  - Apocryphon 6y ago
    What's actually factual is the NYT says > But last month, there were 1.9 trillion transactions on O.T.C. markets, an increase of more than 2,000 percent from a year earlier, according to data from the Financial Industry Regulatory Authority, a self-regulatory group that oversees brokerage firms. And > A 2017 paper from Thomas Renault, a finance professor at the University Paris 1 Panthéon-Sorbonne, analyzed millions of Twitter messages about low-priced stocks. A surge in tweets about a small stock led to big price increases followed by sudden collapses, he found, saying the pattern was consistent with pump-and-dump schemes. Granted, the rest of the article is mostly quotes from ex-SEC regulators, investors, economists, Jordan Belfort; anecdotes about a few OTC stock scams; and an explanation of what pump and dump schemes are. But this whole discussion is oversimplifying the article, assigning motives where there doesn't seem to be one.
runarberg 6y ago
Interesting take. Can you point me to a time in recent history when good, honest, hard working people (i.e. common folks) were the once making money out of the stock market? As a worker, my experience has always been the opposite. That is rich folks using the stock market to get some unearned money out of my work.
- Ensorceled 6y ago
  For the most part, the only time "good, honest, hard working people" make money on the stock market is via their pensions.
- deleted 6y ago
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- havelhovel 6y ago
  Just look at AAPL or, heck, even SPY returns over the last decade. These opportunities were equally available to rich and poor alike, and they certainly didn't require a team of analysts working around the clock to uncover.
  - ghaff 6y ago
    Yeah. The last 10 years have arguably been something of an outlier but there is no shortage of companies in which a 2010 investment wouldn't have you looking at a nice pile of money in 2020. Returns in fact that a lot of people peddling "accredited investor" type products would probably kill for. And, as you say, a really boring index fund wouldn't have done half-badly either. I just want to know where these special opportunities are hiding. I do have an investment that pays me an annuity from an endowment that includes some less standard investments. But, while they get good returns, they're nothing truly out of the ordinary.
- missedthecue 6y ago
  There are almost $30 trillion growing in retirement funds. https://www.napa-net.org/news-info/daily-news/retirement-assets-top-29-trillion-while-plan-fees-continue-downward-trend https://www.napa-net.org/news-info/daily-news/retirement-ass...
deleted 6y ago
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dalbasal 6y ago
ehh... More/less regulated is a silly paradigm to think through... especially for long regulated industries. There is no more or less. Regulation are not quantitative, usually. It's about what the regulations are, and what enforcement looks like. Even the term "regulator" doesn't mean quite what it sounds like. It doesn't just mean "rules governments make." Those are laws. To the extent this article is calling for anything, it's calling for policing... which is also something a regulator does. > "it is hard for honest people to raise money on the markets (the original purpose of stock markets), but scammers are still there. If stock markets weren't horribly over-regulated, would the VC industry even need to exist?" Maybe not on some a chalkboard model of the world. In the actual financial world, "penny stock" markets exist for lower cap companies. They are less regulated, for exactly the reason you are alluding to. From the article itself: "Traded on the lightly regulated over-the-counter, or O.T.C., markets, penny stocks face fewer rules about publishing information on financial results or independent board members. Wall Street analysts don’t usually follow them. Major investors don’t buy them." VCs exist. OTC markets exist, they just aren't a popular place for startups to raise or for institutions to invest. VCs are. Reality is not a naive theory, so it's hard to say exactly why. We can think theories about why this is. To find out if they're true, we need to find evidence in the world. It's fine to propose that just not rational to conclude that honest people can't raise money because OTC regulators are too busibodied. It's irrational to conclude that without some corresponding facts from the world corroborating it. I'm not talking about absolute proofs... just something.
paulgb 6y ago
> NYT calling for more regulation as usual. I couldn't find anything in the article that fits this claim. There are a couple lines that report on what regulators are already doing, but not calling for more. > If stock markets weren't horribly over-regulated, would the VC industry even need to exist? Emphatically, yes. The best startups in their early stages do not want thousands of mom&pop cheques and investors to manage, they want a small number of smart money, value-added investors. The need for public investors to have transparency into their investments is in conflict with an early stage startup's need to keep competitive information to themselves.
- dumbfoundded 6y ago
