Day trader army loses all the money it made in meme-stock era

https://www.bloomberg.com/news/articles/2022-05-08/day-trader-army-loses-all-the-money-it-made-in-meme-stock-era

by lalaland1125 • 4 years ago

308 340 4 years ago

bloomberg.com

lalaland11254• 4 years ago

Archive link: https://archive.ph/7WJws

ttyp3• 4 years ago

I think we've heard this story before.

VWWHFSfQ• 4 years ago

Meme stocks or not, for the most part don't day traders always lose money? I read Malkiel's book and that seemed to be the point anyway.

alfalfasprout• 4 years ago

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.

FabHK• 4 years ago

So how do you identify whether it is luck or not?

Quite a few people win in the casino.

TameAntelope5• 4 years ago

The vast majority do. Day trading is gambling, period. Obviously some people luck out, but there is no way to repeat that success.

jmcgough• 4 years ago

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.

1270018080• 4 years ago

Technical analysis is neither technical or analysis

malshe• 4 years ago

Finance research shows that individual investors who engage in trading lose badly:

Here are a few articles:

"Trading Is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors"

https://static1.squarespace.com/static/56282f2ae4b06b50e93ef...

"The Dynamics of Institutional and Individual Trading"

https://www.jeffreyhharris.com/downloads/papers/JeffreyHHarr...

"Just How Much Do Individual Investors Lose by Trading?"

https://johanhombert.github.io/papers/Barber_et_al_RFS2009.p...

"Attention Induced Trading and Returns: Evidence from Robinhood Users" (Forthcoming in the Journal of Finance)

https://papers.ssrn.com/sol3/Papers.cfm?abstract_id=3715077

thrwyoilarticle5• 4 years ago

I don't think the article is using a common definition, at least not in line with Pattern Day Trader rules.

givemeethekeys• 4 years ago

Not all. Not yet.

tester756• 4 years ago

We've detected unusual activity from your computer network

To continue, please click the box below to let us know you're not a robot.

lol.

and it doesn't even work, I'm in infinite loop

soneca• 4 years ago

Tried to pass three times and couldn’t. It just reset to the initial state

wsinks• 4 years ago

Same, just validating you. I even recorded it with quicktime.

arthurcolle• 4 years ago

https://news.ycombinator.com/item?id=31319924

jonny_eh2• 4 years ago

It's a bad link, the correct one: https://www.bloomberg.com/news/articles/2022-05-08/day-trade...

stuaxo• 4 years ago

Same here, that's 5 minutes saved in my day I guess.

adders• 4 years ago

Wrong link, should be https://www.bloomberg.com/news/articles/2022-05-08/day-trade... instead of https://www.bloomberg.com/tosv2.html?vid=&uuid=0ba7046d-cfde...

jonny_eh2• 4 years ago

Pretty revealing that a HN post can make to the front page with a broken link.

natly• 4 years ago

Are you implying people don't read the body of the article or that there's bot interference? (I can imagine either could be true.)

planarhobbit• 4 years ago

Only if you haven’t been paying attention to how upvoting rings control HN, against all the behind the scenes work to thwart them.

gpm• 4 years ago

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...

fragmede• 4 years ago

Or is it intentionally broken, as a ploy to hurt Bloomberg's bot detection algorithm.

lalaland11254• 4 years ago

@dang, can you do us a favor and fix the link? I don't seem to be able to fix it myself.

dang• 4 years ago

Fixed, thanks! The former did a redir to the latter and our software follows redirs now.

Someone1234• 4 years ago

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.

twblalock4• 4 years ago

Based on today's prices, VTI is about where it was in February 2021 and if you'd bought and held before then, you'd have made gains.

But that's not really the point: the question is, who performed better?

At this point, as the article shows, the meme and day traders have underperformed the boring buy-and-hold index investors.

mbesto• 4 years ago

At this point, as the article shows, the meme and day traders have underperformed the boring buy-and-hold index investors.

That's because very few people actually outperform, on average, index investors. Memes or otherwise.

timr• 4 years ago

The whole market is down, but when you consider that (for example) Netflix is down >70% from November 2021, it's a different level of drop.

It's sort of impressive that GME is still holding out at around $100, however...

paxys2• 4 years ago

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.

FormerBandmate• 4 years ago

GME is propped up by a cult with almost millenarian views of the stock market. It’s more like a giant penny stock scam from the 00s than anything

kevin_thibedeau2• 4 years ago

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.

gruez• 4 years ago

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%.

omegalulw• 4 years ago

Can someone tell me if this is a good time to invest? Or would it go lower?

