Penny Stocks Are Booming, Which Is Good News for Swindlers(nytimes.com)
nytimes.com
Penny Stocks Are Booming, Which Is Good News for Swindlers
https://www.nytimes.com/2021/03/18/business/penny-stocks-trading.html
246 comments
> 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.
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.
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.
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.
> 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.
ICOs provided the single best example of why regulation is necessary in decades — a world of fly by night scammers doing whatever it takes to separate people from their money, and a few well inventions but utterly unsuccessful projects. Zero ICOs turned into real successful business. Zero. You can count them on no hands. In exchange for what must be hundreds of billions of dollars worth of investments from the common person. What an utter write off.
Thing is, if you can raise from value added investors with experience and connections, you do. If you can’t you go after people who don’t know better. This leads to massive adverse selection risk - present in JOBS act investing too fwiw.
There’s a long and storied tradition here.
ICOs provided the single best example of why regulation is necessary in decades — a world of fly by night scammers doing whatever it takes to separate people from their money, and a few well inventions but utterly unsuccessful projects. Zero ICOs turned into real successful business. Zero. You can count them on no hands. In exchange for what must be hundreds of billions of dollars worth of investments from the common person. What an utter write off.
Thing is, if you can raise from value added investors with experience and connections, you do. If you can’t you go after people who don’t know better. This leads to massive adverse selection risk - present in JOBS act investing too fwiw.
There’s a long and storied tradition here.
A lot of ICOs aren't trying to turn into businesses, or at least not primarily. They're trying to make an open protocol with a valuable token. Successful examples so far include Filecoin, Ethereum, and several major Ethereum competitors. One built on top of Ethereum is Maker, the leading decentralized stablecoin. Another is Chainlink, which does oracles.
Two actual businesses I can name that started with ICOs and appear to be doing well are Funfair, which does legal regulated gambling over Ethereum state channels, and Monolith, which puts tokens on VISA cards for spending.
Two actual businesses I can name that started with ICOs and appear to be doing well are Funfair, which does legal regulated gambling over Ethereum state channels, and Monolith, which puts tokens on VISA cards for spending.
ICOs are mostly scams. If the company's product isn't the coin, clear scam. If the product is the coin, is the coin unique in some way? If not, scam. Most ICOs fall into one of those categories. I'm sure there are a handful of counterexamples amongst the myriads of scams
The following ICOs became successful projects:
Ethereum Tezos Monero ( I think ) BAT (Brave Browser's Token)
There are plenty of others, but these are the ones that came up off the top of my head.
Ethereum Tezos Monero ( I think ) BAT (Brave Browser's Token)
There are plenty of others, but these are the ones that came up off the top of my head.
> The rise of ICOs and crowd funding provide a strong counterexample.
The crowdfunding provisions of the JOBS act are nearly a decade old now, which is the horizon of a typical VC fund. Has there been a single company that has returned well to investors? (Honest question, I haven't looked -- but I've seen some pretty suspicious looking pitches enabled by the act)
> Ideally the best startups would be funded by revenue and bank loans.
This is basically what happened before venture capital. If it were a more efficient way of funding startups, VC would not have emerged as an industry.
The crowdfunding provisions of the JOBS act are nearly a decade old now, which is the horizon of a typical VC fund. Has there been a single company that has returned well to investors? (Honest question, I haven't looked -- but I've seen some pretty suspicious looking pitches enabled by the act)
> Ideally the best startups would be funded by revenue and bank loans.
This is basically what happened before venture capital. If it were a more efficient way of funding startups, VC would not have emerged as an industry.
Certainly, absent the VC model (or some other wealthy investor model), it would be much harder to scale businesses that are capital-intensive and/or aren't profitable in the short-term. So presumably absent VCs, you'd have a lot fewer crappy tech startups but you might also not have the success stories--or at least it would have taken them a lot longer to get there.
Oculus started on Kickstarter. I believe GlowForge is a unicorn and started on Pebble.
Although the naming is confusing, crowdfunding in the JOBS Act sense enables small-time investors to invest for equity. It’s different from crowdfunding in the traditional, product sense which is essentially just a preorder and was legal before the JOBS act.
> The rise of ICOs
The rise of this scam ecosystem is proof that regulation is useful. Maybe there are rare cases of ICOs that were not scams. And maybe some of few remaining and were not utter, complete and predictable failure.
But it was a good demonstration how gullible people are and how evil people will readily exploit it.
The rise of this scam ecosystem is proof that regulation is useful. Maybe there are rare cases of ICOs that were not scams. And maybe some of few remaining and were not utter, complete and predictable failure.
But it was a good demonstration how gullible people are and how evil people will readily exploit it.
> how gullible people are and how evil people will readily exploit it
This really shouldn't be a surprise to anyone at this point. At least this one didn't create a war or recession. ICOs are innovative the same way other crowd funding initiatives are. It's a way for poorly networked but high quality people to get funding. There will be less scams over time as the people get smarter. It's no different than when radiation was discovered in the early 20th century, irradiated products became all the fad (1). Innovation always brings this risk.
(1) https://www.washingtonpost.com/health/the-lethal-legacy-of-e...
This really shouldn't be a surprise to anyone at this point. At least this one didn't create a war or recession. ICOs are innovative the same way other crowd funding initiatives are. It's a way for poorly networked but high quality people to get funding. There will be less scams over time as the people get smarter. It's no different than when radiation was discovered in the early 20th century, irradiated products became all the fad (1). Innovation always brings this risk.
(1) https://www.washingtonpost.com/health/the-lethal-legacy-of-e...
ICOs seems to have vastly higher rate of fraud than say Kickstarter
Yes, but you don't get equity or securities equivalents from Kickstarter. Here's an article about how $115B was scammed from crowdfunding investors in China (1). The biggest individual scam was a simple $8B Ponzi scheme.
(1) https://www.crowdfundinsider.com/2020/08/165315-115-billion-...
(1) https://www.crowdfundinsider.com/2020/08/165315-115-billion-...
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.
Most ICOs are simply scams and in no way comparable to legitimate investments.
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.
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.
Name three ICO successes.
Let's look at topcoinlist.com. Not the current version, but the one of three years ago.[1] See how the top 5 from early 2018 came out.
- Tripbit - Down to near zero.[2]
- Developeo - No longer listed. "Website not active" as of 2020.[3]
- Proof of Toss - "Coin is inactive"[4]
- BitRewards - Still traded, sort of.[5] Issued at US$0.003, now at US$0.0002, with a daily trading volume of about US$1.
- CoolCousin - "Coin is inactive" [6]
FAIL.
[1] https://web.archive.org/web/20180403121628/https://topicolis...
[2] https://ih.advfn.com/crypto/TripBit-TBT
[3] https://icomarks.com/ico/developeo
[4] https://www.coingecko.com/en/coins/proof-of-toss
[5] https://coinmarketcap.com/currencies/bitrewards/
[6] https://www.coingecko.com/en/coins/cool-cousin
Let's look at topcoinlist.com. Not the current version, but the one of three years ago.[1] See how the top 5 from early 2018 came out.
- Tripbit - Down to near zero.[2]
- Developeo - No longer listed. "Website not active" as of 2020.[3]
- Proof of Toss - "Coin is inactive"[4]
- BitRewards - Still traded, sort of.[5] Issued at US$0.003, now at US$0.0002, with a daily trading volume of about US$1.
- CoolCousin - "Coin is inactive" [6]
FAIL.
[1] https://web.archive.org/web/20180403121628/https://topicolis...
[2] https://ih.advfn.com/crypto/TripBit-TBT
[3] https://icomarks.com/ico/developeo
[4] https://www.coingecko.com/en/coins/proof-of-toss
[5] https://coinmarketcap.com/currencies/bitrewards/
[6] https://www.coingecko.com/en/coins/cool-cousin
I'll name nine: Ethereum, Cardano, Chainlink, Filecoin, Maker/DAI, Augur, the Brave browser, Funfair, and Monolith/Tokencard.
- Monolith/Tokencard: down 90% from peak.[1]
- Funfair: down about 95% from peak.[2]
- Brave basic attention token - actually went up.
- Augur - down about 70% from peak.
- Maker/DAI is a sort-of-stable coin. [4] DAI is supposed to be stable with respect to dollars, but is backed by Etherium and the right to dilute Maker coins. So Maker holders are subordinate creditors. Unclear how that will hold up in a downturn. Interesting, though.
- Filecoin has been going way up lately, with institutional backing. That's interesting and needs further attention. It's a scheme for trading disk storage capacity.
- Chainlink has gone way up. Although the system for actually storing files is only in beta, and hasn't been priced yet.
- Cardano - way up at the ICO, then way down for three years, now back up to slightly above the ICO peak. This is a proof of stake system.
- Etherium - big peak in 2017, crashed to about 15% of peak, now back up.
[1] https://coinmarketcap.com/currencies/monolith/
[2] https://icomarks.com/ico/funfair
[3] https://www.coinbase.com/price/basic-attention-token
[4] https://coinmarketcap.com/currencies/augur/
[5] https://coinmarketcap.com/currencies/multi-collateral-dai/
[6] https://www.msn.com/en-us/news/technology/what-is-filecoin-a...
[7] https://www.coinbase.com/price/chainlink
[8] https://coinmarketcap.com/currencies/cardano/
- Funfair: down about 95% from peak.[2]
- Brave basic attention token - actually went up.
- Augur - down about 70% from peak.