  I don't agree at all. The rise of ICOs and crowd funding provide a strong counterexample. Ideally the best startups would be funded by revenue and bank loans. The idea of value-added investors is pretty silly IMO. On one side, you add value to your team not by investing but by hiring. On the other side, you never want to have to rely on investment and with interest rates as low as they are, loans would almost always be preferable over equity dilution. Usually the most significant value an investor can add is by making a raise as fast and painless as possible so the founders can get back to building their business. "Smart money" and "value-added" seem like concepts invented by investors to get equity at a better price. Founders should desire to spend as little time possible networking with investors and the maximum time focused on building products, engaging with customers and networking within the industry.
  - nradov 6y ago
    Value-added investors effectively act as "free" management consultants, and also make introductions to potential customers and partners. Those services are valuable, at least to founders who lack experience and industry connections. Small investors can't provide those services. Most ICOs are simply scams and in no way comparable to legitimate investments.
    - dumbfoundded 6y ago
      Wouldn't you prefer an advisor then? Same exact benefit but with better alignment. Usually advisors are actually currently in the industry and can give meaningful introductions outside their portfolio. I also don't think it's fair to call all ICOs scams. It's certainly in its wild west phase but provides an alternative funding mechanism.
currymj 6y ago
what kinds of deregulation would you hope to see? make it easier for small companies to do public offerings?
tim333 6y ago
I don't see them as calling for more regulation: >But current and former regulators say penny stock fraud will remain as long as penny stocks are traded. It's more fraud's going to happen. The "reminiscent of the 1920s, when amateurs flooded into the stock market before the 1929 crash" is a little ominous.
adventured 6y ago
> Why must every part of the world be regulated into safety for the common man? That's not really their concern, they're pathological hypocrites in reality. They're very happy to keep state sanctioned lotteries plentiful and legal, so the common person can blow their financial brains out handing their hard-earned cash to the government in a scheme that specifically benefits the government (they get you on the tickets, then they get you on a massive tax hit on the win). Unregulated penny stocks are not worse for the common person than government controlled lotteries that vaporize so much money for average people; arguable lotteries are far worse, your odds of winning might as well be zero. They absolutely do not care about the so called common man, not in the least. They care about control, power; they care about who has it, who has access to it, and who gets to sell it to the highest bidder.
- sethhochberg 6y ago
  This framing makes the whole thing sound like a nefarious plot, but I suspect the reality is more simple: you can't pump-and-dump a lottery, the draw is tightly controlled. The parts of the penny stock / meme stock world that are drawing lots of negative attention right now are the online communities where anonymous people are giving plenty of "not financial advice" and disclaiming it away with a statement like "do your own DD" (due diligence). Obviously, yes, you should do your own due diligence when acting on a stock tip from a stranger. But even that assumes that the stranger's tip was made in good faith, and wasn't just designed to help them unload something they bought and want to get rid of profitably by hyping a market to unsavvy buyers. With a lotto, you can see the projected winnings, know the draw date, and usually even know how many other people are buying tickets. With penny stocks from reddit, there's a decent chance the guy offering the tip about which stock to buy plans to exit long before his target price, because he strung together a plausible hype pitch to trick you into getting stuck holding the bag. The state is usually prevented from lying about possible winnings to sell more lotto tickets. I'm not sure whether more regulation for retail investors is a good thing or not. But I do think it isn't a very genuine comparison to say that regulating financial markets is a farce because lotteries exist, there is much more information asymmetry in retail stock trades.
  - 6y ago
snidane 6y ago
Good point about VC industry. Would there even be a distinction among various types of funds if not for regulation? Ie. pool money and invest? No matter if it is VC fund, hedge fund, pension fund, mutual fund, they all just pool money and invest in something. Which used to be called.. just a 'bank' before all those regulations.
Shivetya 6y ago
What I read was, Social media bad. A part of the long running crusade of the NYT and other media that is finding itself displaced by Social media, whether existing sites or new upstarts. The simple point is, NYT and other legacy media companies resent that they don't control the news and how it is portrayed, delivered, and worse for them fact checked. They really loathe being called out repeatedly by "upstarts" who aren't real "journalist". There have been many editors, writers, and more, taken down in recent years that used to operate with impunity within the legacy media. No one would question them or the paper they wrote for. Now they can get caught when they cross the line or worse outright fabricate stories. So the legacy media simply writes stories that portray social media as bad and in need of regulation, in other words, silencing.
deleted 6y ago
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css 6y ago

