Stonks Are What You Can Get Away With: NFTs and Financial Nihilism(blog.evjang.com)
blog.evjang.com
Stonks Are What You Can Get Away With: NFTs and Financial Nihilism
https://blog.evjang.com/2021/06/nft.html
264 comments
An interesting counterpoint comes from coin collecting.
You can send coins to a professional authenticator and grader, like PCGS or NGC, who would certify the coin and place it in a serialized holder. Such "slabbed" coins are often easier to sell and command higher prices. This is a huge deal for some types, where a single point increase of grade (on a 70-point scale) turns $500 into $5000, and some where there are so many fakes that the standard best practice is to buy certified only.
Originally, they'd just have a lookup system on their site so you could see "Certificate 123456 was assigned to a 1825 half dollar, graded XF-45". If someone's selling certificate 12456, but on a 1912 nickel, red flags.
They still ended up with a problem of fake holders/certificates. Just scrape their database and get a cert number for the type and grade you're trying to sell, and pair it with a fake or lesser coin. So the next step was to include a high res photo of the coin in their repository. You could pull up a certificate and see "well, that's a 1825 half dollar in the container, but the one they graded has obviously different wear pattern, toning, die variety". This makes faking it much harder.
Notice it didn't require a blockchain though. There's a clear chain of trust back to the grading service, who has been in business for decades and established their brand and usually guarantees that if they misauthenticate a coin, they'll make the buyer whole.
You can send coins to a professional authenticator and grader, like PCGS or NGC, who would certify the coin and place it in a serialized holder. Such "slabbed" coins are often easier to sell and command higher prices. This is a huge deal for some types, where a single point increase of grade (on a 70-point scale) turns $500 into $5000, and some where there are so many fakes that the standard best practice is to buy certified only.
Originally, they'd just have a lookup system on their site so you could see "Certificate 123456 was assigned to a 1825 half dollar, graded XF-45". If someone's selling certificate 12456, but on a 1912 nickel, red flags.
They still ended up with a problem of fake holders/certificates. Just scrape their database and get a cert number for the type and grade you're trying to sell, and pair it with a fake or lesser coin. So the next step was to include a high res photo of the coin in their repository. You could pull up a certificate and see "well, that's a 1825 half dollar in the container, but the one they graded has obviously different wear pattern, toning, die variety". This makes faking it much harder.
Notice it didn't require a blockchain though. There's a clear chain of trust back to the grading service, who has been in business for decades and established their brand and usually guarantees that if they misauthenticate a coin, they'll make the buyer whole.
I gave up on coin collecting because of the terrible fraud problems, in every aspect of buying, selling, and grading. The whole business is a giant racket.
Heck, you can't even hand a collection to a grader. He'll swap out your good coins for lesser ones when you aren't looking.
Same with stamps.
Heck, you can't even hand a collection to a grader. He'll swap out your good coins for lesser ones when you aren't looking.
Same with stamps.
"Heck, you can't even hand a collection to a grader."
If coins and stamps are worth enough - and many are then you need to start treating your assets with respect. I would consider things like markings that show up under ultraviolet light or a microdot - things that don't affect the article. Get the marking(s) asserted in some way. Make the grader aware that you have taken steps. If the value is great enough, then you might pay out for a minder that follows the article throughout the process.
Perhaps there is a market for an intermediary service of some sort to do this job. Anyway, this has all been done before. You need to do a risk assessment on your stuff and protect yourself in proportion to the potential value of your things. Getting valuations done for any valuable thing is potentially problematic but I'm sure if you have a chat with, say, a jeweller they'll tell you how to get the job done safely.
If coins and stamps are worth enough - and many are then you need to start treating your assets with respect. I would consider things like markings that show up under ultraviolet light or a microdot - things that don't affect the article. Get the marking(s) asserted in some way. Make the grader aware that you have taken steps. If the value is great enough, then you might pay out for a minder that follows the article throughout the process.
Perhaps there is a market for an intermediary service of some sort to do this job. Anyway, this has all been done before. You need to do a risk assessment on your stuff and protect yourself in proportion to the potential value of your things. Getting valuations done for any valuable thing is potentially problematic but I'm sure if you have a chat with, say, a jeweller they'll tell you how to get the job done safely.
One of the grading tricks I read about they'll do right in front of you. Hand them a stack of coins/stamps. They'll grade the first one very generously, so you'll think they're good. As they take their time one by one, you'll get bored/impatient and pay less and less attention. The lower down on the stack, the lower they'll grade them.
Sure enough, I went to a coin dealer and that's exactly what they did.
Sure enough, I went to a coin dealer and that's exactly what they did.
I think you're looking at a different type of grader than the services I'm referring to.
You're paying for the grading/encapsulation as a service, independent from any future sale plans, so they have no stake in under or over-grading any individual coin. They got their service charge (typically $15-100 or so depending on estimated value and turnaround speed) and they'd lose community trust if they were consistently too lenient.
The market only trusts a handful of firms, most of who have been around since the 1980s or 1990s and certified millions of coins. Most other brands are "price it as you would an uncertified coin, caveat emptor" or perhaps even worse, as some sketchy dealers would set up a fourth rate grading service as a means to make low-quality inventory more appealing.
You're paying for the grading/encapsulation as a service, independent from any future sale plans, so they have no stake in under or over-grading any individual coin. They got their service charge (typically $15-100 or so depending on estimated value and turnaround speed) and they'd lose community trust if they were consistently too lenient.
The market only trusts a handful of firms, most of who have been around since the 1980s or 1990s and certified millions of coins. Most other brands are "price it as you would an uncertified coin, caveat emptor" or perhaps even worse, as some sketchy dealers would set up a fourth rate grading service as a means to make low-quality inventory more appealing.
NFTs are purely digital assets. Expecting physical assets to meld with NFTs is a curiosity for which we will have to wait and see. The benefit of NFTs from the perspective of software is that computers can validate the authenticity with a function call. Blockchain-based financial systems can integrate with them to create interesting use cases.
I’ve been playing around with the idea of a defi project where I mint NFTs for all of my PSA graded TCG cards which would allow you to return the NFT me to be “burned” and I’d ship you the underlying asset.
This would allow someone to hold and have high liquidity in graded trading cards without every having to take possession of the underlying asset.
This would allow someone to hold and have high liquidity in graded trading cards without every having to take possession of the underlying asset.
Something like this is being messed around with by a few different companies in the form of fractional share ownership in cards, which is likely to be the form it ends up taking (a trusted market, ala the Nasdaq).
So the market holds the 1952 Mickey Mantle and shares get issued against it. You can buy and sell the shares, you never need worry about taking possession of the underlying asset. The market holds the physical asset and insures it.
If cards are going to have another level up from the single digit million dollar area, it'll be due to fractional ownership speculation. Up to this point, generally speaking, either a singular or very small number of people own the most expensive cards or can afford to own them. With fractional ownership, people can put $500 into a $5 million Mantle card, and own part of its appreciation over time. That flood of buyer demand will inevitably pop the total value of all the shares far higher than would otherwise occur for the card as a whole (which prompts the question of whether $30-$50 million type valuations end up happening for some of those cards, as in the art world).
PWCC is one of the obvious candidates for building a giant holding market, with card IPOs or something akin to that. They already allow you to borrow against the cards you hold in their vault. I'd be surprised if they don't experiment with fractional ownership in the near future.
So the market holds the 1952 Mickey Mantle and shares get issued against it. You can buy and sell the shares, you never need worry about taking possession of the underlying asset. The market holds the physical asset and insures it.
If cards are going to have another level up from the single digit million dollar area, it'll be due to fractional ownership speculation. Up to this point, generally speaking, either a singular or very small number of people own the most expensive cards or can afford to own them. With fractional ownership, people can put $500 into a $5 million Mantle card, and own part of its appreciation over time. That flood of buyer demand will inevitably pop the total value of all the shares far higher than would otherwise occur for the card as a whole (which prompts the question of whether $30-$50 million type valuations end up happening for some of those cards, as in the art world).
PWCC is one of the obvious candidates for building a giant holding market, with card IPOs or something akin to that. They already allow you to borrow against the cards you hold in their vault. I'd be surprised if they don't experiment with fractional ownership in the near future.
I had this exact same idea not long ago but with PSA graded Pokemon cards. Essentially a reserve for digitising real world assets and collectibles. The challenge would be convincing everyone that your reserves are always secure and properly backed.
Why burn the NFT? Wouldn't it be better to transfer the ownership of the NFT along with the physical item?
That gets back to crazygringo's point that someone down the line could sell the NFT paired with a counterfeit physical item and it might even be hard to tell who is the scammer and who is the victim.
Doesn't sound very liquid relying on a single person to follow through on that.
The NFT can be traded infinitely as fast as the network will allow you. You would only have the NFT burned if you want to redeem it for the underlying asset.
I agree with your premise and doubt that adding NFTs into the mix will do anything to prevent counterfeits.
I don’t buy fancy handbags, but I have read that counterfeits are often made of higher quality material than luxury brands. So, the fool pays $$$ for a quality knockoff and an NFT. Maybe they realize it 5 years from now when they try to sell the bag. Hopefully at that point they will learn that there’s no tangible way to link physical objects to a blockchain.
One optimistic consequence of this may be a distancing between materialism and value. After all, The knockoff is just as good or better than the authentic. Let’s tie value to experience rather than objects. If you really must use NFTs and blockchains, then use them for concert/event tickets, governance systems, game collectibles , decentralized gambling’s/prediction markets, p2p and cross border value exchange, etc.
I don’t buy fancy handbags, but I have read that counterfeits are often made of higher quality material than luxury brands. So, the fool pays $$$ for a quality knockoff and an NFT. Maybe they realize it 5 years from now when they try to sell the bag. Hopefully at that point they will learn that there’s no tangible way to link physical objects to a blockchain.
One optimistic consequence of this may be a distancing between materialism and value. After all, The knockoff is just as good or better than the authentic. Let’s tie value to experience rather than objects. If you really must use NFTs and blockchains, then use them for concert/event tickets, governance systems, game collectibles , decentralized gambling’s/prediction markets, p2p and cross border value exchange, etc.
> After all, The knockoff is just as good or better than the authentic.
I think this may be over optimistic—the fact that counterfeits can be same quality doesn't mean they always, or even often, are. There are product categories where the difference is not apparent even to trained casual inspection, but there are real quality or even safety sacrifices.
I think this may be over optimistic—the fact that counterfeits can be same quality doesn't mean they always, or even often, are. There are product categories where the difference is not apparent even to trained casual inspection, but there are real quality or even safety sacrifices.
You don't generally have to trust. If you do your research you can buy a counterfeit of the highest quality which is often better than the product.
There are counterfeits that are of low quality, with a suitably even lower price, but by doing some research you can often tell.
This is a big problem for sneakers, counterfeits are often literally impossible for anyone to distinguish. In my high school a kid would be selling knock offs of hyped shoes and brought them to official stores or specialized resellers and got them appraised as authentic, repeatedly.
Now I hear through the grapevine that they have to use things like the rigidity of the cardboard in the box they came in with to try and figure out fakes, because the shoe itself is just too close to tell.
Ultimately there's nothing magic to the original. The products are generally much cheaper to make than they are sold, so there is no reason why someone couldn't make a version with better materials at the same cost. It's a question of imaginary property and signaling more than anything.
There are counterfeits that are of low quality, with a suitably even lower price, but by doing some research you can often tell.
This is a big problem for sneakers, counterfeits are often literally impossible for anyone to distinguish. In my high school a kid would be selling knock offs of hyped shoes and brought them to official stores or specialized resellers and got them appraised as authentic, repeatedly.
Now I hear through the grapevine that they have to use things like the rigidity of the cardboard in the box they came in with to try and figure out fakes, because the shoe itself is just too close to tell.
Ultimately there's nothing magic to the original. The products are generally much cheaper to make than they are sold, so there is no reason why someone couldn't make a version with better materials at the same cost. It's a question of imaginary property and signaling more than anything.
Not all counterfeits are "counterfeit". Some literally come off the same production line as the legit products. A company will order say 20,000 units from a factory but because of overages in components it's actually cheaper (or not more expensive) to manufacture 22,000 units. They can then sell that 2k unit overproduction to a counterfeit dealer for pennies on the dollar, or fractions of a penny on the penny, to make a nice little bonus.
Manufacturing can often be like hot dogs and hot dog buns. The end product is a hot dog in a bun but hot dogs come in ten packs while buns come in four packs each for their own reasons. The most efficient combinations of dogs and buns are common multiples but demand isn't always in those neat numbers. Storing the dogs and buns can be expensive and they will go bad so there's no guarantee you can ever use your stock of stored buns and dogs. If there's a counterfeit market for complete hot dog units you can unload the overproduction and not need to worry about storage or spoilage. You're in the hot dog construction business, not hot dog component storage business.
Clothes are particularly susceptible to the overproduction/counterfeit market.
Manufacturing can often be like hot dogs and hot dog buns. The end product is a hot dog in a bun but hot dogs come in ten packs while buns come in four packs each for their own reasons. The most efficient combinations of dogs and buns are common multiples but demand isn't always in those neat numbers. Storing the dogs and buns can be expensive and they will go bad so there's no guarantee you can ever use your stock of stored buns and dogs. If there's a counterfeit market for complete hot dog units you can unload the overproduction and not need to worry about storage or spoilage. You're in the hot dog construction business, not hot dog component storage business.
Clothes are particularly susceptible to the overproduction/counterfeit market.
Certainly there's likely to be no reason that knock-offs can't be the same quality as, or better than, the original for much less price—but making the knock-offs appear to be the same quality while actually being lower quality is even cheaper still. As a counterfeiter, why wouldn't you make the cheaper product if no-one can tell the difference?
I am thinking here particularly of counterfeit chargers, which are designed to mimic the originals to comical extremes—so that you essentially wouldn't know without tearing them apart—but which are missing crucial safeguards that mean that they are much more prone to catch fire. If, as ClumsyPilot suggests (https://news.ycombinator.com/item?id=27573695), you are thinking only of fashion items, then it's probably less of an issue.
I am thinking here particularly of counterfeit chargers, which are designed to mimic the originals to comical extremes—so that you essentially wouldn't know without tearing them apart—but which are missing crucial safeguards that mean that they are much more prone to catch fire. If, as ClumsyPilot suggests (https://news.ycombinator.com/item?id=27573695), you are thinking only of fashion items, then it's probably less of an issue.
You don't because there is a very very competitive market for counterfeits of these products. For some shoes there might be five or six counterfeiters competing so they may distinguish themselves with higher quality and uphold a reputation that way.
Then there is a whole community of people that evaluate which batches are of higher or lower quality. Personally I don't buy counterfeits at all, the hyped shoes nowadays are just reskins of old designs and aren't that comfortable or imo look that exceptional.
Certainly, don't buy counterfeits that plug into mains though, unless you really really really know what you're doing.
Then there is a whole community of people that evaluate which batches are of higher or lower quality. Personally I don't buy counterfeits at all, the hyped shoes nowadays are just reskins of old designs and aren't that comfortable or imo look that exceptional.
Certainly, don't buy counterfeits that plug into mains though, unless you really really really know what you're doing.
I think the kind of product in question has a big role. A handbag should be relatively easy to inspect; look at the seams and look at the material. If both are robust and you like the way the bag looks, then it's a good bag regardless of authenticity. But on the other hand, what about something like wristwatches? To inspect all the parts you would need to tear it apart, which just isn't feasible before purchase [if at all.]
All I know about wristwatches is you can tell a faux Rolex from a real one by the faux sweep hands move in increments, while the real one moves smoothly.
I couldn't care less, and wear a cheap Timex because I regularly ruin them (usually by scraping).
I couldn't care less, and wear a cheap Timex because I regularly ruin them (usually by scraping).
That's what everyone "knows" about fake Rolexes, and it isn't true and hasn't been for a long time. 10 years ago I bought a Rolex for $15 in China that had a smooth sweep.
A street vendor in New York once tried to convince me to buy a Rolex with the pitch "It's got real Seiko parts inside!"
In Bangkok, the fake watch dealers offer grades of product, giving you the option to pay more for a better fake.
In Bangkok, the fake watch dealers offer grades of product, giving you the option to pay more for a better fake.
I think he is talking about a large category of product where you 'pay for the brand', the whole point is being outrageously expensive and exclusive. Thing diamons and designer handbags.
I had a fake "Gucci" watch in the 90s that looked ok on the outside, but just picking it up you knew it wasn't the real deal. Someone gave me as a gag gift. Opening it showed the case was a good match, but the inside was just a generic battery powered quartz watch. kept good time though.
I am visiting Turkey every year or two and every time I am going to local bazar to buy counterfeited clothing. They are more or less of the same quality (Turkey is a source of high quality cotton and linen) and really good fit because counterfeiters just cloning original articles piece-by-piece, seam-by-seam. Maybe buttons and zippers are of lower quality, but they are repairable, so I am okay with that.
