> - Covid stimulus going to people who didn't need it
From the stimulus the worst of the offenses by far happend in the PPP for small business. It was absoutely shameful.
While there was of course waste in the direct treasury payments to citizens, they get way overrepresented compared to what happened in the PPP. It's the same human nature of: If a big company gets 100M of our taxes for no reason, people grumble a bit, but if their next door neighboor gets an extra $100 and they don't, you never hear the end of it.
The PPP was rife with waste, but by design you'll hear way more media and people complain about the co-worker they know of or cousin that spent $1000 on trading cards.
Edit: And skipping my rant that it was by design that the PPP had no transparency and the adminstration fired the inspectors general that would oversee the program for waste to avoid transparency.
Edit: And to be clear it's fine to have untargeted stimulus for people to cover day to day expenses, and also fine to have loans to businesses to keep things afloat. But to intentionally do so with blocking transparency, and removing oversite officials is just creating a cesspool for waste.
This and the arm chair government spending police in this thread is completely wrong. The PPP helped a ton of small businesses who needed it. I, along with many small business owners in our industry got PPP, used it correctly on employee payroll, rent and utilities. It took me all of 30 min to apply for each of the PPP rounds. It took me about the same amount of time to apply for forgiveness.
Of course there were problems with the wrong people getting their hands on the money. If you actually put up a ton of filters to make sure the wrong people didn't get the money, it would have delayed the actual people needing money from getting it. The right thing to do is to hand out the money fast and go after the abusers later.
These comments are the reason why the small guys always gets the short end of the stick. The big companies have their army of people to solve problems. The small guys are the ones who need it fast without the bureaucracy. Comments like "too much waste" and "shameful" do not hurt the big companies one bit. They just put up another road block for the small guys.
Hmm, I thought the thread was about how well or badly PPP was organized. If other stimulus measures, or defense spending was badly managed, that doesn't really mean that PPP was badly managed.
> The right thing to do is to hand out the money fast and go after the abusers later.
In my opinion, this is not a winning strategy. It takes magnitudes more efforts to go after criminals and recover misappropriated money than to prevent the crime in the first place.
P.S.; I'm not an American, so I don't think I have much say in judging how you guys spend your taxes, anyway.
I went through some of the PPP records and found some seemingly fraudulent things, like a youth baseball club receiving an absurd amount of money.
Was it poor record keeping or was it fraud? Companies sprang up just in time to receive loans, including a bunch in California named things like "88 Cloud Computing". All of the names in this case had 88 in them, which is often code for neo-nazi crap (88->HH->Heil Hitler).
It helped those who needed it, sure, but the deliberate sabotage of record keeping and oversight seems intentional.
Those four companies - 88 Cloud Computing LLC, 88 Enterprise Services LLC, 88 Investment Empire LLC and 88 Venture Capital LLC - each received between $350,000 and $1 million in loans within the span of a week in June 2020. The four companies purportedly provide cloud computing and investment services and two of them listed 24 employees each; however the address of all four businesses is a home in an affluent South Bay suburb.
The purpose of the “stimulus” funds wasn’t to give what was needed to the people who needed it. The purpose was to smooth out the economic whiplash. We knew there would be an enormous temporary dip in demand, but that structurally (long term) we’d still need all our businesses and couldn’t really afford for them to go bankrupt.
The money was supposed to be given to those who could spend it, to help keep all our small/medium/large businesses as healthy as possible.
> The purpose of the “stimulus” funds wasn’t to give what was needed to the people who needed it.
Agreed, and providing direct payments to people who are working to put together food or pay their rent makes perfect sense to me. The potential disasters we would have seen if we hadn't done that would've been horrible.
And providing loans to small businesses so they can keep functioning also makes sense. But firing the inspectors who are supposed to oversee the small business loans (as they always have done), blocking pushes for basic transparency of even what businesses receive the loans, and then "forgiving" 97% of all loans as a gift from the govt is beyond wildly irresponsible.
I basically operate within small to medium size business as sales in California. Every business owner I know took/got so much PPP money they flat out feel guilty but at the same time all they did was take what was being offered. It's probably the most internally rage inducing thing I've ever heard of, but Im so used to faking agreement to keep the sales relationship alive I basically can block it out.
Money is sales feels like fake money anyway so I can cope. But I think if any hard working people really found out what happened they'd almost go French revolution on government.
Not taking PPP money that your business is eligible for is akin to paying more taxes than you're required. Maybe it's honorable in some strange way, but it's certainly not rational.
In my humble opinion - this is a great insight on both paying your fair share and not taking PPP/social security/unemployment even if you technically can but don't actually need it. It should be lauded more even though it probably will never be.
I don't know why we would have debates on whether we should "laud" things or not. How about regulating things, rather than having debates about who or what should be praised? Companies aren't dogs or children. I personally get very little from either the praise or condemnation of anonymous strangers.
Not really directed at you, I'm just sick of the idea that if we all get together and declare things good or bad, that's some sort of accomplishment. People who do well do well through ignoring the irrelevant and immaterial comments of busybodies and bikeshedders.
Moral exists and you can aim for a virtuous life in an Aristotelian way and are free to think people who strive for that should be admired. I am at this point in my life of an opinion opposite to yours. What people do is not neutral and people who abuse system or knowingly profit from harmful systems have a negative impact on our society as a whole and it is legitimate to see their actions as bad.
I'm struggling with this personally as I decide whether or not to work for unethical companies in exchange for life-changing compensation.
Overall I think my suffering-footprint is tiny compared to most so maybe I'm okay with being a bit more unethical in some areas of my life. But I'm unsure.
Agree - ideally it would be better if everyone just did their own thing and was valued by society for their contribution.
The comment is much more as a counterpoint to the existing dogma of valuing an individual's contribution to society primarily based on ability to amass capital (i.e. splashy magazine covers based on net worth - which often translates to percentage ownership of a company valued on the price paid by the last marginal buyer).
there's nothing fair, gov policies are created to stimulate economy, and that literally means people should go get it and spend it. stashing it in overseas safe haven is less ideal than say spend it all
At the time, it also wouldn't have been wise because none of us had any clue what was going to happen long term. If you'd taken that money, paid your short term shortages with it, and held on to your reserves you could have been spending instead, you'd be in a better position later if things kept going badly.
> But I think if any hard working people really found out what happened they'd almost go French revolution on government.
I can't speak for everyone, but I have simply decided to opt-out wherever possible; I'm not going to fight against a system that has moated itself out of obsolescence. If startup culture has taught me anything it's been to learn when to expend your energy matters more than you may think as it compounds over time. If you're constantly deluding yourself there is reform in a system that is designed to be this way, you'll be in incapable of creating viable alternatives.
I had qualms about how poor the US education system--I went to both private and public schools--when I was student, I couldn't fathom just how much we spent and how poor the results were in almost all facets until I realized that this was exactly what it was intended to be: a bloated bureaucratic system designed to siphon funds from the pubic coffers into private hands and enrich an administrative class who seem content with throwing out what they feel impedes them meeting their easily manipulated metrics.
With that said, I still think the airline bailout was the real takeaway of how this whole debacle was managed [0] in the US. It's the typical Socialism for the rich, ruthless Capitalism for the poor playing out all over again as we saw in 2008. Failing up happened, and the stock market and housing market rallied in the midst of mass unemployment and re-opening problems for small businesses etc... this is all make-believe, and it has been for most of my Life, too. It would be almost laughable, in a jaded George Carlin way, if it didn't have such dire consequences: homelessness, and over-dose death due to substance abuse is a pandemic itself.
