Claims about equities (and gamblers)

Mr. Young, 30, has only about $2,500 invested, making him a guppy among whales. But some Wall Street analysts see people who used to bet on sports as playing a big role in the market’s recent surge, which has largely erased its losses for the year.

“There’s zero doubt in my mind that it is a factor,” said Julian Emanuel, chief equity and derivatives strategist at the brokerage firm BTIG. “Zero doubt.”

Millions of small-time investors have opened trading accounts in recent months, a flood of new buyers unlike anything the market had seen in years, just as lockdown orders halted entire sectors of the economy and sent unemployment soaring.

It’s not clear how many of the new arrivals are sports bettors, but some are behaving like aggressive gamblers. There has been a jump in small bets in the stock options market, where wagers on the direction of share prices can produce thrilling scores and gut-wrenching losses. And transactions that make little economic sense, like buying up the nearly valueless shares of bankrupt companies, are off the charts.

File under “speculative,” here is the full NYT story.

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"File under “speculative,”"

+10

"Stymied sports bettors are sitting on a substantial amount of money. Gamblers legally wagered more than $13 billion on sports last year, according to Eilers & Krejcik Gaming, a research and consulting firm, and estimates suggest illegal wagering is 10 times that figure. "

That sounds like far too little money to have any significant effect on the market.

I'm enough of an EMH guy to be skeptical as well, but there was so much more in this article than that argument.

A huge percentage of men I know went through a period in their early 20s, typically lasting 1-3 years but occasionally much longer, of having bookies teach them that the only way for most people to make money gambling on sports is to be on the bookie side of the transaction. Humbling lesson in EMH.

Playing the market provides the same rush as gambling and a better NPV. And now this:

"Robinhood, fueled by hundreds of millions of dollars in venture capital, had long been offering commission-free online trades. Its established competitors were forced to lower their prices until finally, in October, the giant brokerages — Charles Schwab, TD Ameritrade, E-Trade, Fidelity and Vanguard — started eliminating fees, too."

What does it mean when dollars spent on gambling are redirected to the stock market, even if indiscriminately? It sounds like a good thing from the standpoint of society and everyone involved.

Those are important questions for the gamblers-turned-investors and people who want to study them. Gambling in the stock market is almost surely more financially useful to them than gambling on sports or roulette is.

That's a good thing for them but for the rest of society, JWatts' question still stands: do they have enough of an effect on the stock market to make a difference in its price movements, efficiency, etc.? It takes a whole lot of guppies to equal the influence of even a single whale so I'm dubious. Maybe certain specific stocks, such as the Hertz example that someone cited.

I seem to recall just a week or two there was a post here that was on a related topic and some commenter said, or cited a study that said, gamblers don't view the stock market as an adequate substitute for betting on sports. Sports provide a payoff (or loss) within days or even hours. But so does day trading, so I wondered about the validity of that argument that the stock market does not suit gamblers' desires.

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"Playing the market provides the same rush as gambling and a better NPV. "

Indeed, it has a positive value for your average participant vs a negative value for sports betting.

Day trading/gambling with stocks and options does not have positive value for the average participant.

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we file everthing from the newyorktimes.con under "speculative"
remember when they told us music lessons cause "inequality"

In some case we file it under pure propaganda. The 1619 project for example

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Investor Robert Kiyosaki was just quoted recently saying something to effect, "the central banks and these systems were set up by and for the elites to protect the, not the small investor etc. etc.".

Maybe a lot of this 'Robin Hood' small day-trader stuff is a young generation realizing that if the system is rigged to gambling on the market, then why not take the chance of getting in on the market too? I mean, if you end up getting a flush you might just end up being too big to fail, just like the big-timers. Doing things the old-fashioned way is a surefire way to lose, so give a choice between a guaranteed losing strategy why not gamble and have slightly better chance at something approaching victory.

First 2008, now this...I'm not surprised there's a younger generation looking at what's in front of them for direct evidence of how your mom and dad keep losing their shirt and their sh*t while guys on Wall Street or popular day-traders keep getting made whole again, or just not caring about their losses at day's end.

"First 2008, now this...I'm not surprised there's a younger generation looking at what's in front of them for direct evidence of how your mom and dad keep losing their shirt"

Did mom & dad lose their shirt? Or did they just leave their 401K funds and they all recovered in 18 months?

"Looking at the annualized average returns of these benchmark indexes for the 20 years ending June 30, 2019 shows: S&P 500: 5.90% Dow Jones Industrial Average: 7.03% Russell 2000: 7.70%"

That doesn't seem awful.

"Did mom & dad lose their shirt? "

Depends. Did they fail to pay their mortgage because they lost their job in 2008? Did they have to tap that 401k to make ends meet? Did they get sick after losing their health insurance? Don't think it's oh so easy. Life gets real, son.

None of that has anything to do with how their 401K did during the period. Context matters Boomer.

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Incentives matter. There's no clear path to the middle class based on work and labor anymore. We only have a casino economy based on gambling and paper pushing that gets bailed out by governments and central banks every few years.

The economy has always had boom and busts, The difference is that the lower quintile of workers has had stagnant wages for the last 30 years and the cost of housing, college education and health care have all been growing at faster than wage growth for the bulk of the work force.

I would add the baseline for acceptable housing, education, and health care rises faster than wages too (not just the cost)

For example, average home sizes.

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"There's no clear path to the middle class based on work and labor anymore."

The basis for this assertion is what?

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As a Stockbroker's Daughter, I figured out my father was a professional gambler before I worked out the truth about Santa Claus.