I think that paying hundreds and even thousands for industrially manufactured shirts, jeans and underwear just for its brand is universally stupid.
I think that paying hundreds and even thousands for industrially manufactured shirts, jeans and underwear just for its brand is universally stupid.
> This is the fundamental problem with NFT's as I see it -- there is fundamentally no way to tie it to a physical object.
There is actually. I can't find any references to it at the moment, but there are certain things that are easy to make but near impossible to clone. For example, particles suspended in epoxy can make for a unique pattern for each item that can be scanned and verified, but getting a duplicate pattern is nearly impossible, and not economically feasible.
The NFTs aren't really needed though, a manufacturer could just have a "scan this item with your phone to see if it's genuine" app and that would be sufficient.
There is actually. I can't find any references to it at the moment, but there are certain things that are easy to make but near impossible to clone. For example, particles suspended in epoxy can make for a unique pattern for each item that can be scanned and verified, but getting a duplicate pattern is nearly impossible, and not economically feasible.
The NFTs aren't really needed though, a manufacturer could just have a "scan this item with your phone to see if it's genuine" app and that would be sufficient.
Banksy the artist has a validation site.
and an art registry to try a curb east to make fakes (stencils):
https://pestcontroloffice.com/real.asp
and an art registry to try a curb east to make fakes (stencils):
https://pestcontroloffice.com/real.asp
>
The NFTs aren't really needed though, a manufacturer could just have a "scan this item with your phone to see if it's genuine" app and that would be sufficient.
Again, the problem of a centralised ledger comes back.
Again, the problem of a centralised ledger comes back.
Why would it? If brand X adds anti counterfeit detection in their products and makes a brand X validation app, what's the added value of the ledger?
As we have seen, apps decay over time. So someone has to keep track of the app. Also, given unlimited time, all cryptographic algorithms can be brute forced, especially something that has the same key for all hashes. So, now you have the problem of maintaining a key for your "counterfeit detection", and somehow get older keys revoked. Do you see a ledger now?
[deleted]
why does our counterfeit detection need a key?
Someone gets rich quick on pre-mined coins.
I don’t think centralization is a universal problem. In many cases (one could argue the majority of cases), centralization is not an issue.
For items made from natural materials, it should be straightforward. For instance my musical instrument has unique wood grain patterns that could be memorialized in high resolution photos.
When I went to the optometrist, he prescribed some new ones. I ordered a new set of expensive glasses at the adjoining shop.
I noticed that the glasses came in an off-brand cheap case. Another customer there noticed the same thing. What the shop was doing was swapping out the expensive case that went with the expensive glasses, and likely sold the expensive ones to a glasses counterfeiter.
I don't use cases, so didn't care, but I thought the shop was pretty scummy.
I noticed that the glasses came in an off-brand cheap case. Another customer there noticed the same thing. What the shop was doing was swapping out the expensive case that went with the expensive glasses, and likely sold the expensive ones to a glasses counterfeiter.
I don't use cases, so didn't care, but I thought the shop was pretty scummy.
Author here. Thanks for challenging my ideas.
If you keep the bag for yourself, and don't care that other people think you have a fake bag, then this is equivalent to the case of "consumable luxuries" that I discuss with Wagyu beef NFTs. I think this still creates pressure on the counterfeit economic incentives. The counterfeiter needs to acquire a real NFT for every fake bag they want to sell, and furthermore, this scam does not profit in units of cash - you end up with NFT-less real bags, which will be difficult to trade back into cash (caveat: this is assuming that no one will want to buy the NFt-less real bag).
I also mention the following in the post - it is not about guaranteeing the pairing of NFT and physical objects. I agree that there does not seem at present a reliable mechanism to pair NFTs with a physical objects. However, I changed my mind once I realized that it's about disrupting the economic incentives of counterfeiters. An even more roundabout way to achieve this goal would be to create legitimate jobs for people with these counterfeiting skills. Not all solutions have to be secure in the transactional sense.
If you keep the bag for yourself, and don't care that other people think you have a fake bag, then this is equivalent to the case of "consumable luxuries" that I discuss with Wagyu beef NFTs. I think this still creates pressure on the counterfeit economic incentives. The counterfeiter needs to acquire a real NFT for every fake bag they want to sell, and furthermore, this scam does not profit in units of cash - you end up with NFT-less real bags, which will be difficult to trade back into cash (caveat: this is assuming that no one will want to buy the NFt-less real bag).
I also mention the following in the post - it is not about guaranteeing the pairing of NFT and physical objects. I agree that there does not seem at present a reliable mechanism to pair NFTs with a physical objects. However, I changed my mind once I realized that it's about disrupting the economic incentives of counterfeiters. An even more roundabout way to achieve this goal would be to create legitimate jobs for people with these counterfeiting skills. Not all solutions have to be secure in the transactional sense.
Agreed, and his argument ignores the market for a large proportion of counterfeit sales - not sold as originals, but sold as counterfeits, for substantially lower cost than the original.
This makes a lot more sense.
What producers actually want is an enforceable monopoly on trade dress (the look and design of something), not authenticity or even scarcity.
This is why the most successful art market is probably video game cosmetics, where the game developer can meaningfully enforce that they are the only ones who can provide an X that looks the way it does. Even though an unlimited number of people can have it.
What producers actually want is an enforceable monopoly on trade dress (the look and design of something), not authenticity or even scarcity.
This is why the most successful art market is probably video game cosmetics, where the game developer can meaningfully enforce that they are the only ones who can provide an X that looks the way it does. Even though an unlimited number of people can have it.
Indeed, if it can't be tied to a physical object, then there is no way to prevent two completely independent markets from developing for the object and its associated NFT. People could buy NFT's with no interest in getting a counterfeit, but simply selling it to someone else at a later date.
Granted this is strictly a hypothetical for me since I don't buy luxury items. My most luxurious possession is a musical instrument that I love dearly, but that is in fact fairly generic, and its value is based solely on its quality. But supposing I bought a laptop computer and it came with an NFT, my first impulse would be to sell the NFT as soon as possible, treating it like a rebate card.
Granted this is strictly a hypothetical for me since I don't buy luxury items. My most luxurious possession is a musical instrument that I love dearly, but that is in fact fairly generic, and its value is based solely on its quality. But supposing I bought a laptop computer and it came with an NFT, my first impulse would be to sell the NFT as soon as possible, treating it like a rebate card.
His argument bases on the presumption that the counterfeit and the real thing are very close in quality as to be indistinguishable. You can sell the real item and keep wearing the counterfeit and nobody is any wiser, or vice versa. Whether you keep the "real" item to wear or wear a counterfeit is inconsequential. The real value of the item passes along with the NFT to the new owner. The remaining item whether is real or not has vastly less value.
The economic incentive of counterfeiting is ruining in that the counterfeiter cannot sell 1000 counterfeits with the full price as the real item.
The economic incentive of counterfeiting is ruining in that the counterfeiter cannot sell 1000 counterfeits with the full price as the real item.
In general for these goods the use value comes with the visual signaling. No one is going to check that the NFT is owned by you in public.
The other value comes with being able to enjoy the utility of the good without risking someone noticing you're wearing a counterfeit. Again, no one's going to check that you hold the NFT.
In that sense, it makes the counterfeit's value higher.
The other value comes with being able to enjoy the utility of the good without risking someone noticing you're wearing a counterfeit. Again, no one's going to check that you hold the NFT.
In that sense, it makes the counterfeit's value higher.
The visual signaling isn't that because NFT is a new thing. Someone will come up with NFT based visual signaling pretty soon.
> Whether you keep the "real" item to wear or wear a counterfeit is inconsequential. The real value of the item passes along with the NFT to the new owner. The remaining item whether is real or not has vastly less value.
IE, it assumes that attaching an Hermes NFT to Birkin bags would cause Birkin bags to become worthless.
The reduction in incentive to counterfeiters is in direct proportion to a presumed reduction in value of the bags themselves.
I think the more likely outcome would be that the NFT is mostly worthless, but wherever things wind up, it remains as two seperate markets.
Hermes could probably get someone to pay for NFTs they create. Pretending they’re tied to their other goods just adds reputational risk.
IE, it assumes that attaching an Hermes NFT to Birkin bags would cause Birkin bags to become worthless.
The reduction in incentive to counterfeiters is in direct proportion to a presumed reduction in value of the bags themselves.
I think the more likely outcome would be that the NFT is mostly worthless, but wherever things wind up, it remains as two seperate markets.
Hermes could probably get someone to pay for NFTs they create. Pretending they’re tied to their other goods just adds reputational risk.
I don't know how people are making these authenticity arguments using NFTs, because your counter-argument is spot on. Having said that, the anti-counterfeiting mechanism for physical goods like Birkin bags is exactly the use case for Vechain.
> I don't know how people are making these authenticity arguments using NFTs, because your counter-argument is spot on.
Because people are desperately investing reasons to justify themselves because:
1) they're gullible and bought into the hype, or
2) they're shady and want to make money off of the gullible.
Because people are desperately investing reasons to justify themselves because:
1) they're gullible and bought into the hype, or
2) they're shady and want to make money off of the gullible.
It also assumes the economics of counterfeits are about tricking people into believing they have something authentic.
There's plenty of people who want convincing counterfeits because they are unwilling/unable to obtain the real thing.
There's plenty of people who want convincing counterfeits because they are unwilling/unable to obtain the real thing.
Reminds me of comments I've seen about counterfeit high end fashion goods. The counterfeits are often higher quality.
If the warranty travels with the NFT, then it provides an avenue for the fraud to be uncovered, and since the intended life of the bag is recorded in the blockchain, the fraudster can be determined. I think it'd be more difficult to get away with what you describe on a large scale with the NFT in the picture than without.
Anyone involved in NFTs for physical objects (other than say, landmarks or some other abstract concept) has missed the point of NFTs. Which is understandable, since that point requires a bit of mental flexibility to grasp in the first place.
Considering the #1 use case widely discussed for NFT's is establishing authenticity+ownership of art both digital and physical, I'd say you seem to have missed the point.
You clearly seem to have a strong opinion about it, but your opinion seems to be entirely against the mainstream NFT conversation.
And please don't insult people by claiming their ignorance is "understandable" because their brains aren't "flexible" enough.
You clearly seem to have a strong opinion about it, but your opinion seems to be entirely against the mainstream NFT conversation.
And please don't insult people by claiming their ignorance is "understandable" because their brains aren't "flexible" enough.
Any reading you can direct me to on people implementing NFTs for authenticity of physical art? I've seen it discussed casually but haven't come across anyone seriously looking at doing it in practice.
The flexibility comment wasn't intended as an insult to people who dislike / don't understand NFTs (or to anyone, maybe just a jab at NFTs themselves).
The flexibility comment wasn't intended as an insult to people who dislike / don't understand NFTs (or to anyone, maybe just a jab at NFTs themselves).
There's some potential for embedding unique steganographic watermarks (or natural variation, like non-silicon PUFs) into physical items and linking them to the blockchain but it's currently hypothetical.
> was the one who bought it from Birkin
Birkin is not a company/brand, Hermes is the brand that sells these bags.
So no offense to you, but if you don't even know that I'm guessing you're not very up to date on the fashion world in general, and on how authenticity/counterfeit prevention is handled in that space. And your opinion on whether NFTs make that more difficult or easier to handle is probably just an off the cuff guess.
Birkin is not a company/brand, Hermes is the brand that sells these bags.
So no offense to you, but if you don't even know that I'm guessing you're not very up to date on the fashion world in general, and on how authenticity/counterfeit prevention is handled in that space. And your opinion on whether NFTs make that more difficult or easier to handle is probably just an off the cuff guess.
This is a great post.
> Many retail investors don’t really care about whether GME’s price is justified by their corporate earnings - they simply buy at any cost. This financial nihilism - where intrinsic value is unknowable and all that matters is what other people think - is a worldview often encountered in Gen Z retail traders
The article makes it sound like as if this is a recent phenomenon. I don't believe that's true. I believe that stock prices, or prices of anything, be it tulips or paintings, have always been driven by narratives. For example, both "fundamental analysis" and "technical analysis" are just different narratives that people have bought into. They then became self-fulfilling prophecies with feedback loops due to their adoption. Some may argue "but earning reports are scientific! It's numbers!" - not it's not. There are so many ways you re-arrange, manipulate, or re-interpret these things. It's just another narrative that has been accepted by a large enough number of people.
Predicting the market has and will never be about "facts" - it will always be about predicting other people's behavior.
> Many retail investors don’t really care about whether GME’s price is justified by their corporate earnings - they simply buy at any cost. This financial nihilism - where intrinsic value is unknowable and all that matters is what other people think - is a worldview often encountered in Gen Z retail traders
The article makes it sound like as if this is a recent phenomenon. I don't believe that's true. I believe that stock prices, or prices of anything, be it tulips or paintings, have always been driven by narratives. For example, both "fundamental analysis" and "technical analysis" are just different narratives that people have bought into. They then became self-fulfilling prophecies with feedback loops due to their adoption. Some may argue "but earning reports are scientific! It's numbers!" - not it's not. There are so many ways you re-arrange, manipulate, or re-interpret these things. It's just another narrative that has been accepted by a large enough number of people.
Predicting the market has and will never be about "facts" - it will always be about predicting other people's behavior.
It’s not all Gen Z. I have heard from several friends who are older Gen X guys that they’ve done cash out refinancing to dump money into the stock market. The reasoning is that they’d be idiots not to borrow at 2.5% and put it into stocks. Hard to argue with when the US stock market has a 100 year track record of producing 7% on average.
A couple weeks after hearing about this from one guy, his wife tells me that he made $80k on AMC today. It’s gone up another 3-4x from that day. No idea if he’s still in or not, but this kind of thing feels like the end of days of bubbles. It won’t end well.
A couple weeks after hearing about this from one guy, his wife tells me that he made $80k on AMC today. It’s gone up another 3-4x from that day. No idea if he’s still in or not, but this kind of thing feels like the end of days of bubbles. It won’t end well.
> A couple weeks after hearing about this from one guy, his wife tells me that he made $80k on AMC today.
Speculative traders like to talk about their biggest wins, but they're generally quiet about losses.
Sure, it's possible that one guy YOLOed everything into a single stock at just the right time, cashed out, and walked away. It's more common for these traders to make a lot of bad bets, then get excited when one of them pays off. The problem gets worse when these payoffs come in the form of black swan market events that the trader just happened to be on the right side of.
Or maybe I'm wrong and the meme stonk trend will continue forever, making the gamblers wealthy while the rest of us lose out.
Speculative traders like to talk about their biggest wins, but they're generally quiet about losses.
Sure, it's possible that one guy YOLOed everything into a single stock at just the right time, cashed out, and walked away. It's more common for these traders to make a lot of bad bets, then get excited when one of them pays off. The problem gets worse when these payoffs come in the form of black swan market events that the trader just happened to be on the right side of.
Or maybe I'm wrong and the meme stonk trend will continue forever, making the gamblers wealthy while the rest of us lose out.
I’ve been on wsb for years and Ive seen more loss porn than gains up until relatively recently.
I think the current stonks situation and folks involved are a bit more nuanced than you’re implying here, but I can certainly see how you might come to such a conclusion from the outside looking in.
I think the current stonks situation and folks involved are a bit more nuanced than you’re implying here, but I can certainly see how you might come to such a conclusion from the outside looking in.
The cultural shift of not posting “loss porn” on WSB is going to be the undoing. Well, the eternal September it’s been going through since this time last year has been a big contributor too.
Speculative traders like to talk about their biggest wins, but they're generally quiet about losses.
Um, yes. This is zero-sum. There have to be a lot of losers out there.
Um, yes. This is zero-sum. There have to be a lot of losers out there.
I buy Microsoft at 10 and sell to you at 20. You then sell at 30.
We have both won and clearly no one has lost. Cash equity Markets are not zero sum.
We have both won and clearly no one has lost. Cash equity Markets are not zero sum.
It depends on your perspective. The act of speculation is zero sum, but holding onto the stock and letting it appreciate isn't zero sum. Seeing how "speculative traders" are in it to make more than the 8% average (or whatever), we're probably talking about the former and not the latter.
You have not factored in the person that I sold it to for 30.
Who did j sell to and who did You buy from?
Stock markets are not zero-sum. Derivatives markets would be, though
Derivatives markets are zero-sum measured in currency, but few people/organizations have perfectly linear utility functions. Transferring risk from more risk averse people to less risk averse people is not necessarily zero-sum if the accounting is done in utility instead of currency.
I'd guess that a lot of the WSB crowd has some exposure to crypto, which isn't doing so hot recently.
I don't see how gamblers make you lose out.
There's no way to tell if stocks going up is a bubble or not. But if you never invest when stocks are going up, you'll never make money.
Most of the money a retail trader is making comes from another retail trader.
Is a poker table a bubble? Another way to interpret the price is, “the most recent payout at the poker table.”