Personally speaking, after having done sales for my fintech startup, I learned to do the same: but I'm realizing just how internally jaded it has made me about most things in Life. It has a spill-over effect that didn't really dawn me until much later in Life long after I left tech for a while, and returned to culinary whose work force is mainly the 'working poor' who constantly get screwed over. I've helped several of my friends get over the worst situation, and I'm glad they are mostly doing better, but it isn't by much after inflation and perpetual rent hikes.
Yup, instead of providing a reasonable recurring "stimulus" income directly (along with suspending rent/loans) during the emergency, PPP loans funneled massive amounts of money into "business owners" pockets.
The loans were meant to be used for payroll but the process was so opaque and full of loopholes that business owners could simply play a shell game and keep the funds, or some people even created businesses to receive it.
What irritates me is that this is another instance the heavily flawed "trickle down" concept. Companies time and time again act against the best interest of individuals. PPP only further enriched a small subset of business owners at the expense of individual taxpayers.
A clear wink-and-a-handshake "deal" to funnel huge amounts of government money into corporations with minimal oversight.
If the money had gone directly to people instead, it could have been spent as normal, and that would have done more to help local SMALL businesses stay afloat. Plus the business owners who had to close for lockdowns would have been receiving regular benefits too and rent/loans should have been suspended.
A startup I worked with that raised 20+ million in late 2019 filed for ppp and got 600k+. They didn’t need it but all they had to do was say Covid had impacted them, when truth be told it impacted all of us. It was a waste of tax payer dollars. I just hope the businesses that truly needed it were able to get it.
the local immigrant mom and pop shops that needed it I'm sure had a hell of a time navigating the paperwork, not to mention trusting the government and banking system to take care of forgiving the loan when all the conditions were met.
My wife's small store (two owners, no employees) was unable to figure out the PPP paperwork, threw up their hands and said 'screw it' and just got on with figuring out how to reopen. I think the smaller the business, and the more they depended on that business to pay the bills, the less likely they had the time and resources to navigate the paperwork.
The funny (or sad) thing is, "small" firms that are hedge funds also managed to apply and because they often have tax accountants on retainer, they had an easy time doing the paperwork!
My wife and business partner had no payroll, because they do things themselves. Some people were telling her she could still get PPP, but it was not possible to get an informed bank human on the line to ask about it, and then all the money was gone and she moved on.
If this was the very first round of ppp, I believe that banks got up to speed after a few weeks, and more money was found, so the situation improved considerably.
You might be surprised how much money is made and exchanged under the table which makes negotiating these things precarious for some businesses. The negative economic impacts when these businesses die are still felt regardless of if they cheat on their taxes.
A counter example, my neighbor owns a small drycleaning business and was able to navigate the paperwork. He has a long-time relationship with a particular local bank and I think someone there helped him navigate.
>not to mention trusting the government and banking system to take care of forgiving the loan when all the conditions were met
This concern could have been allayed by keeping the funds in a bank account until certain of forgiveness. Absent said forgiveness one repays the loan using the retained funds.
$4.2 trillion was the total stimulus spent. I find it hard to imagine the scale of this spending, with nothing to show for it. No new infrastructure was built, and we still seem to be staring at the beginning of a recession.
That's an interesting and sobering thought. It basically bought two years of breathing room but also delivered the Fed a very tricky puzzle that they need to solve now. And solving that puzzle without causing a recession later this year is going to be very difficult.
Isn't that the whole point of preventative measures?
"not nothing": could have used less money.
Relatedly, getting a recession now does not at all mean these measures were not successful or that this recession is at all similar to the one that was prevented.
If it kept businesses alive it was probably worth it. Small businesses take a long time to establish themselves but can be snuffed out pretty quickly. Many of my friends with such businesses barely made it and the PPP loans were crucial in getting them through the pandemic.
The PPP was precisely Bernanke's "Dropping money from helicopters" scenario.
I think the fear of a Depression was real, and the government was willing to pull the level on the most outrageous tool they had, which was drop money from the skies into the pockets of people who could spend it.
Of course I think that was wrong, but I know exactly where this came from, and it was a playbook that was broadcasted by Bernanke I believe decades ago to fight a Depression. At least we can all agree that it worked, although a little too well, which is why asset prices have skyrocketed and inflation has gone horribly wrong.
The action of the FED was clearly faster, heavier and in the end better than the ECB. As a result, the FED was able to increase the interest rates faster. Sure it was not perfect but "good enough".
> The action of the FED was clearly faster, heavier.. than the ECB
Well of course, the situation was vastly different. First, in most EU countries there were very few people losing their jobs due to various existing or expanded temporary/partial/etc. unemployment schemes which meant that people kept their jobs, but were paid by the local government instead of the business. Second, the ECB didn't have the required authority to do what needed to be done, and it required negotiations between the eurozone members to agree on how to proceed in regards to loans. And third, actions were taken locally at each government level.
The problem was that the lack of controls meant it was so easy for the fraudsters to set up situations where they would get the money and not face the repercussions.
We saw the same thing with unemployment--the system got overwhelmed so they quit checking and the result was a lot of identity thieves collected unemployment for workers who weren't actually unemployed. (Of course the real problem is the unemployment system has been deliberately kept dysfunctional because that reduces the amount they have to pay out.)
No really explain that logic as when we give tax credits to business we do not then again use the same screwed up logic
the biggest example, the Trump org tax credit check from early 2000s. in fact now that the IRs know it was base don fraud there still asking for it back.
The PPP was much different than the other forms of stimulus. It either went to employees, or it had to be paid back. The interest on the loan was low though.
I doubt much of PPP funds were being used in the meme trading game.
For the initial loan to get it issued quickly, that’s correct.
To have the loan forgiven, you had to submit documents at tax time to verify it or it became a low interest loan that had to be paid back.
PPP was one of the best ideas that came out of locking down the entire country because otherwise a tooooon of people would have been laid off immediately. Instead, even people who couldn’t do any work at all due to lack of child care were able to be paid, maintain insurance and benefits. They had to act so quickly.
I didn't say there was no fraud in the PPP program.
The OP comment didn't mention the PPP specifically as stimulus.
The context of the article, is individuals investing money in meme stocks.
The PPP went to business owners (with the assumption they would pay employees rather than laying them off) and likely wasn't being used for meme stocks.
I was reading through the WSB Reddit sub at the time. There was a lot of chatter there about people using their personal stimulus payments for investing in meme stocks.
I also spent a lot of time on Reddit subs checking chatter on PPP and EIDL. Of the two, my guess is there was a lot more widespread fraud (more people involved, but with smaller disbursements) with the EIDL. The EIDL was giving out 1K per employee (up to 10K) for anyone who claimed they were business owners. That didn't have to be paid back.
> - Covid stimulus going to people who didn't need it
Could you please elaborate? I think the way the US did it's COVID stimulus was outstanding and very close to the ideal way to actually address people's potential needs.
> - People spending that stimulus money to invest (often for the first time) on zero-fee platforms like Robin Hood
What's exactly the problem? Aren't people free to spend their own money any way they feel like it? Or are we now held accountable by a righteous capitalism police to determine if an expense we make is kosher?
> - Meme stock investors intentionally manipulating stock prices to cause them to diverge from the underlying value of the company
What's exactly the problem? I mean, who are you to tell what's the "underlying value" of something, specially in a free market economy?
It seems to me that worst case scenario the people spending their money on stocks are only gambling their own money, and best case scenario they profit from their own investment.
> Could you please elaborate? I think the way the US did it's COVID stimulus was outstanding and very close to the ideal way to actually address people's potential needs.
I have a number of friends in the contracting/remodeling/construction industry. Demand for their services skyrocketed during COVID while they were all simultaneously working with their accountants to maximize their take from the COVID PPP program.