- Maker/DAI is a sort-of-stable coin. [4] DAI is supposed to be stable with respect to dollars, but is backed by Etherium and the right to dilute Maker coins. So Maker holders are subordinate creditors. Unclear how that will hold up in a downturn. Interesting, though.
- Filecoin has been going way up lately, with institutional backing. That's interesting and needs further attention. It's a scheme for trading disk storage capacity.
- Chainlink has gone way up. Although the system for actually storing files is only in beta, and hasn't been priced yet.
- Cardano - way up at the ICO, then way down for three years, now back up to slightly above the ICO peak. This is a proof of stake system.
- Etherium - big peak in 2017, crashed to about 15% of peak, now back up.
[1] https://coinmarketcap.com/currencies/monolith/
[2] https://icomarks.com/ico/funfair
[3] https://www.coinbase.com/price/basic-attention-token
[4] https://coinmarketcap.com/currencies/augur/
[5] https://coinmarketcap.com/currencies/multi-collateral-dai/
[6] https://www.msn.com/en-us/news/technology/what-is-filecoin-a...
[7] https://www.coinbase.com/price/chainlink
[8] https://coinmarketcap.com/currencies/cardano/
All true but what matters to ICO investors is their buying price. For Ethereum for example, the ICO price was between 30 cents and 60 cents, depending on when they bought. At the bottom of the post-2017 bear market it was $82, and at this moment it's $2098.
The only way Ethereum ICO investors could have lost money is if they bought over 43 cents, and sold when it dipped down to that point several months after launch.
The only way Ethereum ICO investors could have lost money is if they bought over 43 cents, and sold when it dipped down to that point several months after launch.
Advisors can certainly play that role, though they’re often low commitment roles with a small degree of aligned interests. Advisors are on their side and investors are on yours ideally.
Consider also that bank loans require that you make frequent structured payments with interest. That simply doesn’t apply to venture backed investments. Nobody ever got anywhere at a bank by taking risk. The role of the VCs is to provide the right level of risk tolerance on their capital.
> 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.
Usually switching out of the wild west phase is marked by regulation.
Consider also that bank loans require that you make frequent structured payments with interest. That simply doesn’t apply to venture backed investments. Nobody ever got anywhere at a bank by taking risk. The role of the VCs is to provide the right level of risk tolerance on their capital.
> 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.
Usually switching out of the wild west phase is marked by regulation.
VCs certainly have a role for high risk high reward investments. Equity is very expensive and if you can avoid giving it up, you should. Bank loans aren't an option for everyone but if both VCs and loans are on the table, you should pretty much always take the loan (unless it's personally collateralized).
I don't have any issue with the idea of VCs and generally I think they're better aligned than private equity. The big point is not to value smart vs dumb money. Just take the best deal and use the money you saved to hire someone. No amount of "smart" is worth even an extra 0.5% on the cap table. When comparing VCs, I'd like to safe vs dangerous instead. Does a VC have a reputation of creating problems for founders or giving them space even if things aren't going well? That's way more of a consideration than if a VC has better intros or a smarter team.
I don't have any issue with the idea of VCs and generally I think they're better aligned than private equity. The big point is not to value smart vs dumb money. Just take the best deal and use the money you saved to hire someone. No amount of "smart" is worth even an extra 0.5% on the cap table. When comparing VCs, I'd like to safe vs dangerous instead. Does a VC have a reputation of creating problems for founders or giving them space even if things aren't going well? That's way more of a consideration than if a VC has better intros or a smarter team.
> No amount of "smart" is worth even an extra 0.5% on the cap table.
I respectfully disagree. Your equity is worthless until it’s worth something. That 0.5% could be the difference between a unicorn and a bankruptcy. I would counter with: don’t over value your equity. Don’t make stupid decisions of course but don’t let 0.5% be the reason you fail.
I respectfully disagree. Your equity is worthless until it’s worth something. That 0.5% could be the difference between a unicorn and a bankruptcy. I would counter with: don’t over value your equity. Don’t make stupid decisions of course but don’t let 0.5% be the reason you fail.
Why would an advisor be better aligned than an investor?
An investor has other constraints that prevent them from acting in the best interest of the company. Especially VCs have a timeline they need to hit for their fund so they'll push founders to make -EV decisions to speedup the timeframe. Investors also only care about the value of their portfolio, not the value of an individual company. Portfolio infighting, for example lawsuits, is highly discouraged even if it's for the benefit of one company. An advisor is usually an industry professional with fewer constraints and fewer possible sources of conflict.
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> The idea of value-added investors is pretty silly IMO.
The company I work at is VC funded. It would have folded if it was run by the original founders. At ~200m valuation it started stagnating. A member of the board that was on a VC seat found a consultant who came in as a strategy officer at first. He was able to turn the company around, made it possible for original founders to step away and became the new CEO in about 1 year. The company became a unicorn +-1.5 years ago.
After seeing this I prefer smart money very strongly.
The company I work at is VC funded. It would have folded if it was run by the original founders. At ~200m valuation it started stagnating. A member of the board that was on a VC seat found a consultant who came in as a strategy officer at first. He was able to turn the company around, made it possible for original founders to step away and became the new CEO in about 1 year. The company became a unicorn +-1.5 years ago.
After seeing this I prefer smart money very strongly.
For every example of a VC saving a company (other than the actual investment), there are a dozen about a VC destroying one.
Let's also actually analyze the economics of this success case to show how it's still silly. Let's say the VC got a 15% discount for being smart(1). Let's say the VC owns 20% of the company. At a $200M valuation, the founders paid $6M to get smart investors as opposed to dumb money. For this $6M, they got an introduction at a pivotal point in the company. The salary of the COO of Yelp is $3.3M year (2) and most of that was stock compensation. For $6M, you could have your choice of COOs from top tech companies. IMO, that $6M could've been spent much more efficiently.
(1) This is a big assumption and you can play around with the numbers but if "smart" money doesn't get a better valuation than dumb money, there's no value to being a smart investor and the extra effort wouldn't make it worth it. 15% is also pretty conservative as you can feel free to look at the difference in VC valued companies vs how Sovereign Wealth Funds valued them.
(2) https://www1.salary.com/Jed-Nachman-Salary-Bonus-Stock-Optio...
Let's also actually analyze the economics of this success case to show how it's still silly. Let's say the VC got a 15% discount for being smart(1). Let's say the VC owns 20% of the company. At a $200M valuation, the founders paid $6M to get smart investors as opposed to dumb money. For this $6M, they got an introduction at a pivotal point in the company. The salary of the COO of Yelp is $3.3M year (2) and most of that was stock compensation. For $6M, you could have your choice of COOs from top tech companies. IMO, that $6M could've been spent much more efficiently.
(1) This is a big assumption and you can play around with the numbers but if "smart" money doesn't get a better valuation than dumb money, there's no value to being a smart investor and the extra effort wouldn't make it worth it. 15% is also pretty conservative as you can feel free to look at the difference in VC valued companies vs how Sovereign Wealth Funds valued them.
(2) https://www1.salary.com/Jed-Nachman-Salary-Bonus-Stock-Optio...
Well, you made a lot of assumptions here. For example that a COO from a good tech company in the US would come to a small EU country to save a failing startup. Also, we needed some pretty specific knowledge to succeed and we did not even know we were missing it.
Our company checks with people working in the org to see if we want to take money from particular investors. We have rejected investors in the past because the values of the investors were different from ours. We take money from investors that we can align on the mission. I mean, there are so many more criteria than money - values, mission, control of the company (are we free to run the company as we like?), preference treatment (how much preference you give VC's on their stock? How much are you willing to reduce the risk of the investor by taking their terms?). We used to value such things and we continue to do so. I'm happy we paid a premium and would do so again.
I look at it the other way round - if you compromise on values / mission / control / other things that are important to you and people in the organisation - you can get more money.
I mean, but how did we get into a hole if we took all this smart VC money? We followed some of their advice (as well as our own misguided ideas). If we failed back then, we would have been just another company "destroyed by smart VC's".
Our company checks with people working in the org to see if we want to take money from particular investors. We have rejected investors in the past because the values of the investors were different from ours. We take money from investors that we can align on the mission. I mean, there are so many more criteria than money - values, mission, control of the company (are we free to run the company as we like?), preference treatment (how much preference you give VC's on their stock? How much are you willing to reduce the risk of the investor by taking their terms?). We used to value such things and we continue to do so. I'm happy we paid a premium and would do so again.
I look at it the other way round - if you compromise on values / mission / control / other things that are important to you and people in the organisation - you can get more money.
I mean, but how did we get into a hole if we took all this smart VC money? We followed some of their advice (as well as our own misguided ideas). If we failed back then, we would have been just another company "destroyed by smart VC's".
I think I'm much more cynical about investors than you. Employees are very different from investors. Employees dedicate most of their waking hours to make your company better while using that money to provide for their families. Investors spend maybe a couple hours every quarter making sure their investment is successful. The vast majority of investors do not depend on a single bet or really care that much if a single bet loses. As a founder, how you treat investors and employees should be very different. For me in particular, I see investors as a necessary evil. I see employees contentment and fulfillment as a chief responsibility.
I have client who has developed industry-changing medical technology but they do not want to sell any equity.
We are looking at a bank loan to fund the factory and growth. They sell products that cost $5 per metre and sells at $500 per metre.
Bank loans are under used in startups but every company is different.
We are looking at a bank loan to fund the factory and growth. They sell products that cost $5 per metre and sells at $500 per metre.
