Day trader army loses all the money it made in meme-stock era
May 9, 2022 7:00 PM   Subscribe

Nursing losses in 2022 that are worse than the rest of the market’s, amateur investors who jumped in when the lockdown began have now given back all of their once-prodigious gains. Famous names from the height of the frenzy are nursing serious losses. AMC Entertainment is down 78 per cent since June 2021. It has lost 49 per cent this year. Peloton Interactive is off 90 per cent from its record.
posted by geoff. (47 comments total) 12 users marked this as a favorite
 
The inability of knowing when to step out is exactly why I do not do this kind of investing. I have a pretty good investment broker, actually. A thing I feel really weird typing or saying out loud, but yeah, he's making me pretty good money even when the market goes bad. He does the thing I can't do for myself, and yes please thank you.

I have a friend on twitter who got into the market about 8 months ago and who has been doing micro trading / day trading and been talking about it online. His tweets are mostly cryptic, but I get the impression he's making more good intuition choices than bad ones. So go him!
posted by hippybear at 7:12 PM on May 9 [5 favorites]




I wonder if google is gonna change its mind on its 20:1 stock split this July.
posted by NoThisIsPatrick at 7:28 PM on May 9 [2 favorites]


The inability of knowing when to step out is exactly why I do not do this kind of investing
I've been keen to get into trading shares for quite a while, but this very thing is what stops me. One of these days I'll get serious about figuring out how the whole thing works and give it a go.
posted by dg at 7:36 PM on May 9 [1 favorite]


The inability of knowing when to step out is exactly why I do not do this kind of investing.

No one knows. It's a game for morons. Hold fast to that knowledge.
posted by praemunire at 7:54 PM on May 9 [53 favorites]


"Traditional capitulation is typically marked by a quick de-grossing by hedge funds + systematic macro strategies, where positioning is already light,”

I hate business writing so very very much.
posted by Multicellular Exothermic at 7:54 PM on May 9 [53 favorites]


having turned of display of FPP titles since the day they were debuted, and dovetailing excellently with the post in front of this one (or is it behind [nothing is real {-∞} ] ), i honestly thought this was about personnel losses within the nursing field the first several times i read this
posted by glonous keming at 8:07 PM on May 9 [38 favorites]


🎶 Ooooh Las Vegas / ain't no place for a poor boy like me 🎶
posted by Fiasco da Gama at 8:13 PM on May 9 [4 favorites]


I wonder if google is gonna change its mind on its 20:1 stock split this July.

Since it’s current trading at $2250 a share, it’d have to drop a lot, lot more for that split not to make sense. That high of price causes all sorts of problems with liquidity.
posted by jmauro at 9:03 PM on May 9 [2 favorites]


Yeah, GOOG is that rare stock that's holding steady regardless of the rest of the NASDAQ plunging, let alone these memestocks.
posted by Apocryphon at 9:33 PM on May 9


Never really paid attention to stocks until the meme stocks and the NFT baloney and just wow it's all just a pyramid scheme - and since I'm never going to be the guy with the special knowledge, I am out. Also LOL at the "diamond hands" needle at the end.
posted by turkeybrain at 11:07 PM on May 9 [1 favorite]


dg: One of these days I'll get serious about figuring out how the whole thing works and give it a go.

When you get there, remember three things:
* If you can't spot the chump in the deal, it's you.
* Over half of last year's human led funds lost money -- almost like it's random -- with professional economists, business experts and claimed-savants underperforming funds which match the make-up of share indices like S&P-500, Nasdaq and FTSE-100
* For study, read Liar's Poker, Flash Boys and The Big Short by Michael Lewis, and understand the mechanisms of pump-and-dump grifts and the family of ripping people off.