Huge quantities of COVID money were pumped into companies that absolutely did not need it, and that's not even counting the massive volume of fraudulent claims. The COVID Paycheck Protection Program was supposed to shore up companies that would otherwise have to fire employees, but AFAICT nothing really stopped highly profitable companies from also collecting the money.
> Huge quantities of COVID money were pumped into companies that absolutely did not need it, and that's not even counting the massive volume of fraudulent claims. The COVID Paycheck Protection Program was supposed to shore up companies that would otherwise have to fire employees, but AFAICT nothing really stopped highly profitable companies from also collecting the money.
And this was by design. The administration at the the time explicilty pushed for there to be no oversight at all on this. The opposition party at the time said it's just setting things up for fraud and corruption, but it was desired to have no oversight. Not even after the funds had been released (if you wanted to make an argument that upfront oversight would have slowed down the distribution).
The administration both fired the inspectors general that would oversee the program, and passed laws to prevent transparency into the program. It was fairly controversial at the time, but now mostly lost in the haze of 2020 lockdowns.
IMHO they should have done a compromise where the terms of eligibility were closer to 2nd draw in that you needed to have an actual emergency, huge sick leave, late bills, etc. Or at least high likely hood.
Still give it out right away. Just put a checkbox on the form. And then follow up with the details on forgiveness later.
If a company jumps the gun, they think things look black, but in a month it turns around and they are fine allow them to return it or keep it at a low (but not crazy low) interest rate.
For foreignness prove the loss/necessity.
So can go after egregious abusers. Because it wasn't abuse if you took it and didn't need it. So long as used for payroll, rent, etc. Because why wouldn't you take free money. We did.
I have multiple friends who received second draw PPP loans for their businesses in summer 2021 under the current administration. They received a significant percentage of their 2019 revenue in a full distribution to spend on payroll and some other expenses despite the fact that their monthly revenue at the time of distribution had rebounded. They were able to bank current revenues because current costs were covered by the loan, which will ultimately be forgiven. It didn't make any sense. I don't blame them for taking advantage of it though.
I have 0 or negative AGI while sometimes having gross income/earnings/gains in the millions I got auto-sent several stimulus checks of the max size, because Congress wrote it based on having an “AGI of $75000 and lower” or similar number. AGI is after most tax deductions
Back to the by design part, the primary goal was to keep velocity in the economy high, and that means getting it to people with a high spend
Fairness is not a factor at all
Our economy works from velocity not whether one has money. Hoarding is worse than spending, not saying that poorer people would hoard just how its not a factor. It was designed to make maximum spending
Someone prewrote it for congress they knew what they were doing while congress was just scared
It's fine. We needed a sensitive intervention, not a specific one. And given the time constraints, those two were definitely in opposition. The administration made the right choice.
This is directly akin to using the defence of "i didnt realise the burning coal was hot". Common sense would have got you 99.9% of the way to not hurting yourself but you reached into the fire and grabbed it anyway. Given these are fiscal monetary "experts" they should have and could have done better. That includes delegating decisions and actions to those better able.
I agree with you they targeted small businesses pretty heavily with stimulus, and probably a lot of fraud occurred. While some of that money made it in the form of bonuses to employees, I bet a lot of it was soaked up by the frothy stock market.
Yes but observing the end effect it was apparent a lot of that money went into the stock market, and thus didn’t really go where it was needed. The damage was done already.
> Huge quantities of COVID money were pumped into companies that absolutely did not need it (...)
Since when is revenue and profit dictated by anyone's sense of fairness? That's an awfully moralistic and judgemental take on everyone else's needs and desires.
Sadly this blend of judgemental view of everyone's money already hit small things like buying groceries. Damn the have-nots for generating inflation by actually stocking on the decent food that the well-to-do used to buy.
Do you see any problem in anyone spending their own money in any way they'd like?
These were supposed to keep at-risk companies from failing when the economy crashed, but then the economy didn't crash and instead it was just a huge government handout of free money to most companies.
I think you're putting too much weight on "did the economy crash" here. As in, "wow, the economy didn't crash, we shouldn't have done anything" aka "wow, Y2K didn't ruin everything, we shouldn't have updated all that code" or "we didn't get hacked, why did we bother applying security updates" or similar.
"We want to prevent the economy from crashing hard and long" is how I'd phrase motivations. Certain sectors did crash immediately, and yet the overall blast radius wasn't very large and a lot of stuff bounced back immediately.
That seems like a great success.
Loans being forgiven to generously even for companies that did NOT see a sustained dip in demand, on the other hand, is a more targeted specific problem, and a lesson to learn. But if you learn too broad a lesson like "stimulus is dumb" then you just drive yourself back off a difference cliff next time something exceptional happens.
A better lesson to learn is that shutting down major sectors of the economy was dumb. It was a total overreaction, and proved to be completely ineffective in controlling the pandemic. If politicians hasn't done that then there wouldn't have been a risk of an economic crash in the first place.
> If politicians hasn't done that then there wouldn't have been a risk of an economic crash in the first place.
This is naive and ignores the real sequence of events.
Things like conferences were getting canceled before the first official government actions in the US. Groceries were being hoarded. People were paying attention to events. The government sticking its head in the sand or just repeating "everything is fine, stay calm" messages wouldn't have prevented any impact.
Uncertainty is an economic killer. And if you remember early on, that uncertainty also led to a lot less controversy over the canceled events and restrictions than arose later. (Though in retrospect, even many "paranoid" estimates back then were far less than a million US deaths...)
Some level of stimulus was almost certain to be necessary regardless of official Covid actions in March 2020 unless you wanted to just let those companies and workers drown as people chose to change their behavior.
(The "restrictions should've been loosened earlier" argument is a much more reasonable one, but IMO still ignores how much of this was already local by winter of 2020, and also that at that point the initial economic damage was done.)
(That's before getting into the recklessness of assuming future severe novel diseases won't be even more deadly on limited early data...)
I don't think there's enough investigative power to find all the people who were abusing the system. The level of fraud that I personally witnessed of people filing hundreds of PPP loans for non-existent businesses was in the high 7-figure range, and that was just 2 guys I happened to hear of. There were likely hundreds of scammers doing the same thing in every major city, each stealing millions of dollars each.
It should be possible to identify these people very easily with a SQL query. To qualify, a business had to have been running for some time (years) and have payroll. So run a query for "loans issued to entities with banking history < 1y and w-2 withholding payments == 0".
Small business owners are a very powerful political force. If you are handing out checks to regular people (their employees) You basically have to give them something or they will wreck you.
If the PPP was intended to help struggling businesses, but your business wasn't actually struggling due to the pandemic, then you didn't need it. It has nothing to do with fairness.
> Do you see any problem in anyone spending their own money in any way they'd like?
"How dare you tell the bank robber to return the money he stole. Who are you to tell him how to spend his own money? That's awfully moralistic and judgmental of you."
The original PPP was intended to give money to all businesses with employees, to incent them to not lay off workers (it was a loan, repayable if the company reduced their workforce). The second version of the application form added a clause (after media bruhaha) about "potentially being affected by the pandemic", so would exclude some small subset of businesses that could absolutely guarantee that nothing about their future revenue and input costs would change aversely. Any concept of actually having been negatively affected in the past, prior to application came much later.
College students who weren't planning to have any income anyway before Covid hit. And that's at least still a relatively "legitimate" payout compared to the screw-ups like sending money to prisoners [0].
But really both cases are massively massively dwarfed by anyone who could fog a mirror starting an LLC and getting $40k to $250k of PPP money. I personally know a couple people who should go to jail for this (but probably won't even have to repay the money, let alone repay with interest, let alone get in trouble).