Bank loans are under used in startups but every company is different.
There’s also a lot of debt finance available outside the Western world of finance if you know where to look (and how to negotiate with...interesting types).
I was expecting to see Brave browser in your list.
> 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.
That is probably true, but that's also the only option startups have during their early stages, so there's nothing to compare it to.
That is probably true, but that's also the only option startups have during their early stages, so there's nothing to compare it to.
Not all startups are VC-funded. (Of course, if your definition of startup is the sort of hypergrowth that requires VC funding, then we have a tautology.)
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.
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.
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.
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.
> 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.
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.
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.
> 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.
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.
> Penny Stocks Are Booming, Which Is Good News for Swindlers
The editorializing agenda is right there in the title. This isn't news it's propaganda and as usual the NYT lies through omission. Please name one reason the state lotto is ok but investing in penny stocks is not. You don't see any NYT articles about that though.
The editorializing agenda is right there in the title. This isn't news it's propaganda and as usual the NYT lies through omission. Please name one reason the state lotto is ok but investing in penny stocks is not. You don't see any NYT articles about that though.
That was a great article - to anyone seeing this comment, I’d recommend reading through it
Notice the difference between the two articles?
OP: Penny stocks are rife with fraud and reward swindlers
Your article: This one instance of state lotto had fraud. No comment on the lotto in general.
OP: Penny stocks are rife with fraud and reward swindlers
Your article: This one instance of state lotto had fraud. No comment on the lotto in general.
(sarcasm) the government profits from state lotto, it doesn't profit from stock swindlers.
Ummm, actually you do. Editorials and Op Eds as well.
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.
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.
The tax problem is actually relatively simple to solve. Tax at the point of consumption. Unfortunately, people would rather have an ineffective game of cat and mouse where they FEEL like it's progressive, even though the rich still aren't paying.
Classic consumption taxes (sales taxes and VAT) tend to be quite regressive.
I haven't read the whole report, but this was studied in 2005[1] and they had to add a "Family Credit" (basically a UBI) of 500-1000$ per month to balance it out, and recovered approximately 65% of individual and corporate income taxes.
1. https://govinfo.library.unt.edu/taxreformpanel/final-report/...
I haven't read the whole report, but this was studied in 2005[1] and they had to add a "Family Credit" (basically a UBI) of 500-1000$ per month to balance it out, and recovered approximately 65% of individual and corporate income taxes.
1. https://govinfo.library.unt.edu/taxreformpanel/final-report/...
Sounds like the fair tax by Neil Bortz.
High sales tax on all “new” products. None on used. A check to everyone each month so that poor don’t suffer from it.
Basically eliminates the IRS, and much of the Tax compliance / avoidance industry. Stops a lot of the tax nonsense that corporations and congress loves.
High sales tax on all “new” products. None on used. A check to everyone each month so that poor don’t suffer from it.
Basically eliminates the IRS, and much of the Tax compliance / avoidance industry. Stops a lot of the tax nonsense that corporations and congress loves.
The problem with that is, people (usually rich people) will stop buying expensive stuff in the country, and they start buying them from another country that does not have any sales tax. Rich people avoid taxes and poor people are now stuck with the VAT on their daily needs.
Tax purchases made overseas.
Tariffs are already used a lot.
Tariffs are already used a lot.
Yeah more or less credit it back as a function of income by way of monthly payouts. At a certain income the credits begin getting phased out slowly. You can also tax different things at different rates. For instance, vegetables sound be taxed differently than yachts. It also lets externalities be taxed the entire lifecycle of the good or service.
I imagine that I would have a hard time listing out all the points of consumption. For example, I would include "filing to make a corporation" on the list. However, when the police come to protect my business from burglars, do I add that to the list? Or would a "daily protection" make more sense? Higher up the ladder, when our intelligence agencies trade favors in exchange for weapons contracts, should lockheed pay for that? Or should the workers at the bomb factory? Or the municipality in which the factory exits?
consumption based taxes are an even larger boon to the rich since they consume so much less of their income.
This is predicated on the idea that the rich will pay their taxes if we just close all the loopholes.
If you polled the top brackets I think you'll find that they are more than happy to continue with our current tax system.
If you polled the top brackets I think you'll find that they are more than happy to continue with our current tax system.
Are you suggesting that the rich would break the law and engage in tax evasion (not legal loopholes)?
A great portion of my taxes goes to military and police. Wouldn’t they just collect the money push come to shove? They certainly have the capability, but possibly not the will.
A great portion of my taxes goes to military and police. Wouldn’t they just collect the money push come to shove? They certainly have the capability, but possibly not the will.
It’s relatively easy to pay less taxes than your true compensation once you get past the rank-and-file level of employment.
As income taxes rise there’s a clear pattern of altered compensation like stock grants, expense accounts, etc.
For example, a company can lease an apartment for you to live in. That expense is a write off and isn’t subject to FICA taxes.
Instead of giving you $40,000 in cash which would cost 30% in FICA between you and the company plus personal income tax to you, you can live in a nice $3500/mo apartment you would otherwise be paying for in after tax dollars.
Instead of you paying $800/month+ for a Tesla model X lease with your after tax dollars the company can pay for it, write it off, and again they’re saving 15% on taxes and you’re saving > 40% on that $10,000 and pocketing more of your after tax income.
As income taxes rise there’s a clear pattern of altered compensation like stock grants, expense accounts, etc.
For example, a company can lease an apartment for you to live in. That expense is a write off and isn’t subject to FICA taxes.
Instead of giving you $40,000 in cash which would cost 30% in FICA between you and the company plus personal income tax to you, you can live in a nice $3500/mo apartment you would otherwise be paying for in after tax dollars.
Instead of you paying $800/month+ for a Tesla model X lease with your after tax dollars the company can pay for it, write it off, and again they’re saving 15% on taxes and you’re saving > 40% on that $10,000 and pocketing more of your after tax income.
>For example, a company can lease an apartment for you to live in. That expense is a write off and isn’t subject to FICA taxes.
I'm not an accountant or a tax lawyer, but it doesn't look like that's the case according to the IRS's website. Housing is only exempt if it's "Lodging on your business premises"[1]. A tesla would also likely not be exempt for a typical office worker[2]
[1] https://www.irs.gov/publications/p15b#en_US_2021_publink1000...
[2] https://www.irs.gov/publications/p15b#en_US_2021_publink1000...
I'm not an accountant or a tax lawyer, but it doesn't look like that's the case according to the IRS's website. Housing is only exempt if it's "Lodging on your business premises"[1]. A tesla would also likely not be exempt for a typical office worker[2]
[1] https://www.irs.gov/publications/p15b#en_US_2021_publink1000...
[2] https://www.irs.gov/publications/p15b#en_US_2021_publink1000...
Other countries solve this by taxing it as a "benefit in kind". It is compensation, and should be included in how one is taxed.
It is a thing in the US too. For example, I have to pay income tax on the annual "fitness reimbursement allowance" the company provides for us.
Very simplified version: we can spend up to $1k/yr on fitness related expenses and get them reimbursement. We submit a reimbursement request, and if it gets approved, I get the money back in my account. The HR page explicitly warns that any reimbursement received will count towards your income tax.
Very simplified version: we can spend up to $1k/yr on fitness related expenses and get them reimbursement. We submit a reimbursement request, and if it gets approved, I get the money back in my account. The HR page explicitly warns that any reimbursement received will count towards your income tax.
I don't think you can tax the rich with income tax, for the reason you state. I think you need a wealth tax.
At which point the regulatory burden imposed with the righteous purpose of catching those damn nimble "tax evaders" actually causes more tax loss by affecting and discouraging initiative, entrepreneurship and business agility?
If the wide view of the landscape in the US (little) and EU (much) is any indicator I imagine the point at which there is too much regulation is closer to or beyond the EU levels. In the US the never ending stream of new MLM, ICO/DeFi, and otherwise repackaged 'investment' scams is a constant reminder that it's very much a wild west.
Average people in the US need to know an obscene amount just to walk the minefield, while inflation erodes what little earnings they have.
Of course the richest investors can pump money into new ventures started in the lowest regulated markets to realize the highest gains with whatever hoop-jumping to get profits laundered through lowest taxed markets.
Average people in the US need to know an obscene amount just to walk the minefield, while inflation erodes what little earnings they have.
Of course the richest investors can pump money into new ventures started in the lowest regulated markets to realize the highest gains with whatever hoop-jumping to get profits laundered through lowest taxed markets.
You seem to view legislators as mustache-twirling villains while regulators are valiantly trying to save the little guy. They're often the exact same people.
Naturally there are good and bad among both roles, accountability and transparency is sorely needed everywhere.
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.
* 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.
Just because there are some things the government does not protect people against, does not mean that investments are the only thing the government protects people against.
> State lotto
Most gambling is either highly regulated or outright banned. Also, gambling is a financial product, which arguably falls under the category of "investment".
> Supplements/vitamins of dubious value
Because these products are very carefully designed and marketed to avoid the heavy regulation that is applied to medical products
> Regular stocks with wildly ridiculous P/E ratios
These are investments, so this example doesn't really fit into your thesis that the government only regulates investments.
> Various forms of "insurance"
Insurance is a financial product that could also be viewed as an "investment". Further, many types of insurance are highly regulated.
> State lotto
Most gambling is either highly regulated or outright banned. Also, gambling is a financial product, which arguably falls under the category of "investment".
