Stonks and Bubbles.

Some observations.

  1. The interest rates are at present very low, to negative.
  2. The employed, at least in the antipodes, are strongly encouraged or coerced into having pension plans (“Kiwisaver” in NZ) and most of that money is in the share market
  3. There are groups of traders who are now attacking the hedge funds and speculators. They have observed that a buy and hold strategy works because there are no margin calls, and all you can lose is beer money
  4. The housing market is unaffordable. People who are approaching retirement are cashing out and trading down to the Gen Xers ar milleinials who managed to get on the property bubble. This includes people cashing up in the cities (where lockdowns are coming) and moving to the South Island (which is, currently, COVID free).

Kea heard son one an dme talking about this and said all this was vicious. We then explained that it was not about the money. It was about sending a message. Even NPR gets it. The stonks can cause pain, and pain the disenfranchised want the city and Wall St to feel.

For those Reddit members, all this isn’t just about making money. “There’s also kind of a populist thing happening here with a lot of these traders, judging by the Reddit threads. You know, they just want to poke a middle finger at Wall Street,” says Paddy Hirsch, of NPR’s The Indicator from Planet Money podcast.

GameStop’s stock symbol is GME. On Reddit, one member of wallstreetbets, wrote early Thursday: “GME is about sending a message. … For all the recessions they caused. For all the jobs and homes people have lost. For all the people that can’t pay for college because minimum wage has stagnated while wall street gets rich. For all the retail traders they left holding the bag. For all the times they got bailed out with our tax money while we got nothing.”

Another member suggested that the Reddit traders were part of a resistance movement of sorts, writing, “this is not a war on billionaires, the wealthy yada yada, but it may well be described as a resistance against injustice, inequality, rigged rules, uneven playing field etc which has been rampant on Wall Street forever.”

A wallstreetbets member, who vowed not to sell GameStop, wrote late Wednesday: “I am proud to be a part of this piece of history with you. … Call it an opportunity, call it revenge, or justice, I know we are on the right side of this.”

Rep. Alexandria Ocasio-Cortez, D-N.Y., a member of the House Financial Services Committee, weighed in on the GameStop phenomenon. “Gotta admit it’s really something to see Wall Streeters with a long history of treating our economy as a casino complain about a message board of posters also treating the market as a casino,” the lawmaker tweeted Thursday.

And it hasn’t stopped with GameStop. Other companies that are suffering heavily during the pandemic are seeing their shares soar as people on Reddit’s wallstreetbets talk them up. The companies include AMC Entertainment, the beleaguered theater chain, which shot up more than 300% on Wednesday (before dropping about 50% by Thursday afternoon), and American Airlines, which soared more than 30% Thursday morning.

Robinhood, a popular trading platform for young traders, announced Thursday that “in light or recent volatility” it was restricting transactions for certain securities, including GameStop and AMC, and raising margin requirements.

The mania has gone global, “whipsawing stocks from Amsterdam to Sydney,” Bloomberg reported. “In Europe, short-seller favorites including Unibail-Rodamco-Westfield jumped 20% or more. E-commerce giant Rakuten Inc. and baby-care goods maker Pigeon Corp. climbed at least 6.9% in Tokyo on Thursday.”

NPR

This is a bubble. Don’t go there with real money. Use beer money, and buy and hold for the ride. It is a distraction.

Prepare instead for what is coming. The stock market is down since China Joe took over. I’ve never been able to time a market, but it is safer to be pessimistic right now: in particular it is worth noting that big cities that attract immigrants (Auckland, Vancourver, Sydney) are nosebleed expensive.

It’s also worth noting that if Joe Biden considers 400K US income a year rich enough, in NZ, that number is 180K NZ, or 120K US.

Things are over valued. Time to simplify, cash out, and hold some folding stuff. I’ve taken pennies in the dollar selling things right now because we are in the process of doing precisely that and I’m pruning the things I have. Selling a guitar I bought with my first job… was hard. But needed.

And the stonks? Think of them as entertainment. I expect the financial sector to become boring again after the crisis.

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Jonathan
Jonathan
4 months ago

I’ll be curious to see how the “official” response to this unfolds and what blowback Robinhood sees, if any. The way RH and others are preventing movement in the market comes across as very suspicious and bolsters the arguments that some of the investors make about the market being rigged by the big guys against the little guys.
If handled badly (which is almost a certainty), it will make the elites look worse and turn more people against them – after having blatantly stolen an election, and rigged the market, the tipping point against them may have moved forward in time… I don’t think they realize the fire that they are playing with.