Stocks and Trading Thread - Channeling your inner Mono

[The Minsky Moment]

1) Generally, the stock market's whole schtick is greed, fear, exhilaration. These are powerful emotions. We harness facts to these emotions, not the reverse. It therefore shouldn't be surprising that emotions play a very important role in assessing how it operates.

Institutional investors still dominate share trading. Exhilaration is rarely a factor, fear only occasionally, greed admittedly more. Institutions trade according to models that are based on some sort of analytical framework - with mathematically based algorithms steadily gaining prominence over time.  Where human discretion is deployed, it is enveloped in elaborate risk control techniques The image of the buccaneering, risk-taking trader is really more self-mythologizing at this point.

2) Specifically, because here, the issue is divided on the very notion of what ought to be. Stating what the rules are is an important element in any discussion, but the crux of the matter is always what they mean, and that discussion itself is almost impossible to disentangle from what we think they ought to achieve. And in that regard, we can only work through metaphors.

That is true for virtually all social phenomena.

[The Minsky Moment]

Yes, I have been following - if only because I am fond of moments like this where we are forced to peer behind the curtains of what the economy is "made of".

Well that one is easy enough. Using the metaphorical turn one can say that the entire economy involves the manufacture of sausage in one form or another. Even when the end products seem nice they may not always be healthy and a close examination of how the product came to be is often not uniformly pleasant. 

Moreover, to switch metaphors to something more easily analogizable to the mechanisms of the financial market, this episode may give some apparent insight into how the shell game hucksters move the cups around. But the trick is still on the viewer because we are still focusing on the wrong shell.  The stock market occupies a talismanic position in the American imagination, as can be seen in how it obsessed Donald Trump or in the fact that the Dow Jones index still dominates media headlines despite its near disuse in the markets. But the stock market is a relative financial minnow compared with the vastly larger and more significant debt markets. Even in the area of equity finance the public markets have to compete with the large and still growing private equity markets.

[The Minsky Moment]

You are obfuscating.

Groups of investors can pool their assets to collectively invest: they typically use hedge funds or mutual funds. Mutual funds are much more tightly regulated and are much more limited in the types of speculative activity they can undertake.

High net worth individuals can join hedge funds. Most ordinary investors are prohibited by law from doing so, but could if they met the wealth requirement.

If you want to argue that hedge funds don't produce above market returns and high net worth individuals aren't really getting a comparative advantage from being allowed to join them: I'm receptive to that argument. I also think the amateur speculators buying up Gamestop are by and large morons and deserve the losses most of them will suffer. But the financial regulatory structure prevents them from organizing in ways that wealthy people can--I can see a fundamental unfairness there.

That's exactly the argument I made above that you just said was "obfuscating" (?)
There is no solid evidence that taken a whole the hedge fund industry produces alpha, and some evidence it actually lags behind after fees.
The best case for alternatives is that they can more easily generate non-correlated beta for diversification purposes, but even if true and provable it's a pretty minor point for a typical small investor putting $ away for retirement.

The premise is also false - as I stated there are fund-of-fund vehicles and bank sponsored hedge funds with relatively low min investments - some in the 4 figures - plus ETFs that are designed to mimic hedge fund strategies.  It's true that ordinary Joe investor can't get preferential access to the so-called "top" or "hot" managers - of course, that is also true for many quite wealthy people as well.

[Tonitrus]

This used to be a nice, low-key thread, that mostly evaded the Languish-Pontification Borg.   Ya'll have ruined it. 

[Tamas]

The Guardian is calling today's pumping of silver as a Reddit thing despite WallStreetBets specifically trying to have nothing to do with it, with people downvoting any mention of SLV etc.

[Josquius]

The Guardian is calling today's pumping of silver as a Reddit thing despite WallStreetBets specifically trying to have nothing to do with it, with people downvoting any mention of SLV etc.

Yes, very curious to see from the guardian in particular. My respect for them has dropped.

Regardless I have a few mining shares. They have gone up. Time to sell?

