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If Crowdfunding is the New Day Trading, Look Out

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Re: If Crowdfunding is the New Day Trading, Look Out

#21

Post by ISL »

JonSkeptic wrote: post #7
brey wrote: post #2

If you don't know who the sucker at the table is, it's you.

Exactly. Crowd funding is an ideal source of capital for con artists. "We are a team of Nigerian Bankers, and with your donations we will raise enough money to give you double what you contribute!" "We are a team of scientists who have discovered this one wierd trick that the medical community doesn't want you know about. If we meet out goals, you can receive the new wonder pill that adds 3 inches to your penis!" The…

It'll be much like the past.

Re: If Crowdfunding is the New Day Trading, Look Out

#22

Post by ChuckMcM »

Wow, this editorial exactly parallels my concern. Basically people chasing outsized returns getting fleeced by the bottom of the barrel type pump-n-dump types.

Here is my thesis, there exists a significant number of people who attempt to exploit people's desire four outsized returns using illegal "pump and dump" schemes where they pump up the value of a penny stock and them dump their shares to the unwitting victims. This is illegal and they get hunted down and sometimes caught. Now we'll have a "perfectly legal"[1] way for these same folks to create the illusion of an outsized opportunity. And that will create dark versions of wefunder type companies which are focused not on enabling the next generation of entrepreneurs but instead in fleecing the next generation of technology "investors".

[1] "Perfectly Legal" - code for a way to take money from someone where they cannot get it back, and yet had they known all of the facts would never have handed it over in the first place.

Re: If Crowdfunding is the New Day Trading, Look Out

#23

Post by chamblin »

This disdain for "common" investment is over the top.

A much bigger concern than the potential for poor decisions by individuals is the creation of financial instruments that are, by government fiat, only available to an elite group of institutional investors and the otherwise-wealthy.

Re: If Crowdfunding is the New Day Trading, Look Out

#24

Post by lukev »

shubb wrote: post #16
ig1 wrote: post #11

Earlier quoted context omitted.

That's a straw man arguments, I don't think anyones claiming that doing courses on Coursera is the equivalent to a Stanford degree. Certainly the universities aren't.

But they are charging plenty of money for University of Phoenix Online courses. The statistics, that a disproportionate number of graduates from Phoenix and places like that are unable to make student loan payments, tell you that they are not returning on investment for those students. If you are poor, and study very hard, it is possible to win a scholarship at a reputable college, and achieve social mobility that wa…

I disagree that a scholarship is the only way to earn achieve social mobility.

A college degree is a necessary but not sufficient condition for breaking into the middle class. If a loan can help someone meet that condition, great.

This is not to say that colleges aren't horribly overpriced (they are) or that more scholarships shouldn't be available (they should, including government grants; one of the best long-term investments in the economy the government can make).

Re: If Crowdfunding is the New Day Trading, Look Out

#25

Post by bayesianhorse »

What they are describing doesn't sound like crowd-funding at all. It looks more like advertized private equity with dramatically lowered quality standards.

It does not sound as if "accredited investors" would necessarily include a lot of people, especially when people know that the risk is worse than in the usual stocks.

Re: If Crowdfunding is the New Day Trading, Look Out

#26

Post by [deleted] »

breckinloggins wrote: post #10

The nice thing about Crowdfunding is that, like traditional trading, motivations vary. For example, I recently backed the Infrared Human Vision study on Microryza [1] simply because it sounded like cool research. I backed the Ubuntu Edge even though I knew it would most likely fail to reach its funding goals because I wanted to send a message that there's a market for a "pocket to desktop" convergence device. I sent…

[deleted]

Re: If Crowdfunding is the New Day Trading, Look Out

#27

Post by dvanduzer »

arbuge wrote: post #20
breckinloggins wrote: post #10

The nice thing about Crowdfunding is that, like traditional trading, motivations vary. For example, I recently backed the Infrared Human Vision study on Microryza [1] simply because it sounded like cool research. I backed the Ubuntu Edge even though I knew it would most likely fail to reach its funding goals because I wanted to send a message that there's a market for a "pocket to desktop" convergence device. I sent…

>> The nice thing about Crowdfunding is that, like traditional trading, motivations vary. Most certainly they do but I'm guessing that a large chunk of the crowd will be going into this thinking it's a surefire way to make money.

I've been advocating Crowdfunding for years, but specifically with the assumption that it would be a mechanism to help the middle class diversify their investment portfolios.

The questionable wisdom of this assumption has been pointed out to me several times. So just now, I looked up the stock market crash of 1929, and it tells me that only 16% of U.S. households were invested in the stock market at the time. The bigger problem (ostensibly) was that commercial banks were too heavily leveraged in the market.

So we get Glass-Steagall and the Securities Act of 1933 out of all that. The "separate commercial and investment banking" clauses come out of the former. The "accredited investor" clauses that prevent true crowdfunding come out of the latter.

In 1990-something, Clinton weakens Glass-Steagall. In 2012, Obama signs the JOBS act, which weakens some "accredited investor" parts of the SEC.

So now, in retrospect, are we more worried about a weak Glass-Steagall after 2010?

Or are we more worried about policy that would have only protected 16% of households in 1929, and since then, has excluded ~99% of Americans from early stage investment?

edit: a $1,000 investment at Google's IPO would be worth $10k today. however, a $100 investment early in Google's history would also be worth $10k today.

Re: If Crowdfunding is the New Day Trading, Look Out

#29

Post by dvanduzer »

ig1 wrote: post #19
shubb wrote: post #16

Earlier quoted context omitted.

But they are charging plenty of money for University of Phoenix Online courses. The statistics, that a disproportionate number of graduates from Phoenix and places like that are unable to make student loan payments, tell you that they are not returning on investment for those students. If you are poor, and study very hard, it is possible to win a scholarship at a reputable college, and achieve social mobility that wa…

MOOC != University of Phoenix

MOOC == Hey, those guys might be on to something?

Re: If Crowdfunding is the New Day Trading, Look Out

#30

Post by pcowans »

breckinloggins wrote: post #10

The nice thing about Crowdfunding is that, like traditional trading, motivations vary. For example, I recently backed the Infrared Human Vision study on Microryza [1] simply because it sounded like cool research. I backed the Ubuntu Edge even though I knew it would most likely fail to reach its funding goals because I wanted to send a message that there's a market for a "pocket to desktop" convergence device. I sent…

From the article: "To be clear, Malik isn’t talking about Kickstarter where funders make a donation that acts like a pre-order. He’s talking about the public buying stock in private companies, something that may soon be legal thanks to the JOBS Act..."
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