Merv's Politically Incorrect Audio Blog

Iatrogenics. Nassim Taleb talks about this, how a lot of deaths are attributable to needless testing for diseases. The example is how a study was done where a random group of healthy kids were taken to a dentist and asked if they needed a tonsillectomy. At least some were told "yes." The researchers then took the rest of the group to another dentist, and the same thing happened. They repeated until eventually 100% of the kids were told they needed their tonsils out. You see the issue.

 

I’m not against banning hate speech, especially since history has shown how quickly words can become actions.

The GameStop issue pisses me off though because of what it says about what is supposed to be a level playing field where all players operate under the same rules with the same risk. That does not appear to be the case here.

There are other bigger issues of course with derivatives and automated computer trading that I personally think will lead to tragedy and dispair for many. History has shown what happens when financial markets decouple from reality and that is clearly happening now on the scale of hundreds of trillions of dollars.

 

Glad to know. I’ve got a lot of silver right now and would love for it to pull a gamestop move. If it happens I’m definitely going to buy a big boy headphone amp.

 

No doubt You’re right about Reddit and I can say from personal experience that playing with derivatives is a great way to lose a lot of money.. in my case tens of thousands. At the moment I have a 5% paper loss on silver bullion that I would very much like to see become a paper profit.

All that being said, I think there is real risk to all investors if people start to believe there is a government bailout for big players or small players don’t have the same rights to buy and sell their investments in the market.

 

To follow up on the above- At this point, playing in the stock market is no different than gambling. If the concern is the hazard to small players, fix the market, don’t decide after the cards are dealt who can play.

 

I wouldn’t right now. I considered doing so this AM. If I had made the trade I was contemplating, I would have made around $20K, but the risk..... The volatility is pushing the price of entry through the roof. If you’re in a position to sell puts or calls there’s a lot of potential, but buying in at this point seems like a great way to reward someone else

 

The same was said for Pol-Pot, Mao, Hitler, etc. by people in the past... or if we want to use more modern characters, we could use Warren, Sanders, Pelosi, AOC, Ted Cruz, Orange Man, McConnell, or whoever else. Even the villians have a valid point or two somewhere. It's how they gain traction in the first place. Nothing anywhere ever works 100% and people by nature are going to call out the faults and want improvement. Possibly at a greater cost than the net improvement... more likely so in a democratic society.

It was watching Sanders here and there between 2017 and 2019, i.e. out of the election spotlight, that made me realize that this guy is good at calling out certain issues (very valid issues IMO) and he most likely won't be sold unlike 80%+ of politicians, but I wouldn't personally listen to or believe in him for much else. 99% I would have come to the same conclusion sooner but I didn't know who he was before 2016. 1% chance I would put on the foil hat and think of him like an Alex Jones - maybe supported by the powerful to make those who question the system look loony and lose credibility.

 

Robinhood could stop trading, it could be wrong but it would not be illegal. That what exchanges and brokerages are allowed to do in case of some market weirdness. Short term suspended trading is considered to neutral to the stock price.
That's not what they did, they stopped people from buying, allowing them to sell, this way forcing the stock down, that's market manipulation and illegal . That by itself by may land their slick CEO in jail. If he did it in cooperation with the affected hedge funds and if, big if, SEC is not a part of the game, he is going down.

 

I'm happy to be wrong, but it's my understanding that the reason RH started limiting trades on a handful of equities was a funding issue. Part of what makes RH work is VC investment to cover the margin on more complex transactions that aren't available to schmucks like me through normal brokerage. RH needed a quick capital injection to cover margins on a bunch of trades on a small number of equities that wouldn't clear without those margins. IOW, RH couldn't clear the trades unless there was some cash behind them, which RH didn't have, so they stopped trading on those positions. Volatility = margin requirements to back your position. It's important to understand that RH isn't direct access to the market itself, they're bundling/bungling trades themselves in an aggregated fashion. And they stand to make money based on pricing friction/arbitrage. Or they could be trying to f**k everybody out of access to the market because the institutional wealth doesn't want main street to be rich. Occam's razor?

