It's not worth discussing BTC, TSLA, GME, or HTZ. That is missing the forest for the trees.
The degradation of even the appearance of an orderly market is the story. The money movement (volume of excess trades X magnitude of price change) seems out of reach of unleveraged retail. Faith in private and public institutions is justifiably poor, but also under organized attack.
This is going to end badly for everyone, except perhaps for China.
I think in regards to finance, the only thing that's under attack is the idea of "stock market as source of knowledge about value." But I'm not sure that the stock market has actually served that purpose for decades.
IMO, it's good that people are beginning to see the stock market as a casino. If people want to "invest," they'll figure out more pro-social ways to do it than the stock market, and if they want to gamble, well, there's always the stock market.
Ben Graham said many decades ago that over the short term the market is like a voting machine but over the long term it's a weighing machine.
There have always been periods of irrationality in the markets but there's no reason to believe that equities are fundamentally untethered from their inherent value in perpetuity.
Eventually most of the overnight WSB stock picking geniuses are all going to lose their shirts and we'll see less of this GME nonsense. They make up a tiny fraction of trading volume anyway.
It happened in '07-08, late 90s dot-com bubble and about every decade or so before that for different reasons
>but there's no reason to believe that equities are fundamentally untethered from their inherent value in perpetuity.
Yes, but human lives are finite. Of course the current market is mostly a ponzi, but what if it lasts yet another decade? That's a major fraction of anyone's lifespan.
Fundamentally the ponzi started to collapse in 2007/2008, but it was bailed out by the government. Increasingly it looks like the only way the ponzi can actually collapse is by dollar inflating, everyone getting poorer and ponzi games collapsing in real terms, but not nominal terms.
Unfortunately, probably the best thing to do in the meantime is to try to win at ponzi games and try to leave others with bags.
I like that Graham quote, and you make good points. I guess when I say "investing," I mean more like - Purchasing an equity entitles you to a share of that business' income and potentially assets, but if you buy the equity on the stock market, you're not actually investing in capacity, the way you would be if you bought an IPO or even just a piece of equipment you could use to make something.
And I think people have always given the stock market more credit than it's due as being "the economy," when really the stock market is a set of signals about the economy. The economy is the people and machines and the buildings that do stuff and make things, and the economy remains regardless of what's happening in the stock market.
If a bunch of silliness happens around a certain stock, or if the stock market becomes wildly detached from reality, it doesn't have anything to do with peoples' ability to produce value.
> you're not actually investing in capacity, the way you would be if you bought an IPO or even just a piece of equipment you could use to make something.
while you are not directly investing in capacity like you might in an IPO, purchasing stock does create the same outcome. It's just not _you_ who is doing the capacity investing directly, but someone else who does so, as a result of the chain of investments.
It doesn't necessarily though. When I buy an IPO, my dollars go straight (kind of) into a company's bank account. When I buy stock on the market, my dollars go to whoever I bought the stock from, who will probably use those dollars to buy more stock. The only time a company ever receives dollars it can use is when it sells stock to the public or gets a loan, and the vast, vast majority of transactions on the stock market do not involve dollars going to anyone who will use them to invest in capacity.
> vast majority of transactions on the stock market do not involve dollars going to anyone who will use them to invest in capacity.
If you could _only_ invest directly into capacity, the amount of dollars that people would be willing to put in would be much smaller than today's. That's because the risk profile is singular in direct capacity investment.
The reason the stock market can fund IPOs is because it allows the different stratas of risk to be separated, and taken on by different parties that want those risks. So without your dollar buying an existing stock, thus letting early investors for an IPO an exit, they would unlikely to want to invest in the IPO in the first place!
Yeah, it's certainly true that the financialization of everything allows for a lot more of every type of investment to be made (including in productive capacity).
> If people want to "invest," they'll figure out more pro-social ways to do it than the stock market,
Will they? Is there any such thing as a pro-social 401K or Roth IRA? If money is going from your paycheque into your retirement fund, bypassing you entirely, it adds significant friction to moving it out into something with more direct impact.
What’s happening is that the masses now have access to do the same absurd gambling that the “experts” have been doing for a century. The only way out is to remove the gambling functions from the market.
But then that would require that traders go get actual jobs, and produce actual value. I think these people would rather see the US burn than do that.
That's pretty cynical and optimistic at the same time.
Cynical because it doesn't acknowledge the value that a well functioning and regulated financial system can create. Efficient flow of capital only sounds bad if you haven't seen the absence of it, like projects failing for lack of funding while bad ones are burning money.
Optimistic for thinking that the masses have anything approaching the same level of access. I was hoping anyone with fintech experience could chime in disabuse others of this, but the masses don't have anything. It's depressing to watch so many people (on average) just destroying their savings while they're young and can make the biggest impact on their future savings.
The reason walmart's prices are stable is _because_ of the gambling of the market!
The financial engineering of modern day has managed to separate risk (which is what causes price fluctuations) from their underlying commodity/goods/etc, and sell that risk away to people who want to take it.
This allows those who want to not have risk (and thus stable prices) to have it - albeit yes, they pay a small premium for that. But ask any farmer and they prefer a lower, but stable price for many years, rather than the fluctuating price of produce.
So the gamblers, who by definition, want risk, take on all the risk. Thus, a functioning financial market is how this is all conducted.
Nonsense. We had stable prices before the gambling functions were possible. The gambling functions of the market add nothing of value, and produce no economic output.
it's only stable if you imagined it to be stable - it wasn't. And commodities futures and speculation is only gambling if you choose to call it gambling and compare it to casinos - it's not. Comparing it to a house-odds gambling game like casino is just personal bias on your part, and your lack of understanding of the machinations of commodities trade.
Seriously, what are the possible outcomes (positive or negative) that we can see play out? By what mechanisms can the currently inflated markets end and how will that impact the rest of the economy?
I think their point is that the top commenter engaged in an informal fallacy by painting a jaded picture then saying at the end of it China somehow wins, without any amount of narrative/justification. To me it seems like you could skip all but the last two words of top commenters comment to see their message.
The degradation of even the appearance of an orderly market is the story. The money movement (volume of excess trades X magnitude of price change) seems out of reach of unleveraged retail. Faith in private and public institutions is justifiably poor, but also under organized attack.
This is going to end badly for everyone, except perhaps for China.