[alfred russel]

That's exactly the argument I made above that you just said was "obfuscating" (?)
There is no solid evidence that taken a whole the hedge fund industry produces alpha, and some evidence it actually lags behind after fees.
The best case for alternatives is that they can more easily generate non-correlated beta for diversification purposes, but even if true and provable it's a pretty minor point for a typical small investor putting $ away for retirement.

The premise is also false - as I stated there are fund-of-fund vehicles and bank sponsored hedge funds with relatively low min investments - some in the 4 figures - plus ETFs that are designed to mimic hedge fund strategies.  It's true that ordinary Joe investor can't get preferential access to the so-called "top" or "hot" managers - of course, that is also true for many quite wealthy people as well.

The reason I'm saying you are obfuscating is that my point is that there is validity that what the reddit dudes complaint that the rules are biased against them.

They are trying to profit (or make the world a better place by scaring short positions) by collectively taking action to aggressively speculate in a single stock. While you have said they could get sued for doing what they did through a hedge fund vehicle, it isn't explicitly illegal to do so. But they couldn't form a hedge fund because the SEC has income and high net worth tests that most people have to pass to be allowed into the funds. They were denied the opportunity to provide themselves legal cover for their collective actions because they don't make or have enough money - and that is because of SEC rules not because fund managers don't want to mess with poor people.

Being able to work around not being able to get into hedge fund like vehicles is not the same thing. These guys couldn't join a hedge fund like vehicle to squeeze short positions in Gamestop because such a fund doesn't exist.

I have zero interest in joining or creating a hedge fund, and have seen the research that they don't produce above market returns. For the vast majority of investors, the best returns will be obtained by investing in well diversified mutual funds with very low fees (such as index funds) -- which is the way that I invest - I haven't bought an individual stock in over 10 years. That is immaterial to the point that SEC rules provide high net worth individuals additional investment opportunities versus ordinary investors.

[Tamas]

The Guardian is calling today's pumping of silver as a Reddit thing despite WallStreetBets specifically trying to have nothing to do with it, with people downvoting any mention of SLV etc.

Yes, very curious to see from the guardian in particular. My respect for them has dropped.

Regardless I have a few mining shares. They have gone up. Time to sell?

When I first fumbled around in the stock market (like 15 years ago, knew even less than I do now so don't ask) I noticed Silver was extremely volatile and unpredictable and in general seemed like a big boys' playground.

I don't think WSB could make a dent in it even if they wanted to. I'd assume some funds were doing/planning to do some moves and decided to grab the coattails for some additional news exposure to hype it up.

[Tamas]

https://edition.cnn.com/2021/01/31/investing/silver-price-squeeze-reddit-wallstreetbets/index.html

https://www.cnbc.com/2021/01/31/silver-futures-jump-7percent-as-reddit-traders-try-their-squeeze-play-with-the-metal.html


When I had a look a few hours ago I could not find a SINGLE WSB post calling people to buy silver-related stocks/futures/whatevs. Saw a few actively discouraging people from doing so.

How nice when market manipulation meets journalistic laziness. Decidedly old school compared to what happened to Gamestop.

[Josquius]

I found this site useful for examining WSB buzz:

https://www.topstonks.com/stocks/GME

Just put in the ticker code you want in place of GME.

Most of the silver stuff does seem to be in the "WTF is the media going on about?" area

[Habbaku]

Regardless I have a few mining shares. They have gone up. Time to sell?

You should sell and stop buying individual stocks.

[alfred russel]

Also, you shouldn't buy individual socks. Unless you only have one foot, in which case, carry on.

[Josquius]

Regardless I have a few mining shares. They have gone up. Time to sell?

You should sell and stop buying individual stocks.

This is a personal attack?

[Tamas]

Regardless I have a few mining shares. They have gone up. Time to sell?

You should sell and stop buying individual stocks.

This is a personal attack?

I think the idea is that buying an ETF or similar is safer, especially if you aim to be exposed to a particular sector.

[Habbaku]

Regardless I have a few mining shares. They have gone up. Time to sell?

You should sell and stop buying individual stocks.

This is a personal attack?

Very, very few people should be picking and choosing individual stocks, as Tamas says. Invest in a broad portfolio of stocks, not individuals. Your long-term returns are basically guaranteed to be higher.