> If stock markets weren't horribly over-regulated, would the VC industry even need to exist? It's not just the stock market, its almost everything about corporate finance. The straitjacket bank regulators have placed around the ability of banks to go outside of the government defined process of evaluating credit-worthiness is a big factor. These rules (mainly FDIC insurance requirements) make it near-impossible for many companies to get loans. This problem incentivizes companies to play financial games (e.g., Adjusted EBITDA) to get around the crazy restrictions. This is why there is an emerging trend of non-traditional lenders (e.g. some VCs and PE firms). I’m sure the government will find a way to regulate them eventually.

loceng 6y ago

I mean, this is the only reason Bitcoin has made it mainstream, no? The hype has onboarded tens of millions of layperson speculators who are now financially invested in the MLM-Ponzi scheme - and they're all hoping, the army of HODLers, to get the rest of society to adopt - so it's the latest adopters left holding the bag - meanwhile then in the structure, the agreement that wealth is unnecessarily, unreasonably, transferred to the earlier adopters (via the "current price" being higher than their buy price).

seibelj 6y ago
For a relatively quick read with an alternative perspective, check out The Bitcoin Standard https://www.amazon.com/Bitcoin-Standard-Decentralized-Alternative-Central/dp/1119473861 https://www.amazon.com/Bitcoin-Standard-Decentralized-Altern... There is a logical explanation as to why bitcoin could be very valuable in our current world. It is because it cannot be inflated beyond the 21 million cap. If you have an open mind, give it a read!
- loceng 6y ago
  Thanks for sharing. There are other viable better options that simply don't get exposure, or thought by pro-Bitcoiners, as they aren't financially aligned with their investment - though better because they would use blockchain but would be leveraging real life trust networks like of those of governments of democratically elected governments agreeing to use a specific system with other democratic nations.
  - cmoscoso 6y ago
    blockchain tech is definitely the future. /s

mancerayder 6y ago

It's the now-routine elitism of the center-left liberal elites. I know it comes off as left regulatory demands, but it's a sort of call for the Clever to protect the Little People from themselves.

cma 6y ago
Isn't that what unchecked capital accumulation is too, where trickle down is supposed to protect the little people who would mess things up if they had more decision power (represented by capital)?
sosuke 6y ago
I'm not actually thinking anything about your comment or the parent comment. But I wanted to share that the characterization of the "elitism of center-left liberal elites" makes my gut reaction to dismiss your comment. The same thing happens with I see something like "right extremist Q" or whatever the vernacular is. Is there a better, perhaps more clinical, way to more narrowly describe these kinds of groups? Or is that the right way to say it and my own bias is being applied?
- ceilingcorner 6y ago
  I think it’s mostly accurate, but you’d probably want to add a few more adjectives like East Coast, Ivy League, pro-Establishment (as in, not “punk”), neoliberal, etc.
- JKCalhoun 6y ago
  Well, he/she did use the word elite twice in the same sentence....
undefined1 6y ago
it's more the ruling class, that includes both left and right.

Craighead 6y ago

Yes yes the boring and repeated argument of "why improve anything when things will fail on their own" Please try something new, I'm so curious as to why this logical fallacy gets repeated ad nauseam

fractionalhare 6y ago
I don't agree with the parent comment either. But if you're going to critique it, you might as well levy a substantive criticism rather than a driveby dismissal calling it a "logical fallacy"...

paulryanrogers 6y ago

Financial regulation has many goals. At least two of them are protecting the naive from thinly veiled fraud and mitigating tax evasion. Even if governments had no other objectives I imagine those are enough to produce a lot of regulation. Tax evasion alone looks like a continuous game of cat and mouse. Where governments are always playing catch up as less ethical legislators slip more loopholes and pork into incomprehensively large budget proposals.

