It’s interesting how that idea has been around for so long - it wasn’t new when A Random Walk Down Wall Street came out in the 1970s - but there’s a never ending supply of people who think they can beat the odds and investors who want to believe.
The crazy thing is, /r/wallstreetbets is fully cognizant of this fact. They just do it anyway for the lulz. They egg each other into increasingly degenerate highly risky options trading, and huge losses are lionized just as much as huge gains.
> Unless the market can remain bored longer than institutional investors can remain solvent...
Don't let nit-picky facts like that institutional investors control substantially more capital than retail investors get in the way of a good narrative.
Tell that to all of the institutional investors that have lost money shorting Tesla.
No, there is no good reason for Tesla to be valued the way it is - but there is no shortage of people willing to buy it without putting too much thought into the price, either.
Tons of good reasons. My model says $TSLA should be $1,000 a share and is undervalued. It should be there for March and even earlier. $5,000 in a decade.
It was also difficult to implement in a practical way for most people. While mutual funds (SICAV in EU, OEIC in UK) have technically been around since stocks have been around, implementing an index-tracking fund needed (a) indexes to be invented, and (b) computers to be able to do data processing:
Perhaps the Dow Jones was small enough of an index to keep track of manually, but things like the S&P 500 would have been harder (never mind the Russell 3000 or total market):
You are talking about a different issue (correlation between the stock market and the economy). The person you are replying to is talking about active versus passive investment (i.e. betting on individual stocks to beat the market rather than investing in total market index funds)
If you get lucky gains starting out doing riskier things like WSB does, you might be more inclined to keep that style until you take some losses. And if you're swept up in WSB's fun, you'll probably end up taking more losses. WSB is basically an accelerant for investing psychology.
Sure, but what does that have to do with the pandemic or the current state of the economy? It will always be true that active investors are more likely to get "lucky" gains than passive investors. The allure of gambling isn't going to suddenly go away once the overall economy stabilizes.
I think the key disagreement here is that you don't agree that a stock market staying high during a pandemic due to government intervention would attract more active investors, and those active investors can make less mistakes because the stock market was staying irrationally high.
And if you're just a regular wage earner with some cash, seeing the labor market being dropped on its head, maybe this stock market thing might be a good idea to try. I mean, some people definitely bought stocks with the $1200 stimulus check. Getting into the stock market (which ended up doing unreasonably well) was a way to hedge against losing your job (which you had a higher likelihood of losing).
Did active investors do significantly better, or did they just benefit over the short term from massive government efforts like everyone else? The real test of the market will be if Biden wins and all of the Republican “deficit hawks” wake from the coma they’ve been in for the last 4 years.
I would say it’s far too early to draw conclusions about the pandemic stock market, and certainly to say that an observation which has generally been supported by data for the last century or so is no longer valid.