Is a poker table a bubble? Another way to interpret the price is, “the most recent payout at the poker table.”
The meme stock thing is very different than the S&P in terms of state of the market.
When denominator is M2 money supply, the stock market doesn't look bubbly at all..
When denominator is M2 money supply, the stock market doesn't look bubbly at all..
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I think the difference is the people buying tulips did genuinely believe in their investment whereas Millennials & Gen Z seem have more of a FOMO/YOLO outlook. The tulip buyers (or even the sub-prime mortgage backed security buyers or whoever) bought in to the underlying economic system but a lot of Millennials/Gen Z (and even some Gen X) see the economy as “everything is made up and the points don’t matter” so they figure they might as well try to ride the meme stock wave.
I worry historians will look back on this unusual market activity and wonder how we missed the generation backed into a financial corner by a system stacked against them who are clearly lashing out and in need of help. We’re mildly amused and sometimes annoyed but not taking them seriously. And I think the resulting financial frustration from these “meme stocks” will be even worse than the financial frustration that gave rise to them in the first place.
I worry historians will look back on this unusual market activity and wonder how we missed the generation backed into a financial corner by a system stacked against them who are clearly lashing out and in need of help. We’re mildly amused and sometimes annoyed but not taking them seriously. And I think the resulting financial frustration from these “meme stocks” will be even worse than the financial frustration that gave rise to them in the first place.
I mostly agree with you, but I’m not sure where you get the idea that “we missed the generation.” Everyone seems to know that Gen Z is coming of age into a dead end. It’s just that we’re all more interested in using the situation as a political tool than in actually doing anything about it.
> a system stacked against them
How is investing in stocks stacked against people?
How is investing in stocks stacked against people?
Wrong system.
System as parent comment alluding to is "the world". Many latest/last gen people feel as though it is highly unlikely they will ever buy a house, for example. It is simply not feasible for most of them given wages vs house price increases.
I think the YOLO thought process is:
" If you're fucked anyway, why not bet everything you can borrow?
Worst outcome: you're slightly poorer. If that is possible.
Best outcome: you're rich! "
Not one I agree with, but I can see how people get there.
System as parent comment alluding to is "the world". Many latest/last gen people feel as though it is highly unlikely they will ever buy a house, for example. It is simply not feasible for most of them given wages vs house price increases.
I think the YOLO thought process is:
" If you're fucked anyway, why not bet everything you can borrow?
Worst outcome: you're slightly poorer. If that is possible.
Best outcome: you're rich! "
Not one I agree with, but I can see how people get there.
In the short term I agree, but in the long term the market is still a weighting machine (not a narrative driven voting machine).
I agree but the short term can impact the long term. AOL bought Time Warner. AMC is raising ridiculous amounts of new capital that gives them a lot of breathing room to figure out a future for the company.
I remember reading newspapers as a kid which were so excited by how Time Warner was modernizing by acquiring AOL. Meanwhile, I was twelve years old and sitting there thinking, "AOL is a dinosaur, too."
I wouldn't have bought AOL shares, but the folks who did and sold them around the merger would have done well for themselves, even if I was right about AOL being a company whose time had passed.
I wouldn't have bought AOL shares, but the folks who did and sold them around the merger would have done well for themselves, even if I was right about AOL being a company whose time had passed.
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Indeed, I think that's why stonk investing is associated with Gen-Z: they didn't invent mimetic desire, they just happen to be young enough to not have seen the "weighing machine" part of the cycle with their own money.
Can you elaborate more? I understand that they didn’t invent memetic desire (no one did it’s a innate human behavior from girard pov) but don’t understand the second portion of your comment
Until you lose most of your money in a bubble, you don't really get bubbles - they seem like something that only happens to other dumb people, not to you.
The most obvious, recent, and one of the biggest being the subprime housing bubble in the US.
Everyone who wasn't buying a house looked like a moron for 3 years as prices were going up >10% per year (on 33:1 leverage, if not near infinite leverage - a lot of these were no money down).
The average family was making more money in appreciation on their house than working their jobs.
Isaac Newton was not exactly a moron, and he lost all his money TWICE in the South Sea Bubble: https://royalsocietypublishing.org/doi/10.1098/rsnr.2018.001...
> This paper shows that Newton did not just taste of the Bubble's madness, but drank deeply of it. His losses, even by conservative accounting, almost surely exceeded £10 000, and plausible methods easily produce values that exceed the £20 000 figure that family lore claimed, and which is frequently cited today. By comparison with typical earnings, and making allowances for a very different society and economy, £20 000 in 1720 might be comparable to £20 million, $20 million, or euro 20 million today.9 However, before the Bubble, in the 1710s, Newton's investments appear to have been those of a careful and shrewd person, and to have been very successful. Newton died rich, with an estate valued at about £30 000, but that is primarily because he was already rich on the eve of the Bubble.
The most obvious, recent, and one of the biggest being the subprime housing bubble in the US.
Everyone who wasn't buying a house looked like a moron for 3 years as prices were going up >10% per year (on 33:1 leverage, if not near infinite leverage - a lot of these were no money down).
The average family was making more money in appreciation on their house than working their jobs.
Isaac Newton was not exactly a moron, and he lost all his money TWICE in the South Sea Bubble: https://royalsocietypublishing.org/doi/10.1098/rsnr.2018.001...
> This paper shows that Newton did not just taste of the Bubble's madness, but drank deeply of it. His losses, even by conservative accounting, almost surely exceeded £10 000, and plausible methods easily produce values that exceed the £20 000 figure that family lore claimed, and which is frequently cited today. By comparison with typical earnings, and making allowances for a very different society and economy, £20 000 in 1720 might be comparable to £20 million, $20 million, or euro 20 million today.9 However, before the Bubble, in the 1710s, Newton's investments appear to have been those of a careful and shrewd person, and to have been very successful. Newton died rich, with an estate valued at about £30 000, but that is primarily because he was already rich on the eve of the Bubble.
Not GP, but I think what they mean is that most of gen Z has not yet seen a serious downturn with their own eyes and with their own money in the market. On one hand they have older generations telling them to watch out and that bubbles never last, but on the other hand all their own experience has ever told them is that stocks pretty much only go up and that meme stocks go up way more than "boring" companies with allegedly better fundamentals. It is a very human instinct for these gen-Z investors to trust their own observations much more than the advice they get from other people.
The argument is that eventually a crisis will come again (as it has done repeatedly every 10-20 years for centuries) and then the boring companies with big buffers and lack of risky behavior will be much better positioned to weather the storm, while many of loss-making companies in declining industries (yet with very high share prices due to meme stock status) will suffer more and possibly go bankrupt. That is the "weighing" part of the stock market boom/bust cycle as opposed to the "voting" part of the stock market that is currently exemplified by the stonks investing community.
The argument is that eventually a crisis will come again (as it has done repeatedly every 10-20 years for centuries) and then the boring companies with big buffers and lack of risky behavior will be much better positioned to weather the storm, while many of loss-making companies in declining industries (yet with very high share prices due to meme stock status) will suffer more and possibly go bankrupt. That is the "weighing" part of the stock market boom/bust cycle as opposed to the "voting" part of the stock market that is currently exemplified by the stonks investing community.
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But in the long term we are all dead.
Pretty often (but not always), the time periods in which the market becomes a weighing machine is only a couple of decades. The long term in which we're all dead is significantly further away.
Most of the time only a single decade is sufficient to flush out high-flying hype and revert back to fundamentals. How close we are to that point now is anyone’s guess.
Thanks for nothing J M Keynes ;-)
Only someone who never had children would say something so nihilistic
Only someone who never had children would say something so nihilistic
Read the full quote, it's not nihilist at all.
I don't think you can claim its entirely narrative driven so long as stocks continue to represent equity stake in real companies with real revenue liabilities and assets.
Sure, the market price is largely driven by human behavior, but so long as stock ownership represents a claim on real assets the base value of that stock (which can wildly differ from the price) can only be as narrative driven as the value of those assets.
Unless you want to argue that commodities themselves are priced largely by narratives rather than real utility, but that's a stronger claim.
Sure, the market price is largely driven by human behavior, but so long as stock ownership represents a claim on real assets the base value of that stock (which can wildly differ from the price) can only be as narrative driven as the value of those assets.
Unless you want to argue that commodities themselves are priced largely by narratives rather than real utility, but that's a stronger claim.
> Predicting the market has and will never be about "facts" - it will always be about predicting other people's behavior.
It will be a combination of both, as different people will react differently to the same facts about a company and the market/economy. And there's no way to predict ahead of time when these new facts / information will appear (e.g., lawsuit against a company), and so fluctuations will occur 'randomly' over time:
* https://en.wikipedia.org/wiki/A_Random_Walk_Down_Wall_Street
It will be a combination of both, as different people will react differently to the same facts about a company and the market/economy. And there's no way to predict ahead of time when these new facts / information will appear (e.g., lawsuit against a company), and so fluctuations will occur 'randomly' over time:
* https://en.wikipedia.org/wiki/A_Random_Walk_Down_Wall_Street
Disagree. The whole premise of fundamental analysis is to justify the stock price by its corporate earnings, which is at least expressing an interest in corporate earnings. Forecasts of such earnings may sometimes be wildly wrong, sure, but this is still qualitatively different than "GME to the moon" which never pretended to bother about the earnings to begin with.
> The whole premise of fundamental analysis is to justify the stock price by its corporate earnings
Isn't this an example of the GP's point?
There's no intrinsic reason for earnings to be directly related to stock price.
Like you said, it's a justification not reasoning.
Isn't this an example of the GP's point?
There's no intrinsic reason for earnings to be directly related to stock price.
Like you said, it's a justification not reasoning.
Say I’m offering a contract to pay you $100 every month for as long as I'm alive.
Would you buy that for $1? What about $1M? Something price in-between? Does the price change if it’s Bill Gates offering? What if it's the US government? Does it change based on your life expectancy, the tax treatment of that $100, expected inflation rates, if a bunch of investors want to buy this contract, or if the payment is “maybe $100, but sometimes more or sometimes less, within a reasonable range”?
There is a calculable and narrow band for the fundamental price of this contract, and it’s intrinsically based on two things: how much I promise to pay back (~return) and how believable it is (~risk).
"Corporate earnings" are equivalent to this monthly payment, just the payments take the shape of dividends, or share buy-backs, or reinvestment which promise even greater corporate earnings.
Would you buy that for $1? What about $1M? Something price in-between? Does the price change if it’s Bill Gates offering? What if it's the US government? Does it change based on your life expectancy, the tax treatment of that $100, expected inflation rates, if a bunch of investors want to buy this contract, or if the payment is “maybe $100, but sometimes more or sometimes less, within a reasonable range”?
There is a calculable and narrow band for the fundamental price of this contract, and it’s intrinsically based on two things: how much I promise to pay back (~return) and how believable it is (~risk).
"Corporate earnings" are equivalent to this monthly payment, just the payments take the shape of dividends, or share buy-backs, or reinvestment which promise even greater corporate earnings.
Many stocks don't pay dividends and re-investment is extremely fuzzy and hard to value because it depends on insider knowledge.
In the US specifically, issuing dividends is a suboptimal strategy for returning money to shareholders due to taxation. While dividends are common elsewhere, the two standard strategies in the USA are share buybacks and reinvesting into growth. Buybacks work because increase demand + reduced supply = your holdings go up. Reinvestments work because higher returns in the future = people will buy the contract from you for more than you paid for it. In either case, it's the equivalent of the company "giving" you $X that month, just not as a bank transfer but as capital gains that you can shuffle as per your tax strategy.
>... and re-investment is extremely fuzzy and hard to value.
Yes. And the more this is true, the more that "stock" becomes a "stonk".
>... and re-investment is extremely fuzzy and hard to value.
Yes. And the more this is true, the more that "stock" becomes a "stonk".
> There's no intrinsic reason for earnings to be directly related to stock price.
Yes there absolutely is. If you are the owner of a company you may divert the future earnings to your own bank account, which has a precisely defined value.
Your counterargument may be that minority shareholders never have the power to affect distributions of earnings, but that is also false. Minority shareholders at minimum hold the power of arbitrage between majority shareholders.
Yes there absolutely is. If you are the owner of a company you may divert the future earnings to your own bank account, which has a precisely defined value.
Your counterargument may be that minority shareholders never have the power to affect distributions of earnings, but that is also false. Minority shareholders at minimum hold the power of arbitrage between majority shareholders.
> There's no intrinsic reason for earnings to be directly related to stock price.
You are buying a share in an income stream! You are using your money to buy money! If there is no intrinsic reason for this to have a price that is measured in money, where exactly do you think a price measured in money is appropriate?
You are buying a share in an income stream! You are using your money to buy money! If there is no intrinsic reason for this to have a price that is measured in money, where exactly do you think a price measured in money is appropriate?
Corporations are not required to share their income stream with investors, either directly through dividends or indirectly through buybacks. The "income stream" concept is only theoretical.
If they don't, and can't demonstrate that they're doing something else useful with that money, investors get angry and fire the board.
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That assumes that companies will pay dividends and your can get a good estimate of future yield to value. Corporate earnings are a proxy for potential future yield when there might be future yield. But most large tech companies don't regularly (or don't ever) plan on doing that. We're left with a proxy that no longer works in most cases and in the cases it can, has already been arbitraged so that retail investors won't be buying future cash flows through dividends at reasonable rates.
Yes, it assumes you can get an estimate. Yes, this assumption can be problematic. Yes, there are limits. But, again, even the most problematic estimate is leagues ahead of "diamond hands, diamond hands, GME to the moon".
No, "yield" in terms of dividends is not necessary. Owning a share in a company that puts cash in a bank account is also worth money.
No, "yield" in terms of dividends is not necessary. Owning a share in a company that puts cash in a bank account is also worth money.
> assumes that companies will pay dividends
The most powerful practical enforcers of valuations are M&A and debt financing. Both are highly dependent on cash flows. You can narrate a stock up and down until the cows come home, but acquisitions and debt will set a fundamental floor based on economic reality. (There is no similar mechanism limiting upside given our cultural aversion to short selling.)
The most powerful practical enforcers of valuations are M&A and debt financing. Both are highly dependent on cash flows. You can narrate a stock up and down until the cows come home, but acquisitions and debt will set a fundamental floor based on economic reality. (There is no similar mechanism limiting upside given our cultural aversion to short selling.)
Dividends are not the only way to distribute earnings; stock buybacks are a very popular method as well.
Stock buybacks are, if anything, often considered preferable to dividends, because they allow people who invest outside of tax shelters to control whether or not they want to have taxable income this year (by selling the stock on their own schedule, rather than getting a dividend on the company's schedule).
That’s a very postmodernist framing… the difference is that some narratives are better models of reality than others. I agree that earnings reports are so stage-managed as to be almost completely devoid of real information content, but what if you had unrestricted access to the company’s books? What if you could look into their sales database? Equities are a fairly standardized legal claim to quantifiable value, and this may not seem to factor into the market price much nowadays, but it is a qualitatively different kind of narrative than “sentiment”.
> "The article makes it sound like as if this is a recent phenomenon. I don't believe that's true. I believe that stock prices, or prices of anything, be it tulips or paintings, have always been driven by narratives. "
That might have an element of truth, but recent generations have had opportunities for "financial nihilism" well in excess of anything imaginable by earlier generations, in line with the availability of information, speed of communication, and access to services. Just looking back two or three generations, you got your stock prices in the daily newspaper, you didn't have computers to draw out all your fancy technical analysis charts (although if you were patient you could make charts with pencil and paper), almost no one had access to a stockbroker, and of course there wasn't an internet where you could read about meme stocks or the latest cryptocurrency scheme.
That might have an element of truth, but recent generations have had opportunities for "financial nihilism" well in excess of anything imaginable by earlier generations, in line with the availability of information, speed of communication, and access to services. Just looking back two or three generations, you got your stock prices in the daily newspaper, you didn't have computers to draw out all your fancy technical analysis charts (although if you were patient you could make charts with pencil and paper), almost no one had access to a stockbroker, and of course there wasn't an internet where you could read about meme stocks or the latest cryptocurrency scheme.
> almost no one had access to a stockbroker
That isn't true. My dad invested in stocks starting in the 1940s, investing his Air Force pay (which wasn't much).
I started investing around 1980 at Boeing, and lots of the other engineers did, too.
Just phone up Schwab or Merrill Lynch or whatever, they'll send you the forms, and off you went.
That isn't true. My dad invested in stocks starting in the 1940s, investing his Air Force pay (which wasn't much).
I started investing around 1980 at Boeing, and lots of the other engineers did, too.
Just phone up Schwab or Merrill Lynch or whatever, they'll send you the forms, and off you went.
“Fundamental analysis” is not merely a narrative, though. For example for a mature company, there is an underlying economic reality about the time frame you can expect to earn back your initial investment in dividends, and the subsequent ROI.
At the end of the day its a model and all models are fallible because they cannot perfectly capture reality.