solosoyokaze 6y ago
It's funny how only when it comes to investments does the government care to "protect" people from their own free will. I present a sample list of fraudulent activities either not discouraged by the government or actively promoted: * State lotto * Psychic hotlines * Supplements/vitamins of dubious value * Regular stocks with wildly ridiculous P/E ratios * Various forms of "insurance" Which is to say, it's never been about protecting people from fraud and it's always been about limiting who's allowed to participate in the capital class activities.
- JumpCrisscross 6y ago
  > State lotto Heavily regulated. > Psychic hotlines Have large numbers of people historically lost fortunes to these? > Supplements/vitamins of dubious value Fair. > Regular stocks with wildly ridiculous P/E ratios Literally the thing you're criticizing. > Various forms of "insurance" Heavily regulated.
  - solosoyokaze 6y ago
    Stocks are heavily regulated as well. Regulation and fraud are orthogonal to each other.
    - JumpCrisscross 6y ago
      > Regulation and fraud are orthogonal to each other This is a heady statement. It goes against all the research I've seen about international markets, though I'm open to changing my view.

ceilingcorner 6y ago

Once I realized that The NY Times represents the establishment class, their writings suddenly made sense to me. Heck, they own a skyscraper in one of the most expensive cities in the world. How could they not be the establishment? Established entities always prefer regulations, as it makes it harder for new competitors to join the market.

2OEH8eoCRo0 6y ago
Yearly revenue is under $2bn though. I'd like to see more print media do well- the NYT still needs competition. Everyone cries about ads and tracking. Put your money where your mouth is and buy print from a source that you enjoy.
- psychiatrist24 6y ago
  Any suggestions?
  - 2OEH8eoCRo0 6y ago
    I enjoy NYT and New Yorker.
totalZero 6y ago
> Established entities always prefer regulations, as it makes it harder for new competitors to join the market. Depends on the regulations. Comcast opposed Net Neutrality, for example. Goldman Sachs didn't like the Volcker Rule. Devon Energy pushed for weaker regulations on methane venting and flaring.
- nostrademons 6y ago
  Note that the first two are regulations designed to encourage competition and enforce a clear separation between industries. The last one is the rectification of an externality. Perhaps this suggests a useful principal for government regulation: regulations that promote competition and divestiture, or that force companies to bear the true costs of their actions, are good. Regulations meant to mandate a specific way of doing things are bad, and should instead be structured so that they incentivize entrepreneurs to find the best way of doing things and allow them to bring it to market. Regulate market structure, not markets.

icedchai 6y ago

It would be like 1999 again, where a junk company goes public and raises $20+ million, the collapses in 2 to 3 years.

beambot 6y ago
Substitute "SPAC" for "junk company" and you basically described the current situation. There are some that are legit, but many of them are "greater fool" scenarios -- and that ratio is getting worse as acquisition targets dry up. No one wants to give their SPAC money back, less the music stops...

api 6y ago

This isn't wrong, but there is a counterargument: bad chases out good. If you let scams run rampant, eventually the whole ecosystem becomes associated with scams and the good money and good players just leave. This is the #1 risk to the largely unregulated cryptocurrency ecosystem. Many people already associate anything cryptocurrency with scams, or even equate the two. Legitimate value creating industries and legitimate players tend to avoid the whole space. Many people refuse to even look at cryptocurrency and block chain oriented technology for fear that being linked with the term will make them look "scammy." A major objective of all this regulation is to retain US dominance in global finance by protecting US markets' reputation as (relatively speaking) solid and safe. A good analogy is a "bad neighborhood." It takes only a small percentage of residents in a neighborhood committing street crime (far less than 1%) coupled with police neglect to label a neighborhood "high crime" and "bad," a label that will stick for decades and depress the whole area. Once a neighborhood carries such a label it often takes heavy handed police action or a complete tear-down / rebuild of the area to shake it.

newsclues 6y ago
The illegal drug market is a great example of bad chases out good. Organized criminals who are willing to be violent displace outlaw entrepreneurs who are peaceful.
- api 6y ago
  Sure, and this is a major factor behind the number of deaths among drug users too. Bad product such as opiates cut with fentanyl or "bath tub crank" methamphetamine with nasty contaminants chases out purer (and thus lower margin because it's harder to make) product. (I'm not advocating use of these drugs, just pointing out that less harm would be done if they were pure instead of nasty street jank.)

