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Okay let's take a FIRE perspective on Wall Street Bets --
1) Earlier this week, there were 900k users on WSB. Today, within 72 hours, the users grew to 3.3 million. This indicates that many of the people piling into WSB recommendations are noobs
/thread /1
1) Earlier this week, there were 900k users on WSB. Today, within 72 hours, the users grew to 3.3 million. This indicates that many of the people piling into WSB recommendations are noobs
/thread /1
2) Newbie investors often lack the experience to assess risk/reward, to know if there's a bubble, to even know *what* a bubble means. They often have small holdings -- $3k, perhaps, or $5k -- but it represents an outsized proportion of their savings. A loss would hurt.
/2
/2
3)Encouraging noobs who lack context, skill, judgment to pile into a short-term speculative trade is leading the sheep to slaughter.
Much has been said about "David & Goliath," the individual investor besting the hedge funds. That's a great narrative, but it masks ....
/3
Much has been said about "David & Goliath," the individual investor besting the hedge funds. That's a great narrative, but it masks ....
/3
... the fact that literally *millions* of people getting in on the action cannot handle the loss.
There's a distinction b/t social effect and individual impact. Yes, David & Goliath may be good for society, but many low-net-worth individuals are left holding the bag
/4
There's a distinction b/t social effect and individual impact. Yes, David & Goliath may be good for society, but many low-net-worth individuals are left holding the bag
/4
The David & Goliath narrative may have some kernel of truth to it, BUT it's also a psychological crutch, a way for people to justify buying overvalued assets.
"I'm not buying b/c I'm greedy; I'm buying b/c I'm a good person and this is a communal movement."
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"I'm not buying b/c I'm greedy; I'm buying b/c I'm a good person and this is a communal movement."
/5
4) Short-term speculators are posting screenshots of Robinhood accounts w/ balances of $1MM - $5MM. But when you look at their cost basis, you see they bet $200k - $800k to begin with.
Anyone who bets that much on a single stock is either ultra-rich or poorly asset allocated. /6
Anyone who bets that much on a single stock is either ultra-rich or poorly asset allocated. /6
5) People who are good at "making" money in the market -- bet big, win big -- are also good at losing it.
Risk/reward runs both ways, and eventually the pendulum swings, the seesaw tips to the other side.
Those who take big risks often don't have wealth 2+ years later.
/7
Risk/reward runs both ways, and eventually the pendulum swings, the seesaw tips to the other side.
Those who take big risks often don't have wealth 2+ years later.
/7
6) If you want to 'go big or go home,' you risk going so big -- and then subsequently so small -- that you lose your home.
If you want to protect against the risk of ruin, by contrast, you keep yourself in the game.
And staying in the game is the best long-term strategy. /8
If you want to protect against the risk of ruin, by contrast, you keep yourself in the game.
And staying in the game is the best long-term strategy. /8
What's the point of hitting a $1MM net worth at the age of 35, only to lose it all by age 36?
The goal is wealth for life, not wealth for a month. And that requires long-term thinking, not short-term speculating.
/9 /endthread #wallstreetbets
The goal is wealth for life, not wealth for a month. And that requires long-term thinking, not short-term speculating.
/9 /endthread #wallstreetbets