Good luck, and here's a joke about economists:
Two economists were walking through the city centre and one of them spotted a $20 bill on the ground. They walked on and the other economist says "Hey, wasn't that a $20 on the floor? Why didn't you pick it up?"
"Can't be," says the first economist. "There's 'no unrealised gains', so if there was $20 loose on the floor, someone would've picked it up already."
posted by k3ninho at 12:38 AM on May 10 [29 favorites]


I managed to get into AMC and out of AMC at the right time. Never bought the hype "we're gonna bankrupt hedge funds because naked shorts ?" garbage but had just enough spare brain cycles to attend to my phone for a few months. All told ended up taking about 12k in profit off of a 700 dollar purchase. This let me avoid COVID from May - November 2021 by not working.
posted by lazaruslong at 12:49 AM on May 10 [9 favorites]


My stonks are worthless?
posted by maxwelton at 1:20 AM on May 10 [2 favorites]


hodl.
posted by chavenet at 1:28 AM on May 10 [4 favorites]


* For study, read Liar's Poker, Flash Boys and The Big Short by Michael Lewis, and understand the mechanisms of pump-and-dump grifts and the family of ripping people off.

And also Where Are The Customers' Yachts? by Fred Schwed
posted by chavenet at 1:29 AM on May 10 [3 favorites]


The inability of knowing when to step out is exactly why I do not do this kind of investing.

If the market really starts to move down, and your 50 share sell order along with ~200 others of a similar size all come in 2 hours ahead of a 10,000 share sell order from a big institutional investor, whose order do you think your broker will process first?
posted by jamjam at 1:31 AM on May 10 [3 favorites]


I've been keen to get into trading shares for quite a while, but this very thing is what stops me. One of these days I'll get serious about figuring out how the whole thing works and give it a go.

No one knows. It's a game for morons. Hold fast to that knowledge.

TLDR Investing 101 - I keep saying that investing should primarily be viewed as a form of risk reduction (like insurance) - not as a way of making a quick buck.

Putting all your money into a single asset type (cash) in a single currency is not a zero risk investment strategy. You are exposed to inflation risk (reducing the value of your assets), interest rate risks (reducing the yield of your assets) and currency fluctuations.

People should invest the way corporate finance teams in large companies invest their spare cash. They're NOT trying to make a quick buck by speculating on metals or oil prices. The company will focus on their main "job" - manufacturing widgets, for example - and their corporate finance team figures out how to best protect the value of their assets by minimizing their risk exposure.

In the same way, you have your main "job" - say you go to work at an office and earn a salary. Your "investment" of your excess cash should likewise not be about making a quick buck by speculating on metals or oil prices, or the latest cryptocurrency trends - it should be about diversifying them to reduce their risk exposure.

By spreading your assets among several classes - property, stocks, global investments (to reduce over-exposure to purely domestic assets) - this will insulate you to some degree from any unexpected shocks to the economy. The point isn't to make super high returns, the point is to tether yourself to multiple parts of the economy and commit to rising and falling with them in tandem to avoid the probability that the any one single thing you tied your wealth to suddenly wipes you out. Putting 100% of your wealth in your bank account is just as bad as putting 100% of your wealth into a single house, or 100% of your wealth into Tesla, but if you did a roughly even split between short / long term cash deposits, index funds in domestic / overseas markets, and property, you'll sleep a lot better at night no matter which direction the economy moves, up or down.

If someone asks me how my investments are going I kind of go, that's not the point. Stocks and property have returned absurdly higher returns for me than cash over the past 15 years, but I would have been equally happy if they had broken even or even declined in value by 20%. I am equally pleased by the market moving upwards or downwards - upwards means the economy is doing well and I get higher dividends / rental yields, downwards means I can buy more of those assets at a discount.
posted by xdvesper at 1:53 AM on May 10 [20 favorites]


I can't stop seeing this as losses in nurses.
posted by bendy at 2:05 AM on May 10 [13 favorites]


I've been keen to get into trading shares for quite a while, but this very thing is what stops me. One of these days I'll get serious about figuring out how the whole thing works and give it a go.

Just take your physical money out back and light it on fire. In either case it'll all be gone, but at least this way you'll get some warmth out it.

(I'm not anti-market, but anyone who thinks they'll beat the market over the long run by trading individual stocks has an excess of ignorance or arrogance. Just buy index funds and hold them for as long as you can. Own the whole market.)
posted by NotMyselfRightNow at 2:55 AM on May 10 [5 favorites]


>>>>The inability of knowing when to step out is exactly why I do not do this kind of investing.

