6 ms·

Who cares what gamblers lost? "Betting on/against" whatever company isn't trading. It's not arbitrage, it doesn't have an edge, it's just fingers crossed hope f

Who cares what gamblers lost? "Betting on/against" whatever company isn't trading. It's not arbitrage, it doesn't have an edge, it's just fingers crossed hope for the best gambling. And of all gambles, shorting is the worst. By all I mean "long or short", so I guess there isn't much variation left when you leave shorting out. But with going long on a company at least you can buy and forget. Maybe it bounces back up. Not today or this year but eventually. With shorting though, it's pure loss. On top of the interest the lender is charging you for the stock that they loaned to you (some 2% last time I checked, when reference rate was pretty much zero). Unlike long where you earn interest (dividends). So unless you got a really really good reason to short (insider knowledge, some solid stat arb reasoning)... don't do it. Or if you do it, I won't weep for you when you lose.

tempestn 3y ago
This is all true, but it's a bit of a shame as it puts a limit on market efficiency. To take an extreme example, every rational person knew that Gamestop wasn't worth $20B+. (Or even close to what it's trading at now.) But given the costs and risks of shorting, there was (is) no way for most traders to profit off of that with a reasonable risk/reward, and so the mispricing persists. Tesla could be seen as a less extreme example of the same. Unlike Gamestop, it's a very successful company with a lot going for it. But was it ever really worth more than every other car company combined?
- jliptzin 3y ago
  If it’s making more profit per vehicle than all other car companies combined, while continuing to grow its business at a rapid clip, then do you think that justifies the market cap? https://www.visualcapitalist.com/charted-teslas-unrivaled-profit-margins/ https://www.visualcapitalist.com/charted-teslas-unrivaled-pr... Or what about rapidly growing revenue every year, which no other car company is currently able to do? https://www.macrotrends.net/stocks/charts/TSLA/tesla/revenue https://www.macrotrends.net/stocks/charts/TSLA/tesla/revenue
  - wredue 3y ago
    Just no. Teslas revenue growth is rapidly slowing. Growth contracting by 50% each year since 2019 Tesla has .66x the revenue of GM but 18x the market cap. Even at todays rate of growth, teslas market cap today is valued at like 100 years in the future. Disclaimer, I didn’t even do napkin math because teslas valuation is utterly absurd and claiming it’s proper in comparison to other companies in the same segment is completely ludicrous.
    - jliptzin 3y ago
      Why are you not comparing profit? Or taking into account the debt levels of each company? There is more to valuation than revenues
      - wredue 3y ago
        Who cares? No company with declining growth and half the revenue is worth 18x another in the same segment.
        jliptzin 3y ago
        And what if one of those companies has $200 billion in debt to service at a high interest rate and the other has close to no debt? How does that impact your calculations? I would love to see your valuation model.
pardoned_turkey 3y ago
Nobody is arguing that you should feel sorry for short-sellers. It's just a mildly interesting fact, although it's less meaningful than implied in the article, because Tesla is also one of the most-heavily traded companies on the market. A lot of "index fund" folks criticize shorting and other "gambling" tactics, but it's probably worth noting that the argument for the soundness of index funds hinges on there being a class of traders who identify bad businesses and try to drive their price down. Otherwise, you're just pumping money into a snapshot of the market with no regard for the health of the constituent businesses, and it eventually ends in tears.
- thriftwy 3y ago
  Why? If market on average grows then so is your snapshot. If it does not, then financial systen will eventually collapse so $1 = $0
  - prepend 3y ago
    Index funds aren’t the entire market. Just specific major stocks (eg, s&p 500). You want someone “thinning the herd” to keep the index sound over time.
  - gizmo686 3y ago
    The market is not an isolated thing sitting out there in nature. It is a complex system built and run by humans. Index investors are freeloading off of the work that a bunch of active investors are doing. This is good for the index investors because they do not need to pay for all the work that active investors are doing for them. Active investors, for their part, need to either maintain enough of an edge over freeloaders to justify their pay, or serve a niche market with concerns other than "line go up" (this is where the "hedge" in "hedge fund" comes from). If every participant is an index investor, then no one is doing the actual work, so the entire system crumbles.
    - thriftwy 3y ago
      What if it does not crumble? What if the people who "did the actual work" turn out to be the useless ones?
bdangubic 3y ago
Defining investing as gambling might just be the funniest thing I have read on HN and I am almost 50 years old :)
- advael 3y ago
  I mean, I think they were only arguing long- and short- selling are gambling, not any form of investment. I would also say most daytrading is at least gambling-adjacent. We get a little more fuzzy once we talk about investing significant amounts into a business (e.g. "Angel Investors") where you can meaningfully be said to be influencing the outcome you're betting on in a significant way, and we can probably say that investing in vehicles like index funds are a pretty safe bet as long as the economy writ large doesn't crash, but like many terms in the english language a whole ambiguous grey area exists where the connotational choice you make in describing it is pretty subjective
- hnlmorg 3y ago
  Short selling could be argued as the literal opposite to investing because you're borrowing stock, immediately selling and hoping it goes down in value so you can buy it back cheaper. You're not actually investing in anything. Maybe you're getting confused with normal trades where you hold onto your stock and hope it goes up in value (like with any other investment)?
  - wkyle 3y ago
    I don't think that it makes a ton of sense to draw an ideological difference between shorting and buying in the secondary market, where buying is 'Investing' and short selling isn't. Both are valid contributors to price discovery. The initial investment already happened, you're not actually adding capital to the company when buying shares on an exchange.
    - hnlmorg 3y ago
      Investing doesn't mean you have to contribute to the thing you're investing in. Take investing in gold for example, you don't polish nor do anything else to the metal. You just buy a quantity of it and hope it goes up in value. The problem with short selling is that you're actually borrowing. That all said, I'm not saying I disagree with your point either. It is hard to make an ideological argument when this is really more just different shades of grey. Personally I'd say all investments are a form of gambling. Some investments are just riskier than others.
hipadev23 3y ago
> Who cares what gamblers lost? You have an odd view of how investing or trading works. Why should the only choices be "this will go up" or "im gonna sit this one out". What's wrong with the equally valid scenario of "this is overvalued and will go down"? Were they incorrect? Sure. But that doesn't mean believing that something will go down is inherently wrong or invalid behavior.
- MichaelRo 3y ago
  "Believing" is not "investing", sorry for breaking this out to you. God bless, lol!!! :)) Getting back to being serious, "believing" is pretty much what betting is about. Synonym that is. "jecroisque" / "io crecă" trading system, rofl again :)))) . jecroisque = Je crois que.
  - hipadev23 3y ago
    You have no goddman clue what you’re saying.
    - MichaelRo 3y ago
      You like saying "goddamn" a lot. That doesn't make you right, consarnit.

