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Redditors are right about the unfairness of the market

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Re: Redditors are right about the unfairness of the market

#111

Post by UncleMeat »

rapsey wrote: post #99
fennecfoxen wrote: post #90

Earlier quoted context omitted.

Meh. GME didn't stop trading because some fund had shorted the shares. They stopped trading because people couldn't be sure firms like Robin Hood would be good for the money. No one was prepared to go to bat and procure millions of dollars in meme-stocks for them, then be on the hook when those millions in dollars didn't show up. And everyone whined and whined and whined about "different rules for hedge funds!!!" Of…

> Meh. GME didn't stop trading because some fund had shorted the shares The entire issue is a fund was allowed to short shares they did not have. An illegal act unless you are powerful enough. That is the origin and cause of the entire story. No one disagrees that Robin Hood is garbage. But them being that is not the main issue at all. RH having collateral is something entirely different from the shares you have supp…

> The entire issue is a fund was allowed to short shares they did not have.

Has this ever been demonstrated?

Re: Redditors are right about the unfairness of the market

#112

Post by grayhatter »

soco wrote: post #46
zz865 wrote: post #13

I understand that people shouldn't benefit from insider information for their personal trading - but there are rules around this. Blanket banning stock trading has a lot of downsides. Its an important part of everyone's financial wellbeing - esp if you are wealthy or powerful. I left my job in financial industry primarily because of this.

I can't see the downside in affecting the financial wellbeing of the wealthy and powerful.

It seems like you're not thinking clearly then. Everyone has a vested interest in making sure no party is willing to flip the table rather than continue to play the game.

Re: Redditors are right about the unfairness of the market

#113

Post by nradov »

DSMan195276 wrote: post #62
nradov wrote: post #28

Earlier quoted context omitted.

There's nothing really wrong with stock buybacks. They're just a tax efficient method for companies without strong growth opportunities to return value to shareholders.

I think part the above person's complaint may stem from what happened a few years ago, which is that a decent number of businesses had their taxes reduced and simply used the extra money to do stock buybacks instead of improve or expand the company, increase pay, etc. Now that said, stock buybacks on their own are not necessarily a "bad" thing, and if a company has no uses for a bunch of cash on hand then giving it t…

Taxing corporate income is rather silly to begin with. It causes companies to engage in all sorts of pointless financial engineering just to avoid taxes without generating any value. This is a net drain on the economy.

A better approach would be to cut corporate income taxes to zero. But make it revenue neutral by increasing taxes on shareholders, bondholders, and highly paid employees.

Re: Redditors are right about the unfairness of the market

#114

Post by Aunche »

rapsey wrote: post #72
fennecfoxen wrote: post #69

Earlier quoted context omitted.

How is it a scam? You buy stock. You own a share in a company, or in a company that owns more companies. The company makes money. It pays that out by dividends or share buybacks. You sell it decades later, hopefully for a profit. That's the deal. That's what's for sale. You want to blame HFTs or whatever? Bah. Worst case you're losing a fraction of a percent of your initial purchase. You've got absolutely nothing on…

>How is it a scam? You buy stock. You own a share in a company, or in a company that owns more companies. Because the stock you buy may not have been actually bought by your broker. Which is the entire point of the GME saga which you completely misunderstand. A stock has no business being shorted over 100% in a market that is not a scam. Major firms can get away with crimes like naked shorting and no one can do anyth…

>Because the stock you buy may not have been actually bought by your broker

The stock did get bought by your broker. That's why gme's stock skyrocketed and brokers didn't want to trade it. A short interest over 100% doesn't imply naked shorting. If you're borrowing a stock, you can lend it out to someone else. It's like a sublease. There are two leases for a single apartment.

Re: Redditors are right about the unfairness of the market

#115

Post by bern4444 »

One of the biggest misconceptions is that the stock market is a zero sum game. Its absolutely not. One person can make money without another person losing money. Is that always the case? No. But that doesn't make it a zero sum game.

If I buy a few shares from someone, I could be buying them from someone who is up on that investment and wants to cash in on their profit. If that stock continues to do well, everyone wins. I make money, the person I bought the shares from makes money.

Who cares how much the other person made, I'm focused on myself. If someone does a good job, and opens their expertise to the public - like Cathie Woods and her ETFs - even more people can benefit. No one is hurt by her success.

Of course people lose money, but that's not always and only because someone else is then making money from your loss.

Everyone knows nearly every hedgefund does worse in the long run. Maybe they have 2-7 incredible years. Years 8 - 12 though aren't likely to go so well and they'll end up closing up shop. Only the top 20-50 hedgefunds likely consistently outperform a market index fund. The other few hundred are running on luck or just doing poorly anyway.

Despite the issues of insider trading in this article, individuals are still able to do remarkably well by buying VTSAX (or whatever index/mutual/etf fund you like best) consistently over a long period of time.

Re: Redditors are right about the unfairness of the market

#116

Post by lotsofpulp »

johnchristopher wrote: post #60
everdrive wrote: post #43

Earlier quoted context omitted.

>Don't fall for it. It's just rich people and politicians taking money from less rich people. How do rich people make money in the stock market if it's a "scam?" And how do politicians use the stock market to take money from anyone? (usually they use taxes to do this) What about index funds, which usually have proven returns and require no special knowledge?