Reminds me of water conservation focusing on personal use versus industrial agriculture in the middle of literal deserts. Or the output of a Toyota Camry versus a container ship.
Same reason we're told to stop eating beef and take public transport to fight climate change, and almost nothing about reducing population or taxing and punishing fossil fuel cartels and profiteers.
Yeah. We got stimulus checks we didn't need. I think that was the right thing to do, though--they would have come out a lot later if they had to go through and try to figure out who needs them. Especially since both of us are self-employed, the IRS simply gets the quarterly estimated payments and nothing about what we are actually making until we file the tax return.
PPP was a fraudster's paradise, though. The idea was good, the implementation was not so good.
> College students who weren't planning to have any income anyway before Covid hit. And that's at least still a relatively "legitimate" payout compared to the screw-ups like sending money to prisoners [0].
Where exactly do you see a problem with that? To put it differently, do you feel it's better to arbitrarily discriminate against elements of your society with a program intended to actually help everyone everywhere?
More importantly, what leads you to believe that the goal of the COVID stimulus was to help individuals instead of society as a whole? Think about it for a second. In a moment in time where circumstances were leading to an unprecedented economic crunch, wouldn't a bottom-up consumer side stimulus help economy stay afloat?
Because college students yolo-ing on Gamestop options isn't especially productive for society.
But, as I said, my bigger issue is the massive PPP fraud. And my issue with massive fraud on the scale of hundreds of billions of dollars is that the US is already deeply in debt.
And my issue with the nation being deeply in debt is that future generations will have to pay for the profligate spending of this one, which I find immoral.
Examples I witnessed are friends who never lost their job got like an extra $8k (couple working with two kids). So they bought stuff with it.
I have multiple friends in tech who switched to remote and literally used the extra stimulus cash to trade with Robinhood and crypto.
I doubt this is representative. But people making $100k who ended up saving money from no longer needing to commute did not need thousands of dollars in stimulus. Of course, it was neat getting the money, but it resulted in a lot of extra cash.
Comically, I also have friends who just paid down debt and didn’t buy anything.
But my anecdotes are lucky in that I didn’t know anyone who lost their job or got seriously ill.
I feel it’s worth pointing out that saving people from financial ruin was only part of the intent of the PPP legislation. The main point of a “stimulus” is to stimulate the economy. If your friend received money and then spent it on something, the legislation essentially worked as intended.
It was not sold as a stimulus, it was to allow businesss to pay furloughed employees (in a bizarre ill-thought-out privately-run unemployment insurance scheme) to continue to pay ongoing expenses.
What didn't make sense, of course, is what those people were supposed to be buying, since the reason they were furloughed was because.... people weren't buying things, because of lockdowns and such. Hence, inflation when aggregate $ exceeded stuff worth buying.
> It was not sold as a stimulus, it was to allow businesss to pay furloughed employees (in a bizarre ill-thought-out privately-run unemployment insurance scheme) to continue to pay ongoing expenses.
Can you clarify what's your rationale for believing that a program designed to "allow businesss to pay furloughed employees (...) to continue to pay ongoing expenses" does not correspond to an economic stimulus program?
It was not to pay furloughed employees, it was to avoid having to furlough or lay off more employees than they did anyway. Furloughed employees did not get paid, but retaining a certain percentage of pre-pandemic headcount was a requirement for the loan to eventually be forgiven.
Source: I was furloughed April 2020 while my employer at the time received over $2m in PPP. Furloughed employees were explicitly told to collect UI.
If they spent the extra money on secondary-market financial investment (like stocks or crypto), propping up asset prices, then that seems like it goes against the stimulus that the program wanted, which was to keep steady sales for otherwise reliable businesses.
Inflation is hitting most countries aggressively now. The US may actually be on the conservative end of inflation which may have been buffered using government subsidies/influence, but the net takeaway is the rapid expansion in the world can't be explained by simply looking at the US's free-money-keep-buying scheme.
The graph shows until this Feb. JPY has been plunged about 13% recently, and even without it import energy/food/everything price is increasing for obvious reason. Let's see whether salary catch up (I doubt).
Maybe. but like crypto scams where everyone keeps stealing from each other and paying yeild farmers to get leverage, it's really hard to see what the net net of all the money flying around is.
> Examples I witnessed are friends who never lost their job got like an extra $8k (couple working with two kids). So they bought stuff with it.
And what's wrong with that? Aren't we talking about an economic stimulus program? What do you think is the whole point of an economic stimulus program, other than stimulating the economy?
The economy was tanking, how long would it have taken to filter the deserving people? How many thousands of people would have fallen through the cracks? How much money would have gone to laid off white collar people while 'essential workers' still had to go into work and earn minimum wage in the middle of a pandemic? This is politics, can you imagine the outrage if such an already polarizing figure decided to pick and choose who got the funds and who deserved more? I am very much not a fan of the Trump administration but in this situation I think they played a bad hand pretty well.
First, I’m not a professional economic policy person so I assume they will have much better ideas.
But we could have put rules in place that were enforced retroactively. Something like “you get $600 if you lost your job. Everyone who asks gets it. But when you file your taxes if you didn’t lose your job and you took the money, you have to pay it back.” Stuff like that.
I worked for a consulting company that had a pretty smart expense approval process. They approved everything and audited you severely when you went up for partner. It wasn’t perfect, but it was pretty close as people were really nervous and conservative even though they wouldn’t be audited until years later.
There was also a lot of stuff where unemployment paid more than working so there were perverse incentives to not work and make more money. I had a family member who normally made about$2k/month. He got $600/week in unemployment so took a long time to go back while making an extra $500 per month. Stupidly, he bought a car with the extra money (but he’s been able to keep making the payments).
Just having some cap that paid 80% of your salary in unemployment would have been super simple to implement.
Or some programs ran for over a year. So the emergency stuff could have phased out after 3 months or 6 months.
There’s lots of ways they could have designed interventions much better.
> There was also a lot of stuff where unemployment paid more than working so there were perverse incentives to not work and make more money. I had a family member who normally made about$2k/month. He got $600/week in unemployment so took a long time to go back while making an extra $500 per month. Stupidly, he bought a car with the extra money (but he’s been able to keep making the payments).
On an instinctive level I prefer hearing a story like this to the kind of story that would have been more common/worse without the very broad aid that was given, but perhaps this sort of event is quite damaging as well. I'm not sure it's possible, but it would be interesting to see attempts at quantifying the difference.
> Just having some cap that paid 80% of your salary in unemployment would have been super simple to implement.
There is nothing super simple about government unemployment insurance programs, especially in recent years. What about Uber drivers, per diem nurses, people whose employer was dependent on events in Wuhan so their pay was cut?
Even if there are easy answers to these questions, UI is administered by the states so there are going to be more than 50 versions of each answer.
> It wasn’t perfect, but it was pretty close as people were really nervous and conservative
How is that close to perfect? I assure you that some people who would need and actually deserve that payout wouldn't apply for it just out of the irrational fear that it will cause them problems later.
COVID relief was not an economic stimulus program. It was intended specifically to ease economic pain and displacement, not to stimulate an economy experiencing slack demand.
"Could you please elaborate? I think the way the US did it's COVID stimulus was outstanding and very close to the ideal way to actually address people's potential needs."
Many of the people who got the stimulus checks didn't need them. Same with the advanced child tax credits (increases spending when it looks like you have more money). This was true for myself and many coworkers. There were others who needed it. It was far from perfect though.
"What's exactly the problem? Aren't people free to spend their own money any way they feel like it?"
Yes they are free to do that. It causes problems when there's a disconnect between value and price. Many of the activities were trading or gambling, which are not beneficial. That gambling affects prices and the market, thus affecting others.