> Supplements/vitamins of dubious value
Because these products are very carefully designed and marketed to avoid the heavy regulation that is applied to medical products
> Regular stocks with wildly ridiculous P/E ratios
These are investments, so this example doesn't really fit into your thesis that the government only regulates investments.
> Various forms of "insurance"
Insurance is a financial product that could also be viewed as an "investment". Further, many types of insurance are highly regulated.
My point is the government isn't "protecting" anyone with these regulations. They will happily watch you spend your life savings buying lotto tickets (not an investment) but if you actually want to put that money into a company, you're going to be scrutinized.
An even better example are the accredited investor laws, which also claim to "protect" people but in reality cut off all but the wealthy from the true upside to investing.
An even better example are the accredited investor laws, which also claim to "protect" people but in reality cut off all but the wealthy from the true upside to investing.
The difference is that a state lottery is completely transparent about their payouts. Companies will often lie about their expected payouts, hence the scrutiny.
> but in reality cut off all but the wealthy from the true upside to investing
I don't understand the logic here. There isn't a global conspiracy among rich people to stopping others from making money. It doesn't make any difference to Jeff Bezos on whether $1 million gets made by Peter Thiel or a regular person. In fact, Bezos would probably prefer the latter since they're more likely to spend their money on Amazon purchases.
The reason for accredited investor status is because losing money hurts more than winning money benefits unless if you have a lot of money to begin with. One regular person making $1 million doesn't make up for 10 regular people losing $50,000, even though that would be wildly EV positive.
> but in reality cut off all but the wealthy from the true upside to investing
I don't understand the logic here. There isn't a global conspiracy among rich people to stopping others from making money. It doesn't make any difference to Jeff Bezos on whether $1 million gets made by Peter Thiel or a regular person. In fact, Bezos would probably prefer the latter since they're more likely to spend their money on Amazon purchases.
The reason for accredited investor status is because losing money hurts more than winning money benefits unless if you have a lot of money to begin with. One regular person making $1 million doesn't make up for 10 regular people losing $50,000, even though that would be wildly EV positive.
I'm very skeptical that there are all these highly lucrative investments that small retail investors are missing out on once you adjust for risk. Many VCs don't actually have particularly great returns overall, for example. The idea that there's some magic money machine out there that only the private club has access to doesn't have a lot of evidence supporting it.
It gets really problematic when the money market doesn't allocate capital to productive investments. That's its ostensible and actually the only socially acceptable purpose.
We see people investing in dodgy companies, look at Theranos, not because the business idea is sound, but because the investors have powerful backers and can extract outsize return from inferior product.
And then there's bitcoin, which is not a medium of exchange, not a store of value, not a unit of account, but a pure object of speculation and now even Goldman Sachs advise to put the money there. The real world is not improved by clear-eyed people allocating funds to a Ponzi scheme.
We see people investing in dodgy companies, look at Theranos, not because the business idea is sound, but because the investors have powerful backers and can extract outsize return from inferior product.
And then there's bitcoin, which is not a medium of exchange, not a store of value, not a unit of account, but a pure object of speculation and now even Goldman Sachs advise to put the money there. The real world is not improved by clear-eyed people allocating funds to a Ponzi scheme.
I'm not seeing the problem. What you're saying is that you want to dictate how people spend their money. Why is buying penny stocks a concern to you but spending that same amount of money on travel, cars, beanie babies... is not?
People should be able to spend their money as they please. Again, this is a red herring because their is upside to be had in plenty of these investments. Contrary to the article penny stocks are nowhere near 100% fraudulent.
People should be able to spend their money as they please. Again, this is a red herring because their is upside to be had in plenty of these investments. Contrary to the article penny stocks are nowhere near 100% fraudulent.
> 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.
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.
Stocks are heavily regulated as well. Regulation and fraud are orthogonal to each other.
It’s so weird that when what could be dumped into a river got regulated, the river stopped catching fire. Is that orthogonal too? Maybe a coincidence?
[1] https://clevelandhistorical.org/items/show/63
[1] https://clevelandhistorical.org/items/show/63
The Cuyahoga River catching fire was motivation for creating the EPA.
> 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.
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.
Regulation leads to regulatory capture which leads to power and information imbalances that are great substrate for fraud. The stock market (not just penny stocks) is highly regulated but I think we could all agree there's fraud happening.
Happy to read any links you have that has evidence contrary to that though.
Happy to read any links you have that has evidence contrary to that though.
Deregulation leads to collusion and centralization which are great for gouging.
Regulatory capture is corruption. In every scenario we need transparency and enforcement of agreed upon rules to maintain a balanced playing field.
Regulatory capture is corruption. In every scenario we need transparency and enforcement of agreed upon rules to maintain a balanced playing field.
Basically everything on your list is highly highly regulated except for vitamins which should be. They really should be. When you buy vitamins you have no idea if they work or do anything, it’s a giant waste of money. I’ve read some studies on the bioavailability of magnesium supplements and they range from 20 to 90% depending on the brand. FDA regulated Tylenol doesn’t range from 20 to 90% affective depending on whether I get the brand-name or generic. This is yet another argument in support of regulation. [1]
As for the reason these financial products are regulated, they lead in part to the great depression. State has an interest in it because it is in the states interest to maintain a functioning economy.
There are compelling arguments against regulations, particularly in industries that have no business being regulated like aestheticians. Or barbers. There is genuinely no good reason for that. But the suggested vitamins and drugs shouldn’t be regulated, but financial product should be regulated? I’m having a hard time with this one.
[1] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6683096/#!po=0....
As for the reason these financial products are regulated, they lead in part to the great depression. State has an interest in it because it is in the states interest to maintain a functioning economy.
There are compelling arguments against regulations, particularly in industries that have no business being regulated like aestheticians. Or barbers. There is genuinely no good reason for that. But the suggested vitamins and drugs shouldn’t be regulated, but financial product should be regulated? I’m having a hard time with this one.
[1] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6683096/#!po=0....
Article is about stocks, so the fact that governments aren't consistent in protections compared to other areas seems a bit off topic.
That said, whenever the failure to protect carries a very high cost one would hope those things would get weighted more heavily when protections are considered. Supplements in particular are interesting in that they appear increasingly _designed_ to skirt existing regulations. And as more and more are found doing significant harm the governments of various states have starting paying more attention.
That said, whenever the failure to protect carries a very high cost one would hope those things would get weighted more heavily when protections are considered. Supplements in particular are interesting in that they appear increasingly _designed_ to skirt existing regulations. And as more and more are found doing significant harm the governments of various states have starting paying more attention.
Politicians chase/follow outrage. There's not enough outrage about psychic hotlines and supplements of dubious value.
Is there any outrage about penny stocks? I only see that from establishment media and financial outlets, not citizens.
Vitamins and supplements are part of what happens when doctors don’t listen.
Was getting up 10 times a night. Life was a living hell. Doctors were useless.
So I tried a recommended one. (Aloe Vera pills)
I sleep through the night now.
Now I also have had bad experiences. Elderberry was not fun.
Was getting up 10 times a night. Life was a living hell. Doctors were useless.
So I tried a recommended one. (Aloe Vera pills)
I sleep through the night now.
Now I also have had bad experiences. Elderberry was not fun.
Without getting into the specifics of weather particular substances have any meaningful effect vs placebo, part of the issue was that there’s no guarantee that there is even the thing on the label inside the pills or that their formulated in a way that actually makes them available to the body. For instance this study in magnesium supplementation shows a 20-90% absorption based on brand.
[1] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6683096/#!po=0....
[1] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6683096/#!po=0....
Yea, lots of different kinds of magnesium and brands are very annoying.
Stuff is amazing dramatically reduced headaches and muscle aches. Magnesium citrate.
I generally stick to the most expensive ones.
Other variations have not helped, I felt weird on them.
Problem is the same (though to a much lessor degree) for prescriptions.
Plaqunial name brand is drastically more impactful then it’s genetics. So much so, that I have to cut dosage 1/2 to 1/4.
Stuff is amazing dramatically reduced headaches and muscle aches. Magnesium citrate.
I generally stick to the most expensive ones.
Other variations have not helped, I felt weird on them.
Problem is the same (though to a much lessor degree) for prescriptions.
Plaqunial name brand is drastically more impactful then it’s genetics. So much so, that I have to cut dosage 1/2 to 1/4.
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> 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.
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.
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.
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.
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.
Organized criminals who are willing to be violent displace outlaw entrepreneurs who are peaceful.
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.)
(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.)
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.
Established entities always prefer regulations, as it makes it harder for new competitors to join the market.
> 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.
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.
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.
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.
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.
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.
The NYT has been governed by the Sulzberger family since 1896, more recently via a dual-class share structure after its shares became publicly traded in 1969. A. G. Sulzberger and his father, Arthur Ochs Sulzberger Jr are the current leaders of the Sulzberger-Ochs dynasty.
The NYT is as establishment as it gets, despite the endless posturing of 'investigative reporting', a fig leaf for quiet reinforcement of the status quo.
Its equivalent in the UK is arguably the Financial Times, who are in comparison very straight forward supporters of globalization, WEF 'great reset' etc along with the Rothchild/Agneli magazine the Economist.
There used to be a common descriptor of the Soviet era Pravda that you had to read between the lines to get near the truth. I broadly feel the same way about all of the above media companies.
There used to be a common descriptor of the Soviet era Pravda that you had to read between the lines to get near the truth. I broadly feel the same way about all of the above media companies.
