I remember Matt Levine making the point in one of his articles that there was a shocking lack of stories of victims from the Gamestop run. Lots of people were presumably losing their shirts, and normally when market bubbles crash we are used to stories of "father of 3 ruins life with bad investments".
I suspect there are a lot more stories like this, but since WSB seemed to prey on young, media-hating introverts they just never came forward.
The problem is a bit deeper than just addiction. It is manipulation and social engineering of a young and exploitable group. This is the new kind of scam and many people are ill-equipped to deal with them, just like how some people were weak to nigerian prince scams once upon a time.
When people sincerely said something like: "I have crypto and tesla stocks, I am rich and don't need to work", there are more problems to solve than just gambling addiction.
I think the correct way to frame this is that a foolish person squandered their money (something that happens every day in every country) rather than a young, impressionable would-be victim got sucked in by predatory messaging.
Otherwise we have to close all
the Louis Vuitton stores.
They didn't get scammed, they just blew all their cash. Adults are allowed to do stupid things with their money, it's almost never a crime (nor a tragedy) when it happens.
They're allowed to do stupid things with their own money, but not with other people's money.
If you walk into a bank and say "I want to borrow $76,000 to buy a massively overpriced piece of luxury fashion," they're going to send you on your way.
If you log into a web site and say, "I want to borrow $76,000 to buy a meme stock", they'll hand it to you and ask if you want to borrow more.
They will require collateral, but will accept other meme stocks that could collapse at an moment. The bank would give you a loan for a fancy bag if you backed it with your house, but far less likely if your collateral is a bunch of over-inflated stocks.
We can't, and probably shouldn't, protect people from blowing all their own cash. But it should be possible to prevent them from leveraging themselves into destitution. Not only is it bad for them, it's bad for the system as a whole, because it leads to crashes even of seemingly unrelated parts of the system.
As a society, we should look out for the vulnerable part of our population. The example with high fashion brands is on point though, but I also absolutely detest paying extra to have a logo on my stuff so it doesn't really resonate with me.
High fashion is also marketed toward specific classes of people, those with the means and ability to afford them. Meme stocks and cryptos are geared toward small retail traders who don't really have much in the first place. One of these will cause more damage than the other to its targets.
> As a society, we should look out for the vulnerable part of our population.
Having read a bit about the neuropsychology of gambling addiction, I agree.
Slot machines are specifically designed to turn those who are susceptible to it into addicts.
Some people simply don't have the mental capabilities to distinguish a legit investment from a scam.
Maybe some kind of authorization should be required if you try to wire your life savings to a crypto exchange. But banks only ever ask questions if a lot of money comes in, not when it flows out :D
> But banks only ever ask questions if a lot of money comes in, not when it flows out :D
This is false. My bank made my rent payment late this month by freezing a wire (identical to dozens of others I have sent) because my client geoIP is in Japan.
> Meme stocks and cryptos are geared toward small retail traders who don't really have much in the first place.
I don't know anyone blowing money on meme stocks or sketchy cryptos that isn't also blowing money on equally wasteful designer "fashion". I don't think they are "geared toward" anyone or anything.
Some are, but others, personal friends even, aren't able to be honest with themselves. They're the type who're smart enough to rationalize themselves into gambling, but not smart enough to rationalize themselves out of it.
Reading about stocks, and hype is fun. Reading 10-Ks and building risk models is not.
Even nudging them in that direction is met with the skepticism and ridicule of responses like "Why would I do that?" as if suggesting the idea of doing actual financial analysis has made me grow a second head.
> They're exploitable because they're economically desperate.
2.5k € after taxes doesn't really count as economically desperate in Germany, I'd say.
Sure, housing is expensive - especially in Munich - but education and health isn't.
This is another hype-driven mania where some people gamble away their money. This guy could have just as well played roulette and bet 50k on a number.
I wonder if any kind of investor/debitor protection would help in these cases.
How did he get those loans? Why would a bank approve a 1.5k down payment with just 2.8k income after taxes, leaving just 1.3k for rent and food in Munich? Might be OK when buying a flat - but for gambling on the stock market?
Should more verification be required for risky or high volume trades? I just need to check some boxes with "yeah, I know that stuff" and I could trade derivatives + options with leverage.
So that's where all those stupid fuddy duddy quotes by old fogies came from like "a fool and his money are soon parted", "not all that gleams is gold" and "there's a sucker born every minute", but what do those old jerks know. We live in the modern age!
Imo for those people, it is less about the argument of "we live in the modern age, things are different now", and more like "a fool and his money are soon parted[, and i will be the one on the winning side of this partition, not the losing one]" and "there is a sucker born every minute[, but that's not me]".
I.e., it isn't about them believing that modern times are different, it is about them believing that they are the ones above the cut, an exception from the average masses, the kind that can thrive in such landscape. Which is the same core premise that's been funding those types of gambles since forever ago.
But I am a boomer, but I have to keep explaining to my younger friends that I'm one of the good ones, lol. I've been an environmentalist since I attended the first Earth Day in 1972 yadda yadda
Its been an expensive hobby. I spent two years algo trading. My all-time peak profit was 400k. Which, I successfully and meticulously lost down to break even.
Its been an educational ride, as I learned alot of finance, stress management, algorithms in search of eldorado.
Now, I just invest in etfs and DRIPs and study other areas.
Doesn't WSB have a similar position as The Onion in the public conscious, in the sense that the vast majority of readers can tell that it's satirical and not something on which to base important decisions?