Think about what happens when's there's a rush on a bank. A bunch of people acting stupidly in large numbers can create a negative environment for everyone else.
> Think about what happens when's there's a rush on a bank. A bunch of people acting stupidly in large numbers can create a negative environment for everyone else.
that's not people acting stupidly - a bank run happens when trust in the banking system drops to below a critical threshold. This trust might be eroded by some external event, and mishandling by the governing authority etc.
it is rational then, as an individual who cannot change the authority's handling, to take action to protect one's own interest.
> Yes they are free to do that. It causes problems when there's a disconnect between value and price. Many of the activities were trading or gambling, which are not beneficial.
they are beneficial from the point of view of the person doing it.
It isn't the activity that causes the problem - it's that those activity is funded by taxpayer money, not their own!
Something can be rational and unreasonable at the same time. It seems you answered your own question from your previous comment - it creates a problem for others based on them acting on their own self interest.
"they are beneficial from the point of view of the person doing it."
Just because it's beneficial for one person doesn't mean it can't be a problem for others.
"It isn't the activity that causes the problem - it's that those activity is funded by taxpayer money, not their own!"
Even if it were their own money, it would still cause problems. Although it's questionable if they would have participated in that behavior without the extra money.
Platforms like Robin Hood make money off delaying the transaction slightly and microtrading in advance of it, as well as compiling a 'bigger picture'.
The "geniuses" in GME, Stonks, WSB, etc telegraph to the entire world what they're going to do via their subreddit, then give the trading house even more data showing how many people follow through on particular "talk", allowing the trading house to accurately predict what sort of activity a post will generate.
They think they're incredibly smart when really all they did was fuel the world's largest pump-and-dump scam. /r/GME was deeply depressing during some of the crashes, with people sharing poverty-food recipes not just to help people get by who had lost more than their disposable income, but to help people buy even more stock.
> It seems to me that worst case scenario the people spending their money on stocks are only gambling their own money, and best case scenario they profit from their own investment.
A lot of people got swept up in the hype and got left holding the bag after the initial set of meme investors made their money and got out.
> Could you please elaborate? I think the way the US did it's COVID stimulus was outstanding and very close to the ideal way to actually address people's potential needs.
The way the US tax system works meant that non-residents got the cheque as well (because they have to file taxes). Non-residents are usually able to reduce their tax liability to zero, so a US citizen earning over 200k but not living in the US would get a cheque mailed to them.
Anecdotal but all my friends who work retail ended up making more on stimulus/unemployment than they did working. That is already strange but when you add in that people on unemployment were making far more than the "essential" retail workers and it became kind of perverse.
> "are we now held accountable by a righteous capitalism police"
I would argue that yes, if you are getting free money from the government to help sustain you during trying times it is reasonable to say it shouldn't be used for gambling. I don't think we are impinging on anyones freedom to say they can't spend their food stamps at a casino.
I generally favour the way covid stimulus went but I suppose the argument would be that if it's going to people who are using it to buy GME maybe they didn't actually need it.
Whether it _should_ only have gone to those who needed it, or just to everyone, is another question.
> What's exactly the problem? Aren't people free to spend their own money any way they feel like it? Or are we now held accountable by a righteous capitalism police to determine if an expense we make is kosher?
Yes, they are free to spend their own money that way…evidenced by the fact that they weren’t prevented from spending their money that way. Other people are also free to call their choices stupid.
There's nothing outstanding about repeatedly handing out thousands of dollars to every taxpayer and increasing unemployment because all the gig economy workers were upset that there was no more gig economy for a few weeks. Just like every time our government bails out organisations like GM, none of that money did any lasting good for the economy and simply served to increase the entitlement rampant among US citizens. Imagine a place where people who deliver disgustingly unhealthy takeout to a population where the majority of morbidity and mortality is directly related to chronically poor lifestyle choices are called "essential." Thanks to all that "stimulus," there is no small number of people who hardly worked the entirety of 2020, if at all.
"I know you took this job because there wasn't really an interview, you don't have a real boss, you work whenever you feel like it, you don't have to do anything you don't already do every day and it's just so hard to find a job in the Great Resignation, but now you want to cry foul because there's no job security due to people not having enough money to stuff their faces full of shit for a few weeks, so here's some extra cash. 'Murika!" "Oh! It wasn't enough that we paused student loans for all of 2020 and 2021, so we're going to keep extending that, even knowing many of you will just bedmaking minimum payments until the remaining balance falls off (I know doctors making six figures who have been doing this since before the most recent pandemic)."
Full disclosure: I was unemployed for about half of 2020, didn't ever take unemployment and survived on my VA disability while actively pursuing employment. I have also currently paid 80% of my student loans after graduating in 2016. We should be teaching the next generation how to survive in this increasingly dysfunctional world, not letting them believe that some person/organisation will always be there to bail us out after every stupid decision. Apparently, you haven't noticed, but the US brand of capitalism and the stupid idea that we'll just keep throwing money at every problem is literally destroying the planet.
You can't shield kids from the effects of the economy and the world. Even given the best of luck and hard work ethic they could fall sick, into debt, and financially crippled.
I think you have the relationship inversely related. The stimulus was -because- people were not working, which was because there was a global pandemic that was also incredibly mishandled by the gov
And in the end it was redistribution from the lower to the upper class. The last two years were the biggest wealth transfer in history. And "wealth" is so much more than just money... we absolutely screwed our kids in a way that will impact them for quite some time.
This is what every major crash in the US economy is. Poor people lose assets and rich people can coast long enough to buy them up cheap. Not a surprise that we are headed towards continuously record-breaking levels on income inequality
- The Fed juicing the market (and not stopping when it should have, dismissing inflation concerns as transitory, etc.)
This in my mind is the key reason we as a society did not solve the pandemic quickly. If the investor class felt the same pain everyone else did, they'd be throwing their resources towards moving forward rather than re-locating to Palm Beach and complaining about the Northeast.
Can you elaborate? I'm failing to understand the connection between the Fed Juicing the market and investors moving to Palm Beach dnd complaining about the Northeast? Was there a mass exodus? Would that not also be moving forward though? Or am I missing something?
> This in my mind is the key reason we as a society did not solve the pandemic quickly.
Ignoring a lot of the specifics you make a good point. There was a lot of good effort thrown after bad mistakes, financially, medically and unfortunately sacrificing civil liberties.
This gamblers fallacy of 2020-2021 is starting to wear off and the hangover is setting in. 2023 is going to hurt :(
As long as you realise and acknowledge that your student loans where paid out not at the cost of growth of the company whose stock you meme-d or some hedge fund (who remained solvent long enough to ride this meme-wave), but at the cost of other retail investors who bought into the hype a few days/weeks/months after you only to lose their investments, many congratulations to you!
If they had got into NFTs early, they would have an investment that's up 100x or so. Why does that sound to you like they're wishing they were born "retarded"?
Anyone who unironically invested in an NFT project solo was a mark. NFTs are a simple scam: To plan this game you loan crypto to your friends, you all "buy" the same NFT from each other multiple times so that the price appears to go up astronomically, then you wait for a sucker to buy it from you or any one of your friends. When that happens you all laugh, split the money, and start the grift again with the next NFT. Nobody risked their money, and if you don't get a bite at the "top" price everyone just returns the money back to the original friend and nobody gets hurt.
You just keep the NFT that is still "worth" whatever you last paid for it, but it's basically free to you. So what do you do? Loan it to a celebrity and announce it as if it's a sale! This generates news articles about celebrity adoption, they get your bored ape that you couldn't sell, and suddenly a new wave of suckers floods into the market.