Adding the UK Guardian to the above, who are in a whole class of their own as sheperds for the oligarchs wishes
> they own a skyscraper in one of the most expensive cities in the world. How could they not be the establishment?
I agree that the Times represents the institutional / political elites views surprisingly accurately. (Most societies don't have such a public lens into their elites' preferences.)
Your signaling mechanism, however, is poor. Lots of organizations own landmark properties in New York City. Most of them are property management companies. (Brookfield, I believe, owns about 40% of the New York Times building.) New York property types are...let's just say they've cultivated a reputation for eccentricity. Far from establishment, albeit powerful in their own right.
I agree that the Times represents the institutional / political elites views surprisingly accurately. (Most societies don't have such a public lens into their elites' preferences.)
Your signaling mechanism, however, is poor. Lots of organizations own landmark properties in New York City. Most of them are property management companies. (Brookfield, I believe, owns about 40% of the New York Times building.) New York property types are...let's just say they've cultivated a reputation for eccentricity. Far from establishment, albeit powerful in their own right.
Yes I guess my point is just that Democracy Now or a similar org doesn’t own a skyscraper.
[deleted]
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.
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.
> ICOs were regulated - they were covered by the same regulations that applied to stock sales
Theoretically, yes. But enforcement was practically nonexistent.
Theoretically, yes. But enforcement was practically nonexistent.
It would be like 1999 again, where a junk company goes public and raises $20+ million, the collapses in 2 to 3 years.
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...
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...
> 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.
The common man will end up demanding something more extreme when they lose.
Yep. Better to regulate now than have to bail out with taxpayer dollars later.
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
- 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
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.
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.
NYT calling for more regulation as usual.
What does the latter link have to do with deregulation?
If the question is 'what does two terms of Reagan have to do with deregulation?': 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.
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.
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.
> 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.
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.
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.
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.
The government is also not a monolithic entity, the officials trying to regulate OTC stocks are not the ones running lotteries, and they're not even at the same level of government! What do the money-raising schemes of states have anything to do with federal regulators?
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.
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.
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.
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.
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.
>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.
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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.
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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Wouldn't that preclude investment until a company went public?
what kinds of deregulation would you hope to see? make it easier for small companies to do public offerings?
And who will pick the winners?
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
Please try something new, I'm so curious as to why this logical fallacy gets repeated ad nauseam
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"...
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.
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?
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?
Well, he/she did use the word elite twice in the same sentence....
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.
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)?
it's more the ruling class, that includes both left and right.
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.
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.
For the most part, the only time "good, honest, hard working people" make money on the stock market is via their pensions.
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.
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.
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.
There are almost $30 trillion growing in retirement funds.
https://www.napa-net.org/news-info/daily-news/retirement-ass...
https://www.napa-net.org/news-info/daily-news/retirement-ass...
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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).
For a relatively quick read with an alternative perspective, check out The Bitcoin Standard 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!
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!
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.
blockchain tech is definitely the future. /s
I had this casino-going coworker. She and her husband used to go to Atlantic City quite often. Now she's messing around with options trading on Robinhood.
I can't help but think a lot of volume is from casino enthusiasts stuck at home.
I can't help but think a lot of volume is from casino enthusiasts stuck at home.
For a while before the pandemic, lots of my poker buddies got into crypto. Most of them didn't even know what a blockchain was, but they had a portfolio of 20 crapcoins and hundreds of trades a month. Now, like your coworker, they're on Robinhood. Gamblers gotta gamble.
It's hard for me to decide if I am okay with that, because the Stock Market is indeed a casino. Or if I am troubled since the Stock Market is not supposed to be a casino.
I think that there is some nuance:
Day trading and short term plays are a casino. It is a zero sum game where every winner has a loser.
Long term holds, index investing, etc. Is arguably not a casino since there is very much a way to play that is not zero sum. You are counting on dividends, actual value being created, and it is possible to make money without there being a 'loser'.
Day trading and short term plays are a casino. It is a zero sum game where every winner has a loser.
Long term holds, index investing, etc. Is arguably not a casino since there is very much a way to play that is not zero sum. You are counting on dividends, actual value being created, and it is possible to make money without there being a 'loser'.
I sort of wonder if long term, as more and more retail investors get into the market, it'll become less and less rational. A lot of people seem to treat it sort of like trading cards or a fan club, where they buy stock in a company because they like it.
It's an easy product to sell. They gamified the lottery. Complete with a faster turnaround time, higher frequency, and stronger dopamine hits. The winners are more visible too.
This is an excellent point and should be reiterated often.
The lottery is one of the more innocent gambling game. The delayed reward, low chance of winning small amounts, and fixed schedule makes it so that it is not nearly as triggering of addictive behavior as other gambling games.
Personally I think the lottery should still be illegal, but it provides a good baseline. Any gambling game that has more effective contingencies then the lottery should at least be heavily regulated (possibly banned). And stocks definitely do.
The lottery is one of the more innocent gambling game. The delayed reward, low chance of winning small amounts, and fixed schedule makes it so that it is not nearly as triggering of addictive behavior as other gambling games.
Personally I think the lottery should still be illegal, but it provides a good baseline. Any gambling game that has more effective contingencies then the lottery should at least be heavily regulated (possibly banned). And stocks definitely do.
Yeah, the problem is, if you make the lottery illegal, numbers rackets will pop up to fill that void.
I guess it's a bit like the Japanese government turning a blind eye to the pachinko parlors.
I guess it's a bit like the Japanese government turning a blind eye to the pachinko parlors.
Except the Japanese government turning a blind eye is a simple case of corruption
At least where I live, the lottery profits (around 50% of revenues, IIRC) are largely used for charities and just various social organizations and stuff, like sports. I'm not really for lotteries personally, but I think what you said is quite unfair to lotteries all things considered.
I see. I wasn't trying to make an ethical statement about lottery profits, just compare the likelihoods of winning.
Well, why do you think Robinhood is valued at $11.7e9 on $0.68e9 in revenue? It's not people investing a fraction of their pay cheques once a month.
Please make this notation become a standard thing across news papers and discussions across the world!
Especially English<->Other european languages have different meanings to the word billion and miljard.
Especially English<->Other european languages have different meanings to the word billion and miljard.
It works here, for obvious reasons, but not nearly so many people know what $1e9 means as know what $1 billion means.
Although if you dig into it, it turns out that a lot of people are hazy on exactly how much more a billion is than a million, or a trillion than a billion. Quite aside from the short and long scale thing, I just mean that instead of knowing that a billion is to a million as a million is to a thousand, their concept is more like a million is "big", billion is "really big" and trillion is "omg really really big!!!".
Although if you dig into it, it turns out that a lot of people are hazy on exactly how much more a billion is than a million, or a trillion than a billion. Quite aside from the short and long scale thing, I just mean that instead of knowing that a billion is to a million as a million is to a thousand, their concept is more like a million is "big", billion is "really big" and trillion is "omg really really big!!!".
That's only a P/E of 17.2, which is not all that high. Schwab has a P/E of 31.3. Walmart has a P/E of 28.6, Coca-Cola has 29.3, Apple has 33.4, Visa has 44.8. If anything I'd say that the market considers Robinhood a poor business. Walmart and Coca-Cola have higher P/Es, and they are only going to grow about as fast as global GDP since they've pretty much saturated their markets. So Robinhood has a substantially lower multiple than companies that we know aren't going to grow very fast. And it's less than half of its "stodgy" competitor where people do invest a fraction of their pay checks.
P/E means price-earnings ratio, earnings means profits rather than revenues. E.g., Walmart has P/E of 28.6 but Price/Revenue=0.68 (https://finance.yahoo.com/quote/WMT/key-statistics?p=WMT)
I don't know.
You know something I had never thought before? "Hey, I have a business plan — and our target market is the poor."
And yet I have been fascinated with the Dollar Generals (Family Dollar, etc.), the payday loan business, the lottery....
It sounds like you can make a business on the back of the poor – you just need volume.
You know something I had never thought before? "Hey, I have a business plan — and our target market is the poor."
And yet I have been fascinated with the Dollar Generals (Family Dollar, etc.), the payday loan business, the lottery....
It sounds like you can make a business on the back of the poor – you just need volume.
The bottom 10% of American households have negative net worth. I don’t think these people are significant players on the stock market.
idk. I wouldn’t discount the promise of get out of dept quickly schemes. Reading headlines like “Made x millions on Robinhood”, “Invested in GameStop, now a millionaire” is doubly tempting for desperate folks. And if you have easy money available from predatory lenders (i.e. payday loans, second mortgages, etc.) I wouldn’t be surprised if a significant amount of the bottom 10% have lost money on the stock market.
Of course this is a measurable figure, so I’m willing to accept that I might be wrong.
Of course this is a measurable figure, so I’m willing to accept that I might be wrong.
Order Flow and Data. If you have access to Order Flow you can make pennies on each trade, this is how High Frequency Trading companies make money. If you have access to Data, you can be one step ahead of the market and figure out the direction.
Robinhood makes money by directing Order Flow through Citadel.
Robinhood makes money by directing Order Flow through Citadel.
I do have to wonder how much of this behavior is risk compensation [1] from people stuck at home.
[1]: https://en.wikipedia.org/wiki/Risk_compensation
[1]: https://en.wikipedia.org/wiki/Risk_compensation
Options trading is literally gambling, so this would be unsurprising. Robinhood made it much easier for people to get into.
