There's quite literally no difference between trading stocks and gambling.
Betting on sports matches, if you're doing it right, is probably more informed gambling than the stock market.
despite it being near completely random and volatile,
This is a neoliberal myth, fwiw. It's meant to scare individuals away from the idea of "economic value" existing as a real thing vs. "marginal preferences" and all that bullshit. It's also to scare you into buying financial instruments and trusting "financial experts"
Mr. Market is a moody bastard who needs therapy, but in the long run, stocks always trend towards their actual value. The volatility is short term noise caused by the fact that markets are not perfectly rational.
in the long run, stocks always trend towards their actual value
How do you determine what a stock's "actual" value is, independently of the market? There a thousand artificial and arbitrary actions and injections that deliberately shape stock trends and the market.
Because a "stock" is just a part share ownership in a business. It's value is based on the intrinsic value of that business. There's definitely an art to it as much as a science, and it's a long term trend. Unless you're a moron who believes in the efficient market hypothesis, price and value don't always match up but trend towards each other. Fundamentally, people aren't going to keep paying 30 cents for a quarter or sell a dime for 8 cents forever.
It’s value is based on the intrinsic value of that business.
Okay, so. How is the intrinsic value of that business determined? Is there a reliable formula? Do you then have any data to show that the market value actually trends towards the intrinsic value?
How is the intrinsic value of that business determined?
All kinds of ways :). Check our Benjamin Graham's work on this like "Security Analysis". It's based on a combo of expected business profits and the value of all
Remember a stock is a REAL THING. You are an owner when you own stock, even if you're just a trader. You own a piece of that business and its profits, assets, future profits, etc.
Do you then have any data to show that the market value actually trends towards the intrinsic value?
Do you have any data to show that the price of a quarter trends towards 25 cents? Ask Warren Buffett about how he made his money.
In his case, it was very easy because there were a lot of good deals back then. In particular, Buffet would target companies whose market cap was less than the book value. "Market cap" means "how much would it cost to buy all of the stock". "Book value" is how much all their shit is worth (land, factories, equipment). If the book value is let's say $1/share and the stock
It's more complicated than that now, but the "data" is the millions of rent seekers who earn a living in the same manner as Buffet.
Tesla will either crash, or there's insider shenanigans going on.
Prices trend towards intrinsic value in the long run. Prices can stay irrational longer than you can stay solvent, as they say.
So there’s no way to make money off of knowing that Tesla is incredibly overvalued because very rich people could just continue to sink money into it, keeping the price high for the foreseeable future?
Yes.
There's ways to make money, but there's an element of luck involved. It's like betting on a coin that you know has a 51% chance of coming up tails and you have to guess the over/under on tails out of 1000 coin flips
I feel like the markets have become so volatile that anything outside of penny stocks is just too risky for the average person
Middle class retirements depend on the stock market (401ks). The US government knows as much, which is why they are swift to keep the bubble propped up.
An index fund can certainly crash, but if it does, any cash you hoarded instead will also be worthless.
Ironically, the WallStreetBets people aren't gambling. They've got the hedge funds by the balls, and they know it. This is like a modern day wildcat strike.
Basically they're collaborating to force the hand of the hedge funds, independently without an organization. Hedge funds with short positions need to buy shares. They have a debt that has to come due. Everyday they don't pay, they pay interest on the outstanding shares. The higher the price rises, the more money the shorts have to pay in interest. The more they pay, the deeper the hole they get in and the more return they need from the eventual collapse.
By refusing to sell, the WSB guys are arbitrarily pushing the price higher and higher. The longer they hold the line, the more they force the hand of the short sellers. It's a classic "short squeeze", but it's unique because it's driven by retail investors instead of other hedge funds. It's just like how workers pushed to the brink can refuse to work and cost a business money, even if it means losing a paycheck.
Of course, the real winners are the ones the hedge funds are paying interest to.
And possibly whatever fund is paying Robinhood for trade info so they can front-run it with HFT.
Is there a reason why funds buy shorts instead of put options? Seems a lot risker
Unfettered Greed baby! "Haha infinite potential loss? That would never happen TO ME!"
Edit: more seriously, options come with premiums and can still lose you money even if the stock did in fact go down (i.e. You buy a PUT for $5, the stock is at $4 currently, but the PUT costs you more than $2 because there is a premium to pay based on a bunch of Greek alphabet astrology, so you'd only make money if the stock goes down to $3 or less)
On the whole, buying options is a losing proposition. Options were literally designed as insurance against unfavorable moves. What happens with insurance companies? They usually make a whole fuckload of money. It's those long tail, black swan events that wipe them out.
Its funny because neoliberal ideology fetishizes risk-taking and proliferates gambling everywhere
Ah yes, the revolution is imminent, it's not like there are a fuckton of worse contradictions just laying there, fucking thousands of people's lives every second.
Lmfao tfw reddit shitpost gamblers loose their money and flip a coin on whether to go fash or anti-capitalist
"Hey I'd like to trade in my copy of capitalism"
"Alright, sure. Looks like I can give you fascism, or $15 over the next 5 years if you go with in-store credit."
Meh, just look at the poor working class people who know they are shitted on and they just dream with being the one doing the shitting [insert Paulo Freire education quote]
ahh yes i cant wait for athiest capitalism that serves the interests of the people (after we make some money first of course) led by democratic (dictator) Elon Moosk and first lady Groimes
I can assume many people doing this know the system is designed against them and are doing this to "get back" at the big guys. Ripe for radicalization.
If I sold my share right now I would pocket 200 bucks, lol. Courtesy of the worst people on earth. In theory (not at all likely) these short sellers could end up having to buy back the stock for more money than exists in the economy. That's how bad of a position they are in if people hold the stock when they are forced to buy back. If I understand things correctly, they used a 3 billion loan to double down on shorts.
And if I sold now, in the time it took to writing all that, I would walk away with 300.
This is funny as hell. Just a totally logical investment.
Capitalism is the most rational economic system. That's why a company that is headed toward banruptcy faster than Blockbuster in the late 2000s has a share price of $375.
“I’m a retail investor!” I scream as I frantically purchase lotto scratchers from a vending machine.
"the poors are using our own tools to fuck over our dear hedge fund managers, how rowdy"
Look, Chumbawumba when you trade on Wall Street you're going to get knocked down, and you'll get up again. No one is going to keep you down.
Obligatory Chumbawamba are actually super duper leftist post.
I'm so sure this is exactly what the market is for I unironically cannot imagine another reason for the markets to exist. You put in some capital on an idea and you either win money or lose money on the idea.
What does she think the market is for?