There are warning signs, very high PE ratios (Amazon and Facebook were sitting on PE ratios of more than 100)
Rising interest rates and inflation.
Multiple financial sectors showing more than 10% growth a year. (sharemarket up, houseing market up, high gdp grower)

However things have been very hard to call since the Global Financial Crisis.
Quantitative easing has made it impossible to know the real value of Government Bonds as the Federal Reserve seemed to be the main buyer.

To quote Maynard Keynes; "the Share market can be wrong longer than you can wait to be right"
posted by Narrative_Historian at 3:04 AM on May 10 [5 favorites]


Once again everyone is focusing on the stonks and ignoring the bronds
posted by phooky at 3:57 AM on May 10 [15 favorites]


I pulled this in full because it's great in many ways even though I'm about to disagree with it:

TLDR Investing 101 (like insurance)..this will insulate you to some degree from any unexpected shocks to the economy. The point isn't to make super high returns, the point is to tether yourself to multiple parts of the economy and commit to rising and falling with them in tandem to avoid the probability that the any one single thing you tied your wealth to suddenly wipes you out. Putting 100% of your wealth in your bank account is just as bad


(1) I think the poster knows this, but insurance works very differently, almost the opposite, from market investing. The point of insurance is that you don't know when something will break and the insurance fills the gap when it does. In the opposite way, your investments/savings you sort of know when you're likely to need to convert them for retirement or funding college or whatever...but you don't know if your timing will be good or if you'll be forced to sell into a down cycle. This makes it sort of a shit plan for the average 'investor'. Granted, I'm not trying to trivialize the risk of holding in a bank account/mattress/house.

(2) Diversification is sort of over, isn't it?

In the 80s you could say that 'financialization is accelerating'. These days I think you'd have to say that financialization is complete. The combination of excess global wealth looking for a place to 'mature', the speed of transactions and the size of the hedge/dark markets means that market fundamentals matter less and that things that used to be more reliably counter-cyclical aren't.

No one knows. It's a game for morons.

(3) It's worse than this, though, isn't it? Wasn't the whole point of stuff like Big Short and Lewis' book that it's not even a fair coin flip, it's a heavily weighted against you flip? Institutional corruption should not be a niche position anymore.
posted by Reasonably Everything Happens at 5:17 AM on May 10 [7 favorites]


If the market really starts to move down, and your 50 share sell order along with ~200 others of a similar size all come in 2 hours ahead of a 10,000 share sell order from a big institutional investor, whose order do you think your broker will process first?

Casual response: yours, because all small lot orders are processed electronically these days and books are deep enough to fill them instantly.

More in depth response: Yours AND the 200 others of a similar size, because they are generally uncorrelated with each other and have low information content. As a gross generalization, market makers (as opposed to take positions and hold them) generally try to make a bit of money on every trade - they'll buy for 100 and sell for 100.10, that sort of thing. So if there's 200 orders from a bunch of customers, in general two things are true: it's a mix of buyers and sellers, and the customers don't know anything in particular. If the 200 orders are an even mix of buyers and sellers - and there are always buyers - it's actually risk free to fill those trades.

On the other hand, a 10,000 lot order from an institutional investor is likely higher information content (they know more) and riskier, so filling it will push the market down and require the market maker to actually have more of a position then they'd likely want.
posted by true at 5:56 AM on May 10 [4 favorites]


The institutional investors are WAY ahead of you. Big institutional orders almost never hit the market directly. There’s a whole ecosystem of flow internalization, where the more active trading firms directly take the institutional flow, and then trade out of it more actively. At least in civilized countries this doesn’t happen entirely behind closed doors, any such trade does get publicly printed through (in the US) the Alternate Display Facility (ADF). The report is required to be reasonably timely, but that’s still just within a couple of seconds, and when it happens it’s required to be at or better than the national best bid or offer (NBBO). Sorta. Mostly. It’s complicated.