Fundamentals is a narrative that assumes a lot of things like the stability and idealization of a businesses operating environment. These are just baked into the narrative in such a way that they seem “objective” and a part of the “economic reality”.
Yuval Harari’s Sapiens and Taleb’s Black Swan make really compelling narratives that everything is a narrative.
Fundamentals is a narrative that assumes a lot of things like the stability and idealization of a businesses operating environment. These are just baked into the narrative in such a way that they seem “objective” and a part of the “economic reality”.
Yuval Harari’s Sapiens and Taleb’s Black Swan make really compelling narratives that everything is a narrative.
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What would a compelling narrative that everything isn't narrative look like?
Financial post-post-modernism? Interesting, perhaps something like Micheal Hudson's take, but I don't how to apply it to valuation of stocks.
Mature companies that do not pay back dividend or buy back shares also exist and are still valuable (eg amazon).
At some point, they stop growing, and will be expected to pay a dividend. Apple and Microsoft pay dividends. Failure to pay a dividend is seen only in companies where the founders have a stock scheme which keeps them from being out-voted.
This feels similar to when people describe poker as a game of luck. It's easy to dismiss skill if you haven't played enough hands.
It doesn't sound to me like the GP is dismissing skill, just pointing out that people rather than facts drive the market.
That's fair, skill is the wrong word. My point was that there are underlying fundamentals (as a stock is partial legal ownership), but they can often be obscured by the noise in the short run.
The difference is that on a long enough time horizon the best poker players clearly beat the averages.
On a long enough time horizon, individual stock pickers very very rarely beat the market as a whole to the point where its hard to argue what they've done is skill and not blind luck.
On a long enough time horizon, individual stock pickers very very rarely beat the market as a whole to the point where its hard to argue what they've done is skill and not blind luck.
The usual counterpoint to this is the essay "The Superinvestors of Graham-and-Doddsville": https://www8.gsb.columbia.edu/articles/columbia-business/sup...
TLDR: If it was really blind luck, you would expect the people who beat the market to come from a wide variety of stock picking philosophies. Ie, some technical analysts, some fundamental value investors, some momentum traders, some "throw a dart at the newspaper" people, some sector investors, etc etc etc. However, if you look at the investors who have consistently beat the market over many years it turns out that the majority of them came from a single school. The statistical chances of that happening as a result of pure chance are so small that the alternative hypothesis (ie those investors actually do have an edge, like good poker players) becomes very likely indeed.
TLDR: If it was really blind luck, you would expect the people who beat the market to come from a wide variety of stock picking philosophies. Ie, some technical analysts, some fundamental value investors, some momentum traders, some "throw a dart at the newspaper" people, some sector investors, etc etc etc. However, if you look at the investors who have consistently beat the market over many years it turns out that the majority of them came from a single school. The statistical chances of that happening as a result of pure chance are so small that the alternative hypothesis (ie those investors actually do have an edge, like good poker players) becomes very likely indeed.
There's a few layers to this.
If you want higher than market (average) returns, there are known factors that you invest in that have higher expected (but not guaranteed) returns:
* https://en.wikipedia.org/wiki/Fama–French_three-factor_model
Buffett's historical success has been quantified in light of this:
* https://www.aqr.com/Insights/Research/Journal-Article/Buffet...
* https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3197185
Also worth noting that Benjamin Graham, in his very last published interview (Financial Analysts Journal, 1976), stated:
> In general, no. I am no longer an advocate of elaborate techniques of security analysis in order to find superior value opportunities. This was a rewarding activity, say, 40 years ago, when our textbook "Graham and Dodd" was first published; but the situation has changed a great deal since then. In the old days any well-trained security analyst could do a good professional job of selecting undervalued issues through detailed studies; but in the light of the enormous amount of research now being carried on, I doubt whether in most cases such extensive efforts will generate sufficiently superior selections to justify their cost. To that very limited extent I'm on the side of the "efficient market" school of thought now generally accepted by the professors.
* https://valuehunter.files.wordpress.com/2009/05/conversation...
Now there are lots of folks that don't bother listening to his advice, and take an active role in the market. But empirical studies have shown that, generally speaking, the more active a person is the worse their results tend to be. We've know this for at least fifty years:
* https://en.wikipedia.org/wiki/A_Random_Walk_Down_Wall_Street
And even the professional folks who spend their working life generally get it wrong:
* https://www.ifa.com/articles/despite_brief_reprieve_2018_spi...
Over the course of 20+ years of investing, you're more likely (>85%) to make more money by simply buying passive funds that follow major indexes (S&P 500, Russell 3000, MSCI EAFE), why bother with the extra risk? Is the extra potential (not guaranteed) return really needed to meet your financial goals? If you can (e.g.) retire comfortably getting 'only' 6% returns, why bother chasing (say) 8-9%? Having more money isn't necessarily a bad thing, but what are you trading-off chasing for it?
The odds are not on your side if you think that you're one of the folks that can beat the market, especially over a time period of 20-30 saving for retirement (and then 20-30 years in retirement). The extra returns are generally not 'free': you're taking extra risk for them.
Of course one often hears about the 'superinvestors' that made it, but what about the (probably many more) people that did not:
* https://xkcd.com/1827/
As for luck versus skill, this has been studied:
> When we turn to individual funds, the challenge is to distinguish skill from luck. With 3,156 funds in our full ($5 million AUM) sample, some do extraor- dinarily well and some do extraordinarily poorly just by chance. To distinguish between luck and skill, we compare the distribution of t(α) estimates from ac- tual fund returns with the distribution from bootstrap simulations in which all funds have zero true α. The tests on net returns say that few funds have enough skill to cover costs. The distribution of three-factor t(α) estimates from net fund returns is almost always to the left of the zero α distribution. The extreme right tail of the three-factor t(α) estimates for net fund returns, however, is roughly in line with the simulated distribution. This suggests that some managers do have sufficient skill to cover costs. But the estimate of net return three-factor true α is about zero even for the portfolio of funds in the top percentiles of historical three-factor t(α) estimates, and the estimate of four-factor true α is negative. Moreover, the estimate of true α for funds in the top percentiles is no better than the estimated α (also near zero) for large, efficiently managed passive funds.
* https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1356021
* https://mba.tuck.dartmouth.edu/bespeneckbo/default/AFA611-Ec...
Basically: the larger the portfolio, the more skill you need to beat the market (especially on a risk-adjusted basis) over time. Get 'too big' and you tend to run out of runway on your skill (at which point just go passive). This cross-over point is different for everyone, but you won't necessarily know where your's is ahead of time, and so initial (skilled) success may end unexpectedly and suddenly.
If you want higher than market (average) returns, there are known factors that you invest in that have higher expected (but not guaranteed) returns:
* https://en.wikipedia.org/wiki/Fama–French_three-factor_model
Buffett's historical success has been quantified in light of this:
* https://www.aqr.com/Insights/Research/Journal-Article/Buffet...
* https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3197185
Also worth noting that Benjamin Graham, in his very last published interview (Financial Analysts Journal, 1976), stated:
> In general, no. I am no longer an advocate of elaborate techniques of security analysis in order to find superior value opportunities. This was a rewarding activity, say, 40 years ago, when our textbook "Graham and Dodd" was first published; but the situation has changed a great deal since then. In the old days any well-trained security analyst could do a good professional job of selecting undervalued issues through detailed studies; but in the light of the enormous amount of research now being carried on, I doubt whether in most cases such extensive efforts will generate sufficiently superior selections to justify their cost. To that very limited extent I'm on the side of the "efficient market" school of thought now generally accepted by the professors.
* https://valuehunter.files.wordpress.com/2009/05/conversation...
Now there are lots of folks that don't bother listening to his advice, and take an active role in the market. But empirical studies have shown that, generally speaking, the more active a person is the worse their results tend to be. We've know this for at least fifty years:
* https://en.wikipedia.org/wiki/A_Random_Walk_Down_Wall_Street
And even the professional folks who spend their working life generally get it wrong:
* https://www.ifa.com/articles/despite_brief_reprieve_2018_spi...
Over the course of 20+ years of investing, you're more likely (>85%) to make more money by simply buying passive funds that follow major indexes (S&P 500, Russell 3000, MSCI EAFE), why bother with the extra risk? Is the extra potential (not guaranteed) return really needed to meet your financial goals? If you can (e.g.) retire comfortably getting 'only' 6% returns, why bother chasing (say) 8-9%? Having more money isn't necessarily a bad thing, but what are you trading-off chasing for it?
The odds are not on your side if you think that you're one of the folks that can beat the market, especially over a time period of 20-30 saving for retirement (and then 20-30 years in retirement). The extra returns are generally not 'free': you're taking extra risk for them.
Of course one often hears about the 'superinvestors' that made it, but what about the (probably many more) people that did not:
* https://xkcd.com/1827/
As for luck versus skill, this has been studied:
> When we turn to individual funds, the challenge is to distinguish skill from luck. With 3,156 funds in our full ($5 million AUM) sample, some do extraor- dinarily well and some do extraordinarily poorly just by chance. To distinguish between luck and skill, we compare the distribution of t(α) estimates from ac- tual fund returns with the distribution from bootstrap simulations in which all funds have zero true α. The tests on net returns say that few funds have enough skill to cover costs. The distribution of three-factor t(α) estimates from net fund returns is almost always to the left of the zero α distribution. The extreme right tail of the three-factor t(α) estimates for net fund returns, however, is roughly in line with the simulated distribution. This suggests that some managers do have sufficient skill to cover costs. But the estimate of net return three-factor true α is about zero even for the portfolio of funds in the top percentiles of historical three-factor t(α) estimates, and the estimate of four-factor true α is negative. Moreover, the estimate of true α for funds in the top percentiles is no better than the estimated α (also near zero) for large, efficiently managed passive funds.
* https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1356021
* https://mba.tuck.dartmouth.edu/bespeneckbo/default/AFA611-Ec...
Basically: the larger the portfolio, the more skill you need to beat the market (especially on a risk-adjusted basis) over time. Get 'too big' and you tend to run out of runway on your skill (at which point just go passive). This cross-over point is different for everyone, but you won't necessarily know where your's is ahead of time, and so initial (skilled) success may end unexpectedly and suddenly.
It’s very easy to argue rhetorically that it’s all luck, but the point does not stand up to any kind of rigour at all. Even if you make extremely conservative estimates, just one of the top funds is microscopically unlikely to arise via chance, let alone the multitude that do. Renaissance Technologies alone cannot be explained as random.
The price of GME and AMC are not justified by fundamentals at this point but thats irrelevant, it’s the desire to squeeze out the hedgegfunds who never covered their shorts that’s at stake here. Thats what is attractive about it and that is what has people buy these stocks and hold. Shortsellers meanwhile had large losses and continue to lose on a regular basis. They may be up to something..
> Many retail investors don’t really care about whether GME’s price is justified by their corporate earnings - they simply buy at any cost. This financial nihilism - where intrinsic value is unknowable and all that matters is what other people think - is a worldview often encountered in Gen Z retail traders
Bitcoin?
I joke, Bitcoin does (sort of) have an intrinsic value: the cost of the electricity to mine a new Bitcoin. If that's higher than the cost to buy an existing Bitcoin, you'd do the latter. So the cost of mining (in electricity-dollars) sets a floor on the price of Bitcoin. (The ceiling is due to the financial nihilism described above. Same with gold and silver.)
Bitcoin?
I joke, Bitcoin does (sort of) have an intrinsic value: the cost of the electricity to mine a new Bitcoin. If that's higher than the cost to buy an existing Bitcoin, you'd do the latter. So the cost of mining (in electricity-dollars) sets a floor on the price of Bitcoin. (The ceiling is due to the financial nihilism described above. Same with gold and silver.)
> If that's higher than the cost to buy an existing Bitcoin, you'd do the latter. So the cost of mining (in electricity-dollars) sets a floor on the price of Bitcoin.
You are describing production cost. Not intrinsic value. Once someone decides to buy a Bitcoin, the build or buy decision is as you describe. But that demand is what causes the value. Not the production cost.
You are describing production cost. Not intrinsic value. Once someone decides to buy a Bitcoin, the build or buy decision is as you describe. But that demand is what causes the value. Not the production cost.
This is even true with houses and land value - a house didn't get 10x more expensive to build in the last 50 years, but thsts what people are willing to offer for it.v
There's 3 circular things at work there - land value has gone up, interest rates dropped making total cost of ownership go down, and therefore the land value has gone up creating a good investment.
If I borrow 500k at 1% interest I'll pay back 565k in total over 25 years. At 6% I'll pay back close to $1m. Or to put it another way, the collapse in interest rates have almost halved the total cost of a house. Now, house prices are twice as high because everyone has access to low rates, but as well as this houses look like a fantastic investment - it's doubled in value! It's going to the moon!
If I borrow 500k at 1% interest I'll pay back 565k in total over 25 years. At 6% I'll pay back close to $1m. Or to put it another way, the collapse in interest rates have almost halved the total cost of a house. Now, house prices are twice as high because everyone has access to low rates, but as well as this houses look like a fantastic investment - it's doubled in value! It's going to the moon!
> a house didn't get 10x more expensive to build in the last 50 years
It got 10x (or more) more expensive to get approval to build dense housing in decent locations.
It got 10x (or more) more expensive to get approval to build dense housing in decent locations.
The author doesn’t understand why people buy GME. It’s not to push the price up in a coordinated way or something else like that. It’s because it is understood that Citadel never covered it’s short position from January, after doing massive naked shorting to drive the price of GME down to zero. There is a belief that they are kicking the can further down the alley by creating more and more synthetic shorts, hidden in deep ITM long or other mechanisms, because they cannot actually cover their current position. And that eventually something will force them to cover, resulting in a massive short squeeze.
It’s not nihilistic at all, people who participate in this because they actually believe their analysis is correct and a short squeeze is imminent. That’s why in this framework buying at a cost below the floor (currently discussed at $20mio per share, seriously) is considered cheap.
The research people discuss on this topic on r/superstonk is interesting to read just to get an idea of what they are doing. Not that I’m saying a short squeeze will happen or not, I personally have no idea, but it’s a fascinating niche to become familiar with.
It’s not nihilistic at all, people who participate in this because they actually believe their analysis is correct and a short squeeze is imminent. That’s why in this framework buying at a cost below the floor (currently discussed at $20mio per share, seriously) is considered cheap.
The research people discuss on this topic on r/superstonk is interesting to read just to get an idea of what they are doing. Not that I’m saying a short squeeze will happen or not, I personally have no idea, but it’s a fascinating niche to become familiar with.
Not sure why this being downvoted. Don't really have skin in the game when it comes to GME, but the naked shorting and creating short squeeze thesis has some legs, beyond the "stonks only go up" narrative. Burry was one of the first people to go long before all the craze.
I’ve tried to explain this on HN twice before and been immediately downvoted, despite my best attempt at explaining the nuances. Your comment sums things up well, thanks for sharing.
For anyone else who’s curious to learn more, as mentioned, Superstonk[1] is the place to go. Don’t be put off by the name — Superstonk is dedicated exclusively to monitoring the GME situation specifically.
It’s actually the third subreddit used for this since January — r/WallStreetBets has clearly been taken over by pump-and-dump schemes on a mass scale, and the older r/GME subreddit saw a mass exodus of users to the newly-formed Superstonk, after mods lost control of it to speculated “shill” posters. Plenty of evidence has arisen showing anonymous recruiters offering to pay Redditors to spread GME misinformation.
I’d suggest filtering Superstonk posts to just the “DD” flair to hide the humour/camaraderie, which can understandably be a bit off-putting to outsiders, unfamiliar with the myriad of crazy events that have happened so far[2].
Having followed the GME saga very closely since January, one of the most enlightening revelations for me has been the blatant media manipulation surrounding GME. There’s just far too many examples to ignore — so perhaps it’s unsurprising that many people still think it’s simply a “Reddit meme stock” that’s run it’s course.
If the DD is to be believed, this thing is far from over. Regardless, I’m thoroughly enjoying watching how it unfurls.
[1] https://www.reddit.com/r/Superstonk/
[2] https://gmetimeline.com/
For anyone else who’s curious to learn more, as mentioned, Superstonk[1] is the place to go. Don’t be put off by the name — Superstonk is dedicated exclusively to monitoring the GME situation specifically.
It’s actually the third subreddit used for this since January — r/WallStreetBets has clearly been taken over by pump-and-dump schemes on a mass scale, and the older r/GME subreddit saw a mass exodus of users to the newly-formed Superstonk, after mods lost control of it to speculated “shill” posters. Plenty of evidence has arisen showing anonymous recruiters offering to pay Redditors to spread GME misinformation.
I’d suggest filtering Superstonk posts to just the “DD” flair to hide the humour/camaraderie, which can understandably be a bit off-putting to outsiders, unfamiliar with the myriad of crazy events that have happened so far[2].