The fact that it's so simple to do this and scam people makes NFTs a great scam vehicle. Add in the fact that crypto tends to attract true believers (aka fantastic marks) and you elevate the grift from great to all-time.
If anyone from a VC fund is reading this, yes this is actually what's happening with your Web3/crypto investments lmao.
I might nitpick you on the tone and exaggerations, but on the substance of your post I mostly agree with you. However, none of this answers the very simple question I asked GP: ""Why does that sound to you like they're wishing they were born "retarded"?"" Now I know you are not GP, so you can't answer on their behalf, but I'm just pointing out that you wrote a very long answer to a question and your answer didn't even try to relate to the question that was asked.
I could buy a starter pack of pokemon cards for something like $20 USD. It's a game, I can find a friend and play it. I can play almost any normal video game for $10 to $60 USD.
To play Axies, you need to buy around $900 worth of "starter axie" NFTs.
People are buying ugly pictures of apes for prices like $11,000 USD.
NFTs produce artificial hierarchy and scarcity over functionally useless, objectively worthless, and materially non-existing assets. It is the claws of a dystopia reaching in to take away the free and open internet we've all learned to love.
Ponzi schemes and scams are so ubiquitous in the crypto space (presumably mostly NFTs) that they coined a new term "rugpull" for talking about it.
NFTs featuring unauthorized art is so common that Deviant art implemented a feature to help artists get notified when someone tries to mint and sell your art.
Did you read the parent post you just replied to? I guess not. It's ok, I'll copypaste it for you:
> I'm just pointing out that you wrote a very long answer to a question and your answer didn't even try to relate to the question that was asked.
This is the post that you're replying to. I find it ironic that you replied to this post with a run-of-the-mill crypto-is-bad rant that still doesn't answer the question that was asked.
> Because the whole premise is completely idiotic, it's just designed to scam people into spending money on nothing.
Ok, so this friend of yours wishes that they would have made 100x return on what you describe as a scam. You describe this as "wishing they were born retarded". How does that make sense to you? If you want to criticize the morality of making money of the backs of others in a scheme that resembles a Ponzi, do that. What you described was something else entirely.
Dunno about Pokemon, but Magic cards may hold their value. There's a very limited number of sought after, rare items (Power 9, sealed boxes of early sets etc.) and millions of people who really enjoy the game. Some of them are bound to be wealthy and crazy collectors, who create demand beyond just pure speculation.
My understanding of the GameStop situation is that the stock's value had already diverged from the underlying value of the company, and the meme stock crowd noticed that and took advantage of it. Specifically, they saw that there were more short positions than total shares of existing stock, so they bought shares, thus causing a short squeeze. (This is possible because there's a power imbalance between the people who short a stock and the people who are long.)
The meme stock crowd didn't create the value/price imbalance (it was created by the short sellers), they just saw that it was already off and took advantage of the situation, so then the value imbalance swung the other way. And in the end GameStop as a company survived and are now doing pretty well as far as I'm aware. GME is trading at about $100 a share, which is a lot better than about $4 a share a couple years ago. Maybe that's an artificially inflated price, but who cares? As far as I can tell that's just the normal market consequence of too many people shorting a stock and someone calling their bluff.
> Despite all of that, people who bought and held a total market or S&P 500 index fund in 2020 have still made gains.
The market can stay irrational longer than you can stay solvent. Two years is a fairly short time to estimate market performance and corrections. We very well may be telling a different story in 15 years.
> Meme stock investors intentionally manipulating stock prices to cause them to diverge from the underlying value of the company
I get what you’re saying but this point kind of implies that there was information symmetry, or even near-symmetry, between the market of investors and the underlying value of the company.
A few big players and the professionals maybe have their finger on this pulse. But they are still subject to many biases that amateurs are.
COVID stimulus certainly did go to people and businesses that didn't need it. Or didn't need as much of it as they got.
However, PPP didn't adequately cover some of the businesses that needed it the most.
Consider somebody who is bootstrapping a small business because they were packaged-out of their corporate job a year or two before the pandemic began. They couldn't afford to draw anything close to what they need to live on in the year prior to the pandemic. So the PPP payment formula didn't approximate their true needs.
People in that situation had no choice but to try for EIDL. But EIDL required income reported on a Schedule C or an 1120 / 1120S, and if you didn't have that because you were still finding the customers that could sustain the business, then in all likelihood your business either died an early death or came out of the deepest part of the crisis in much worse shape than when it began.
The fed should have stopped juicing the market as soon as the current boom seemingly began. We have no concept of loose monetary policy in bad times and tight in good times, just loose all the time now.
It’s weird you didn’t mention the number one reason for all that. Millions of people with decent incomes and nothing to spend it on due to Covid, bored out of their minds and looking for something to do. Unfortunately for them they did something really stupid. At least nobody got hurt.
This is weird, I remember seeing discussion on along these lines that wasn't ever flagged. It sounds like you're speaking from experience, do you have an example of something you posted maybe?
I don’t think getting downvoted for spamming inflammatory political opinions on HN is the damning evidence of censorship conspiracy you think it is. Do you have examples of this? Did this happen anywhere besides HN?
You may want to question your own objectivity on this subject.
There were definitely some missteps but given that these problems are global I don't think you can really pin it too tightly on any US policy. The main drivers by far are the pandemic and the war in Ukraine. Both black swan events.
Don't hold your breath. You're 600 points away from 2020 pre-pandemic levels and the way everything is looking right now, you would be lucky if it doesn't bottom out lower.
>- Meme stock investors intentionally manipulating stock prices to cause them to diverge from the underlying value of the company
That's the hang up. The USA is the only country in the world which lets the market naked short sell. It's not that the meme investors manipulated the system, it's the short sellers that manipulated it. All these funds figured gamestop was headed to the pinksheets during covid; a reasonable bet but too many fund managers got the same idea. They short sold more stock than exists. That's fraud, I wish I could sell nothing for money.
Other people noticed the disparity and simply started buying. Eventually these funds are basically forced to come to you to buy outside the market. They in person have to approach you unsolicited and offer to buy your stocks. It's going to be a blank cheque... but the SEC never punished them. These funds owe equivalently infinite money but aren't forced to pay.
They just let them be criminal. Wells fargo obviously saw where they were, basically infinite money in the negative so they bowed out in 2021. There are a bunch of others who are in the same position.
>Despite all of that, people who bought and held a total market or S&P 500 index fund in 2020 have still made gains.
I have a small position in S&P500 bought in late 2019 or so doing just fine. Im letting it ride, I expect it to drop another 50% or more.
However, something you missed in your list that nobody is talking about. Nobody owns S&P500. If you look at FTSE, TSX, various other indexes for other countries. They are healthy. Rich folks own their percentages of them all. Excluding obviously amazon or tesla which have their billionaires protecting.
AOS is a good example.
0.72% % of Shares Held by All Insider
98.87% % of Float Held by Institutions
If you check the S&P500, the supermajority of stocks are like this. Basically insiders dont want to touch the stock with a 10foot pole.
Basically the only people who own these stocks are suckers such as myself.
Mind you, every other country in the world is healthy right now. This is USA only.
There's no explanation. There's no 'I'm selling these stocks because of..."
So we have a broken stock market in the USA because some memers discovered the fraud.
We have some seriously bad economic health behind it as well as pretty major crash already happening.
Lets not forget the imminent civil war situation. Star Trek Strange New World literally said 2nd US civil war.
My recommendation? Dont be dealing with the USA stock markets at all; or accept the punishment. Ignore the meme stocks, ignore everything. Only buy stocks you see are of good value.
- Forcibly shuttering the world economy over a bad cold while yammering on about a v-shaped recovering that increasingly looks like just as much nonsense as everything else from the last two years.