mixedbit 6y ago

ICOs were much less regulated, but I don't think this significantly helped honest people to raise money. Scam to honest company ratio was simply to high in such an environment.

makomk 6y ago
ICOs were regulated - they were covered by the same regulations that applied to stock sales. The only real way to avoid the consequences of that was for US Government not to be able to track down the people involved in creating and promoting them. Naturally, this didn't encourage the creation of honest and non-scammy ICOs.
- JumpCrisscross 6y ago
  > ICOs were regulated - they were covered by the same regulations that applied to stock sales Theoretically, yes. But enforcement was practically nonexistent.

uniqueid 6y ago

NYT calling for more regulation as usual. Deregulation sounds inspiring in theory https://youtu.be/qXBswFfh6AY https://youtu.be/qXBswFfh6AY but, in practice: https://www.nytimes.com/interactive/2017/08/07/opinion/leonhardt-income-inequality.html?smid=tw-share https://www.nytimes.com/interactive/2017/08/07/opinion/leonh...

shawnz 6y ago
What does the latter link have to do with deregulation?
- uniqueid 6y ago
  If the question is 'what does two terms of Reagan have to do with deregulation?': https://daily.jstor.org/why-reagan-became-the-great-deregulator/ https://daily.jstor.org/why-reagan-became-the-great-deregula... If the question is a challenge for me to provide an unassailable proof that deregulation hurt most Americans: it's economics so I can't provide one.
  - shawnz 6y ago
    It's not just comparing pre-Reagan to post-Reagan though, but also the 25 years following that. If you look at the animation, the biggest changes happen after 2000.

MattGaiser 6y ago

> Why must every part of the world be regulated into safety for the common man? The common man will end up demanding something more extreme when they lose.

JKCalhoun 6y ago
Yep. Better to regulate now than have to bail out with taxpayer dollars later.
- ghaff 6y ago
  I'm willing to bet that there are a lot of people here who simultaneously believe two things: - People should be able to put their money into anything they want - There should be strong safety nets to protect people who have lost their money/income
  - Karunamon 6y ago
    Those stances are not mutually incompatible. The safety net is there because it leads to worse outcomes for everyone to not have it, not as a statement on what people should and shouldn't be spending their money on. Putting your entire net worth (to the point where you're out of room and board) into any investment instrument is unwise. I'd even support regulations at that point, i.e. you may not directly invest more than X% of your income ...but this applies to penny stocks and cryptocurrencies just as much as it applies to an S&P index fund or treasury bonds.

cblconfederate 6y ago

And who will pick the winners?

nkozyra 6y ago

Wouldn't that preclude investment until a company went public?

anotherman554 6y ago

NYT says Penny stocks are filled with fraud. This is a factual claim, but your response is not to say that the NYT has the facts wrong, but instead to imply they shouldn't report on facts and imply they have a secret agenda for doing so.

rcoveson 6y ago
That's not a factual claim, it's a subjective statement. "Some penny stock transactions are fraudulent" is a factual claim, though not a very interesting one. "The SEC estimates that X% of penny stock transactions are fraudulent" is a stronger factual claim.
- JumpCrisscross 6y ago
  The growing frequency and magnitude of fraud in the penny stock market is absolutely a factual claim. It would be better if the article made it explicitly. But it's implicitly there, albeit only anecdotally substantiated. The SEC is chronically underfunded. A compelling anecdote in the press isn't an uncommon way for an investigation to start. In that light, this article is an expression of a hypothesis.
  - rcoveson 6y ago
    > The frequency and magnitude of fraud in the penny stock market is absolutely a factual claim. Yes, that's exactly what I said. However, the article doesn't make any such claim. Or maybe I missed it, because it was "implicit". What frequency or magnitude of fraud was claimed by the article? "A lot" doesn't cut it. That can mean anything to anyone.
- Apocryphon 6y ago
  What's actually factual is the NYT says > But last month, there were 1.9 trillion transactions on O.T.C. markets, an increase of more than 2,000 percent from a year earlier, according to data from the Financial Industry Regulatory Authority, a self-regulatory group that oversees brokerage firms. And > A 2017 paper from Thomas Renault, a finance professor at the University Paris 1 Panthéon-Sorbonne, analyzed millions of Twitter messages about low-priced stocks. A surge in tweets about a small stock led to big price increases followed by sudden collapses, he found, saying the pattern was consistent with pump-and-dump schemes. Granted, the rest of the article is mostly quotes from ex-SEC regulators, investors, economists, Jordan Belfort; anecdotes about a few OTC stock scams; and an explanation of what pump and dump schemes are. But this whole discussion is oversimplifying the article, assigning motives where there doesn't seem to be one.