As usual, "it depends." Buying calls and puts is often gambling.
However, you can also do rather conservative options trades (writing out-of-the-money calls on stocks you own and want to sell anyway, for example) and bring in extra money.
However, you can also do rather conservative options trades (writing out-of-the-money calls on stocks you own and want to sell anyway, for example) and bring in extra money.
This strategy is referred to as theta gang in /r/WSB nomenclature, but I would argue this is different because it's meta-gaming other people who are foolish enough to buy those wild out of the money options.
This is my preferred strategy as well.
This is my preferred strategy as well.
It's an old strategy. Without an actual edge and significant (read: sophisticated and costly) risk management, that strategy will eventually get blown out by someone who is better at pricing long tail risk events than the seller. There's a reason market makers obsessively delta hedge.
Would hate to have been selling put options on VIAC when Archegos shit the bed on $20B with >4x leverage. Good luck foreseeing that.
Would hate to have been selling put options on VIAC when Archegos shit the bed on $20B with >4x leverage. Good luck foreseeing that.
Well just make sure you are selling credit spreads and the risk of such events is mitigated
yes, I have had this happen with a biotech stock. The puts can be very risky. I usually sell calls since it is easier to stomach psychologically when it goes wrong.... "I missed out on some gains. But I would've sold anyway..."
>Options trading is literally gambling
To the average ignorant trader, sure. Otherwise this statement doesn't hold water. You should really do some research before making such silly uninformed claims.
To the average ignorant trader, sure. Otherwise this statement doesn't hold water. You should really do some research before making such silly uninformed claims.
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Anyone who purchases options is indeed gambling. I mean, you're not getting anything in return for your money like when you purchase shares to build equity. When you buy an option, if you're wrong you literally lose all your money.
Now, I know you're gonna say you can lose all your money when you buy shares, but no -- that very rarely, if ever, happens. If you buy a dividend stock than it's even better as a long-term investment.
The only parties options trading isn't "literally gambling" for are the ones selling the options like market makers (Citadel). They know people like to gamble and they're happy to take the other side of the trade because it's free money when they hedge properly (sounds like a casino, doesn't it?).
Anyone who buys options is literally gambling.
Now, I know you're gonna say you can lose all your money when you buy shares, but no -- that very rarely, if ever, happens. If you buy a dividend stock than it's even better as a long-term investment.
The only parties options trading isn't "literally gambling" for are the ones selling the options like market makers (Citadel). They know people like to gamble and they're happy to take the other side of the trade because it's free money when they hedge properly (sounds like a casino, doesn't it?).
Anyone who buys options is literally gambling.
Let's say I have 1000 shares of MSFT that I can't sell for 1 year, but I'm worried the stock might drop. I can buy puts to hedge against the price dropping, and the strike price determines how much loss I'm willing to accept, and the corresponding premium I need to pay. If the price in 1 year increased, I'm only out the premium for the 10 puts I bought, otherwise I can exercise them.
> Anyone who buys options is literally gambling.
I guess you also believe the entire insurance industry is gambling too. Out of curiosity, what parts of finance do you think aren't gambling?
If you categorize all speculative activity under uncertainty using the same word, that word ceases to be useful.
I guess you also believe the entire insurance industry is gambling too. Out of curiosity, what parts of finance do you think aren't gambling?
If you categorize all speculative activity under uncertainty using the same word, that word ceases to be useful.
Insurance is rooted in statistical analysis.
Buying options, unless you literally buy every option that exists, is not even close to similar.
Did I adequately address your strawman?
Buying options, unless you literally buy every option that exists, is not even close to similar.
Did I adequately address your strawman?
If you are purchasing “covered” options, it is absolutely akin to paying an insurance premium to limit the impact of short-term price swings, that are out of your control.
Just like you pay health insurance premiums to mitigate against costlier health risks.
You own 1 XYZ at an average price of $200.00. It is trading for $300.00.
You purchase an option to sell 1 XYZ for $300.00, which costs you $10.00, and expires in 3 months.
You just paid $10 to guarantee a minimum profit of $90.00 in 3 months, regardless of whether the price swings down.
There isn’t any morally harmful transaction occurring here, IMO.
It’s actually less risky than owning a stock for 3 months.
Is this transaction a reprehensible one, for you?
To be clear, we’re not trying to say that all options are created equal. Naked options (where you have no position) are in fact straight up gambling, at least insofar as I’ve tried to reasoned about them.
Just like you pay health insurance premiums to mitigate against costlier health risks.
You own 1 XYZ at an average price of $200.00. It is trading for $300.00.
You purchase an option to sell 1 XYZ for $300.00, which costs you $10.00, and expires in 3 months.
You just paid $10 to guarantee a minimum profit of $90.00 in 3 months, regardless of whether the price swings down.
There isn’t any morally harmful transaction occurring here, IMO.
It’s actually less risky than owning a stock for 3 months.
Is this transaction a reprehensible one, for you?
To be clear, we’re not trying to say that all options are created equal. Naked options (where you have no position) are in fact straight up gambling, at least insofar as I’ve tried to reasoned about them.
I bet this person also believes farmers are gambling when they partake in agro futures markets to insure against crop failures...
Yes because futures on corn are the exact same as buying calls on NKLA...
No you didn't address it all. It's also not a strawman because buying options is literally a form of insurance...
Have you ever priced a derivative? What about the estimation of future/realized risk using implied volatility doesn't seem "rooted in statistical analysis" to you?
Have you ever priced a derivative? What about the estimation of future/realized risk using implied volatility doesn't seem "rooted in statistical analysis" to you?
>The only parties options trading isn't "literally gambling" for are the ones selling the options like market makers (Citadel). They know people like to gamble and they're happy to take the other side of the trade because it's free money when they hedge properly (sounds like a casino, doesn't it?).
Anyone can sell options, not just institutions. And it's still gambling, just with better odds. You can still lose all of your money on the selling side. Naked options even come with the risk of losing more than all of your money. The whole thing is just one big casino with everyone betting against each other to see who's right.
Anyone can sell options, not just institutions. And it's still gambling, just with better odds. You can still lose all of your money on the selling side. Naked options even come with the risk of losing more than all of your money. The whole thing is just one big casino with everyone betting against each other to see who's right.
Please explain to me how I can lose money by writing a covered call option.
> Naked options
Us plebs aren't allowed to write naked options, that privilege only belongs to institutional actors.
> Naked options
Us plebs aren't allowed to write naked options, that privilege only belongs to institutional actors.
> Please explain to me how I can lose money by writing a covered call option.
When you to sell the underlying to cover. It's right there in the name. Of course you lose money, it's just that your downside risk is capped.
> Us plebs aren't allowed to write naked options, that privilege only belongs to institutional actors.
Yeah because you'll probably lose all your money. Would you rather be allowed to do something incredibly dangerous and then get met with a dispassionate, "Well, almost everyone fails at this but you tried anyway, should have known better! Thanks for playing."?
Writing any amount of uncovered calls where the present stock price is at least higher than the teens generally exposes you to more risk than the average American can absorb with their entire net worth.
That being said, if you really want to, there are places that will let you do it using margin if you guarantee you know what you're doing. Bad idea though.
When you to sell the underlying to cover. It's right there in the name. Of course you lose money, it's just that your downside risk is capped.
> Us plebs aren't allowed to write naked options, that privilege only belongs to institutional actors.
Yeah because you'll probably lose all your money. Would you rather be allowed to do something incredibly dangerous and then get met with a dispassionate, "Well, almost everyone fails at this but you tried anyway, should have known better! Thanks for playing."?
Writing any amount of uncovered calls where the present stock price is at least higher than the teens generally exposes you to more risk than the average American can absorb with their entire net worth.
That being said, if you really want to, there are places that will let you do it using margin if you guarantee you know what you're doing. Bad idea though.
Lol, wow, there so much misinformation here. Practically anyone with a margin account can write naked options.
I would highly suggest researching options trading, as you appear to be completely confused and/or misinformed about even the most fundamental aspects of options.
If you have a question about options, you can contact the Options Industry Council at 1-888-OPTIONS (1-888-678-4667) or visit its Getting Started web page. On the OIC website, you can also read a number of publications, including the "Characteristics and Risks of Standardized Options" booklet.
If you have a question about options, you can contact the Options Industry Council at 1-888-OPTIONS (1-888-678-4667) or visit its Getting Started web page. On the OIC website, you can also read a number of publications, including the "Characteristics and Risks of Standardized Options" booklet.
No it is not 'literally gambling'. They have a legitimate purpose for risk management.
Ofcourse if you know nothing about risk management, options, or finance in general, you can just use them as a gambling instrument.
Robinhood and others have been irresponsibly pushing options onto clueless individuals.
I'm concerned this will lead to more regulation, taking away this option for us commoners and leaving it to only the 'responsible educated betters' who run hedge funds and such.
Ofcourse if you know nothing about risk management, options, or finance in general, you can just use them as a gambling instrument.
Robinhood and others have been irresponsibly pushing options onto clueless individuals.
I'm concerned this will lead to more regulation, taking away this option for us commoners and leaving it to only the 'responsible educated betters' who run hedge funds and such.
>"They have a legitimate purpose for risk management."
Of course they do. And those little plastic roses they sell in a glass tube at the gas station also have a legitimate purpose. But we all know that's not why they're being sold.
The vast majority of retail options trading is just straight up degenerate gambling. Especially in communities like WSB. And honestly, is there anything wrong with that? It's a much more equitable situation than lottery tickets or a roullette wheel.
