Tag: investing

Wall St. Is A Gambling Proxy

In mid March, when the US became woefully aware to the stark realization of the impact of the COVID-19 virus, we saw the major US stock markets take significant tumbles. The market took some significant dips in the days around St. Patrick’s Day, however they have since rebounded relatively steadily since. And what is interesting is what could be driving this investing activity, against the advise and wisdom of many a seasoned Economist:

In a…presentation to the Economic Club of New York, on Tuesday [May 12], Stanley Druckenmiller, a former hedge-fund manager who now invests his own money, said, “The risk-reward for equity”—that is, stocks—“is maybe as bad as I’ve seen it in my career.” And yet many small investors…do not seem fazed by warnings like these.

John Cassidy, The New Yorker

Over the past few years, many brokerage firms have substantially reduced, or outright eliminated, trading fees. While this has reduced the friction for any individual investor to enter the market and invest, the COVID-19 lockdown and the lack of sports may be having an unanticipated impact on market dynamics:

“It could be that it’s just a lot of people have a lot of time on their hands,” he said. “One friend suggested to me it is replacing gambling. The casinos are closed and there are no sports to bet on.”

For some active traders, this theory does seem to apply. “I like betting on sports,” Dave Portnoy, the founder of Barstool Sports, told Business Insider. “Sports ended, and this was something that was still going that I could do during the day.” After the shutdowns began, Portnoy put three million dollars in an E-Trade account “to play around with.” He’s been busy sharing his exploits with his large Twitter following. (On Friday morning, he reported, “I’m up fifty grand.”)

John Cassidy, The New Yorker

The scary thing about what is happening to the Economy as a result of the tepid response by the US Government to the crisis is that few people really, truly understand the crippling effect the shut down dynamics are having on the greater US economy. With so many people’s investments and retirements tied up in the stock market, when the true scope of the damage slowly exposes itself like a slow motion car crash, you have to wonder if the damage will be accelerated by stocks crashing further and impacting individuals who entered the market to satisfy a gambling itch they could not scratch.

Google Is Seeking Alpha

Google is taking a sliver of its vast wealth ($33 Billion in cash on hand, I read recently) to search high and low for the “next big thing” out there. And at no surprise to this author, it is using algorithms and data sets to help it guide where it invests.

Google says the algorithms have taught it valuable lessons, from obvious ones (entrepreneurs who have started successful companies are more likely to do it again) to less obvious ones (start-ups located far from the venture capitalist’s office are more likely to be successful, probably because the firm has to go out of its way to finance the start-up.)

If I were them, I’d look at ways to improve battery life, remove our dependence on wireless carriers and cable companies, and develop a legitimate flux capacitor to promote time travel (ok, one of those is a joke).

Via NYTimes.com