[awb]

OK, but who are we protecting here? Someone who reads a social media post and makes an investment without doing any due diligence?

That's 90% of WSB, seeing a ticker and rocket emoji and YOLOing into the latest stock because someone said it was going up. Why is this different?

And these are OTC, pink slip stocks. Most major brokerages don't carry them and people who trade them know they're investing in distressed companies with low liquidity.

Sure, go after the pump & dumpers, but it's not clear what the criteria is for halting trading on a stock.

Risk is inherent in any investment. Don't invest what you're not willing to lose because you could lose everything. Your investment can always go to 0, wether it's in stocks, bonds, real estate or a business. And don't invest in what you don't understand.

[phire]

The goal of the SEC is to ensure confidence in the stock market, to protect the stock market and the whole economy in general.

They were primarily setup to avoid another great depression. They are operating under the assumption that the great depression was caused by a general loss of confidence in the stock market (and other types of investments) and that if they insure confidence, it will never happen again.

They don't really care if an individual investor loses money.

But pump&dump schemes prey on inexperienced noob investors and are very effective at pulling all their money away to experienced pump&dumpers. The SCE are worried that many noobs will experience such a scam and decide that investing isn't for them. This deprives the sock market of funds which the SEC considers bad.

As for GME and WSB... well the SEC are in a bit of a tough spot.

In general the SEC wants the stock price to match reality, and WSB's short-squeezes are clearly violating that. But if the SEC does anything to drive the share price back to normality then it looks like they are siding with big hedge funds and that really reduces the confidence of retail investors.

I suspect they might eventually enforce a technical solution which provides live updates to the current status short positions. Such updates will mean that short squeezes can operate on the actual intelligence of short positions, rather than the wild speculation they are currently operating on. On the flip side, shorters will use the live updates to know when they are at risk of a short squeese.

[lilott8]

So is what they're doing some sick joke? I doubt people couldn't care less about the damage done by functionally worthless companies. People are pissed at the perception of manipulation by wall street. This is hilariously myopic. People aren't upset about losing money. They're upset that the game _looks_ (and ostensibly is) rigged. That is where all the lack of confidence stems.

[oarsinsync]

> People aren't upset about losing money.

I’m sure this is true for a minority of participants in the stock market, and I’m sure this is true for a minority of retail investors.

I don’t believe for a second that this is true for a majority of retail money in the market. Most people care very much about losing money.

Just because there’s a bunch of noisy people making news about YOLOing their savings away, doesn’t mean they’re the majority. They’re just noisy and newsworthy.

[devin]

Nailed it. The people upset by minor regulatory intervention to ensure fair markets are as ruthless as anyone in this equation, but they play the victim. If you knowingly manipulate the price of garbage stock for personal gain, you're not a victim, you're an asshole.

[simonh]

But, but, but they're restricting their freedom to be assholes and their personal liberties to do asshole things to people!

[eru]

> The goal of the SEC is to ensure confidence in the stock market, to protect the stock market and the whole economy in general.

Well, that's the official goal.

In practice, public choice theory suggests some additional motivations.

[tarsinge]

That make sense as a mission but that announcement alone will have the opposite effect. The last few weeks proved a lot of people that the game is rigged against retail investors. The is not what is needed to restore confidence, and stop the move to crypto.

[xyzelement]

In general I am with you - invest at your own risk.

That said, having read WSB for the last few weeks as someone who's actually versed in trading and finance, it was like reading a nutrition forum where people told each other how delicious and healthy lead is and how they couldn't wait to eat more of it (if only they weren't feeling so sick.)

So IF there's room in our society for the government prohibiting lead in the food because yes, plenty of people are that stupid, there's something here - though I think these people would find some other stupid thing to lose their last dollar on.

[awb]

I'm not sure I'm on board with that lead analogy because everyone's investing goals are different.

I'd say WSB encourages highly volatile, short-term investments. For most people that's bad advice. For others, they'd much rather be broke or a millionaire than wait 40 years for their savings to steadily accumulate into a reasonable nest egg.

[retsibsi]

It's not just the goals, it's the reasoning. There are highly upvoted advice posts that are transparently illogical and/or based on factual errors.

[Ntrails]

I popped on at the height of the turn to see multiple posts about a "short ladder attack", a concept that exists nowhere except in the echo chamber of WSB.

The groupthink levels are enormous and frankly terrifying

[ikiris]

lead is a great analogy here because its a sweetener.

[mtnGoat]

Maybe if we let the speculators take the hit of losing it all when playing these games, they’d stop playing. But instead we stop it from happening and prevent the hard lesson from being learned.

[SpicyLemonZest]

I think you're severely misreading the history here. Most of the constraints on our modern financial system, including the SEC, were built after the Great Depression to try and prevent it from repeating.

[tarsinge]

Just in case the speculators here are the over leveraged hedge funds on the short side.

[simonh]

If they lose it all, they don't have anything left to play with and now society has some new destitutes to support. People losing everything imposes costs on everyone else, so it's in all of our interests to put up some guard rails.

[midasuni]

Same reason we ban people going to Vegas

[dgfitz]

2008 agrees with you.

[laurent92]

2008 is about people investing in AAA funds which contained subpar stocks, often fraudulently.

2008 is about mortgages given to people who didn’t even have the money to rent a house, with a variable interest based on market conditions.

GMS is about a hedge fund (a fund who uses market volatility to extract value, i.e. not producing value, just taking it from other investors), getting short-squeezed because they are immensely unpopular with the mass of the citizen, due to their shady business practices, and those citizen don’t care about taking money since it is about taking revenge. The desired outcome is that hedge funds cease business, and sticking it to perceived wealthy people, hoping to make the business of hedge funds unreliable and risky. One should wonder whether the SEC shouldn’t weigh on the consumer side and make stock markets atteactive to the lowly again. Otherwise stock markets are just an exclusive tools to make the rich richer again (not that I mind — I ended up in the rich side, but wealth is clearly not correctly distributed).

I’m not a fan of this practice but investing in an arbitrage fund or hedge fund is for wealthy companies/individuals who can afford to lose money or win big; It is an entirely separate market from index funds with long-term investors expecting AAA reliability.

[tekknik]

> I’m not a fan of this practice but investing in an arbitrage fund or hedge fund is for wealthy companies/individuals who can afford to lose money or win big;

Or, you know, companies that want to hedge. This idea that hedge funds are pure evil is getting a bit old, should we all cancel all insurance?

[Const-me]

> This idea that hedge funds are pure evil is getting a bit old

Why? Aren't they useless?

https://www.forbes.com/sites/mitchelltuchman/2013/07/18/hedg...

[dmix]

WSB has bets in the name and frequently points out that fact in various threads.

[mschuster91]

> That's 90% of WSB, seeing a ticker and rocket emoji and YOLOing into the latest stock because someone said it was going up. Why is this different?

WSB bans discussions, even mentions (by autobot) of pennystocks and crypto coins.

[fortran77]

Exactly. You have to go out of your way to invest in the "pink sheets." And it's probably a good idea to make sure unsuspecting "investors" know the risks and common scams associated with these.