[BaseballPhysics]

Eh, frankly, I think that does a disservice to the people buying the stock.

Were a bunch of people buying into the meme stock hype? Sure.

Does that make them financially illiterate?

Well, the folks who bought Hertz sure look pretty damn smart in hindsight even though at the time they were being described in similar ways, so... who's to say if they are illiterate or just have a different view of value and risk?

[dragontamer]

You can be right for the wrong reasons. You can be wrong for the right reasons. You can be right for the right reasons, you can be wrong for the wrong reasons.

The problem with being "right for the wrong reasons", is that your logic fails to apply to future situations.

The "wrong reasons" in this case, is the obvious ego-tickling / ha ha the other people were wrong that's obviously intrinsic to the gambling / meme stonk trading culture. I'm sure it feels good when you're right for the wrong reasons, but I don't think it leads to long term success. ("Royal You", not you in particular, if you don't mind).

But yes, it does feel good to be a contrarian and win due to dumb luck. But I'm not sure how many times "Hertz" situations will pop up in the future. I think this ego-tickling / contrarian mindset is at the root of this behavior, at least based on the discussions I have in my social circle / meme stock traders I'm aware of.

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There's also "wrong for the right reasons", which is my preference in general. You generally want to be wrong today, if it means that your logic holds for most future cases.

[jraby3]

A simpler way to say this is you can have a correct bet and a bad outcome and an incorrect bet and a good outcome.

If I were to offer you $1 for heads and $3 for tails and you chose heads and lost, I’d win the bet but it’s still a bad bet.

[lcnPylGDnU4H9OF]

Sounds like I was wrong for the wrong reasons too. (I lose the bet and it was a bad bet.)

[rchaud]

> who's to say if they are illiterate or just have a different view of value and risk?

When their opinions come exclusively from an echo chamber, there's effectively no difference. Visit r/BBBY and you'll find plenty who are ready to hold the stock all the way through BK.

[0x457]

I mean...those people call themselves degenerate gamblers. It's precisely what it is - a gamble. Premium for calls is cheap, so dumping some cash into $1 calls was basically free.

There are some examples that aren't gambles - Movie Pass, you have to be not just financially illiterate, you have to be illiterate to invest in it.

BBBY is probably just Hertz FOMO though.

[jandrese]

Just because a risky behavior works out sometimes doesn't make it any less risky.

[BaseballPhysics]

I never said it wasn't risky.

I'm saying it's unfair to assume it's proof someone is "financially illiterate", i.e. uneducated or stupid.

Educated people can have different assessments of risk.

[dragontamer]

BBBY was publicly in default in December 2022 (and this was announced to the world in January 2023), and their plan to get out of it was to print hundreds-of-millions of shares and sell it to the APES to raise money a-la AMC.

As much as the APEs want to compare this even to Hertz... Hertz wasn't printing hundreds-of-millions of shares in its troubled time in 2020. (They tried to, but unlike today, a judge shut that attempt down).

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So on the question of "what if the apes just pump the stock up and everyone makes money?". The "financially literate" counter to that question is rather simple: how can the stock price go up if the board of directors is printing 600,000,000 new shares? (Note: BBBY only had 117-million shares in December).

If the stock price fails to go up, why would the apes keep investing? If the apes fail to invest, how does BBBY get out of its default with JP Morgan/Chase? And here we are today, with the formal bankruptcy being filed. It was an attempt (IMO, an immoral attempt) to get money, but it did raise ~$700 million from the apes. But that's not enough to rescue BBBY.

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Now this is where Hertz did well by the way, after the bankruptcy. If you really want to gamble "like people did with Hertz", today is the day, post-bankruptcy filing, that you start sinking your money into this stock. I don't recommend it though.

[itsoktocry]

>I'm saying it's unfair to assume it's proof someone is "financially illiterate", i.e. uneducated or stupid.

Assume, sure. But you could follow along on Twitter or StockTwits and see why many of these people were buying Hertz. That's the beauty of modern times. I certainly didn't see many doing risk analysis, it was mostly "Burn the shorts!".