AFAICT the article presents no evidence that it's the Day Trader Army taking the hit right now.
It could be the Army sold to more serious and/or institutional investors near the top who were chasing returns of their own.
What's been happening for some time is a desperate search for investment returns of any kind. When treasury yields dried up in 2020-1, money piled into stocks, fueled by government transfers such as the PPP giveaway and stimmie checks.
Those programs are long gone, as is a lot (most?) of the money.
At some point, long term yields will stop rising, and the juicy capital gains to be had as the inevitable return to earth commences will beckon to those who have been burned by stocks to try treasuries, fueling sector rotation and more stock declines.
Along the way the occasional explosive stock rally will captivate everyone's attention - for a while. By the time the dust settles, nobody will care about stocks and you'll get blank stares when you say that's what you just invested in.
I’m not in the day trader army, but I do swing trade, and have done alright on the way down— shorting / buying puts. As far as I can see, there’s no reason to think someone who did well last year trading meme stocks hasn’t made money this year shorting them.
At this point, we’re oversold, and I’m mostly in cash waiting for setups to show up again.
I did pretty well last year while being mostly in cash. I probably averaged 80% cash last year, and still ended with a 30% return or so. The thing I like about swing trading is that you take profits and sit in cash while waiting for setups. You also have limited downside, as you have clear stops that trigger if the setup fails.
That said, there are many ways to trade, and some folks are more aggressive than others. I'm very conservative.
I'm still not sure if I even believe in swing trading or technical analysis. I've been a Boglehead most of my adult life, and only recently decided to dabble with swing trading, just to learn / see if there was anything to it.
So far this year, I'm flat, but I've also been less active due to a few life situations.
I'd like to do a statistical analysis once I've been at it long enough.
Also most of the posts on wallstreetbets have a (non)survivorship bias. I know plenty of retail traders who have 200%+ returns in last 6 months but dont post about it.
There is still 1.8T sitting in banks (based on reverse repo rate) with absolutely no purpose. It will be interesting to see what happens to this money.
1.8T with a population of 329.5m is about $5,462 per person in the US. Even if you halve the number of people, ~$11k per person seems like a low number - I’m probably not understanding the numbers correctly?
You do need some cash for a rainy day, emergency expenses, unexpected travel etc.
Yes, you ought to be able to afford to cover small emergencies. But unfortunately it seems that many Americans cannot. For instance, "Survey finds more than half of Americans can’t afford a $1,000 emergency", https://thehill.com/changing-america/respect/poverty/590453-...
VTI is down 13.5% in the last three months, didn't non-meme/non-day traders also lose a lot of their gains for the previous 12-months? This seems like bait for those who were predisposed to believe this anyway.
Netflix wasn't even a "meme stock". Some companies will do worse (and some better) than others at any given point in time, that much is obvious. There's definitely a correction afoot, but twisting the narrative into "see you shouldn't follow the online hype, instead invest into wherever we tell you – Bloomberg" is pretty deceiving.
Netflix has a fundamental problem with its business burning money to make mediocre content because it can't license much of the top tier any more. It has no moat and its tech is no longer special.
Didn't you just describe most silicon valley VC funded startups ? I feel like you can replace Netflix with a lot of other companies, throw in their well known weakness and it would still make sense.
Look at the chart in the article. It seem to have defined the "meme stock era" as starting in jan 2020, and compared the performance of "estimated retail trading" against "S&P 500 total return". During that timespan the former lost all gains, but the latter is still up around 20%.
The geniuses are the ones that regularly take gains when stocks are green for so long, and regularly buy on deep "blood in the streets" reds.
If you can successfully flip the colors, long green is sell, red is a sale, then you can beat the market in the only way small investors can. It is very difficult to do, because of that FOMO.
Some of the better stocks like Apple, Google, Amazon will be splitting in summer, that is a nice regular bump. Prices on some of these will never be this low again. Good time to start dipping buys into index funds (VOO, VTI, VOOG, VOE) etc if you can.
Long green > 1 year so it is long is when stocks have been green for a while or above where your exit / price point was set. I guess people here really dislike the idea of selling and profit taking gains regularly. [1] In no way am I saying don't buy regularly, just also sell regularly so you can get into buying opportunities.
Dollar cost averaging works best if you aren't selling off every downturn and every so often banking some profits. If the only time you are selling is in downturns then that is a problem, selling should be as regular as buying.
A bit surprised this is so controversial. Taking gains regularly, even if you leave some gains on the table is better than only selling in downturns which is what happens in massive pullbacks. The massive pullback reds are when you should have some on the sideline to invest.
The base is sell high buy low, easier said than always done but if you have a regular sell strategy then you can bank some of those higher points just like DCA gets you into some of the lower points.
This doesn't mean you shouldn't dollar cost average or buy the dip, it means you have some cash to invest when there are pullbacks to get in lower. This allows you to continue doing other price target strategies and dollar cost averaging etc. You want some money in cash to be able to get into buying opportunities, like right now there is massive sale due to selling.
Basically have a regular buy strategy and a regular sell strategy.
Let's not pretend institutional investors are doing much better. Look at ARKK or any of the VC funds that are heavily invested in startups having down rounds. And putting your 401k into "safe" investments during that period wouldn't have yielded much better results.
ARKK is the embodiment of the day trader army LMAO. People who think Tesla will generate 500B a year of robotaxi revenue by 2025 aren't exactly conservative institutional investors...
Up until 2021, the TSLA to ARKK correlation of coefficient was 0.9923! [0] I have always seen ARKK being mentioned with TSLA. Aside from it being mentioned in crappy posts that were trying to pump and dump shitty stocks. It is a freaking ETF they have other investments. But it is not your traditional ETF because it is volatile af.
They have bought into hype stocks into bad prices [1]. Roku, ZM, TDOC, CRISPR, SPOT, SHOP, DKNG, RBLX. All of these hype stocks. Very little reasoning behind valuation but they paid for it. ARKK is a terrible terrible metric for anything.
> if you were looking at DOW or S&500 for past couple days it’s nothing but losses
So? The article is about the past 2 years, not the past 2 days.
You could pick any short time period in the past few years that would make meme investors look good compared to the total market. But if you zoom out to a two year period, it's clear the meme investors underperformed.
> But if you zoom out to a two year period, it's clear the meme investors underperformed.
TSLA is still up from 2 years ago by ~380% (May 8th 2020 - May 9th 2022). I know that exceptions tend to prove the rule, but here is at least one just off the top of my head.
Oh, totally agreed. Sorry, i guess i misunderstood what being a meme stock meant. I assumed it was being really volatile on a semi-regular basis and being very hyped on WSB, all while being prominently hated and loved by all sides at the sime and featured heavily in the media.
If we are talking pure meme stocks without much substance (but much of cultism), GME definitely takes the cake, TSLA is indeed not even close.
I'm subscribed to /r/wallstreetbets for the comedy, and the peak activity was definitely when people were throwing in money at the $250-$300 level trying to will it to $420.
> bought at $390 I'm fairly sure. I don't regret a thing.
Which is the point. Gambling isn’t bad per se. People enjoy it. But the system should reallocate from those buying AMC at 390 to those who aren’t.(Full disclosure: I got talked into buying some Wish. So you’re in company, albeit a regrettable one.
AMC is up 3x if you bought it before the meme frenzy (Dec 20) — and 20% from where I bought it during the meme frenzy (Apr 21).
S&P500 is up 25% if you bought it before the meme frenzy and 33% if you bought in April, like I did.
People who spotted it early are still well ahead of S&P500 — and honestly, I wouldn’t be mad at 20% vs 33% returns… because that meme frenzy saved AMC.