It is not the naked exploitation you might think, but it isn’t entirely innocent either. Pretty standard evolution of the market: don’t be ridiculously nasty to the point of pitchforks, but also be subtle about it so by the time the whole scheme is explained to the peasants, they’ve gotten distracted and wander off.

Note: I work in electronic trading professionally, this requires a lot of cognitive dissonance on my part. It pays the bills, but my hands aren’t clean.
posted by notoriety public at 6:45 AM on May 10 [20 favorites]


Totally unrelated I'm sure, TerraUSD, a crypto "stablecoin" (lol) that's supposed to, for totally logical and not made up reasons, be pegged to $1, dipped to $0.69 yesterday amid what is obviously a collapse/bank run (for some reason the liquidity to cash out really dried up when people actually tried to sell it; weird, huh?). The drop was only partially reversed when for some mysterious reason the totally decentralized but actually pretty central banking operations skimming the crypto ecosystem stopped allowing sales and/or stopped letting people sell it for less than $0.70.

You'd almost think that the majority of what's going on in financial markets and wannabe-financial-markets is just a bunch of gambling addicts and conmen playing chicken with one another.
posted by a faithful sock at 6:46 AM on May 10 [6 favorites]


I don’t remember who said it originally, but a phrase that goes around the office is “crypto is an exercise in speed running the entire history of financial regulation”
posted by notoriety public at 6:52 AM on May 10 [24 favorites]


At least they've progressed through Rai stones to wildcat banking and they keep trying to make crypto central banking a thing. So we're at, what, 1900?
posted by Your Childhood Pet Rock at 7:09 AM on May 10 [2 favorites]


Crypto is defining the bleeding edge of unsustainability.

At least I could grow more tulips without using an inordinate amount of energy to do so.
posted by Sphinx at 7:16 AM on May 10 [5 favorites]


Oh dang. I bought $10 of AMC back in the heady days of Gamestop, and it got as high as around $30, but I haven't even looked at it in many months. So much for my plans of early retirement.
posted by Rock Steady at 7:21 AM on May 10 [1 favorite]


If the market really starts to move down, and your 50 share sell order along with ~200 others of a similar size all come in 2 hours ahead of a 10,000 share sell order from a big institutional investor, whose order do you think your broker will process first?

It’s all electronic so yours will be processed long before the 10,000 share order comes though. Also 10,000 shares is still a very small order. Also, floor trading is mainly for show, especially post-COVID. All the US exchanges went electronic in the early 2000s.
posted by jmauro at 7:33 AM on May 10


(1) but insurance works very differently, almost the opposite, from market investing.

Thanks for the comments! I guess I was being loose with a laypersons definition and did not elaborate enough, but I'm basically straight out thinking of how it's all a natural hedge.

If petrol costs are significant annual expense, why not have some fossil fuel stocks in your portfolio - your wallet is suffering at the pump nowadays, but it's offset by the fact the companies you own are earning huge profits. The same way buying a house is a hedge against rising rental costs. Your lifetime expenses are fixed, why not build an asset mix with yields that partially matches it

Of course, if you need money in 3 years time for college, you're better off holding cash. If you're looking at buying a property in 7 years you might be better off sticking some of that money in REITs for awhile rather than holding cash. There's an inflection point between the two situations which will trigger the invest / not invest decision.

(2) Diversification is sort of over, isn't it?

I sort of think of it like the bear story, you don't have to be faster than the bear, just faster than the slowest guy in the group. There is still benefit to diversification - you still get some protection from a localized wipeout of individual industries or regions that would put you ahead of your peers who weren't diversified as well as you were. This advice is more relevant to people in developing countries - there have been periods where the stock market index got wiped out by 85% in a single year, where the currency fell by 50% in months.

I don't think you need something to be literally counter-cyclical, just, even operating at different time-scales can be a good buffer - real estate / rental yields for example, aren't so immediately linked to the rise and fall in the Nasdaq, and while global markets take their cue from the US stocks in the short run they are correlated more with their domestic economies in the longer run.
posted by xdvesper at 7:37 AM on May 10 [2 favorites]


It’s all electronic so yours will be processed long before the 10,000 share order comes though. Also 10,000 shares is still a very small order. Also, floor trading is mainly for show, especially post-COVID. All the US exchanges went electronic in the early 2000s.