It was like that for a long time, with genuine nuggets of profound wisdom and DD, but that was years and years ago. Every single subreddit which crosses some threshold of subscribers turns into rubbish. No exceptions.
Used to be but it turned to q-anon tiered and gathered too many people there who didn't get the memo. It was a decent community at the beginning but turned to cesspool.
Not that I'm aware of. The people behind WSB are Wall St. pros and know what the hell they were doing. It's a social media based pump and dump scheme that prays on the young and vulnerable. That's why WSB stylized itself after 4chan, to attract that crowd. 4chan was already a hotbed of crypto scams and cryptobro true believers ripe for the picking so WSB swept in and showed everyone how the pros run a financial scam.
stonk investing is imaginary anyway unless you direct register them. You're just getting an IOU, not actual shares, and so they manipulate the market by lending those shares with IOUs attached to hedgies for shorting. Not to mention the front running happening in dark pools that you don't get to know about.
at least the blockchain provides transparency and you actually get to self custody your assets.
Shares held by brokerages in street name are still legally owned by you. There are very few situations where direct registration has any kind of practical meaning.
Whatever cryptobro, you're comparing investing into an actual product, or a service, with investing into a token in a database. Your arguments may be valid, honestly I can't tell because I'm not that educated, but I know the difference between a company that produces something, vs. one that produces nothing.
I have zero interest in those garbage coins. What I do have an interest in is:
- BTC which is energy converted into an asset which stores value extremely well and securely
- ETH being used as a utility base layer, such as replacing traditional stock exchanges and tokenizing the stocks so there's real transparency and self custody
Garbage meme coins need to die, the sooner the better
I just don't understand people who post on subreddits like WSB, join the discord and such. I guess HN could be a similar community, but without as much risk (maybe?)and think they're joining a community that wants them to "win."
Blindly trusting people while thinking you found an unlimited money hack, you leverage up and lose almost all of it.
Is that just gambling, or are people just setting up /r/WSB to lead pigs to slaughter?
As I write this, I can see how similar it is with HN, but, no speculation or gambling - we just exchange information, and where it leads/what you chose to believe could very well possibly end the same as above, I guess.
The difference is in part, personality. I do use WSB because they often find interesting speculative stocks. But I would never gamble more than 10% of my portfolio and I would never use leverage.
In part, the deathly combination lies in new participants in investing that use wsb and robinhood which allow overleveraged positions before those new participants actually learn how the market is priced and how your leverage in premiums is priced according to your risk. I dont think anyone with a portfolio over 10 years in the making would be willing to make the bets that I see on the forum.
Robinhood allowing margin trading is a regulatory mistake in my opinion.
WSB is for Bets and loss porn. It's where people go to celebrate losing money. It's not a place where people trick you into "investing" in scams.
Also, $75K debt isn't much for a software engineer with a brain as wrinkly as his. Article says he lost $6K of his girlfriend's money. He didn't even need to borrow any money from his wife's boyfriend, so he's not in deep relative to the average WSB user.
WSB was meant to be the antidote to all those investing forums where people sit around talking about how much smarter they are than everyone else and how they will use their superior knowledge to make all the money and get all the women. WSB was about posting about how you just had the dumbest idea ever and are going to lose so much money that your wife will definitely leave you for her boyfriend. It wasn't literally about celebrating losing money, it was about starting from a place of humility and being honest about expectations.
Overall this entire situation has made clear why there have always been such strong restrictions on individuals using risky investment strategies. It can lock people out of gains, but many simply shouldn't be able to ruin their lives so easily.
You may be underestimating what r/SuperStonk has achieved thus far.
Direct Registration System (DRS) [1][2], a system for book-entry ownership, has been successfully popularized by r/SuperStonk, over the last few years.
From Gamestop's recent SEC filing, 10-K [3]:
> Our Class A Common Stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “GME”. As of March 22, 2023, there were 197,058 record holders of our Class A Common Stock. Excluding the approximately 228.7 million shares of our Class A Common Stock held by Cede & Co on behalf of the Depository Trust & Clearing Corporation (or approximately 75% of our outstanding shares), approximately 76.0 million shares of our Class A Common Stock were held by record holders as of March 22, 2023 (or approximately 25% of our outstanding shares).
Let's let that sink in: visitors of r/SuperStonk collectively own 25% of GME (and registered via DRS), throwing down >$1.5B USD.
How can one not appreciate the magnitude of this accomplishment? It's absolutely unprecedented.
When we look back on this, I'd wager that education will be r/SuperStonk's crowning achievement. Hundreds of thousands of people have mobilized thus far, and are taking an active interest in financial literacy, learning about market structure, reading quarterly statements, joining earnings calls, and submitting commentary to regulators in both the United States and Europe.
When does a group of investors stop being a "cult" and effectively become a full-fledged movement?
That's pretty impressive. Best I've personally witnessed was a stripper who finished her show and then came out to the video poker machines and started shoveling cash into it. Her hands never stopped moving, the dollar balance would jump up as she put in another bill, then every few seconds drop as she bet and lost. Over and over until she (presumably) ran out of cash. We counted over $1000 into that machine in less than half an hour.
Nah that's pretty unlikely. No leveraged trades/options/derivatives without some kind of accredition + a max order limit based on proof of funds/ income could happen, though.
I suspect there are a lot more stories like this, but since WSB seemed to prey on young, media-hating introverts they just never came forward.