runarberg 6y ago

Interesting take. Can you point me to a time in recent history when good, honest, hard working people (i.e. common folks) were the once making money out of the stock market? As a worker, my experience has always been the opposite. That is rich folks using the stock market to get some unearned money out of my work.

Ensorceled 6y ago
For the most part, the only time "good, honest, hard working people" make money on the stock market is via their pensions.
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havelhovel 6y ago
Just look at AAPL or, heck, even SPY returns over the last decade. These opportunities were equally available to rich and poor alike, and they certainly didn't require a team of analysts working around the clock to uncover.
- ghaff 6y ago
  Yeah. The last 10 years have arguably been something of an outlier but there is no shortage of companies in which a 2010 investment wouldn't have you looking at a nice pile of money in 2020. Returns in fact that a lot of people peddling "accredited investor" type products would probably kill for. And, as you say, a really boring index fund wouldn't have done half-badly either. I just want to know where these special opportunities are hiding. I do have an investment that pays me an annuity from an endowment that includes some less standard investments. But, while they get good returns, they're nothing truly out of the ordinary.
missedthecue 6y ago
There are almost $30 trillion growing in retirement funds. https://www.napa-net.org/news-info/daily-news/retirement-assets-top-29-trillion-while-plan-fees-continue-downward-trend https://www.napa-net.org/news-info/daily-news/retirement-ass...

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dalbasal 6y ago

ehh... More/less regulated is a silly paradigm to think through... especially for long regulated industries. There is no more or less. Regulation are not quantitative, usually. It's about what the regulations are, and what enforcement looks like. Even the term "regulator" doesn't mean quite what it sounds like. It doesn't just mean "rules governments make." Those are laws. To the extent this article is calling for anything, it's calling for policing... which is also something a regulator does. > "it is hard for honest people to raise money on the markets (the original purpose of stock markets), but scammers are still there. If stock markets weren't horribly over-regulated, would the VC industry even need to exist?" Maybe not on some a chalkboard model of the world. In the actual financial world, "penny stock" markets exist for lower cap companies. They are less regulated, for exactly the reason you are alluding to. From the article itself: "Traded on the lightly regulated over-the-counter, or O.T.C., markets, penny stocks face fewer rules about publishing information on financial results or independent board members. Wall Street analysts don’t usually follow them. Major investors don’t buy them." VCs exist. OTC markets exist, they just aren't a popular place for startups to raise or for institutions to invest. VCs are. Reality is not a naive theory, so it's hard to say exactly why. We can think theories about why this is. To find out if they're true, we need to find evidence in the world. It's fine to propose that just not rational to conclude that honest people can't raise money because OTC regulators are too busibodied. It's irrational to conclude that without some corresponding facts from the world corroborating it. I'm not talking about absolute proofs... just something.

paulgb 6y ago

> NYT calling for more regulation as usual. I couldn't find anything in the article that fits this claim. There are a couple lines that report on what regulators are already doing, but not calling for more. > If stock markets weren't horribly over-regulated, would the VC industry even need to exist? Emphatically, yes. The best startups in their early stages do not want thousands of mom&pop cheques and investors to manage, they want a small number of smart money, value-added investors. The need for public investors to have transparency into their investments is in conflict with an early stage startup's need to keep competitive information to themselves.