If it ever reaches the exchange. Most brokerages these days involve Payment for Order Flow. This means that the buy and sell orders get sent straight to the market maker instead of the exchange. The market maker can then sort through the orders and match them up most profitably for the market maker, not the individual investor.
posted by Your Childhood Pet Rock at 7:40 AM on May 10 [5 favorites]


For the average retail investor <$10,000 is basically an expensive trip to Vegas. Market makers, institutional investors, momentum investors, people running up against the speed of light as a limit to how fast they can process orders, all sneeze out that much every nanosecond.

Comparing retail investors to a trip to Vegas actually makes meme investing and WSBs appealing and maybe profitable. Looking at it as a get rich quick scheme or a retirement fund is not looking at this in the right light.
posted by geoff. at 9:31 AM on May 10


The impact on finacialization of crypto, which is responsible for at least its last doubling (if not more) was certainly fatal to the idea that it can be used for diversification; it's behaving now as though directly correlated to NASDAQ growth stonks.
posted by snuffleupagus at 11:32 AM on May 10


I can't find the exact wording, and the analogy isn't perfect, but I was struck by this argument: "If you want to play in the NFL, you have to start by being naturally much bigger, stronger, and faster than the average person. Then you have to practice, for say a decade or so for at least 20 hours a week, following the guidance of excellent coaches. Then work closely with 50 other people who are just as good as you and under the guidance of still more coaches, and you might succeed. But you know that if you are just an average person who steps on the field, you will be crushed. So what do you think will happen if you try to outbet the investment banks and hedge funds and other professional investors, who have all the time, money, and experience in the world?"
posted by Mr.Know-it-some at 11:55 AM on May 10 [1 favorite]


Bought 1 QQQ today, guess I'll do that every month. I like that list of stocks more than any hand-curated boutique ETFs.
posted by Heywood Mogroot III at 12:09 PM on May 10 [1 favorite]


So what do you think will happen if you try to outbet the investment banks and hedge funds and other professional investors, who have all the time, money, and experience in the world?"

Individual stocks really aren't that zero-sum. A regular person can make money and big corp can make money, both can lose, or any combination of the above.

It's just that it's not particularly all that lucrative for a regular person unless they have huge amounts of money that they can pour in, hopefully in a diversified fashion so they aren't betting their entire life savings on how well Gamestop does, so they can play small, safe moves.

But most individuals don't have that much capital so they need home runs to make any money at all. Nobody wants to invest $10k+ in the hopes to possibly make $100-$200 dollars a week. Plus that turns into a regular job that's got a lot of stress riding on it.

That's why a trip to Las Vegas is a pretty good metaphor. You might be able to make a bit of money playing nothing more than the Craps pass line, but that's not actually very much fun.
posted by The_Vegetables at 1:47 PM on May 10 [4 favorites]


It was worth it. Sure, I’d rather have gotten out 10K ahead like I could have a few months ago. Now I’m back to where I started, with AMC trading just a dollar above where I bought it and GME not much better. I never invested more than I could afford to lose, which I realize is a significant privilege, and I probably will lose it.

But man, I’d do it all over again. Never in my life felt euphoria and mania like I did that day in 2021. And feeling like we were really doing something, part of a bigger social movement that might also somehow get us rich quick - completely intoxicating. Oh well. Nothing lasts forever, not even diamond hands.
posted by stellaluna at 10:19 PM on May 10 [4 favorites]


Never in my life felt euphoria and mania like I did that day in 2021. And feeling like we were really doing something, part of a bigger social movement that might also somehow get us rich quick - completely intoxicating.