 

The jury is still out. They raised $1BLN overnight when the noise started.

 

From my point of view, the entire thing isn't in anyone's best interest. As someone else pointed out, screwing over hedgefunds hurts pensions, endowments, and charities, and eventually retail investors will get burnt too when the GME panic exit ensues. RH, whether it was to protect their institutional overlords or to stop people from injuring themselves, was warranted in pulling circuit breakers, I think. The stupidity has spread to DOGEcoin, where you have people telling others to hodl an asset that has an infinite emission and has no fundamentals other than cute mascot. Everyone feels self-satisfied now but let's see how long that lasts because it will end in tears.

 

Maybe they shouldn’t be so heavily leveraged? The hedge funds screw people over, they can get screwed themselves. Many so called safe investments aren’t very safe. Nassim Taleb is right about this. If they want to play the game, they must leave all out outcomes on the table. Otherwise it’s not fair. If the people who are incredibly wealthy to making six figures can potentially ruin hundreds of millions of dollars in pension funds, perhaps they all should be held accountable?

The more the system is stacked in their favor, the more risk they are allowed to take, the more people who can’t afford to be screwed, get screwed, the more they risk an extralegal response as the USA becomes a third world kleptocracy with more sectarian identity politics, mass delusion, bullshit wars over hearts and minds, etc.

 

I liked both of the above posts even though they disagree. The system is as intertwined as it is stacked. The only way to make it better is to tear it down. Unfortunately that's going to cause a lot of pain for everyone not just the elites.

I think the only way out is for government to enforce (because they're the only ones with the power to do so) a calm, methodical disentanglement. But that in itself is not possible because half the people don't want govt to get involved in anything and even if that wasn't the case, govt itself would never agree on what the right way to do it is.

IMO the only way to level the playing field somewhat in an easy way is to tax the top 0.5% through the nose. Like 50%. Then you can give the middle class a massive tax break. But some consider that socialism so it's also a no-go.

Until us plebes stop bickering amongst each other and present a united force, we have no chance.

 

RH could be justified putting a circuit breaker, and it is legal but that's not what they did. By stopping buys only, and only for retail investors they manipulated down the GME stock price. And that's illegal.
And the idea that GME investors are just idiots., and that small investors in general do not know what they are doing?!.
Right, Melvyn Capital, those are the experts. And idiots on the market get destroyed every day, GME or not. The only difference is that the institutional idiots can afford to buy politicians to protect them.

Now the scumbags who manipulate the market every day for fun an profit, are getting hurt, That's why you can watch those alligator tears everywhere , on CNBC in particular.
And the fact that GME exposed that the stock market became a private enterprise where corruption between big business and politicians reached unbelievable level, that what is really driving this "deep concerns for small investors".
I did not hear a lot of this "we are deeply concerned home owners would get destroyed" in 2006-2008.

In fact pension funds and charities are under numerous legal investment restrictions, two most important are: Quantitative asset restrictions (QAR), and fiduciary duty which is broadly defined, and may vary state by state, but people went to prison for violating this rule.
I love this "we have to protect crooked hedge funds, otherwise something bad is going to happen to all of us.". That's all they have left at this point.
I do not think they are so concerned about financial loses, the real problem is that the system has been exposed as corrupt almost beyond repair.

 

Most actively managed portfolios run by fund managers do not beat an S&P 500 index return. Your average investor does much worse than that. I think there is evidence to support that small investors in general, do not know what they are doing, and mostly just follow the emotional trend.

 

As a pretty fervent George W Bush hater (and artist) I really liked watching this interview with him on Jimmy Kimmel show. Really humanizes him which was a nice experience for me in this super polarized current state of politics where people are so often villianized and everything is made black and white. George comes off as a pretty decent guy for the first time in my life.