My naive answers: > And how do politicians use the stock market to take money from anyone? Insider knowledge. > How do rich people make money in the stock market if it's a "scam?" They have an army of traders and their job is to buy and sell non stop, taking advantage of smaller players who think the game is fair, until a profit appears. > What about index funds, which usually have proven returns and require no speci…

> Why don't everyone buy into index funds then (genuine question) ?

They should, unless they have an “edge” over others, such as inside information or analysis that others did not do or did incorrectly, such as checking satellite photos of parking lots (in days prior to delivery).

If you do not have an edge, then you are simply gambling. But I would say craps is more fun. Low cost index funds like VOO are just true inflation protected securities over 5+ year timeframe, in my opinion, because you know the US federal government is going to pull out all the stops to prevent its biggest organizations from collapsing.

Re: Redditors are right about the unfairness of the market

#117

Post by fennecfoxen »

rapsey wrote: post #99
fennecfoxen wrote: post #90

Earlier quoted context omitted.

Meh. GME didn't stop trading because some fund had shorted the shares. They stopped trading because people couldn't be sure firms like Robin Hood would be good for the money. No one was prepared to go to bat and procure millions of dollars in meme-stocks for them, then be on the hook when those millions in dollars didn't show up. And everyone whined and whined and whined about "different rules for hedge funds!!!" Of…

> Meh. GME didn't stop trading because some fund had shorted the shares The entire issue is a fund was allowed to short shares they did not have. An illegal act unless you are powerful enough. That is the origin and cause of the entire story. No one disagrees that Robin Hood is garbage. But them being that is not the main issue at all. RH having collateral is something entirely different from the shares you have supp…

Okay, since you're so hung up on this shorting as a reason to call the market a "scam".

I hear some hedge funds owed stock, and held "synthetic" stock, in the form of options, but did not hold the stock itself. Maybe some funds didn't even hold those! Let's assume all of this is truer than true and put it beyond dispute.

It sounds a little dodgy, possibly a violation of contracts, possibly illegal. It also sounds like they lost a fair amount of money acquiring stock to cover their obligations, and it sounds like some retail investors were able to make money from the processes related to their need for this stock.

So let's put this in perspective.

If all of this is such a scam, tell me: who are the victims of this "scam?" Who precisely thought they owned stock, and found out that they did not in fact own stock, and lost some or all of their money? Does this person or legal entity actually exist? Where can we read a story of their woes as their stock evaporated?

And if this is such a scam, how common is all this? We are discussing a very broad claim: "The stock market is a scam.... Don't fall for it." What saliency does the Gamestop story have to this claim? Tell me, sir: if I am an average investor, and I am investing $10,000 in the market, in the statistically average way that people invest, how many of these dollars will I expect to lose to a scam such as this one? On average?

I hold that the answer is probably somewhere between $0.00 and $0.00. Oh, there are some very real scams and fraud out there on the market, but they tend to be more like Enron, or some firm like Theranos (except public) — not "failure to deliver shares" risk. And they're still a tiny risk to any index fund owner.

Re: Redditors are right about the unfairness of the market

#118

Post by paulclinger »

johnchristopher wrote: post #60
everdrive wrote: post #43

Earlier quoted context omitted.

>Don't fall for it. It's just rich people and politicians taking money from less rich people. How do rich people make money in the stock market if it's a "scam?" And how do politicians use the stock market to take money from anyone? (usually they use taxes to do this) What about index funds, which usually have proven returns and require no special knowledge?

My naive answers: > And how do politicians use the stock market to take money from anyone? Insider knowledge. > How do rich people make money in the stock market if it's a "scam?" They have an army of traders and their job is to buy and sell non stop, taking advantage of smaller players who think the game is fair, until a profit appears. > What about index funds, which usually have proven returns and require no speci…

> taking advantage of smaller players who think the game is fair, until a profit appears.

I'm still not sure in what form this "taking advantage" happens. I think the stock market provides unique opportunities in how one can start small and grow with additional capital, knowledge or time when it becomes available.

> Why don't everyone buy into index funds then (genuine question) ?

For a variety of reasons: some find it boring, some think they can beat the index, some get stock grants and stick to what's familiar, some buy stocks that they hear about (because their friends do), etc. Even those who (mostly) buy into index funds may invest a chunk of their portfolio into riskier assets.

Re: Redditors are right about the unfairness of the market

#119

Post by soco »

closeparen wrote: post #100
soco wrote: post #46

Earlier quoted context omitted.

I can't see the downside in affecting the financial wellbeing of the wealthy and powerful.

Low-paying positions of power are a recipe for bribery.

You are right because human nature and bribery will always be there - no amount of pay will stop one from wanting more. That's what the PC said as well: the wealthy and powerful don't want to lose their wealth and power either, do they. The question is, what do we choose to do in such a situation?

Re: Redditors are right about the unfairness of the market

#120

Post by rapsey »

UncleMeat wrote: post #111
rapsey wrote: post #99

Earlier quoted context omitted.

> Meh. GME didn't stop trading because some fund had shorted the shares The entire issue is a fund was allowed to short shares they did not have. An illegal act unless you are powerful enough. That is the origin and cause of the entire story. No one disagrees that Robin Hood is garbage. But them being that is not the main issue at all. RH having collateral is something entirely different from the shares you have supp…

> The entire issue is a fund was allowed to short shares they did not have. Has this ever been demonstrated?

The float was shorted 120%. This is not disputed.
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