tempestn 3y ago

This is all true, but it's a bit of a shame as it puts a limit on market efficiency. To take an extreme example, every rational person knew that Gamestop wasn't worth $20B+. (Or even close to what it's trading at now.) But given the costs and risks of shorting, there was (is) no way for most traders to profit off of that with a reasonable risk/reward, and so the mispricing persists. Tesla could be seen as a less extreme example of the same. Unlike Gamestop, it's a very successful company with a lot going for it. But was it ever really worth more than every other car company combined?

jliptzin 3y ago
If it’s making more profit per vehicle than all other car companies combined, while continuing to grow its business at a rapid clip, then do you think that justifies the market cap? https://www.visualcapitalist.com/charted-teslas-unrivaled-profit-margins/ https://www.visualcapitalist.com/charted-teslas-unrivaled-pr... Or what about rapidly growing revenue every year, which no other car company is currently able to do? https://www.macrotrends.net/stocks/charts/TSLA/tesla/revenue https://www.macrotrends.net/stocks/charts/TSLA/tesla/revenue
- wredue 3y ago
  Just no. Teslas revenue growth is rapidly slowing. Growth contracting by 50% each year since 2019 Tesla has .66x the revenue of GM but 18x the market cap. Even at todays rate of growth, teslas market cap today is valued at like 100 years in the future. Disclaimer, I didn’t even do napkin math because teslas valuation is utterly absurd and claiming it’s proper in comparison to other companies in the same segment is completely ludicrous.
  - jliptzin 3y ago
    Why are you not comparing profit? Or taking into account the debt levels of each company? There is more to valuation than revenues
    - wredue 3y ago
      Who cares? No company with declining growth and half the revenue is worth 18x another in the same segment.
      - jliptzin 3y ago
        And what if one of those companies has $200 billion in debt to service at a high interest rate and the other has close to no debt? How does that impact your calculations? I would love to see your valuation model.