Of course, I sold when it was 5-6x what I paid… so that’s far and away my best performing stock of 2021.
I hope it’s finally over. For a while the market was driven by factors that I can’t analyze or understand using my traditional financial frameworks. It’s now back to a point where my tools work again. It’s like all my instruments just read “Tilt” for the last three years. Now I get readings!
Holding onto losing stocks gets worse after every 5% drop, you will think every time:bounce. By the 3-4th drop you’d be down like 40%. By this time you’d think it’s down 40% it will bounce which it does 10% but then the 5% drops are back and the cycle continues till what’s called capitulation.
What? Day traders are the only ones making any money right now. Everyone else is losing money, literally every major index in the world is in freefall. Why do people think day traders can't short?
Not really. Quite a few don't. It's much harder, on average, to make consistent returns trading actively than investing passively in the market as a whole though.
How about Tiger Global [1] the elite of the elite of hedge funds, smartest of the smartest and most sophisticated quant strategies lossing 50 pct. of capital in weeks? Or Bill Ackman [2] buying Netflix blind, without a moment of analysis and selling in panic loosing 400 mln $ over threee months.
Day traders, even of small, retail kind, could have wild drawdowns but they are usualy OK in longer horizon.
The times are getting interesting and we will see a lot of "smart", "long term" money managers humbled by the market.
I postulate that it's practically equivalent to determine whether someone succeeds through luck or skill, and actually succeeding through skill. And also that succeeding through skill is possible.
I think he was arguing against "chartists", people who try to read a random walk like they could tea leaves. But IMO most day traders are essentially doing that and aren't going to beat beta returns from the market unless they get lucky.
> We've detected unusual activity from your computer network
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i'm assuming it could either be because they are blocking browsers with anti-fingerprinting or because they are blocking all international connections (I'm in Australia), if it's the latter, I wonder how long it will take before they realise they are losing readers LOL. (If it's the former, good riddance)
If it's going to be anything like the last two recessions it's going to cash and (if it dips) real estate, and soon after that it'll be back on the tech stocks that survive. There's really not that much alternatives barring a huge shift in the economy as to where you want to park your wealth if you don't want to trust how much dollars the Fed will print.
Yes this is exactly the point. In march, energy prices shot to demand destroying levels and at that point even if the prices would continue to increase near term, it was obvious that consumers (ie industry, production) will start scaling back as their profit margins are eaten by energy costs.
Tricky to say unfortunately as there's no single asset class that is looking rosy. If I were to say a very coarse average is that sophisticated institutional investors have de-leveraged their portfolios across all assets and are likely to be trading only higher frequency (that is intraday, but not necessarily microsecond) risk and few people hold anything long term.
Furthermore, I believe it helps to think of instruments in two terms: linear and convex. Linear instruments are like vanilla equities, index futures, bonds etc. Convex are various options, variance swaps etc. E.g. you may be still hanging on to some bets on energy going up by holding the futures, but you'd have bought some deep out of the money puts in April with the expectation that the current energy prices are what is termed "demand destroying". E.g. near term prices can further rise indefinitely on supply shock problems, but at some point the actual consumption will be destroyed and this can cause prices to crash down even if supply doesn't return. So you'd end up with a complex portfolio that has both linear and convex sensitivities and is difficult to characterize simply as "long energy, short equities" or similar.
Currently, there's a fair bit of convex exposure. This results in second and third order effects and feedback loops: if people hold too much convex exposure, then significant moves in the underlying price will trigger exponential moves in the convex instrument prices, which require people to do exponentially larger rebalances in the underlying - as counterparties need to hedge.
All these things currently combine into very unstable market conditions. What is different from the market instabilities between 2008 and 2020 is that now there are no policy tools to buttress this. Central banks have but two options: do nothing, or tighten conditions.
Most of the outlook is thus a mixture between recession or stagflation. My personal view is that things will eventually recover. That's what always happens. From a sufficiently long term perspective, the 1920s recession is just a blip. For my personal retirement savings, I'm just continuing with buying regular smaller amounts of equities across the globe. In this sense, I'm bullish on humankind (we'll prevail).
So many animations, huge blocking ads, and scrolling videos. The reading experience on the Bloomberg.com site was so poor that I lost my retirement savings.
Only if you are looking at it on a very short timespan. Those of us that have been VTSAX and chill for the past decade+ are still up plenty. Markets go up, markets go down too. That is why retail investors should buy broad based, low fee, index funds and not try to beat the market.
There were certainly some serious winners over the past few years, but only if you got out and my guess is that most of those folks in meme stocks can't give up the ghost and over estimate their abilities.
> There were certainly some serious winners over the past few years, but only if you got out and my guess is that most of those folks in meme stocks can't give up the ghost and over estimate their abilities.
You might be reading WallStreetBets too seriously and underestimating the financial literacy of people on there.
At the very least, most of the people still there know what IV Crush is.
I think the idea is that the behavior of the subjects of the article will almost never lead to ten years of accumulating wealth. It will more than likely lead to losses after a term of one to three years.
Didn't say it was groundbreaking, just said it's better to be slow and steady than focus on one year's worth of gains/losses. Short term wins is how gamblers think, long term gains is how investors think.
This is like having that fish at a poker table that goes on a big run(or gambler in a casino), but you're never worried about it, because the fish always gives it back.
Sometimes they do, but they come back the next day or the next day.
Greed and addiction are very powerful forces, and even people who recognize the faults in their actions or identify the time where enough is enough have a hard time leaving the game for good.
Picking a successful stock at past point you didn't buy in at is a hell of a sampling bias. The peak of /r/wallstreetbets activity was people throwing in money at the $250-$300 level trying to will it to $420, and it's now below $100. If you were smart and bought before the peak hype... how many other equally promising-looking stocks did you also buy into, before a hype that never arrived?
This article definitely isn't bias-free either but at least it's not picking stocks based on performance.
GME is in a league of its own, now having a cult-like following around the prospect of a "Mother of all short squeezes" (MOASS) at some indeterminate point in the future.
(I'm avoiding using excessively loaded terminology like "QAnon of finance" but I really can't think of a fairer way to describe it than a cult at this point.)
Hilarious how the MSM are blaming day traders when in fact what is really happening is an unparalleled liquidation of overleveraged funds like Melvin capital and co. Every single thing that the folks on r/superstonk, and r/wallstreetbets have mapped out months if not a year ago are now coming to fruition, even the blaming of retail for the collapse of an overbought and artificially stimulated market.
It’s like the last three years all my instruments said “tilt” and none of my traditional financial analysis tools were worth a damn. Now I am getting readings and things are working again. Hope it stays this way. I expect we may overshoot on the downside but that’s typical.
I'm not touching my portfolio. I might rebalance it at some point. 50% global index funds, 16% emerging markets/global small cap/nordics. The whole point of passive investing is you make a philosophical decision not to get spooked when people get spooked.
On the side of this, I also have a couple of single-company bets I made many years ago and won't adjust further.
I expect to be underwater for a couple of years, anything better than that would be a pleasant surprise.
I... am not sure, but having seen similar movies before, I think given that we have an election year, any real pain that needs to happen will not happen prior to elections despite Powell's posturing.
It is mildly annoying that this heuristic works so well..
The original link works (for me), it just directs me through a captcha first. That's not a broken link by the usual meaning of the phrase, it doesn't mean people weren't reading the post...
The former. I for one happily upvote a submission before reading it, to keep it on the front page which is so fragilely ephemeral for new submissions, so I can read the article and then come back to (hopefully) some good comments from others in the thread.
You are lucky, I kept having the same message asking me to prove that I wasn't a robot and couldn't access to the article at all (same reason as you, they "detected unusual activity from your computer network").