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Here's Alex Danco's take on this. He attributes this not only to sports betting but also to performative risk taking on Reddit.

https://danco.substack.com/p/never-hertz-to-ask

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Buy low, sell high. One of the children, a non-gambler, opened a fidelity account last week because they thought stock prices were low.

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W a l l s t r e e t b e t s

Why do people post their cellphone images of their stock account to wallstreetbets and expect anybody to believe? Is Photoshop truly inconvenient and hard to use to make fakes?

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Hertz is aware of this, as they tried to sell $1B in new stock at the same time they are headed towards bankruptcy that would completely wipe out all of that value.

Also see: TSLA, at any point over the last 2 years

Not only is Hertz aware of it, it's explicitly their strategy to rip off retail investors.

Still, play stupid games, win stupid prizes.

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+1

I used to find EMH very convincing. Following TSLAQ has really challenged those priors. Investor dreams, emotions, cognitive biases, and ineptitude, combined with Elon's fraud and manipulation of those tendencies, have inflated that asset price miles past any realistic bull case. And it's retail investors' money funding that.

I'd recommend @teslacharts for running commentary, but maybe it's @bagholderquotes that really highlights the volume of unsophisticated, inefficient retail investment.

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One of these young market rookies ended up with $700,000 in margin debt after a bad options trade and committed suicide.

https://www.marketwatch.com/story/finance-isnt-worth-losing-your-life-over-the-heartbreaking-story-of-a-rookie-trader-who-racked-up-700000-in-debt-2020-06-14

Are you sure? This Bill Brewster guy seems more interested in pushing a lesson that "amateurs" shouldnt be playing with fire, than grieving over family. Story seems fishy.

But can anyone get on Robinhood and "borrow" $700,000 to play in the stock market? I think I'd like to get in on that. Anonymously.

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so, you reckon that $2.5 billion of newbie money looking to ride the tiger on Zoom and Clorox is moving the market around?

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File under "I don't want to believe this rally is real". Tyler, have you read Stephen Roach's anti-dollar rants recently? Any coverage of this coming to the blog?

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There's more volatility due to the economic and public health uncertainties. More volatility always attracts the day traders and gamblers. Their trading volume is not large enough in my opinion to make a significant impact.
These days a lot of the volume is in the last 1/2 hour of trading when ETF funds have to rebalance to match the S&P or whatever they're supposed to match. You often have big swings then

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The market cap of the S&P is somewhere between 25-28 TRILLION. To think that a bunch of millennials with $2500 bucks is making this market swing around is someone that doesn't understand math. For Mr. Emanuel to say he has "zero doubt" is another clear sign of falsehood. Since when can you make ANY comment about the forces moving the market with zero doubt.

They're playing in options markets. Leveraged out the wazoo. No attention to fundamentals. Market cap of the most popular retail shares means nothing (see: TSLA)

I understand, there are approx. 10mil accounts at Robinhood, the big three discount houses have added roughy 1.5mill account since the pandemic. All 11.5 mill account aren't trading options on margin. If anything they are contrary indicators. after last Thursday's market drop we saw a spike in leveraged short ETFs which is running against them. $2500 as your starting capital it will take you a very short time to lose it all in the options market. Statistically, 80% of option buyers lose their money. The "smart" money is on the other side of that trade selling to them.

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Gamblers aren't moving the price of Apple, they're gambling on Chesapeake Energy, a company whose bonds are selling for a nickel on the dollar. The price of Apple is being moved by Berkshire Hathaway, 40% of their portfolio, and the Swiss Central Bank.

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A lot of the kids my age (35) went through college during the peak of the online poker boom (2004-2006ish). We gambled with our student loan disbursements. I never did much more than $20 tournaments, but one of my roommates ran with a crowd that would swing +/- $10,000 in a day playing no-limit games. They are already dead inside with respect to market volatility. And now they all have Robinhood accounts.

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Aarnault and me gambled on Gayer but he was more the rimbaud type ! Berthet.

The Karachi affair, Haha !

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Of course, they funded me, the Frenchies!

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Of course, all these arms deal, would be laundered as European research funds. Mind you, only for whites unless they want to create a guinea pig in the future.

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This fits with my childhood experience of Off-Track-Betting storefronts in NYC being modeled after 1960s style stock broker storefronts. I guess COVID is making stock picking fun again.

More seriously, we no longer have much of a middle class, and in the traditional value system of the working class, where work rarely pays much more than for the basics, the only acceptable way to make a bit of money is to win it.

+1

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If there has been a surge in options trading activity sufficient to move the market, it seems to me more likely that it is coming from retirees with no alternatives in debt for generating income.

Last semester the senior education program offered by our local university had a class on how to trade options by a former trader. The class was full.

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Thank you for this information and the discussion in the comments. This really helps lot while trading. Thank you

What's being cracked in your country? Big 'rafale', small franchouillard - Balladur after a few decades, justice of France will bring Sarkowitch to court in his after-life!

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We could never be the Raj and we're still stuck with cricket in India. Who cares about retirement homes and cancer hospitals chez nous? I can still die like a dog in some other country with my multiple passport.

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A wonderful share related to sports betting ! I’ve just forwarded this onto a pal who has been accomplishing a little research on this. And he in truth offered me dinner because of the fact that I stumbled upon it for him… lol. So permit me reword this…. Thank YOU for the meal!! But yeah, thank you for spending the time to talk about this topic right here on your web site.

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Helpful and Informative!

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