Of course they do. And those little plastic roses they sell in a glass tube at the gas station also have a legitimate purpose. But we all know that's not why they're being sold.
The vast majority of retail options trading is just straight up degenerate gambling. Especially in communities like WSB. And honestly, is there anything wrong with that? It's a much more equitable situation than lottery tickets or a roullette wheel.
> But we all know that's not why they're being sold.
This line of suspicious thinking doesn't make sense to me. Options can be used as a speculative instrument, or for one of a number of other purposes (yield enhancement, insurance, volatility hedging, stock replacement, arbitrage, commodity market access, even multi-year investment), but the thing that makes options trading dissimilar from gambling is the simple fact that you are not playing a game of pure chance. There is a large element of uncertainty in the public markets but they are driven by information, and that is why some participants are able to make money.
If people want to blind themselves to information, then sure, you can call it a game of chance. But if I'm analyzing vol and backing out information implied by pricing in order to take directional views around underpriced catalysts for assets that only a handful of people really have the skills to evaluate in that way, am I gambling or am I speculating?
Some may say "all speculation is gambling" but I see a difference between those two activities. It would also be risky to rent drilling equipment and prospect for oil, but there is a science and method to wildcatting and few people would refer to it as gambling in the sense of playing slots or roulette.
Personally I also believe that people who play card games based on probabilistic reasoning are doing more than just gambling. In a sense, that's what casinos do. It's business at the very least, a form of work that in casinos provides a profit opportunity from entertainment and in the public markets provides a profit opportunity from contributing to the information efficiency of financial instruments.
This line of suspicious thinking doesn't make sense to me. Options can be used as a speculative instrument, or for one of a number of other purposes (yield enhancement, insurance, volatility hedging, stock replacement, arbitrage, commodity market access, even multi-year investment), but the thing that makes options trading dissimilar from gambling is the simple fact that you are not playing a game of pure chance. There is a large element of uncertainty in the public markets but they are driven by information, and that is why some participants are able to make money.
If people want to blind themselves to information, then sure, you can call it a game of chance. But if I'm analyzing vol and backing out information implied by pricing in order to take directional views around underpriced catalysts for assets that only a handful of people really have the skills to evaluate in that way, am I gambling or am I speculating?
Some may say "all speculation is gambling" but I see a difference between those two activities. It would also be risky to rent drilling equipment and prospect for oil, but there is a science and method to wildcatting and few people would refer to it as gambling in the sense of playing slots or roulette.
Personally I also believe that people who play card games based on probabilistic reasoning are doing more than just gambling. In a sense, that's what casinos do. It's business at the very least, a form of work that in casinos provides a profit opportunity from entertainment and in the public markets provides a profit opportunity from contributing to the information efficiency of financial instruments.
Please tell me more about these roses, you’ve piqued my interest!
Of course they have a legitimate purpose.
That doesn't mean the market is rational, etc.
You can know all about risk management, etc, but there is no guaranteed winning strategy. Because options trading is gambling.
That doesn't mean the market is rational, etc.
You can know all about risk management, etc, but there is no guaranteed winning strategy. Because options trading is gambling.
If your trading strategy has a positive expected value, "gambling" ceases to be a useful descriptor for it.
As I said elsewhere, calling everything gambling just because it isn't literally guaranteed is reductive and unproductive.
As I said elsewhere, calling everything gambling just because it isn't literally guaranteed is reductive and unproductive.
Not everything. This subthread is literally about options trading. Lets bring the Wikipedia definition of gambling into focus:
> Gambling (also known as betting) is the wagering of money or something of value (referred to as "the stakes") on an event with an uncertain outcome, with the primary intent of winning money or material goods.
Seems like a fit to me. Even if the expected outcome is positive, it is still uncertain, hence it is gambling. If you go to the casino and count cards at the black jack table, you have a positive expected outcome, however you are still gambling.
> Gambling (also known as betting) is the wagering of money or something of value (referred to as "the stakes") on an event with an uncertain outcome, with the primary intent of winning money or material goods.
Seems like a fit to me. Even if the expected outcome is positive, it is still uncertain, hence it is gambling. If you go to the casino and count cards at the black jack table, you have a positive expected outcome, however you are still gambling.
Are covered puts gambling?
I don’t think it’s rational to talk about “options” as if they’re all created equal.
I think you’d find fewer people disagreeing with you, if you disambiguated by specifying naked puts and long calls.
Covered puts are downside insurance, like buying flood insurance for your home. It doesn’t make sense for these to be spoken about in the same category, but by talking about “options trading”, it gets lumped in.
I don’t think it’s rational to talk about “options” as if they’re all created equal.
I think you’d find fewer people disagreeing with you, if you disambiguated by specifying naked puts and long calls.
Covered puts are downside insurance, like buying flood insurance for your home. It doesn’t make sense for these to be spoken about in the same category, but by talking about “options trading”, it gets lumped in.
I disagree. If you open a probability textbook they'll recite the same thing. But in actual colloquial usage, gambling usually implies a lack of statistical edge and rigor.
If you tell people your uncle goes to Vegas every weekend to gamble, they will have a markedly different reaction than if you tell them he goes and counts cards every weekend.
If you tell people your uncle goes to Vegas every weekend to gamble, they will have a markedly different reaction than if you tell them he goes and counts cards every weekend.
Counting cards is a better analogy then I originally anticipated. You can only expect a positive outcome by counting cards if you have a high starting capital. This means that counting cards is a different game for rich folks then for poor folks. For poor folks to have a positive expected outcome they need to take out a big loan before they start. For most people this is options trading. Only for the already rich can you expect a positive return of investment. The poorer folks would need to take out a loan (often this is a second mortgage) to have a positive expected value.
If you tell people your uncle just took out a huge loan to go to Vegas to count cards, they will have a different reaction still.
If you tell people your uncle just took out a huge loan to go to Vegas to count cards, they will have a different reaction still.
I'd argue that options trading is worse than gambling. At least the one-armed bandit only gives the house a slight statistical edge.
Option traders - real ones, mind you - are sophisticated armies of statistics PhD's. I suspect their statistical advantage over Robinhood option warriors is probably a lot more than "slight".
Option traders - real ones, mind you - are sophisticated armies of statistics PhD's. I suspect their statistical advantage over Robinhood option warriors is probably a lot more than "slight".
> Option traders - real ones, mind you - are sophisticated armies of statistics PhD's
Oh? I guess they forgot to ask me for my PhD at the door when I came to work for the first time.
Oh? I guess they forgot to ask me for my PhD at the door when I came to work for the first time.
My team of traders, quants, and devs is over 50% PhDs, so it isn't that far off. The point is that we have an army of people very good at math working 10+ hours per day analyzing volatility, backtesting decades of data, and shaving microseconds off of execution time. Someone playing with options on Robinhood isn't in a different league, they are playing a different game.
> My team of traders, quants, and devs is over 50% PhDs, so it isn't that far off.
Depends what segment of the industry you call home, but I can think of several options market-making desks where no trader has a PhD, as well as several hedge fund traders and founders that don't have PhDs and trade options frequently or as their core competency.
"Good at math" doesn't require a PhD; I have some college friends who went on to do engineering PhDs at top research institutions, and they suck at the kind of fluid/heat math and probabilistic analysis that option traders think about. I have worked with PhD mathematicians who were good quants but lacked the stomach and mental clarity to run risk, and one who was so caught up in his math that he needed others to remind him about basic realities like earnings reports for his own positions. That last guy tried to start his own hedge fund and failed.
Outside of a few particular research advisors and fields of study, most of the math that you need to know to trade vol is faster to learn by reading papers and explanations on the internet than by studying for a PhD.
Ultimately what makes someone a good or bad trader is based more upon trade and strategy ideation, backtesting/validation, position sizing, etc, and the P&L is the scoreboard. Take a famous contemporary vol trader like Harsh Padia (or whatever other person you choose) and lock him in a room for a year with Excel, Robinhood, cable internet, a phone line, and a few grand, and he'll still find a way to make money.
> Someone playing with options on Robinhood isn't in a different league, they are playing a different game.
If this is true (I believe it is not) then it's yet another data point suggesting that the market is rigged against certain participants for the enrichment of other participants. Lest you think I'm being hyperbolical, I give you the example of that kid[0] who figured out that HFTs front-run large CME orders and placed his own spoof orders so that he would be able to trade the reversion. On the HFT side, you have many of these "traders, quants, and devs...over 50% PhDs" but their business model may well depend upon front-running new trades right when they posts to the order book, but before the higher-latency public can receive the information. Regulators protect the HFTs by treating the order book as public information, while treating retail practices that defeat their strategies as unlawful.
How much of that depends on a PhD?
[0] https://www.bbc.com/news/explainers-51265169
Depends what segment of the industry you call home, but I can think of several options market-making desks where no trader has a PhD, as well as several hedge fund traders and founders that don't have PhDs and trade options frequently or as their core competency.
"Good at math" doesn't require a PhD; I have some college friends who went on to do engineering PhDs at top research institutions, and they suck at the kind of fluid/heat math and probabilistic analysis that option traders think about. I have worked with PhD mathematicians who were good quants but lacked the stomach and mental clarity to run risk, and one who was so caught up in his math that he needed others to remind him about basic realities like earnings reports for his own positions. That last guy tried to start his own hedge fund and failed.