dumbfoundded 6y ago
I don't agree at all. The rise of ICOs and crowd funding provide a strong counterexample. Ideally the best startups would be funded by revenue and bank loans. The idea of value-added investors is pretty silly IMO. On one side, you add value to your team not by investing but by hiring. On the other side, you never want to have to rely on investment and with interest rates as low as they are, loans would almost always be preferable over equity dilution. Usually the most significant value an investor can add is by making a raise as fast and painless as possible so the founders can get back to building their business. "Smart money" and "value-added" seem like concepts invented by investors to get equity at a better price. Founders should desire to spend as little time possible networking with investors and the maximum time focused on building products, engaging with customers and networking within the industry.
- nradov 6y ago
  Value-added investors effectively act as "free" management consultants, and also make introductions to potential customers and partners. Those services are valuable, at least to founders who lack experience and industry connections. Small investors can't provide those services. Most ICOs are simply scams and in no way comparable to legitimate investments.
  - dumbfoundded 6y ago
    Wouldn't you prefer an advisor then? Same exact benefit but with better alignment. Usually advisors are actually currently in the industry and can give meaningful introductions outside their portfolio. I also don't think it's fair to call all ICOs scams. It's certainly in its wild west phase but provides an alternative funding mechanism.

currymj 6y ago

what kinds of deregulation would you hope to see? make it easier for small companies to do public offerings?

tim333 6y ago

I don't see them as calling for more regulation: >But current and former regulators say penny stock fraud will remain as long as penny stocks are traded. It's more fraud's going to happen. The "reminiscent of the 1920s, when amateurs flooded into the stock market before the 1929 crash" is a little ominous.

adventured 6y ago

> Why must every part of the world be regulated into safety for the common man? That's not really their concern, they're pathological hypocrites in reality. They're very happy to keep state sanctioned lotteries plentiful and legal, so the common person can blow their financial brains out handing their hard-earned cash to the government in a scheme that specifically benefits the government (they get you on the tickets, then they get you on a massive tax hit on the win). Unregulated penny stocks are not worse for the common person than government controlled lotteries that vaporize so much money for average people; arguable lotteries are far worse, your odds of winning might as well be zero. They absolutely do not care about the so called common man, not in the least. They care about control, power; they care about who has it, who has access to it, and who gets to sell it to the highest bidder.

sethhochberg 6y ago
This framing makes the whole thing sound like a nefarious plot, but I suspect the reality is more simple: you can't pump-and-dump a lottery, the draw is tightly controlled. The parts of the penny stock / meme stock world that are drawing lots of negative attention right now are the online communities where anonymous people are giving plenty of "not financial advice" and disclaiming it away with a statement like "do your own DD" (due diligence). Obviously, yes, you should do your own due diligence when acting on a stock tip from a stranger. But even that assumes that the stranger's tip was made in good faith, and wasn't just designed to help them unload something they bought and want to get rid of profitably by hyping a market to unsavvy buyers. With a lotto, you can see the projected winnings, know the draw date, and usually even know how many other people are buying tickets. With penny stocks from reddit, there's a decent chance the guy offering the tip about which stock to buy plans to exit long before his target price, because he strung together a plausible hype pitch to trick you into getting stuck holding the bag. The state is usually prevented from lying about possible winnings to sell more lotto tickets. I'm not sure whether more regulation for retail investors is a good thing or not. But I do think it isn't a very genuine comparison to say that regulating financial markets is a farce because lotteries exist, there is much more information asymmetry in retail stock trades.
- 6y ago

snidane 6y ago

Good point about VC industry. Would there even be a distinction among various types of funds if not for regulation? Ie. pool money and invest? No matter if it is VC fund, hedge fund, pension fund, mutual fund, they all just pool money and invest in something. Which used to be called.. just a 'bank' before all those regulations.

Shivetya 6y ago

What I read was, Social media bad. A part of the long running crusade of the NYT and other media that is finding itself displaced by Social media, whether existing sites or new upstarts. The simple point is, NYT and other legacy media companies resent that they don't control the news and how it is portrayed, delivered, and worse for them fact checked. They really loathe being called out repeatedly by "upstarts" who aren't real "journalist". There have been many editors, writers, and more, taken down in recent years that used to operate with impunity within the legacy media. No one would question them or the paper they wrote for. Now they can get caught when they cross the line or worse outright fabricate stories. So the legacy media simply writes stories that portray social media as bad and in need of regulation, in other words, silencing.

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