And, many people bought all the way down from $20 to get an $8 payout.

[steveBK123]

Yes it does.

Just because someone does inevitably win the lottery does not make lottery ticket buying financially literate & savvy.

[BaseballPhysics]

It's ironic that you make that comparison, as a lot of very very financially literate people buy lottery tickets because they know they're taking a risk, they know the probabilities, and they still do it because it's fun.

For the same reason, some of the most brilliant minds out there gamble on games of chance, or engage in sports betting, or other high risk activities.

Just because someone takes a risk that you would not take, doesn't mean they're financially illiterate, and certainly you are not in a place to judge one way or the other.

Edit: And as an aside, I can speak to this with some personal experience, as on a lark I threw a bit of money at GME back in the day. Not a lot! Certainly no more than I could afford to lose (and I assumed going in that I would lose it). It was a rollicking good time as I followed the hype cycle on Reddit and whatnot. And in the end I 5x'd my bet.

I don't for a second believe that was anything but dumb luck. And you won't find me running around finding new meme stocks to chuck money at. But I certainly enjoyed myself!

So does that make me financially illiterate?

[dragontamer]

No. It makes you a gambler.

And gamblers don't usually make money, because they're in it for entertainment rather than making money, saving money, or providing for their families.

Believe it or not, investing is an activity that, under the correct circumstances, leads to the benefit of the investor, the company, and the economy in general. I personally seek this behavior that's beneficial to society in general (and its non-zero sum: I trade liquidity that I have today for the promise of modest future gains). Like 5%/year (aka, the current FFR / risk free rate) to 15%/year on the riskier bets on good years.

People looking for returns much larger than 5% to 15%/year today are gambling. That's just not the speed at which companies grow, so you're betting that other people have undervalued a company, or you're betting on a "Greater fool" swooping in to rescue you. You're not betting on the underlying mechanisms that lead to economic growth.

[BaseballPhysics]

> Believe it or not, investing is an activity that, under the correct circumstances, leads to the benefit of the investor, the company, and the economy in general. I personally seek this behavior that's beneficial to society in general

That sounds very noble.

Of course, the reality is the vast majority of people trading financial instruments do it for one reason: to enrich themselves (or, in this case, to entertain themselves). Everything else is a side effect as a consequence of regulations creating incentives that lead to socially constructive outcomes.

> so you're betting that other people have undervalued a company

That's... kinda the entire point of active trading.

I personally don't believe it. In general I'm an efficient markets guy. But there are a lot of active investors, including mutual funds, hedge funds, etc, that operate exactly on this principle.

[dragontamer]

> to enrich themselves

Yes. Because the underlying 5% to 15% gains due to general economic growth is one of the most reliable ways at building wealth in this country. It provides a service to companies who need money today for their expansion (through the IPO and secondary-offerings mechanisms). It provides steady, long-term growth to investors looking for a place to park their money.

Its not only good for the country, it is also a relatively reliable way to grow money for everyone.

Betting beyond this is unreasonable, and unlikely to make yourself any money. The $700,000,000+ sunk into BBBY this past 6 months is proof of that. (600-million shares at a bit over $1 per share, as BBBY's board of directors printed 600-million new shares to profit over the Ape's stupidity / gambling behavior). Throwing good money at a company that failed to make its bond payments in Dec 2022, while the Board of Directors is printing stock like no tomorrow is... well... its pretty bad.

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Look, if you're going to pretend that you were gambling on good odds or pretending to enrich yourself... at least choose a stock that wasn't so obviously eating the Apes alive for months. We literally can measure the amount of money that they lost by multiplying the secondary-offering prices with the number of shares printed.

[criddell]

> It provides a service to companies who need money today for their expansion (through the IPO and secondary-offerings mechanisms)

I get that issuing stock is a way for companies to raise capital, but once it’s out there, how does a company benefit when I buy 100 of their shares from you? Is it different than the used record or book market?