Just looking to invest in VTI, nothing else.

shpx• 4 years ago

Nobody can tell you that because no one knows.

cercatrova• 4 years ago

Time in the market beats timing the market. Dollar cost average money into VTI every month automatically from your bank account and forget about it.

Yhippa• 4 years ago

We have no idea who the bagholders are and who got out in time.

commandlinefan• 4 years ago

The bagholders are the ones who weren't naive enough to cash out as soon as this became national news.

Ekaros• 4 years ago

Now big question is where the smart cash is going? Real estate? Seems to be kinda in bubble too? Or might it make sense to be on the market?

paxys2• 4 years ago

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.

ushakov2• 4 years ago

exactly

meme stocks are just a segment of a market, more riskier one of course, but still a part of the market

if you were looking at DOW or S&500 for past couple months it’s nothing but losses

twblalock4• 4 years ago

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.

lalaland11254• 4 years ago

The point of the article is that they compare the meme stocks to the stock market as a whole. And the meme stocks are doing much worse.

hahaxdxd123• 4 years ago

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...

aeternum• 4 years ago

Hmm.. TSLA Institutional Shares (Long) 528,735,629 - 51.04%

anyfactor• 4 years ago

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.

[0] https://www.buyupside.com/alphavantagelive/stockcorrelationc...

[1] https://cathiesark.com/arkk/complete-holdings

rsynnott• 4 years ago

Isn't ARKK essentially a meme stock aggregator, tho?

tapland• 4 years ago

This link might work: https://www.bloomberg.com/news/articles/2022-05-08/day-trade...

twblalock4• 4 years ago

The last few years was a perfect storm of stupidity:

- The Fed juicing the market (and not stopping when it should have, dismissing inflation concerns as transitory, etc.)

- Covid stimulus going to people who didn't need it

- People spending that stimulus money to invest (often for the first time) on zero-fee platforms like Robin Hood

- Meme stock investors intentionally manipulating stock prices to cause them to diverge from the underlying value of the company

Despite all of that, people who bought and held a total market or S&P 500 index fund in 2020 have still made gains.

dannyw• 4 years ago

Most importantly, the Fed Put that has been supporting markets since 2008 is unravelling.

arinlen5• 4 years ago

- 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.

twblalock4• 4 years ago

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.

CalRobert• 4 years ago

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.

PragmaticPulp2• 4 years ago

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.

prepend5• 4 years ago

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.

harambae4• 4 years ago

Could you please elaborate?

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).

[0] https://www.forbes.com/sites/thomasbrewster/2022/04/05/gover...

agensaequivocum• 4 years ago

I bought my wife a handgun and myself an AK-47 with the last one. I certainly needed the weapons but not the check.

emerged• 4 years ago

I lost two jobs directly due to COVID and got $0 “stimulus” while my sister was employed the entire time and got an absurd amount of free money.

It wasn’t a stimulus. It wasn’t COVID related either. It was income redistribution. I might respect it to some extent if people called it what it was.

deltree7• 4 years ago

The second stimulus was a disaster.

It has led to an unprecedented sticky-inflation that can only be brought down by inducing a recession.

It's not that there were warned by prominent economists https://nymag.com/intelligencer/2021/11/inflation-larry-summ...

giantg23• 4 years ago

"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.

JoeyBananas• 4 years ago

I never needed/wanted covid stimulus money, but it was practically jammed down my pockets by force when I did my taxes.

bandyaboot• 4 years ago

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.

PhileasNietzche• 4 years ago

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.

ericmcer• 4 years ago

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.

KennyBlanken• 4 years ago

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.

koyote• 4 years ago

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.

testfoobar2• 4 years ago

Add one more: 0DTE options and gamma squeezes.

vuciv1• 4 years ago

Eh, I got into the meme stocks, cashed out, and paid off my student loans. So, not everyone is stupid for it!

nr2x3• 4 years ago

Huge win, congrats. :-)

madmax108• 4 years ago

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!

giantg23• 4 years ago

"People spending that stimulus money to invest (often for the first time) on zero-fee platforms like Robin Hood"

You mean people gambling and trading. Very few people engaging in these activities are really investing.

dalbasal• 4 years ago

The first and second point kind of cross each other.

Stimulus to people who need it (to spend) is inflationary. Stimulus to those who don't need it inflates stock prices.

BoiledCabbage3• 4 years ago

- 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.

pm90• 4 years ago

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.

runnerup• 4 years ago

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.

ganoushoreilly• 4 years ago

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.

gexla2• 4 years ago

The OP didn't mention PPP.

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.

fredgrott• 4 years ago

How is a check for a tax credit wasteful?