Having followed the GME saga very closely since January, one of the most enlightening revelations for me has been the blatant media manipulation surrounding GME. There’s just far too many examples to ignore — so perhaps it’s unsurprising that many people still think it’s simply a “Reddit meme stock” that’s run it’s course.
If the DD is to be believed, this thing is far from over. Regardless, I’m thoroughly enjoying watching how it unfurls.
[1] https://www.reddit.com/r/Superstonk/
[2] https://gmetimeline.com/
It gets downvoted because it’s nonsense. People who talk about naked shorting do not understand what it means. And in general people talking about these sorts of conspiracies definitely don’t understand options/greeks.
Source: career hedge fund trader
Source: career hedge fund trader
You say this, and then it’s reported that funds are bleeding out $800M-$1B per day when GME and AMC rally, so ¯\_(ツ)_/¯
https://www.bloomberg.com/news/articles/2021-06-01/amc-games...
https://www.bloomberg.com/news/articles/2021-06-01/amc-games...
No - see this is what I mean. You don’t understand what that data means. The options market for these stocks has become huge. Many people are long calls. If I am trading around my gamma, I will be shorting underlying against my calls. I can even be net long, even if I am short shares.
There are a lot of outright shorts. But there are also a lot of shorts for other reasons, and those people aren’t bleeding.
There are a lot of outright shorts. But there are also a lot of shorts for other reasons, and those people aren’t bleeding.
I own the underlying and participate in the options market for these securities. I understand the mechanisms very well.
I don’t doubt that you participate.
Nothing you have said indicates you understand professional options markets.
Nothing you have said indicates you understand professional options markets.
Hey, just a random spectator here. I'm super interested in learning as much as I can about this stuff. (currently a math PhD student considering a career in hedge funds)
Are there any resources or books or anything you'd suggest checking out? Right now I'm definitely at an early "learn as much as possible" stage and would love to hear any suggestions you might have on how to get exposure to this world.
Thanks.
Are there any resources or books or anything you'd suggest checking out? Right now I'm definitely at an early "learn as much as possible" stage and would love to hear any suggestions you might have on how to get exposure to this world.
Thanks.
I wasn’t sure whether you’re asking for resources about options trading in general, or info about the GME situation specifically.
Presuming it’s the latter, I would start here: https://reddit.com/r/Superstonk/comments/nwqaj0/gme_moass_th...
That’s a link to a comprehensive beginner’s guide covering the GME saga so far, and offers plenty of supporting research in favour of a further potential squeeze. I hope it’s a useful starting point for you, assuming that’s what you were asking after!
Presuming it’s the latter, I would start here: https://reddit.com/r/Superstonk/comments/nwqaj0/gme_moass_th...
That’s a link to a comprehensive beginner’s guide covering the GME saga so far, and offers plenty of supporting research in favour of a further potential squeeze. I hope it’s a useful starting point for you, assuming that’s what you were asking after!
Thanks for the link but I did mean more in general. I’ve got a textbook on mathematics for finance in the mail I’m planning on getting through this summer and was wondering of other potential resources to get a good background understanding of trading over all.
I guess one goal would be to be able to walk into a trading role at a hedge fund (long/short probably? Also curious about macro strategies) and be at a decent starting point to hit the ground running
I guess one goal would be to be able to walk into a trading role at a hedge fund (long/short probably? Also curious about macro strategies) and be at a decent starting point to hit the ground running
You can study all you want, and any of the major text books on Options/BS-M will give you a primer. But, my best piece of advice: open a paper trading account and start running some options positions. Pick a few underlyings but make sure they're all different: 1x single name, 1x index, 1x commods/fx.
Then using what you've learned in your textbook, just keep your book hedged, without any opinion. Watch how your greeks change, and how that corresponds with your risk and pnl. Most people only really end up learning on the job. I didn't "get" options until I started running some risk and making some money. But that only happened when I first started working.
Then using what you've learned in your textbook, just keep your book hedged, without any opinion. Watch how your greeks change, and how that corresponds with your risk and pnl. Most people only really end up learning on the job. I didn't "get" options until I started running some risk and making some money. But that only happened when I first started working.
Sweet that makes sense. Also for choosing one underlying do you mean only trade options on one single security? So not doing company by company analysis but choosing a single company and then trading options on that one to learn the types of strategies?
Trading and exchanges: market microstructure.
[deleted]
Who should I believe? The career hedge fund trader? Or randos spouting conspiracy theories? I can't decide.
There are plenty of career hedge fund traders actively supporting this “conspiracy theory”.
One of the most well-known contributors at Superstonk is a former Citadel employee — he’s even spoken publicly about these events in an interview with CNBC. I think that makes him less of a “rando” than an otherwise-anonymous career hedge fund trader, who just happens to support your viewpoint.
There are experts on both sides. Nobody knows what’s going to happen. We’ll see!
One of the most well-known contributors at Superstonk is a former Citadel employee — he’s even spoken publicly about these events in an interview with CNBC. I think that makes him less of a “rando” than an otherwise-anonymous career hedge fund trader, who just happens to support your viewpoint.
There are experts on both sides. Nobody knows what’s going to happen. We’ll see!
>There are plenty of career hedge fund traders actively supporting this “conspiracy theory”.
>One of the most well-known contributors at Superstonk is a former Citadel employee
Source for both of these?
>One of the most well-known contributors at Superstonk is a former Citadel employee
Source for both of these?
Former Citadel employee, /u/dlauer — https://www.reddit.com/r/Superstonk/comments/o28tm9/udlauers...
And here’s Dave’s interview with Superstonk: https://youtu.be/AYct0XX0uTU
—
As for “plenty” of career hedge fund traders: I’ll accept “plenty” is a bit of a meaningless word here. Given the anonymous nature of Redditors, I’ll struggle to give you any meaningful identities.
Anecdotally, however, I’ve come across quite a few who claim to be professionals, and were accompanied by some kind of reasonable evidence to back it up. /r/DDintoGME has often brought attention to these people.
There have been several professional traders providing regular updates from their corporate Bloomberg Terminals [1].
Michael Burry, famed investor from “The Big Short”, held a long position on GME [2]. I think he sold it last year, but his tweets have been very bullish about the prospect of a market crash and accompanying MOASS resulting from Wall St being overleveraged. Take this one with a pinch of salt.
Perhaps, most tellingly, there are plenty of major hedge funds — including Blackrock and Vanguard (both of which are full of career traders!) — who seem to think it’s worth holding [3].
[1] https://reddit.com/r/Superstonk/comments/nzyh7f/14062021_gme...
[2] https://www.reddit.com/r/investing/comments/cthume/dr_michae...
[3] https://www.streetinsider.com/holdings.php?q=GME
And here’s Dave’s interview with Superstonk: https://youtu.be/AYct0XX0uTU
—
As for “plenty” of career hedge fund traders: I’ll accept “plenty” is a bit of a meaningless word here. Given the anonymous nature of Redditors, I’ll struggle to give you any meaningful identities.
Anecdotally, however, I’ve come across quite a few who claim to be professionals, and were accompanied by some kind of reasonable evidence to back it up. /r/DDintoGME has often brought attention to these people.
There have been several professional traders providing regular updates from their corporate Bloomberg Terminals [1].
Michael Burry, famed investor from “The Big Short”, held a long position on GME [2]. I think he sold it last year, but his tweets have been very bullish about the prospect of a market crash and accompanying MOASS resulting from Wall St being overleveraged. Take this one with a pinch of salt.
Perhaps, most tellingly, there are plenty of major hedge funds — including Blackrock and Vanguard (both of which are full of career traders!) — who seem to think it’s worth holding [3].
[1] https://reddit.com/r/Superstonk/comments/nzyh7f/14062021_gme...
[2] https://www.reddit.com/r/investing/comments/cthume/dr_michae...
[3] https://www.streetinsider.com/holdings.php?q=GME
My personal and professional online identities are linked. I'm not anonymous. Anyone could figure out who I am with 30 seconds of googling.
I've not argued for/against GME. I've just argued against the conspiracy theories. I have zero insight into their core business, and if I don't have edge, I don't trade. But I know a thing or two about how markets work, and all of the conspiracy nuts who have jumped onto the GME story just don't really get it. That's what I take issue with.
I've not argued for/against GME. I've just argued against the conspiracy theories. I have zero insight into their core business, and if I don't have edge, I don't trade. But I know a thing or two about how markets work, and all of the conspiracy nuts who have jumped onto the GME story just don't really get it. That's what I take issue with.
Don’t believe me! Why would you ever trust some rando on the Internet, whether retail or someone who says they’re a career hedge fund trader?
Last week’s 8-K filing revealed GameStop are actively assisting the SEC with an investigation into ongoing manipulation of their share price.
They even disclosed to investors the risk of a further short squeeze on their stock. If they don’t have reason to believe that’s a possibility, it would never have been put on the record in a public filing.
They even disclosed to investors the risk of a further short squeeze on their stock. If they don’t have reason to believe that’s a possibility, it would never have been put on the record in a public filing.
They can believe it is an exceedingly remote possibility but nonetheless put it in the filing just in case. These filings contain many risk statements about events that do not eventually come to pass.
In addition, assisting the SEC about 'ongoing manipulation' can just as easily mean that the SEC may be considering mass hyping of the stock through reddit to be manipulation. It does not mean that there is definitely shady stuff going on that GameStop is worried about.
In addition, assisting the SEC about 'ongoing manipulation' can just as easily mean that the SEC may be considering mass hyping of the stock through reddit to be manipulation. It does not mean that there is definitely shady stuff going on that GameStop is worried about.
Both fair points, thanks for your comment.
GameStop’s filing did note the following [1]:
The SEC themselves have commented on the investigation too [2]:
[1] https://www.bloomberg.com/news/articles/2021-06-09/gamestop-...
[2] https://www.reuters.com/world/us/us-sec-says-observing-marke...
GameStop’s filing did note the following [1]:
“the inquiry is not expected to adversely impact us”
The SEC themselves have commented on the investigation too [2]:
"SEC staff continues to monitor the market in light of the ongoing volatility in certain stocks to determine if there have been any disruptions of the market, manipulative trading, or other misconduct," a spokesperson for SEC said in a statement.
"In addition, we will act to protect retail investors if violations of federal securities laws are found."
[1] https://www.bloomberg.com/news/articles/2021-06-09/gamestop-...
[2] https://www.reuters.com/world/us/us-sec-says-observing-marke...
> I feel this is a statement they would be unlikely to make if they felt the SEC’s investigation was likely to result in retail sell-offs.
I think that's a major misunderstanding of how the statement works. Gamestop think the SEC inquiry won't affect their business - they aren't making any claims about its effect on their stock price. In a normal world, these would be close to equivalent, and you could interpret the statement as "this will not impact us to an extent that is material to our stock price", but that's not OK to do here.
I think that's a major misunderstanding of how the statement works. Gamestop think the SEC inquiry won't affect their business - they aren't making any claims about its effect on their stock price. In a normal world, these would be close to equivalent, and you could interpret the statement as "this will not impact us to an extent that is material to our stock price", but that's not OK to do here.
If there was a significant retail sell-off right around now that caused the share price to plummet, it would directly affect their business transformation plans.
They are currently completing an at-the-market offering for 5,000,000 shares, as a means to raise capital to fund their new digital strategy. We don’t know how long this will continue to go on for.
You may or may not be aware of this, but their new chairman is on a major recruitment drive and is taking on many new technology-focussed executives (lots of former Amazon execs, a total change in perspective for a brick-and-mortar retailer that was nearly bankrupt last year).
This has all been disclosed in their recent filings — and so as I understand it, at the present moment their share price is directly linked to the performance of their business.
Ultimately, though — I’m just speculating. This is far from the only indication they’ve given that retail investors needn’t worry. Just some food for thought. I wouldn’t normally give much weight to this if it weren’t also for everything else they’ve got going on at the moment. Time will tell!
They are currently completing an at-the-market offering for 5,000,000 shares, as a means to raise capital to fund their new digital strategy. We don’t know how long this will continue to go on for.
You may or may not be aware of this, but their new chairman is on a major recruitment drive and is taking on many new technology-focussed executives (lots of former Amazon execs, a total change in perspective for a brick-and-mortar retailer that was nearly bankrupt last year).
This has all been disclosed in their recent filings — and so as I understand it, at the present moment their share price is directly linked to the performance of their business.
Ultimately, though — I’m just speculating. This is far from the only indication they’ve given that retail investors needn’t worry. Just some food for thought. I wouldn’t normally give much weight to this if it weren’t also for everything else they’ve got going on at the moment. Time will tell!
Curiously, I never see such headlines when GME or AMC drop. GME is down 30% since earnings. How much did the shorts lose?
This is a well-recognised phenomenon.
“Forget GameStop” is a running joke by this point: https://www.reddit.com/r/GME/comments/mhc9vf/dont_forget_to_... — and that post was from nearly 3 months ago. These headlines haven’t slowed down since!
Some people speculate hedge funds are allowing AMC to squeeze, as a way to raise money to cover their GME shorts — not outside of the realms of possibility, given Citadel hold long positions on AMC. The timing of AMC price spikes has also correlated with FTD cycles, but that’s a whole other can of worms.
AMC seems to be covered by the media far more often than GME. On days when GME’s price has rocketed up, there appeared to be media blackouts, and it goes largely unreported. The same thing doesn’t seem to be happening with AMC (at least, not to anywhere near the same extent).
Other common observations include trading apps like Robinhood only sending users push notifications when GME’s price drops significantly — but never when it’s rising. This has not been observed with any other stocks, as far as I’ve seen.
“Forget GameStop” is a running joke by this point: https://www.reddit.com/r/GME/comments/mhc9vf/dont_forget_to_... — and that post was from nearly 3 months ago. These headlines haven’t slowed down since!
Some people speculate hedge funds are allowing AMC to squeeze, as a way to raise money to cover their GME shorts — not outside of the realms of possibility, given Citadel hold long positions on AMC. The timing of AMC price spikes has also correlated with FTD cycles, but that’s a whole other can of worms.
AMC seems to be covered by the media far more often than GME. On days when GME’s price has rocketed up, there appeared to be media blackouts, and it goes largely unreported. The same thing doesn’t seem to be happening with AMC (at least, not to anywhere near the same extent).
Other common observations include trading apps like Robinhood only sending users push notifications when GME’s price drops significantly — but never when it’s rising. This has not been observed with any other stocks, as far as I’ve seen.
I am very interested in hearing the opposite side against GME. Can you provide some points on why the main premise(that there is still a large short position which is underwater) could be false?
The DTCC new rules + ongoing restrictions at brokerages suggests to me something is going on. For instance tdameritrade makes me call in to sell covered calls on my GME position while they allow me to sell covered calls through the web interface for my other positions.
The DTCC new rules + ongoing restrictions at brokerages suggests to me something is going on. For instance tdameritrade makes me call in to sell covered calls on my GME position while they allow me to sell covered calls through the web interface for my other positions.
> Can you provide some points on why the main premise(that there is still a large short position which is underwater) could be false?
I never said this wasn’t true. By all accounts this appears to remain true.
What I take issue with is all this talk of “naked shorting” which is a very specific thing and I’ve not seen any data to suggest this has happened at scale. It also fundamentally misunderstands now Citadel Securities makes money or even just options basics (the vast majority of retail are buying calls which means any MM will be long underlying against their short calls). It’s the conspiracy theory stuff which is nonsense.
I never said this wasn’t true. By all accounts this appears to remain true.
What I take issue with is all this talk of “naked shorting” which is a very specific thing and I’ve not seen any data to suggest this has happened at scale. It also fundamentally misunderstands now Citadel Securities makes money or even just options basics (the vast majority of retail are buying calls which means any MM will be long underlying against their short calls). It’s the conspiracy theory stuff which is nonsense.
> the vast majority of retail are buying calls
This is almost certainly NOT the case. Do you have any data to back this statement up?
The MOASS theory relies simply on retail investors buying and holding shares. On the rare occasion when someone posts to Superstonk about their GME options, the user is quickly warned against them, without fail, every single time I’ve seen it happen.
Retail investors were no doubt trading options through Robinhood back in January. But after all the drama back then, Robinhood has since suffered a mass exodus of users to different brokerages.
It’s clear from spending any time at places like Superstonk that retail investors who’ve read any of the DD have moved away from RH en masse. There was a big push across the community to do this back in February, but I appreciate this isn’t obvious knowledge to someone who hasn’t kept up-to-speed with it for the past 6 months. Options are normally only ever mentioned by uninformed new users.
This is almost certainly NOT the case. Do you have any data to back this statement up?
The MOASS theory relies simply on retail investors buying and holding shares. On the rare occasion when someone posts to Superstonk about their GME options, the user is quickly warned against them, without fail, every single time I’ve seen it happen.
Retail investors were no doubt trading options through Robinhood back in January. But after all the drama back then, Robinhood has since suffered a mass exodus of users to different brokerages.
