4 ms·

The recent frenzy in SPACs, meme stocks, NFTs don't make sense until you realize people aren't buying investments. They are buying entertainment and hope. It's

The recent frenzy in SPACs, meme stocks, NFTs don't make sense until you realize people aren't buying investments. They are buying entertainment and hope. It's all a big casino, and people don't act rationally in casinos.

adam_arthur 5y ago
The market for growth tech/speculative stocks has been irrational for almost a decade now. New metrics always being invented to justify this/that, but plenty of stocks were at 100x Price Sales just a few months ago... Which pretty much never will make sense for a decently sized company. Yet somehow the FAANGs which are effective monopolies sit at 20-30 PE, while Costco is at 45. The market is not efficient at all, and I don't know if it's just blind index investing, herd behavior in fund managers or what. Seems to me we need a real correction to flush a lot of the idiocy out of the market. The government has supported speculators at every turn since the GFC, which is creating a weird moral hazard, most prominently now in housing. Fortunately inflation has forced their hand, and 10y rising even to 3-4%, and mortgages to 6% will crush most of the speculation.
- lanstin 5y ago
  Costco pays dividends. Without dividends, stock is mostly worthless except for the speculative aspect. A Google that paid dividends would be a sound investment, if you neglect the social externalities, and would burst up thru the PE ratios.
  - adam_arthur 5y ago
    Intrinsic value of stocks comes from dividends or the potential for future dividends. Any stock that doesn't pay a dividend could pay one in the future from their earnings/cash flow. So even stocks without dividends have a measurable intrinsic value
libertine 5y ago
It's gambling. In fact it would be a cool subject for some study to see if there's a link between gambling and it's motivations/addictions and these type of products (including some trading cards). My uneducated guess is that the motivation for collectors and gamblers are quite different.
trinovantes 5y ago
I'd say it's more like they have nothing left to lose. In this economy, most of their lives won't change much if they lost their life savings on meme stocks but can significantly improve if they won.
- msoad 5y ago
  This is exactly why poor people play lottery and rich people don't
  - Sebb767 5y ago
    I read someone once describe the lottery as not buying a gambling ticket, but buying a few moments of dreaming about being stupidly rich.
eterm 5y ago
This is what happens when you ban online gambling. You get unregulated gambling in its place.

adam_arthur 5y ago

The market for growth tech/speculative stocks has been irrational for almost a decade now. New metrics always being invented to justify this/that, but plenty of stocks were at 100x Price Sales just a few months ago... Which pretty much never will make sense for a decently sized company. Yet somehow the FAANGs which are effective monopolies sit at 20-30 PE, while Costco is at 45. The market is not efficient at all, and I don't know if it's just blind index investing, herd behavior in fund managers or what. Seems to me we need a real correction to flush a lot of the idiocy out of the market. The government has supported speculators at every turn since the GFC, which is creating a weird moral hazard, most prominently now in housing. Fortunately inflation has forced their hand, and 10y rising even to 3-4%, and mortgages to 6% will crush most of the speculation.

lanstin 5y ago
Costco pays dividends. Without dividends, stock is mostly worthless except for the speculative aspect. A Google that paid dividends would be a sound investment, if you neglect the social externalities, and would burst up thru the PE ratios.
- adam_arthur 5y ago
  Intrinsic value of stocks comes from dividends or the potential for future dividends. Any stock that doesn't pay a dividend could pay one in the future from their earnings/cash flow. So even stocks without dividends have a measurable intrinsic value

libertine 5y ago

It's gambling. In fact it would be a cool subject for some study to see if there's a link between gambling and it's motivations/addictions and these type of products (including some trading cards). My uneducated guess is that the motivation for collectors and gamblers are quite different.

trinovantes 5y ago

I'd say it's more like they have nothing left to lose. In this economy, most of their lives won't change much if they lost their life savings on meme stocks but can significantly improve if they won.

msoad 5y ago
This is exactly why poor people play lottery and rich people don't
- Sebb767 5y ago
  I read someone once describe the lottery as not buying a gambling ticket, but buying a few moments of dreaming about being stupidly rich.

eterm 5y ago

This is what happens when you ban online gambling. You get unregulated gambling in its place.