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.

idiotsecant2• 4 years ago

No, the worst by orders of magnitude was the fed QE. It lead to system-breaking levels of wealth transfer.

nouveaux• 4 years ago

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.

baskethead• 4 years ago

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.

krnlpnc• 4 years ago

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.

LorenPechtel3• 4 years ago

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.)

funstuff007• 4 years ago

- 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.

rob_c3• 4 years ago

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 :(

bogomipz2• 4 years ago

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?

MomoXenosaga2• 4 years ago

We did solve the pandemic quickly. The entire population was vaccinated in a matter of months.

usui• 4 years ago

Let's not forget to add the huge NFT/Web3 craze last year to the list. That is what, signaled to me personally, stupidity.

Maybe even the Pokemon cards as well

gregorty2• 4 years ago

Agreed. I had a friend lament to me recently that he hadn't got into NFTs early. To me, that just sounds like someone wishing they were born retarded.

burntoutfire• 4 years ago

Maybe even the Pokemon cards as well

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.

jfrbfbreudh• 4 years ago

- Meme stock investors intentionally manipulating stock prices to cause them to diverge from the underlying value of the company

You’re giving way too much credit to meme traders, their wallets, and their ability to move markets.

elihu• 4 years ago

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.

athrowaway3z• 4 years ago

No not really.

Its a lot of hard cash moving stock prices around without hedging, and that's before the secondary effect of algorithms amplification.

systemvoltage2• 4 years ago

- Covid stimulus going to people who didn't need it

You couldn't talk about this when it was taking place. Speech was stifled completely and universally.

We need to really think about how to allow dissent. Without it, society will spiral out of control by people that want to control it.

gowld5• 4 years ago

Can you give one example?

antifa2• 4 years ago

That doesn't seem right, I remember people talking about it in pretty normal amounts since day 1.

sakopov• 4 years ago

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.

throwaway6734• 4 years ago

The Fed juicing the market (and not stopping when it should have, dismissing inflation concerns as transitory, etc.)

Interest rates should've been raised much more aggressively in 2018 and they should not have been lowered in 2019.

thkim• 4 years ago

Which part of it is "stupid" ? Please have some respect.

wfhordie• 4 years ago

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.

thefourthchime• 4 years ago

"Despite all of that, people who bought and held a total market or S&P 500 index fund in 2020 have still made gains."

For now.

r3trohack3r• 4 years ago

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.

rob_c3• 4 years ago

- Covid stimulus going to people who didn't need it

Bit of a spicy opinion... (but perfectly accurate)

daveaiello• 4 years ago

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.

mahastore• 4 years ago

Ok genius .. so now where will the money flow to? What .. you cannot think of anything? Well get ready for bull run again.

uses• 4 years ago

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.

seanmcdirmid• 4 years ago

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.

patrick451• 4 years ago

You missed one

- 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.

incomingpain• 4 years ago

- 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.

tootie• 4 years ago

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.

tiahura• 4 years ago

Have they?

GME is still 200% higher then when the “short squeeze” began.

harambae4• 4 years ago

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.)

ummonk• 4 years ago

It's not necessarily irrational, if you treat GME shares as collectables rather than investments in a profit-making business.

unholiness2• 4 years ago

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.

brian_herman• 4 years ago

It doesn't matter how much money we lose there will always be more people to fill in our ranks.

blahblarblar• 4 years ago

In a bull market it’s too hard to tell if you are a genius or taking a random walk on a rising tide. Most think they are the former.

knodi123• 4 years ago

Ask any lottery winner what the secret was to their success. I bet most of them have theories!

chrsig• 4 years ago

Well, since you said any lottery winner...

https://news.ycombinator.com/item?id=9678607

drawkbox2• 4 years ago

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.

tarsinge• 4 years ago

What is « long » green? How long red must be? There are no real signals here, you’re trying to rationalize gambling. Also even if you could perfectly time dips it’s not a good strategy https://ofdollarsanddata.com/even-god-couldnt-beat-dollar-co...

ushakov2• 4 years ago

do you buy, sell or hold?

personally, i’m a little spooked

LaserDiscMan• 4 years ago

In terms of indexes, I find this chart quite comforting myself: https://www.ftportfolios.com/Common/ContentFileLoader.aspx?C...

georgeecollins• 4 years ago

I find this less comforting.

https://www.multpl.com/shiller-pe

A4ET8a8uTh0• 4 years ago

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..

marvin2• 4 years ago

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.

A good time to increase the contributions.

Jamie9912• 4 years ago

I'm HOLDing! I never intended to make a quick-buck, all my investments since 2020 have been long-term (10+ years) in my mind.

lobocinza• 4 years ago

DCA always. No need to get stressed about randomness.

jokoon• 4 years ago

Why is there meme only in the title?

candyman2• 4 years ago

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!