It’s clear from spending any time at places like Superstonk that retail investors who’ve read any of the DD have moved away from RH en masse. There was a big push across the community to do this back in February, but I appreciate this isn’t obvious knowledge to someone who hasn’t kept up-to-speed with it for the past 6 months. Options are normally only ever mentioned by uninformed new users.
> The MOASS theory relies simply on retail investors buying and holding shares.
I should have been clear: I meant that in terms of options volumes (as was my lead into that claim about options volumes) that most retail are buying calls, as opposed to puts.
I have no doubt that in totality, most retail are just buying shares. But for those trading options, it is overwhelmingly calls.
I should have been clear: I meant that in terms of options volumes (as was my lead into that claim about options volumes) that most retail are buying calls, as opposed to puts.
I have no doubt that in totality, most retail are just buying shares. But for those trading options, it is overwhelmingly calls.
> Robinhood has since suffered a mass exodus of users to different brokerages
Has it? Is there any public evidence that their user count is down?
Has it? Is there any public evidence that their user count is down?
I don’t think they’ve publicly disclosed their user counts, but a quick search for “Robinhood users leaving” brings back countless articles like these:
https://fortune.com/2021/02/19/robinhood-brand-damage-gamest...
https://seekingalpha.com/news/3655984-76-respondents-plan-to...
If you go to Superstonk and search for “Robinhood”, you’ll find hundreds of real-world examples backing up my claim.
Any Superstonk users posting screenshots from Robinhood were immediately encouraged by their peers to transfer their shares away, in a mass campaign on the subreddit spanning the course of several weeks. Users would post helpful guides to walk others through the process, which I’m sure I remember reaching the front page at points.
Today, screenshots of brokerage accounts are posted to Superstonk many times throughout the day. But I genuinely cannot remember the last time a user posted a screenshot from Robinhood. T212, eToro, WeBull — screenshots all day long. But there is little to suggest a meaningful number of Superstonk users still use RH.
(Side-note: interestingly, the Robinhood exodus helped provide further evidence suggesting shorts are still in trouble. Many users who transferred their shares away from Robinhood found the cost basis of their transferred shares to be wildly inaccurate — often hundreds of dollars above the price they actually paid for them).
https://fortune.com/2021/02/19/robinhood-brand-damage-gamest...
https://seekingalpha.com/news/3655984-76-respondents-plan-to...
If you go to Superstonk and search for “Robinhood”, you’ll find hundreds of real-world examples backing up my claim.
Any Superstonk users posting screenshots from Robinhood were immediately encouraged by their peers to transfer their shares away, in a mass campaign on the subreddit spanning the course of several weeks. Users would post helpful guides to walk others through the process, which I’m sure I remember reaching the front page at points.
Today, screenshots of brokerage accounts are posted to Superstonk many times throughout the day. But I genuinely cannot remember the last time a user posted a screenshot from Robinhood. T212, eToro, WeBull — screenshots all day long. But there is little to suggest a meaningful number of Superstonk users still use RH.
(Side-note: interestingly, the Robinhood exodus helped provide further evidence suggesting shorts are still in trouble. Many users who transferred their shares away from Robinhood found the cost basis of their transferred shares to be wildly inaccurate — often hundreds of dollars above the price they actually paid for them).
Robinhood sent me some unsolicited recruitment a year and a half ago, where they claimed to have 10m users. Surely the number went up over the following year. Somehow, I don't think that hundreds of posts on a subreddit that is explicitly critical of Robinhood is evidence of a mass exodus.
I don't like Robinhood. They gamify investing (the two metrics they shared with me were number of users and average number of visits per day - which is a terrible metric for an investment platform). I have no desire for them to succeed. But what you've posted isn't evidence of a "mass exodus".
I don't like Robinhood. They gamify investing (the two metrics they shared with me were number of users and average number of visits per day - which is a terrible metric for an investment platform). I have no desire for them to succeed. But what you've posted isn't evidence of a "mass exodus".
> but a quick search for “Robinhood users leaving” brings back countless articles like these:
>If you go to Superstonk and search for “Robinhood”, you’ll find hundreds of real-world examples backing up my claim.
All that proves is that robinhood is losing a bunch of superstonk users, but it doesn't say whether they're losing users in net or how much % of robinhood's userbase are made up of those users.
>If you go to Superstonk and search for “Robinhood”, you’ll find hundreds of real-world examples backing up my claim.
All that proves is that robinhood is losing a bunch of superstonk users, but it doesn't say whether they're losing users in net or how much % of robinhood's userbase are made up of those users.
Well, yes… If you search Superstonk, it proves a bunch of Superstonk users have left.
But I also linked to an article in Fortune, suggesting 56% of users want to leave. This was not a survey of Superstonk users.
Until they release any numbers, the best we can do is speculate. However it seems to me that RH’s reputation was significantly damaged as a result of this.
They also have an ongoing class-action lawsuit from retail investors to sort out.
Just type “Robinhood review” in to Google, and you’ll see this extends far beyond the Reddit echo-chamber.
But I also linked to an article in Fortune, suggesting 56% of users want to leave. This was not a survey of Superstonk users.
Until they release any numbers, the best we can do is speculate. However it seems to me that RH’s reputation was significantly damaged as a result of this.
They also have an ongoing class-action lawsuit from retail investors to sort out.
Just type “Robinhood review” in to Google, and you’ll see this extends far beyond the Reddit echo-chamber.
I think much of reddit is junk, and very much agree with the QAnon take. I largely agreed with the point you are making until GME went back up in February. It happened all at once, so it was not retail traders but a centralized entity. That didn't make sense to me, and still doesn't make sense to me. I don't understand who profits from this behavior.
Burry at one point linked to a blog article on NOPE[0], the Net Options Pricing Effect. The NOPE is an extremely basic metric that attempts to figure out how much of the market is based on the underlying stock, and how much is based on derivatives. I expect Burry figured this out a decade ago and has a much better metric for himself. I think this is why he found this trade early.
As we learned in the housing market of 2006 and the XIV in 2017, when the derivatives gets to be much larger than the underlying, the tail starts wagging the dog. I think the only naked shorting going on is legal, as MM are free to do so if it provides liquidity according to the basic black scholes model.
We can see that the OI on $0.50 puts and $800 calls is extremely excessive. When you have the OI of the January 2022 is at $.50 puts at 132,345 contracts, it seems to reason that the tail is wagging the dog.
If Hedgefunds had puts and that made MM create naked shares, and those shares were then bought by Cohen who then joined the board and locked in those shares, that's in essence a Buyback. If those shares no longer exist and retail buying is leading to an even bigger squeeze, who is buying those puts? Why would Hedgefunds buy the puts again? They should have given up when they lost %50.
[0]: https://medium.com/swlh/options-degenerate-marketplaces-part...
Burry at one point linked to a blog article on NOPE[0], the Net Options Pricing Effect. The NOPE is an extremely basic metric that attempts to figure out how much of the market is based on the underlying stock, and how much is based on derivatives. I expect Burry figured this out a decade ago and has a much better metric for himself. I think this is why he found this trade early.
As we learned in the housing market of 2006 and the XIV in 2017, when the derivatives gets to be much larger than the underlying, the tail starts wagging the dog. I think the only naked shorting going on is legal, as MM are free to do so if it provides liquidity according to the basic black scholes model.
We can see that the OI on $0.50 puts and $800 calls is extremely excessive. When you have the OI of the January 2022 is at $.50 puts at 132,345 contracts, it seems to reason that the tail is wagging the dog.
If Hedgefunds had puts and that made MM create naked shares, and those shares were then bought by Cohen who then joined the board and locked in those shares, that's in essence a Buyback. If those shares no longer exist and retail buying is leading to an even bigger squeeze, who is buying those puts? Why would Hedgefunds buy the puts again? They should have given up when they lost %50.
[0]: https://medium.com/swlh/options-degenerate-marketplaces-part...
> I largely agreed with the point you are making until GME went back up in February. It happened all at once, so it was not retail traders but a centralized entity. That didn't make sense to me, and still doesn't make sense to me. I don't understand who profits from this behavior.
Agree with you here. These names have been coopted by pros. Who exactly I am just as clueless as you. But this sort of gamesmanship happens 24/7 in markets, it's just usually not as visible. It's probably coordinated, possibly illegal...but it's not the grand conspiracy that /r/wsb thinks.
> Burry at one point linked to a blog article on NOPE[0], the Net Options Pricing Effect. The NOPE is an extremely basic metric that attempts to figure out how much of the market is based on the underlying stock, and how much is based on derivatives.
Otherwise known as dealer gamma, something that is closely tracked in all markets. Options OI and pinning are serious business. NOPE didn't invent this.
Naked shorting is 1) risky and 2) not possible to the degree being alleged (also - cornering markets never works). MMs do not want to be massively naked short...it's antithetical to their business model.
Agree with you here. These names have been coopted by pros. Who exactly I am just as clueless as you. But this sort of gamesmanship happens 24/7 in markets, it's just usually not as visible. It's probably coordinated, possibly illegal...but it's not the grand conspiracy that /r/wsb thinks.
> Burry at one point linked to a blog article on NOPE[0], the Net Options Pricing Effect. The NOPE is an extremely basic metric that attempts to figure out how much of the market is based on the underlying stock, and how much is based on derivatives.
Otherwise known as dealer gamma, something that is closely tracked in all markets. Options OI and pinning are serious business. NOPE didn't invent this.
Naked shorting is 1) risky and 2) not possible to the degree being alleged (also - cornering markets never works). MMs do not want to be massively naked short...it's antithetical to their business model.
This is basically the "prove that Dominion didn't switch votes for Biden on a server in Germany" of finance. Unfortunately, I don't have access to every server in Germany, so I can't prove that none of them were involved in this lunatic idea.
Also, many hedge funds are betting on GME going up. To say that this GME rally hurts hedge funds demonstrates a lack of understanding about the market.
Whether or not it's true is irrelevant. The point about the motivations and beliefs of the traders.
I agree that it’s not nihilism when some people really believe it. It might still be nonsense though, or a mixture of some sort.
This is the sort of thing many people stay away from because dumb heuristics say it’s probably nonsense and therefore it’s not worth investigating, and some stranger on the Internet saying “no, there is something to it” isn’t enough to move the needle on being actually curious enough to investigate.
Someone with a reputation for not being fooled would have to look into it and explain why, actually, it’s not nonsense.
More: https://slatestarcodex.com/2019/06/03/repost-epistemic-learn...
This is the sort of thing many people stay away from because dumb heuristics say it’s probably nonsense and therefore it’s not worth investigating, and some stranger on the Internet saying “no, there is something to it” isn’t enough to move the needle on being actually curious enough to investigate.
Someone with a reputation for not being fooled would have to look into it and explain why, actually, it’s not nonsense.
More: https://slatestarcodex.com/2019/06/03/repost-epistemic-learn...
Thankfully users at Superstonk are generally very open to “conflicting DD”, and have reached out to several industry experts to conduct interviews and learn more about the mechanics.
The interviews so far have been extremely helpful in confirming many aspects of the theory, reinforcing the hypothesis that shorts never covered. They’ve also been great opportunities for experts to correct any errors, red herrings, or misinformation in the community’s DD, which hadn’t already been picked up by other users.
Here’s one with Dr Susanne Trimbath, author of the book “Naked, Short and Greedy: Wall Street’s Failure to Deliver”. Her many other qualifications can be found in the video description: https://youtu.be/fGVY2Kco8ng
The interviews so far have been extremely helpful in confirming many aspects of the theory, reinforcing the hypothesis that shorts never covered. They’ve also been great opportunities for experts to correct any errors, red herrings, or misinformation in the community’s DD, which hadn’t already been picked up by other users.
Here’s one with Dr Susanne Trimbath, author of the book “Naked, Short and Greedy: Wall Street’s Failure to Deliver”. Her many other qualifications can be found in the video description: https://youtu.be/fGVY2Kco8ng
Thanks. I’m not actually curious (for reasons explained in my previous post) but maybe it will help someone who is?
The most likely alternative, and the one that is least considered, is that short funds do not cover their position at all. Everyone loses.
Yep. That would make it clear that the system is fucked.
Lehman Brothers and Bear Stearns disintegrating did not bring total collapse to the financial markets. Citadel would be just one institution in a small collection of others. Ordinary investors lose, one or more funds lose. Nothing changes.
> Lehman Brothers and Bear Stearns disintegrating did not bring total collapse to the financial markets.
The market started to collapse when the Fed stepped in to bailout banks and AIG and others.
The market started to collapse when the Fed stepped in to bailout banks and AIG and others.
[deleted]
> The research people discuss on this topic on r/superstonk is interesting to read just to get an idea of what they are doing.
It can be interesting to read to see what they're thinking, but the material posted on /r/superstonk is basically QAnon for stonks.
I took a quick look and their supposed floor price for GME has now crossed $30,000,000. They're all ecstatic that they're going to be kings in the future because they hold a couple shares of Gamestop.
It can be interesting to read to see what they're thinking, but the material posted on /r/superstonk is basically QAnon for stonks.
I took a quick look and their supposed floor price for GME has now crossed $30,000,000. They're all ecstatic that they're going to be kings in the future because they hold a couple shares of Gamestop.
The $30m floor price is a long-running meme, and clearly a joke. But it helps to know the historical context…
https://www.gmefloor.com/ was set up around 4-5 months ago. Back then, the price displayed on the site was around $500 or so.
The site’s counter has just kept ticking up, every second, and has been doing so for months. It’s now at $30m.
It’s more of a running joke amongst the community, with no actual data to support it. The site itself even says it’s satire.
Nonetheless, it captures the spirit of the movement. Hence it gets memed at every possible opportunity.
https://www.gmefloor.com/ was set up around 4-5 months ago. Back then, the price displayed on the site was around $500 or so.
The site’s counter has just kept ticking up, every second, and has been doing so for months. It’s now at $30m.
It’s more of a running joke amongst the community, with no actual data to support it. The site itself even says it’s satire.
Nonetheless, it captures the spirit of the movement. Hence it gets memed at every possible opportunity.
It’s definitely not qanon. You have to pass the first impression given by the heavy use of memes and the Reddit culture and check what they call “DD” (for Due Diligence, which is their way to say “research material”). Just filter posts by flair for this. Or check anything by u/criand or u/attobit.
There is a lot of noise, but some interesting discovery have been done. It’s evolving over time as people find new elements to investigate or new events happen (such as the raise in reverse repo operations).
There is a lot of noise, but some interesting discovery have been done. It’s evolving over time as people find new elements to investigate or new events happen (such as the raise in reverse repo operations).
It might not be exactly qannon but it ticks a lot of the boxes. eg. "trust the plan", some sort of predicted event that never comes to pass but keeps on being pushed back, not to mention accusations of shills left and right.
I recognise those points you raised, and I can see how they sometimes look a bit culty.
QAnon is not an appropriate comparison. Generally speaking, Superstonk is very welcoming of counter-DD. It’s members have good intentions (like /r/ApePhilanthropy for example), and there are lots of smart people doing legitimate research into an intentionally obfuscated industry, with a history of secrecy and corruption. But I do see what you’re getting at.
Even without another squeeze the company has some genuinely exciting fundamentals, and it’s future prospects have never looked better. So many people think it’s just a great long-term investment, no matter what transpires along the way.
Part of the “cult” problem is exacerbated by the inherent nature of the MOASS thesis. At its core, it’s Game Theory in action. The MOASS only works if a critical mass of retail investors allow it to.
Individual voices spreading “FUD” only serve to sabotage the opportunity for everyone else. But at the same time, it’s in all the players’ best interests to base their strategy on reliable information.
There have certainlu been a few occasions when users have gotten overexcited, promised things they shouldn’t have, or made claims they can’t back up. But honestly, overall I’m absolutely amazed by the community at self-policing it’s members, and striving for accuracy.
A big part of this, I think, was the fact that Superstonk is now the 3rd home for GME. Investors have watched WallStreetBets turn in to a pathetic shell of its former self, overrun by bots and pump-and-dump schemes.
Most users who were still interested by February had migrated to /r/GME, where good DD was being posted again. Unfortunately the mods there lost control of the sub, and it quickly became overrun with blatant “FUD” posts — usually from users with brand new accounts, and 0 post karma. The patterns were extremely obvious, and for many people, helped to reinforce their beliefs about market manipulation.
Each time the core community migrated, the quality improved significantly. Superstonk has nearly 500K members — which is a lot, but, nowhere near WSB at its peak (10M members or so).
Superstonk is a generally positive community, filled with people who’ve “held from $400 down to $40, and back again”. That kind of attitude is all that’s necessary by this point. Most members, I’m sure, would agree: the research has been done, and it’s just a matter of time.
—
For me, personally: I’ve found it to be a fascinating, eye-opening opportunity.
No matter how things pan out, it’s been a uniquely enjoyable learning experience, and something I’ve very much enjoyed following.