Outside of a few particular research advisors and fields of study, most of the math that you need to know to trade vol is faster to learn by reading papers and explanations on the internet than by studying for a PhD.
Ultimately what makes someone a good or bad trader is based more upon trade and strategy ideation, backtesting/validation, position sizing, etc, and the P&L is the scoreboard. Take a famous contemporary vol trader like Harsh Padia (or whatever other person you choose) and lock him in a room for a year with Excel, Robinhood, cable internet, a phone line, and a few grand, and he'll still find a way to make money.
> Someone playing with options on Robinhood isn't in a different league, they are playing a different game.
If this is true (I believe it is not) then it's yet another data point suggesting that the market is rigged against certain participants for the enrichment of other participants. Lest you think I'm being hyperbolical, I give you the example of that kid[0] who figured out that HFTs front-run large CME orders and placed his own spoof orders so that he would be able to trade the reversion. On the HFT side, you have many of these "traders, quants, and devs...over 50% PhDs" but their business model may well depend upon front-running new trades right when they posts to the order book, but before the higher-latency public can receive the information. Regulators protect the HFTs by treating the order book as public information, while treating retail practices that defeat their strategies as unlawful.
How much of that depends on a PhD?
[0] https://www.bbc.com/news/explainers-51265169
Yeah, lol. Love reading all these myths about the finance industry regurgitated on HN. Most options traders I know don't have a PhD. Of the subset that do, it's usually more multidisciplinary than just stats because there's a lot more to derivatives pricing than just probability theory. Masters degrees are really common though.
Reading HN, you'd think every quant trading firm had the exact same culture and hiring practices as RenTech.
Reading HN, you'd think every quant trading firm had the exact same culture and hiring practices as RenTech.
Long call options 6+ months are a great way to make money if you believe the stock will increase. Especially in growth sectors like cannabis, long calls can make you some significant money.
You've been lucky so far. Ask yourself if you actually know what the value of the options you're buying is, why they're priced where they are, what the fundamentals of the company are, what the risks are. If you're not an expert, it's nothing more than gambling. That's ok, gamble if you want to. I do. But don't pretend it's investing, and don't promote it as a good way to make money. You just got lucky in a bull market.
Learn something about how financial markets work before you make a blanket statement that options are gambling. Yes, you can gamble on options if you don't know what you're doing, but they are a financial instrument that can be used to hedge risk and make informed financial decisions that result in great rewards.
On a risk-adjusted basis, without an actual edge helping you determine which options to buy, this will not outperform SPY.
So is that the answer to everything? If you want more risk, just lever up 4x on the S&P? Why do other stocks even exist?
It probably seems cavalier or maybe dismissive, but yes. If most people want to take on more risk, I'd suggest just levering up SPY. Without an edge buying options is just going to be beta anyway, but costlier and with extra steps. Take away the discretion unless you're provably excellent at it.
Some options trading is gambling. Not all. Options can be a very useful tool to increase revenue and reduce risk in a portfolio.
The house doesn't always win. Gambling is guaranteed to lose you money amortized, the stock market is the opposite.
Were they not invented as insurance?
Options trading is not “literally gambling”. If anything it’s literally selling insurance. I’ve made about $90k this year just selling calls against my stocks and puts for stocks I want to buy, with about a 90%+ win rate.
This is actually a desired outcome of Robinhood's business model.
They go through great effort to make their trading app feel like a slot machine without giving off the appearance of gambling.
They go through great effort to make their trading app feel like a slot machine without giving off the appearance of gambling.
This is a difficult question. Crack down on fraud, not even novel fraud, the same fraud that would have been cracked down on hard and fast in generations past, and you're cutting individual investors out of the picture. A claim which has merit--it's not obvious to me why e.g. hedge or PE or VC funds shouldn't be open to individual investors.
But let the fraud run rampant, and individual investors will lose money. Enough money that it becomes a political problem. That threatens to destroy the market (e.g. onion futures [1]), or at the very least cost the public at large.
The only solution we have is to wait for a crash. But with modern monetarism, and the political cost of unemployment, monetary easing cushions financial assets from economic declines for a long, long time. Long enough for entire generations to have no memory of losing money in the market.
We need another mechanism. We have the same problem with vaccines [2].
[1] https://en.wikipedia.org/wiki/Onion_Futures_Act
[2] Is there a term for tearing down a levy on account of having no flooding on account of having a levy?
But let the fraud run rampant, and individual investors will lose money. Enough money that it becomes a political problem. That threatens to destroy the market (e.g. onion futures [1]), or at the very least cost the public at large.
The only solution we have is to wait for a crash. But with modern monetarism, and the political cost of unemployment, monetary easing cushions financial assets from economic declines for a long, long time. Long enough for entire generations to have no memory of losing money in the market.
We need another mechanism. We have the same problem with vaccines [2].
[1] https://en.wikipedia.org/wiki/Onion_Futures_Act
[2] Is there a term for tearing down a levy on account of having no flooding on account of having a levy?
We're transitioning to a scam/casino economy.
Nobody sees any way to get ahead doing work, so they're all looking for get-rich-quick schemes.
Nobody sees any way to get ahead doing work, so they're all looking for get-rich-quick schemes.
Ironically I find a literal casino to be more honest to patrons than a lot of the shills on YouTube trying to pump random tickers.
Seems like all of this is just a by-product of near-zero interest rates policy:
https://themargins.substack.com/p/zirp-explains-the-world
Until interest rates go up, capital gonna chase yield.
https://themargins.substack.com/p/zirp-explains-the-world
Until interest rates go up, capital gonna chase yield.
And people trying to escape the M2 money supply inflation.
If you’re interested in fraud and finance, I highly recommend this book:
Lying for Money: How Legendary Frauds Reveal the Workings of the World https://www.amazon.com/Lying-Money-Legendary-Frauds-Workings...
Lying for Money: How Legendary Frauds Reveal the Workings of the World https://www.amazon.com/Lying-Money-Legendary-Frauds-Workings...
IPOs via SPAC are booming too. I think this is even bigger issue.
One of the biggest scams I can see currently - hide the terms behind financial instruments, but take a 20 to 25% fee for making an investment!!
When the usual fees are 1.5% plus a performance fee
I really don’t understand why the SEC allows them to continue without proper disclosures on what they really are....
When the usual fees are 1.5% plus a performance fee
I really don’t understand why the SEC allows them to continue without proper disclosures on what they really are....
Yeah, I really don't get SPACs. From a company's perspective it just seems like a faster way to go public with less regulation. SPACs seem decent for the initial investors. But I don't see how investing in a public SPAC is better than investing in an IPO. There's a lot less disclosure, and you don't really get any special benefits.
I agree. In fact it’s much worse because of the fee structure and lack of disclosure / transparency. Surprised the SEC haven’t jumped in on it as it’s blatantly aimed at avoiding the IPO regulatory process
Notice the subtle dig at cannabis and how NYT is sneering at companies involved in that industry. They are insinuating a link between cannabis and criminality.
I was wondering when they meme stock / "stimmies" traders would get around to penny stocks.
The whole pink sheet / OTC market was always looking for the next GameStop or "ICO". It was a pump-and-dump playground.
It was a similar environment, as you could gamble with stocks that cost cents per share. Except now, with fractionals, everything can be a "penny stock". The difference is in the volume required to make big price moves.
The whole pink sheet / OTC market was always looking for the next GameStop or "ICO". It was a pump-and-dump playground.
It was a similar environment, as you could gamble with stocks that cost cents per share. Except now, with fractionals, everything can be a "penny stock". The difference is in the volume required to make big price moves.
>Except now, with fractionals, everything can be a "penny stock". The difference is in the volume required to make big price moves.
It's not quite the same thing. You still need to own in lots of 100 to sell contracts. Fractionals are basically just a money making scheme for brokerages taking advantage of naïve retail investors.
It's not quite the same thing. You still need to own in lots of 100 to sell contracts. Fractionals are basically just a money making scheme for brokerages taking advantage of naïve retail investors.
A poor investor who wants to invest in Amazon but only has $1000 is still able to. A poor investor who wants to diversify can assemble a portfolio that matches a wealthy investor's, rather than investing everything in a couple companies. Fractional shares level the playing field for smaller players.
If the issue is that a big benefit of shares is holding 100 of them and selling contracts, why not solve that with fractional contracts? Liquidity, probably. But whole shares have the same issue as fractional shares there, as you're still only getting 1/100th of a contractable quantity.
If the issue is that a big benefit of shares is holding 100 of them and selling contracts, why not solve that with fractional contracts? Liquidity, probably. But whole shares have the same issue as fractional shares there, as you're still only getting 1/100th of a contractable quantity.
I think the real solution is force companies to split when they can no longer be effectively traded by small investors.
Companies used to do that on a regular basis...
Companies used to do that on a regular basis...
Were booming. Retail flows are already down 20% from Feb’s peak and penny stock volumes are down what, 50% from their peak in the same month?
Does anyone remember Jonathan Lebed? I always suspected he dressed up as the founder of NIA ... http://4.bp.blogspot.com/-FiBKE2CGN2Y/Tdr106-syXI/AAAAAAAACz...
An education in finance is expensive, no matter where you get it from... school or hard knocks.
It's not just penny stocks, it's also value stocks in the past 5 months. A lot has changed in the stock market, it actually makes more sense now than in the past decade.
We subjects are so grateful our rulers have discovered something else we should fear, and have deigned to tell us how they'll be protecting us even before we are subjected to that protection.
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.