Donald• 4 years ago

What indicators are you enjoying right now?

candyman2• 4 years ago

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.

sgarrity• 4 years ago

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.

chrisseaton• 4 years ago

GME is still up 20x isn't it? Someone who invested in that meme stock won't have lost anything. I wouldn't mind those returns.

zmgsabst• 4 years ago

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.

tomatowurst• 4 years ago

I find not only losses emotionally hard but missed opportunities seem to invoke just as more distress.

for instance, on thursday I bought a put for a stock that I didn't think was going to make earnings on Friday open.

Before the day closed the put options were at 55%.

The next day, they made earning and my same put options were trading -30% (IV crush).

So in panic and afraid of theta decay, I sell to close on Friday.

On Monday, today, I see the stock has hit my OTM strike price and had I held on to those put options I would be looking at 720% ROI, or a 7-bagger.

It really hurts when this happens. I really do not recommend trading options.

robmsmt• 4 years ago

the problem with options is that you need to guess the right direction as well as the timing. With stocks you just need the former

unholiness2• 4 years ago

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.

Handytinge• 4 years ago

I bought at $390 I'm fairly sure. I don't regret a thing.

TheHypnotist2• 4 years ago

I guess that depends on where you got in. It's like 80% off it's high.

lvl102• 4 years ago

Market is dramatically down but big tech earnings still very strong. I don’t think this is the end of the story.

mastazi• 4 years ago

EDIT I was wrong, it was because of this https://news.ycombinator.com/item?id=31320075

I get this in an infinite loop:

We've detected unusual activity from your computer network
To continue, please click the box below to let us know you're not a robot.

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)

throwaway67743• 4 years ago

Nope, excluding android users from their site entirely now. Supply archive.is instead of linking to ridiculous URL

m3kw9• 4 years ago

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.

coldcode• 4 years ago

I can't the article it puts up some BS unusual activity warning.

misc213• 4 years ago

I mean it's unfair to single them out IMO. Most people are losing money in the market right now.

dlp211• 4 years ago

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.

alephnan• 4 years ago

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.

thrwyoilarticle5• 4 years ago

Will you forgive me for not being impressed that you made more money in 10 years than the subjects of the article did in 1?

_Algernon_• 4 years ago

Anyone else stuck in an infinite "We've detected unusual activity from your computer network" loop on this site?

2OEH8eoCRo0• 4 years ago

Yes

Barrera• 4 years ago

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.

ShivShankaran• 4 years ago

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.

simulate-me2• 4 years ago

What did they invest in?

lexapro• 4 years ago

200% of their portfolio or a small amount they gamble with?

christophilus2• 4 years ago

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.

white_dragon88• 4 years ago

Do you do well from swing trading? May I ask how much capital you work with, and what kind of gains you make?

simulate-me2• 4 years ago

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.

yardstick• 4 years ago

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.

neonate• 4 years ago

https://archive.ph/7WJws

ramesh31• 4 years ago

It was fun at first! Then it got cringeworthy. Then it got sad.

kurupt213• 4 years ago

Not if they’re day-trading SQQQ

anm89• 4 years ago

If anything GME is outperforming and a vast majority of the market is getting absolutely stomped.

It feels like this is just telling a certain group of people what they want to hear to help them feel better about their portfolios getting demolished

cosmiccatnap• 4 years ago

Kind of hard to take Bloomberg's word for it considering they are the definitive old guard

nromiun• 4 years ago

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?

mym19902• 4 years ago

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.

djmips• 4 years ago

What if the fish didn't. What if they just stood up with a huge amount of winnings and just walked out?

mym19902• 4 years ago

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.

gigatexal• 4 years ago

Insert simpsons haha.gif here

barrenko• 4 years ago

Not sure what's funny here, the banks and the accredited, "respectful" folk lose our money all the time.

bigbacaloa2• 4 years ago

Don't believe the hype.

- Flava Flav

bigbacaloa2• 4 years ago

Don't believe the hype.

- flava flav

tomcam• 4 years ago

Not sure if reversion to the mean is a surprise

nabla9• 4 years ago

"It's only when the tide goes out that you can see who's swimming naked." – Warren Buffett

amelius• 4 years ago

Gaining money, then losing it all still leaves you in a better position than not having had the money in the first place.

jamisteven• 4 years ago

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.

jcranberry• 4 years ago

There's no "blame" for day traders...its just showing retail traders who started trading around 2020 on average have lost their gains by now.

horns4lyfe• 4 years ago

Maybe, but I made a decent amount of money (for me at least) and stopped because I had clearly just gotten lucky. I still have that money

Day trader army loses all the money it made in meme-stock era

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