pardoned_turkey 3y ago

Nobody is arguing that you should feel sorry for short-sellers. It's just a mildly interesting fact, although it's less meaningful than implied in the article, because Tesla is also one of the most-heavily traded companies on the market. A lot of "index fund" folks criticize shorting and other "gambling" tactics, but it's probably worth noting that the argument for the soundness of index funds hinges on there being a class of traders who identify bad businesses and try to drive their price down. Otherwise, you're just pumping money into a snapshot of the market with no regard for the health of the constituent businesses, and it eventually ends in tears.

thriftwy 3y ago
Why? If market on average grows then so is your snapshot. If it does not, then financial systen will eventually collapse so $1 = $0
- prepend 3y ago
  Index funds aren’t the entire market. Just specific major stocks (eg, s&p 500). You want someone “thinning the herd” to keep the index sound over time.
- gizmo686 3y ago
  The market is not an isolated thing sitting out there in nature. It is a complex system built and run by humans. Index investors are freeloading off of the work that a bunch of active investors are doing. This is good for the index investors because they do not need to pay for all the work that active investors are doing for them. Active investors, for their part, need to either maintain enough of an edge over freeloaders to justify their pay, or serve a niche market with concerns other than "line go up" (this is where the "hedge" in "hedge fund" comes from). If every participant is an index investor, then no one is doing the actual work, so the entire system crumbles.
  - thriftwy 3y ago
    What if it does not crumble? What if the people who "did the actual work" turn out to be the useless ones?

bdangubic 3y ago

Defining investing as gambling might just be the funniest thing I have read on HN and I am almost 50 years old :)

advael 3y ago
I mean, I think they were only arguing long- and short- selling are gambling, not any form of investment. I would also say most daytrading is at least gambling-adjacent. We get a little more fuzzy once we talk about investing significant amounts into a business (e.g. "Angel Investors") where you can meaningfully be said to be influencing the outcome you're betting on in a significant way, and we can probably say that investing in vehicles like index funds are a pretty safe bet as long as the economy writ large doesn't crash, but like many terms in the english language a whole ambiguous grey area exists where the connotational choice you make in describing it is pretty subjective
hnlmorg 3y ago
Short selling could be argued as the literal opposite to investing because you're borrowing stock, immediately selling and hoping it goes down in value so you can buy it back cheaper. You're not actually investing in anything. Maybe you're getting confused with normal trades where you hold onto your stock and hope it goes up in value (like with any other investment)?
- wkyle 3y ago
  I don't think that it makes a ton of sense to draw an ideological difference between shorting and buying in the secondary market, where buying is 'Investing' and short selling isn't. Both are valid contributors to price discovery. The initial investment already happened, you're not actually adding capital to the company when buying shares on an exchange.
  - hnlmorg 3y ago
    Investing doesn't mean you have to contribute to the thing you're investing in. Take investing in gold for example, you don't polish nor do anything else to the metal. You just buy a quantity of it and hope it goes up in value. The problem with short selling is that you're actually borrowing. That all said, I'm not saying I disagree with your point either. It is hard to make an ideological argument when this is really more just different shades of grey. Personally I'd say all investments are a form of gambling. Some investments are just riskier than others.

hipadev23 3y ago

> Who cares what gamblers lost? You have an odd view of how investing or trading works. Why should the only choices be "this will go up" or "im gonna sit this one out". What's wrong with the equally valid scenario of "this is overvalued and will go down"? Were they incorrect? Sure. But that doesn't mean believing that something will go down is inherently wrong or invalid behavior.

MichaelRo 3y ago
"Believing" is not "investing", sorry for breaking this out to you. God bless, lol!!! :)) Getting back to being serious, "believing" is pretty much what betting is about. Synonym that is. "jecroisque" / "io crecă" trading system, rofl again :)))) . jecroisque = Je crois que.
- hipadev23 3y ago
  You have no goddman clue what you’re saying.
  - MichaelRo 3y ago
    You like saying "goddamn" a lot. That doesn't make you right, consarnit.