QAnon is not an appropriate comparison. Generally speaking, Superstonk is very welcoming of counter-DD. It’s members have good intentions (like /r/ApePhilanthropy for example), and there are lots of smart people doing legitimate research into an intentionally obfuscated industry, with a history of secrecy and corruption. But I do see what you’re getting at.
Even without another squeeze the company has some genuinely exciting fundamentals, and it’s future prospects have never looked better. So many people think it’s just a great long-term investment, no matter what transpires along the way.
Part of the “cult” problem is exacerbated by the inherent nature of the MOASS thesis. At its core, it’s Game Theory in action. The MOASS only works if a critical mass of retail investors allow it to.
Individual voices spreading “FUD” only serve to sabotage the opportunity for everyone else. But at the same time, it’s in all the players’ best interests to base their strategy on reliable information.
There have certainlu been a few occasions when users have gotten overexcited, promised things they shouldn’t have, or made claims they can’t back up. But honestly, overall I’m absolutely amazed by the community at self-policing it’s members, and striving for accuracy.
A big part of this, I think, was the fact that Superstonk is now the 3rd home for GME. Investors have watched WallStreetBets turn in to a pathetic shell of its former self, overrun by bots and pump-and-dump schemes.
Most users who were still interested by February had migrated to /r/GME, where good DD was being posted again. Unfortunately the mods there lost control of the sub, and it quickly became overrun with blatant “FUD” posts — usually from users with brand new accounts, and 0 post karma. The patterns were extremely obvious, and for many people, helped to reinforce their beliefs about market manipulation.
Each time the core community migrated, the quality improved significantly. Superstonk has nearly 500K members — which is a lot, but, nowhere near WSB at its peak (10M members or so).
Superstonk is a generally positive community, filled with people who’ve “held from $400 down to $40, and back again”. That kind of attitude is all that’s necessary by this point. Most members, I’m sure, would agree: the research has been done, and it’s just a matter of time.
—
For me, personally: I’ve found it to be a fascinating, eye-opening opportunity.
No matter how things pan out, it’s been a uniquely enjoyable learning experience, and something I’ve very much enjoyed following.
>I wouldn’t go as far as comparing to QAnon — generally speaking, Superstonk is very welcoming of counter-DD [...]
Can you really claim that they're welcoming of counter-DD when people are primed (via the mechanism you described in the later paragraphs) to think that any dissenting information is FUD?
>However, at the same time, it’s in all the players’ best interests to base their strategy on reliable information.
That's only the case if everyone's in it for the long haul (or at least, long enough for the MOASS). However, that's not the only way to make money. You can also make money by riding the wave. In that case reliable information about MOASS only matters insofar as its ability to pump the stock and can be substituted/supplemented with bad information.
Can you really claim that they're welcoming of counter-DD when people are primed (via the mechanism you described in the later paragraphs) to think that any dissenting information is FUD?
>However, at the same time, it’s in all the players’ best interests to base their strategy on reliable information.
That's only the case if everyone's in it for the long haul (or at least, long enough for the MOASS). However, that's not the only way to make money. You can also make money by riding the wave. In that case reliable information about MOASS only matters insofar as its ability to pump the stock and can be substituted/supplemented with bad information.
> It’s because it is understood that Citadel never covered it’s short
I think you mean Citron. I assume Citadel is rolling in retail trader money, right now.
I think you mean Citron. I assume Citadel is rolling in retail trader money, right now.
They don't mean Citron.
> after doing massive naked shorting to drive the price of GME down to zero
The only evidence I’ve seen for this is a misreading of free float statistics and a misunderstanding of the difference between market makers and hedge funds.
That said, your broader point is valid. Someone investing on this thesis is not a financial nihilist.
The only evidence I’ve seen for this is a misreading of free float statistics and a misunderstanding of the difference between market makers and hedge funds.
That said, your broader point is valid. Someone investing on this thesis is not a financial nihilist.
The $67 million Beeple sale turns out to have been a cooperative venture between the artist and the buyer. The buyer then went on to create a derivative NFT so as to dump the cost on other smaller buyers.[1]
That seems to have been a pump and dump intended to inflate NFT prices.
[1] https://www.washingtonpost.com/technology/2021/03/17/nft-bee...
That seems to have been a pump and dump intended to inflate NFT prices.
[1] https://www.washingtonpost.com/technology/2021/03/17/nft-bee...
> While NFTs are not sure proof of a physical Birkin bag's authenticity, they all but ruin the economic incentives of counterfeiting.
One exception to this: if I want a Birkin bag, not to sell but for myself, and I want it to be authentic, I can buy a real bag and a fake bag, and sell the fake bag with the certificate of authenticity. I don't have to worry about diminishing the retail value, since the bag is for my own enjoyment.
One exception to this: if I want a Birkin bag, not to sell but for myself, and I want it to be authentic, I can buy a real bag and a fake bag, and sell the fake bag with the certificate of authenticity. I don't have to worry about diminishing the retail value, since the bag is for my own enjoyment.
Likewise if you have a real bag and a certificate of authenticity but then the bag is ruined and you didn’t have insurance, or bad coverage on the insurance, you can buy a fake bag and resell the fake bag with the certificate of authenticity for less than the cost of a new authentic bag while still lowering the amount of money that you lose out on had you discarded the certificate when the authentic bag was ruined.
Both these posts make sense, but I’d be curious if this will slow the market for fake bags, making it more difficult to source a quality bag.
Probably not - in reality, are people going to say “nice bag - let me see your NFT”. I’d think it equivalent to asking for a receipt from the birken store…
Probably not - in reality, are people going to say “nice bag - let me see your NFT”. I’d think it equivalent to asking for a receipt from the birken store…
I could definitely see certain people going home from a party and looking up whether so-and-so’s bag was real. I don’t think it’s going to take off but that part seems plausible.
It seems insane.
¯\_(ツ)_/¯
We are living in the timeline with millionaire Instagram influencers.
We are living in the timeline with millionaire Instagram influencers.
Before that we lived in a time where that role was delegated to [famous] people on tv that appeared in ads. Really nothing fundamental changed. It just morphed.
I remember several year ago when people kept the tags on their clothes when they wore them, it was almost a statement that 'this' is authentic.
I could absolutely see how this could bleed over into the digital world where you have a sort of MySpace page for the things you own, just for bragging rights.
I could absolutely see how this could bleed over into the digital world where you have a sort of MySpace page for the things you own, just for bragging rights.
This is literally the [Mad] Hatter’s costume (1865). <https://en.wikipedia.org/wiki/Hatter_(Alice's_Adventures_in_...>
Paying $10,000 (and waaay up) for purse seems insane. And yet...
Indeed, and you could also sell the certificate without the bag, at a discount. For instance, you could buy the bag and certificate for $100, and sell the certificate for $50 to someone who wants it for a fake bag. In fact the only distinction a real and fake bag is that the maker was somehow peripherally involved in the supply chain for the real one, for instance ordering it from a manufacturer and having it drop shipped to a retailer.
In fact I would want to unload my certificate before the proliferation of fakes lowered its value.
In fact I would want to unload my certificate before the proliferation of fakes lowered its value.
Absolutely. And actually I think is the major flaw in his argument - NFTs effectively allow you to buy a real birkin for the price of a fake!! And that WILL be exploited, probably heavily.
Just make sure not to buy a bag from someone else who thinks like you do. Or maybe just don't ask yourself if that might have happened. You'll have the pleasure of "knowing" you have a "real" bag despite lacking the cert, and you're not even ripping anyone off, since the girl you sold the "fake" bag to will also "know" she has a "real" bag.
Great post. I agree: stocks, NFTs, Pokemon cards, etc. selling at prices that make no sense to casual and experienced observers area form of art, and indeed "art is what you can get away with!"
I mean, once prices are disconnected from mundane considerations -- such as how profitable a company might be in the future -- there's truly no known limit to how high prices can go, nor is there a known limit to how long prices will continue rising. Just when you might think some kind of "limit to irrationality" has been reached, collective human imagination and wishful thinking can push prices even higher! It's so much fun, and so entertaining, for so many people whose wealth has been spiraling up and up and up.
...Alas, prices cannot rise forever. Our physical reality is finite. Energy cannot be created or destroyed -- the First Law of Thermodynamics is pretty darn strict about that. Our economic reality is finite too. Prices cannot rise to infinity. Stein's Law comes to mind:
"IF SOMETHING CANNOT GO ON FOREVER, IT WILL STOP."[a]
That's about the only thing we can predict with confidence about ''financial markets as collective performance art."
--
[a] https://en.wikipedia.org/wiki/Herbert_Stein#Stein's_Law
I mean, once prices are disconnected from mundane considerations -- such as how profitable a company might be in the future -- there's truly no known limit to how high prices can go, nor is there a known limit to how long prices will continue rising. Just when you might think some kind of "limit to irrationality" has been reached, collective human imagination and wishful thinking can push prices even higher! It's so much fun, and so entertaining, for so many people whose wealth has been spiraling up and up and up.
...Alas, prices cannot rise forever. Our physical reality is finite. Energy cannot be created or destroyed -- the First Law of Thermodynamics is pretty darn strict about that. Our economic reality is finite too. Prices cannot rise to infinity. Stein's Law comes to mind:
"IF SOMETHING CANNOT GO ON FOREVER, IT WILL STOP."[a]
That's about the only thing we can predict with confidence about ''financial markets as collective performance art."
--
[a] https://en.wikipedia.org/wiki/Herbert_Stein#Stein's_Law
Warren Buffett explains long-term stock prices, in 5 minutes:
https://old.reddit.com/r/brkb/comments/l9hpo5/buffett_explai...
I blame the education system. Basic investing theory should be taught in high school.
We have to think of a share price as a number that is a sum of all future earnings, divided by powers of an interest rate according to how far in the future those earnings will be produced. That allows us to evaluate whether a share price is reasonable or unreasonable.
This concept is complex and most people can't understand it without formal education.
That education doesn't occur, so we have a huge mass of investors who have no idea what share prices mean. How can they possibly make good decisions?
https://old.reddit.com/r/brkb/comments/l9hpo5/buffett_explai...
I blame the education system. Basic investing theory should be taught in high school.
We have to think of a share price as a number that is a sum of all future earnings, divided by powers of an interest rate according to how far in the future those earnings will be produced. That allows us to evaluate whether a share price is reasonable or unreasonable.
This concept is complex and most people can't understand it without formal education.
That education doesn't occur, so we have a huge mass of investors who have no idea what share prices mean. How can they possibly make good decisions?
Nobody knows how much money a company will make in its lifetime. And even for companies with rather stable revenues, dividends and number of shares are not fixed, so it seems rather useless making calculations using those ratios.
It wasn't useless for Warren Buffett...
It's hard to predict future revenues of a startup.
But it's not that difficult to get pretty close - looking a few years into the future - for big, established companies like Coke and Pepsi and GM.
The Fed gives investors a 2 year outlook on interest rates. In the last 20 years, they have only ever lowered rates by surprise - and that pushes share prices up. You're highly unlikely to lose a lot of money getting surprised by interest rate moves.
Sure - anything can happen, but historically, over a 3-5 year period, Coke's revenue and profit hasn't been very volatile.
But the share price IS much more volatile. This is what you arbitrage on. The people who are investing in the moment, when you're investing for a longer horizon.
Basically, this strategy is that the short term is much harder to predict than the medium term. I think everyone is in agreement that the very long term (for stocks) is pretty hard to predict.
It's hard to predict future revenues of a startup.
But it's not that difficult to get pretty close - looking a few years into the future - for big, established companies like Coke and Pepsi and GM.
The Fed gives investors a 2 year outlook on interest rates. In the last 20 years, they have only ever lowered rates by surprise - and that pushes share prices up. You're highly unlikely to lose a lot of money getting surprised by interest rate moves.
Sure - anything can happen, but historically, over a 3-5 year period, Coke's revenue and profit hasn't been very volatile.
But the share price IS much more volatile. This is what you arbitrage on. The people who are investing in the moment, when you're investing for a longer horizon.
Basically, this strategy is that the short term is much harder to predict than the medium term. I think everyone is in agreement that the very long term (for stocks) is pretty hard to predict.
”It wasn't useless for Warren Buffett...”
Buffet doesn’t use DCF:
Charlie Munger said at the 1996 Berkshire Hathaway Annual Meeting: "Warren talks about these discounted cash flows. I've never seen him do one." "It's true," replied Buffett. "If (the value of a company) doesn't just scream out at you, it's too close."
Buffet says “The question is, how many birds are in the bush? What is the discount rate? How confident are you that you'll get [the bird]? Et cetera. That's what we do. If you need to use a computer or calculator to figure it out, you shouldn't [buy the investment]. Those types of [situations] fall into the "too-hard" bucket. It should be obvious. It should shout at you, without all the spreadsheets. We see something better.”
https://seekingalpha.com/instablog/5969741-the-value-pendulu...
Buffet doesn’t use DCF:
Charlie Munger said at the 1996 Berkshire Hathaway Annual Meeting: "Warren talks about these discounted cash flows. I've never seen him do one." "It's true," replied Buffett. "If (the value of a company) doesn't just scream out at you, it's too close."
Buffet says “The question is, how many birds are in the bush? What is the discount rate? How confident are you that you'll get [the bird]? Et cetera. That's what we do. If you need to use a computer or calculator to figure it out, you shouldn't [buy the investment]. Those types of [situations] fall into the "too-hard" bucket. It should be obvious. It should shout at you, without all the spreadsheets. We see something better.”
https://seekingalpha.com/instablog/5969741-the-value-pendulu...
> Buffet doesn’t use DCF
There is DCF and there is DCF. The full-formed DCF spreadsheet is a creature of sell-side fiction. The more trivial analysis—how much cash will this business throw off over the next few years and what is that worth to me–is not formally DCF by the modern definition. But theoretically, it’s the same thing. Just dispensing with the garbage that is terminal value estimation.
There is DCF and there is DCF. The full-formed DCF spreadsheet is a creature of sell-side fiction. The more trivial analysis—how much cash will this business throw off over the next few years and what is that worth to me–is not formally DCF by the modern definition. But theoretically, it’s the same thing. Just dispensing with the garbage that is terminal value estimation.
No one knows if you're going to be a car accident so it seems rather useless to buckle up.
Use a statistical approach to analyzing the likelihood of outcomes against the costs.
Use a statistical approach to analyzing the likelihood of outcomes against the costs.
[deleted]
[deleted]
One problem here: I'm not sure Hermes or Birkin wants to solve the counterfeit problem. Right now, the people who want a genuine bag have to buy a new one from the store. If Hermes invents a method to authenticate bags they will empower the resale market which will be like inventing their own competitor. I'd bet they prefer the status quo.
>> Many retail investors don’t really care about whether GME’s price is justified by their corporate earnings - they simply buy at any cost.
In all fairness, most people that invest portions of every paycheck into 401k index funds are the same way. There is a significant amount of money flowing into the market everyday that is ignorant of valuation.
In all fairness, most people that invest portions of every paycheck into 401k index funds are the same way. There is a significant amount of money flowing into the market everyday that is ignorant of valuation.
If I were a wealthy individual I might pay 17M for an easily copyable arrangement of pixels in order to create market excitement for such things, with the hope that I could bring in the rubes to support sales of my art NFTs in the future. So in other words, pump and dump.
To create an NFT you need to pay a 'gas' fee. To me the large figures paid for some pixels is an incentive to get people to create NFTs and therefore pay 'gas' fees to whoever mines those numbers.
If I owned a mining farm I'd be interested in promoting low barrier to entry artwork that creates money for me.
If I owned a mining farm I'd be interested in promoting low barrier to entry artwork that creates money for me.
Who would want their ownership tracked on a public ledger? And what happens when people forget about or don't care about tracking the transfer on the ledger? Also there's still plenty of people to sell fakes to since not everyone is going to verify the authenticity.
This could be useful in the semiconductor industry, for example. We are currently battling with marginally performing chips that were sold out the back door to brokers. A traceable ledger inform us whether a lot we purchased from a broker had a chain of ownership back to the front door. This evidence would do a lot to ease our customer's concerns, and having the data public would be a plus.
Why a blockchain though? How about a database the chip makers can update when they make a new chip, and a public forum showing latest chips made and a lookup to ensure chip authenticity?
What does making this distributed or trusting others have to do with anything?
What does making this distributed or trusting others have to do with anything?
Counterfeit chip makers could simply look up the chips and re-use the serial numbers?
The idea is to use a chain of purchase records (purchase orders and invoices) to ensure that each transaction is recorded and unique, with the first transaction in the chain entered by the manufacturer.
The idea is to use a chain of purchase records (purchase orders and invoices) to ensure that each transaction is recorded and unique, with the first transaction in the chain entered by the manufacturer.
The physical product has to be linked to this chain of purchase records tho. How do you tell, given just a chip, that it has a corresponding chain of records? Whatever solution you give me, what stops counterfeiters from reuse as well?
The business processes of the companies involved in each transaction would ensure the keys/tokens were associated with a physical inventory under their control. MRP systems can manage the warehouse & inventory. The chips themselves don’t have to be marked.