We're all susceptible to these feelings, but, for the sake of your retirement funds, I hope that with the passage of time you can reflect and see how this meant you were being hustled. What you did was make money for a slightly different set of financial intermediaries than usual. Gambling, while it definitely can be fun, is risky enough without persuading yourself you're saving the world at the craps table.
posted by praemunire at 7:24 AM on May 11 [3 favorites]


I mean, I think many people, including myself, knew and understood that it was gambling? It’s literally called r/wallstreetbets. Gambling with stocks or with craps isn’t any different, morally, than going to the movies or any other discretionary consumable entertainment activity that costs money. As with all gambling, if you only play with what you can afford to lose, I don’t see the harm. For me it was a ray of light in a dark time - January 2021, anyone? - and fun as hell while it lasted.
posted by stellaluna at 8:25 AM on May 11 [3 favorites]


Yes, at the time the healthiest way to think about it was like buying a pass to a seasonal festival. But even if you went in that way, it was very easy to get caught up and carried away expanding or defending a position; or start getting into more serious but still ultimately losing trades promoted by various 'educators' or more serious but still totally amateur 'investor communities.' I saw lots of people do that.

It was all very interesting to watch, and I definitely learned a ton about investing and financial markets and derivatives, but the clearest lesson is that as an individual investor if you're not going to just invest through larger funds (mutual funds, ETFs, etc) or pursue a very conservative dividend-based strategy, you're going to do better trying to ride the coattails (or gather the crumbs) of the big players as they move the markets, rather then trying to beat or predict them or think you're going to find 'alpha' they're missing.

And as others pointed out, trading on daily market fluctuations can be done but requires acquired expertise, and is a ton of work and stress to produce a very modest return over what you'd get from investing in a market index fund unless you have a whole lot of capital to work with (and at that point the boring dividend stock strategy starts to look pretty good projected over a lifetime).

I think buying and holding shares (or LEAPS) in a few companies of personal interest is reasonable, especially if you can be disciplined about taking profits when they happen, but most retirement savings should go into diversified funds; which is the same ultimate advice I've heard given all my life, despite all the changes in the economy and financial markets over the years.
posted by snuffleupagus at 8:50 AM on May 11


Look, if you don't ultimately understand the risk of associating words like "euphoria" and "mania" and "intoxicating" with gambling of any sort, you're a grown person and it's your own business. Just be prepared for the day you're on the phone with a lawyer at a regulatory agency or a class-action plaintiff's-side firm trying to explain why you fell for an even stupider story and lost more than you could afford to lose (which you won't get back, after two years waiting on the regulatory agency to do something). And...stay away from Vegas, too. Everyone always thinks they're only going to play with what they can afford to lose. The euphoria, etc. is what makes you lose more.

Gambling with stocks or with craps isn’t any different, morally, than going to the movies or any other discretionary consumable entertainment activity that costs money.

I mean, you literally do not understand the difference between zero-sum activities and ordinary exchanges of value for goods or services (you seem to be under the impression that the money you briefly made made itself and did not come from someone else's pockets?), so you don't even understand the nature of what gave you that euphoria. This is just a dangerous mindset for people who aren't, as they say, very comfortable indeed.
posted by praemunire at 11:52 AM on May 11 [2 favorites]


I would love to hear a mefite's perspective here on the whole r/wallstreetbets craze without also reading condescending and insulting comments from people with an axe to grind. If someone came here to reminisce about how exciting and ultimately pointless their Beanie Babies phase was you probably wouldn't feel the need to repeatedly try to make them feel like shit. Would you be happier if they prefaced it with "I'm a gigantic idiot"? How many times can someone make the same point?
posted by cakelite at 11:58 AM on May 11 [6 favorites]


>money you briefly made made itself and did not come from someone else's pockets

share prices are abstract and do make themselves. Only when the sell button is pushed does the money transfer occur from buyer to seller.
posted by Heywood Mogroot III at 12:13 PM on May 11 [1 favorite]


Praemunire, are you ok? It’s alright to take a step back if this topic hits too close to home. Your assumptions and assertions about me are becoming uncomfortable and disproportionate.
posted by stellaluna at 1:11 PM on May 11 [1 favorite]


OK, stellaluna, I don't mean to be excessively cranky at you, and I apologize. My professional circles spend a lot of time dealing with the aftermath of people making foolish financial decisions because of the lure of the euphoria, etc. It's generally a sad story and there's usually not much to be done afterwards; the money is long gone.
posted by praemunire at 1:40 PM on May 11 [1 favorite]


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