Only store hashes then. You can check that the item is in the database, but not list its contents. We've been doing this for a long time with passwords.
The problem still exists. You cannot permanently fix a digital certificate to a physical object. If I buy a real chip and a fake chip, I can still reattach the certificate to the fake chip and sell it to you and keep the real chip.
Supply chain companies are usually pretty specialized. Their customers are going to only want chips with the certs. What are you going to do with all those certless real chips? Start manufacturing end user goods? There is high friction and low reward for the fraud you're suggesting.
Sell them at a discount to people who can deal with the possibility of lower performance.
Or you could just sell them your bootleg chips? If you're not providing the certs it is obvious someone has been screwed. If one customer doesn't care why do them a favor by giving them good chips (at a discount) and screwing your other customer hoping they don't notice? The economic argument being made here seems very forced - yes you could defraud, but the incentive to do so seems very low.
I do think the incentives exist more at the retail market level but high value b2b supply chains seem to benefit from some blockchain certification. The good that has been separated from its certificate is instantly suspect to the very small and highly informed customer base significantly reducing its value and potentially drawing attention to the party offering it as untrustworthy.
I do think the incentives exist more at the retail market level but high value b2b supply chains seem to benefit from some blockchain certification. The good that has been separated from its certificate is instantly suspect to the very small and highly informed customer base significantly reducing its value and potentially drawing attention to the party offering it as untrustworthy.
Unless your bootleg chips are very good, the buyer will distinguish and your reputation will plummet. If you are forthcoming and sell chips that actually work you can make a lot of profit.
Considering that the biggest reason to buy a lot of these luxury products is status, it seems like many people would want their ownership tracked.
Having ownership tracked on a public ledger does not imply it needs to be associated with a real name, just a key.
Aren't you sharing that key with anyone that you transact with?
Its interesting that people are truly testing "what you can get away with". There is someone on r/algonftmarketplace selling pictures of rocks. Not selling the actual rock, just photos of it. Which I would be on board with if it was an interesting rock or he at least polished the rocks first.
But there is nothing interesting at all about this rock. And what he is doing is putting them in the tumbler for a very short while, and then every time he takes them out, he "mint"s a new NFT and tries to sell it.
I really like shiny rocks. But it seems like he needs to tumble for like twice as long to get there because he is not even cleaning all of the grit off of these before taking the photos and they are really dull looking rocks so far.
But there is nothing interesting at all about this rock. And what he is doing is putting them in the tumbler for a very short while, and then every time he takes them out, he "mint"s a new NFT and tries to sell it.
I really like shiny rocks. But it seems like he needs to tumble for like twice as long to get there because he is not even cleaning all of the grit off of these before taking the photos and they are really dull looking rocks so far.
> When people bid up the price of TSLA or GME to stratospheric valuations, the index fund must re-adjust their market-weighted holdings to reflect those prices, creating further money inflows to the asset and thus a self-fulfilling prophecy.
This claim doesn't apply to the majority of index funds. It's specific to S&P500 funds, which because of their artificial limit of 500 stocks, have stocks enter and exit based on valuation. More modern index fund designs (like Vanguard Total Market) hold a fixed percentage of every public company no matter how small. So they rode TSLA, GME and AMC up and down without lifting a finger. These modern funds only transact due to inflows and outflows, or when stock is newly issued or bought back.
Even specific to S&P500, another quirk of that index's legacy design is that it "must" do nothing in particular. It has an index inclusion committee taking into account factors such as profits, and with the discretion to delay inclusion even after its formal criteria are met.
The investing nihilists love to make arguments that ordinary investors will be "forced" to reward them by some reflexivity. But the reflexive effects they point to are all quite weak. So far, the vast majority of the rewards to nihilists have come by persuading other investors to turn nihilist, not by somehow exploiting mainstream investing strategies.
This claim doesn't apply to the majority of index funds. It's specific to S&P500 funds, which because of their artificial limit of 500 stocks, have stocks enter and exit based on valuation. More modern index fund designs (like Vanguard Total Market) hold a fixed percentage of every public company no matter how small. So they rode TSLA, GME and AMC up and down without lifting a finger. These modern funds only transact due to inflows and outflows, or when stock is newly issued or bought back.
Even specific to S&P500, another quirk of that index's legacy design is that it "must" do nothing in particular. It has an index inclusion committee taking into account factors such as profits, and with the discretion to delay inclusion even after its formal criteria are met.
The investing nihilists love to make arguments that ordinary investors will be "forced" to reward them by some reflexivity. But the reflexive effects they point to are all quite weak. So far, the vast majority of the rewards to nihilists have come by persuading other investors to turn nihilist, not by somehow exploiting mainstream investing strategies.
"As a buyer, you can be quite confident that the bag is authentic if the seller also owns the NFT, and you can verify that the NFT was indeed originally created by Hermès by looking up its public transaction history. "
???
No, you have to verify that 'the bag' you get actually matches the NFT 'certificate'. Which is 'the hard part' making NFT's pointless at least in that scneario.
But this:
"We are starting to see this valuation framework being applied to the equities market today, where price movements are dominated by narratives about where the price is going and what other people are willing to pay for it, "
is a huge underlying problem.
Investors actually do a job - they put money in things that work and remove them from things that don't.
If 'what works' is entirely just 'convincing others' than real productive output will fall.
In the mean time, regular investors are going to get crowded out by the hustlers, making for a very interesting time.
???
No, you have to verify that 'the bag' you get actually matches the NFT 'certificate'. Which is 'the hard part' making NFT's pointless at least in that scneario.
But this:
"We are starting to see this valuation framework being applied to the equities market today, where price movements are dominated by narratives about where the price is going and what other people are willing to pay for it, "
is a huge underlying problem.
Investors actually do a job - they put money in things that work and remove them from things that don't.
If 'what works' is entirely just 'convincing others' than real productive output will fall.
In the mean time, regular investors are going to get crowded out by the hustlers, making for a very interesting time.
The media keeps getting this wrong by underestimating the skill and prescience of some of these meme-stock investors. In Jan-Feb the consensus by the financial media was that GME and AMC would crash and not recover, yet half a year later GME is above 200 and AMC is considerably higher than it was in January. The narrative was (and still is) that "GME and AMC are dying businesses" and maybe this is true, but there is also more than meets the eye and going on behind the scenes, such as restructuring, business pivots, and raising capital.
Moreover, I have observed that mainstream pundits such as on TV and in print give worse advice compared to advice on Reddit, blogs,and other non-mainstream sources. r/wallstreetbets has been recommending GME and AMC for months, and had anyone heeded their advice with even a little bit of money would have done well. Same for Tesla and AMD. Same for Tesla, which they honed in on in 2019 , before its 10x rally. Or Palantir, which surged from $9 after the IPO November 2020 to $25 now.Much better than Seeking Crap/Alpha with publishes nothing but filler articles about stocks that do the opposite of what the authors expect and lose readers' money. Much better than James Cramer, whose only usefulness is he draws huge ratings, has been costing his viewers millions over the past 15 years with terrible stock picks.
Moreover, I have observed that mainstream pundits such as on TV and in print give worse advice compared to advice on Reddit, blogs,and other non-mainstream sources. r/wallstreetbets has been recommending GME and AMC for months, and had anyone heeded their advice with even a little bit of money would have done well. Same for Tesla and AMD. Same for Tesla, which they honed in on in 2019 , before its 10x rally. Or Palantir, which surged from $9 after the IPO November 2020 to $25 now.Much better than Seeking Crap/Alpha with publishes nothing but filler articles about stocks that do the opposite of what the authors expect and lose readers' money. Much better than James Cramer, whose only usefulness is he draws huge ratings, has been costing his viewers millions over the past 15 years with terrible stock picks.
It's cherry picking season
> The media keeps getting this wrong by underestimating the skill and prescience of some of these meme-stock investors.
That is because it's a self-fulfilling profecy. AMC and GME were "undervalued" because a large enough group of people thought they were undervalued, and kept buying them at higher and higher prices until the undervalue was true in retrospect.
In some ways the stock market in general works similarly, but at least there are some sound financial groundings for that, with stocks being the value of expected future dividends.
Enough people memeing on a stock and playing a game of hot potato will make the value rise, but doesn't really make those analysts wrong in their initial analysis.
GME is a bit of an exception of this because some people saw the short pressure and decided to mobilize WSB to take advantage of that, but for the rest which stock would be memed on - and thus would rise in price - had almost zero relation to the actual performance of the underlying company.
That is because it's a self-fulfilling profecy. AMC and GME were "undervalued" because a large enough group of people thought they were undervalued, and kept buying them at higher and higher prices until the undervalue was true in retrospect.
In some ways the stock market in general works similarly, but at least there are some sound financial groundings for that, with stocks being the value of expected future dividends.
Enough people memeing on a stock and playing a game of hot potato will make the value rise, but doesn't really make those analysts wrong in their initial analysis.
GME is a bit of an exception of this because some people saw the short pressure and decided to mobilize WSB to take advantage of that, but for the rest which stock would be memed on - and thus would rise in price - had almost zero relation to the actual performance of the underlying company.
As someone who has been in decentralized social networking with Qbix, and decentralized cryptocurrencies with Intercoin, I feel like an old grandpa who doesn’t “get” why people find half of the NFTs to be useful.
NFTs for reading/viewing are useless. If you have software interpreting the NFT by showing you something, then that can be easily copied. Growing up I have seen enough in the WaReZ scene that even kids traded cracked versions of Windows and Photoshop, so those licenses were useless. So much more so for OPEN source software that can be easily forked.
Real scarce value comes from being able to control/edit/modify/own something, including things like domains (namespace entries), Earth2 land plots, cashflows etc. And that is only valuable insofar as it has a large network effect. Think “milliondollarhomepage.com” and Alex Tew going on a media tour. That made the pixels valuable to edit. The original NFT lol.
ERC721 NFTs are first generation idea. Each NFT can be generalized to fractional ownership and automated market makers should be able to assist in price discovery.
In short ... sell rights to edit something, and maybe let people mix and match to level-up more than the sum of its parts, like the game Battleship or MacDonalds Monopoly game. And make a new ERC for fractional ownership of ERC721 stuff.
Oh, and while you’re at it, get off blockchains! They are overkill for NFTs, too public and don’t need a global consensus. An NFT can just be a private chain per token, they arent divisible after all, no history UTXOs needed.
This whole NFT space is over hyped and has the wrong fundamentals.
NFTs for reading/viewing are useless. If you have software interpreting the NFT by showing you something, then that can be easily copied. Growing up I have seen enough in the WaReZ scene that even kids traded cracked versions of Windows and Photoshop, so those licenses were useless. So much more so for OPEN source software that can be easily forked.
Real scarce value comes from being able to control/edit/modify/own something, including things like domains (namespace entries), Earth2 land plots, cashflows etc. And that is only valuable insofar as it has a large network effect. Think “milliondollarhomepage.com” and Alex Tew going on a media tour. That made the pixels valuable to edit. The original NFT lol.
ERC721 NFTs are first generation idea. Each NFT can be generalized to fractional ownership and automated market makers should be able to assist in price discovery.
In short ... sell rights to edit something, and maybe let people mix and match to level-up more than the sum of its parts, like the game Battleship or MacDonalds Monopoly game. And make a new ERC for fractional ownership of ERC721 stuff.
Oh, and while you’re at it, get off blockchains! They are overkill for NFTs, too public and don’t need a global consensus. An NFT can just be a private chain per token, they arent divisible after all, no history UTXOs needed.
This whole NFT space is over hyped and has the wrong fundamentals.
I believe there is a gap between regulation and technical progress which allows for a wild west in retail financial services. Feels like 1997 again.
I think this gap is sufficiently explained by the individuals irresponsibility. We can try to stop the painful learning process by adding regulation but I believe this only leads to „learned helplessness“
Well said. I believe the irresponsibility is driven by the desire to use your diamond hands to YOLO into a potentially a multi-million dollar gain. But not everyone can be Roaring Kitty.
Such as the "learned helplessness" of building fire safety?
This is a rather bizarre view -- do you have any examples of this?
We are limited thinkers -- we have to hand off the vast majority of our concerns to external systems to manage -- our individual frontal lobes are woefully inadequate for managing our lives.
Is there any sense, other than some rousseauian pre-civilization mythology, in which we are actually worse off here?
This is a rather bizarre view -- do you have any examples of this?
We are limited thinkers -- we have to hand off the vast majority of our concerns to external systems to manage -- our individual frontal lobes are woefully inadequate for managing our lives.
Is there any sense, other than some rousseauian pre-civilization mythology, in which we are actually worse off here?
> In a similar fashion, using present-day frameworks for thinking about business and value do not account for the disruptive force of technology.
Well that seems like a major flaw. You can have an elegant model accounting for future cash flows at an infinite horizon but if a paradigm shift is coming in 2-10 years it's meaningless. As a retail investor I'm not sure it makes sense to think in this way anyway. Seems like the rational plan is X% of your portfolio in index funds, 1-X% in risky speculative assets in the hope of getting rich. The 1-X% is what's driving these finance people nuts, but if the retail investors are cool with it going to 0 it seems totally rational to make those bets.
Well that seems like a major flaw. You can have an elegant model accounting for future cash flows at an infinite horizon but if a paradigm shift is coming in 2-10 years it's meaningless. As a retail investor I'm not sure it makes sense to think in this way anyway. Seems like the rational plan is X% of your portfolio in index funds, 1-X% in risky speculative assets in the hope of getting rich. The 1-X% is what's driving these finance people nuts, but if the retail investors are cool with it going to 0 it seems totally rational to make those bets.
This metaphor is extended to the point that it does more to confuse than to illuminate. An an art NFT is like buying a Birkin bag with a certificate of authenticity... except there is no Birkin bag. So what's the point of the metaphor?
> Financial nihilism
Financialism is economic nihilism.
Financialism is economic nihilism.
I have been following the market of NFT closely lately and I even asked several people involved.
Nobody could yet answer me questions such as:
-As the owner of an NFT that represents a digital object, lets say an image.
How can I be sure there is no other NFT representing the exact same image?
How can I be sure there is no other NFT representing the image in another format?
Can I claim anything (ownership, royalty fees, ...) of the digital object that the NFT in my possession represents?
Would that claim hold up in any court in this world?
For physical objects the same questions can be asked.
Nobody could yet answer me questions such as:
-As the owner of an NFT that represents a digital object, lets say an image.
How can I be sure there is no other NFT representing the exact same image?
How can I be sure there is no other NFT representing the image in another format?
Can I claim anything (ownership, royalty fees, ...) of the digital object that the NFT in my possession represents?
Would that claim hold up in any court in this world?
For physical objects the same questions can be asked.
[deleted]
This is what happens when you redefine 'art' to become almost completely meaningless. Just about everything can be considered art when you squint hard enough, so you can sell just about everything as art to people who play along with the illusion. At least I know what I like, even if it is art.
>their stock, a discounted cash flow model for AMC or GME starts to not become very predictive of share price. By reflexivity, that will have impacts on future cash flows! In a similar fashion, using present-day frameworks for thinkin
This was not the case in the early 2000s.
This was not the case in the early 2000s.
so capitulation of sanity and attempting to rationalize irrational behavior.
I suspect we're close to the top of the bubble.
I suspect we're close to the top of the bubble.
It's amazing to see every argument for NFTs and cryptocurrencies in general ends up whatabouting on scarcity of other real valuables.
The purpose of NFT's is money laundering. When minted off chain (see Beeple's headline sale/ad). Moreover, Financial Nihlism is a rich philosophical subject reduced and fixed here in a way that kills understanding. What response should a population or group do when the written rules say you are free but the unwritten rules, that say you are to accept the caste position you were born in with zero wage growth or chance at middle class because you are to blame as an individual? If you break the unwritten rules you are dismissed as nihilist. Perhaps nihilism is the only way to break the religious thinking of our economic system where we dare not speak the devils name aka any kind of economic system that is not capitalism. I am very serious here, what should we do? Just accept what appears to me to be closer to feudalism in practice but we desperately keep trying to reclaim it. Capitalism stopped in 2007, didn't it?
I disagree. It means you get to have your cake and eat it too -- you use and wear out the authentic Birkin bag for years, a bag you got almost for free because you bought a cheap counterfeit and resold it together with the NFT while keeping the original.
If anything, it seems like this could increase counterfeiting because this would seem like such an... obvious scam to pull.
Indeed, I can even imagine the NFT being resold 10 times, each and every time the person thinking they got an authentic bag, buying a counterfeit and reselling it as authentic... when the only person who kept the actual authentic bag was the one who bought it from Birkin.
This is the fundamental problem with NFT's as I see it -- there is fundamentally no way to tie it to a physical object. Every owner can always sell a counterfeit and keep the original.
So the idea that this "ruins the economic incentives of counterfeiting" doesn't seem to hold water at all.