Reddit and the stock market follow up (1 Viewer)

[ceg301]

So I saw the thread for Reddit and the stock market and funnily enough, I actually wrote my final paper in my econometrics class on the topic. My data came from taking random samples of posts and running regressions on it.

TLDR: WSB stocks can beat the market, but that means timing the market. My data collection methods for this also strongly limited downside so what is presented in the paper represents the potential upside.

Skip to empirical results and conclusion for the interesting parts

Link to the paper

 

[justsomedude]

https://www.reddit.com/r/wallstreetbets/comments/vxhmlw

 

[DrStrange]

Sample size regarding WSB is way too short. Let's see how things look after a full market cycle. We also need to consider the level of risk taken relative to the returns earned. The trades promoted by Reddit followers are often much higher risk than market risk for the US stock market.

It is a mistake to disregard transaction costs. Some of the option strategies favored by the Reddit crew incurred major fees/costs. The trading platforms that would accept the high-risk option / stock trades being made by inexperienced WSB traders took a sizable slice of the money invested through predatory execution of the trades. "Free" didn't actually turn out to be free or even low cost.

Old-school investment firms often have significant requirements for investors who want to take on high risk investment vehicles. And even there, the transaction costs for some option trades can be sizable relative to the money invested.

There is a substantial fraction of the people new to trading the last two years have strongly negative returns. this can skew studies because there is a steady stream of losers that depart the market and disappear from the population. < lots of poker groups see the same sort of results >

Fair notice - I don't believe the typical novice or even seasoned trader can outperform the market. Sure, there will be a few winners for every hundred people that try. But aggregated results just don't outperform the markets.

Slow and steady is boring but it generally wins the race for most investors -=- DrStrange

 

[justsomedude]

Looks like 75bps is base for next hike. And 100bps is back on the table after today’s CPI print…

Traders of futures tied to the Fed's policy rate are now pricing a 70% probability of a full percentage-point rise at the coming meeting, according to an analysis of the contracts by CME Group.

 

[Hot Nuts]

Took the day off. Watching Eat the Rich: The GameStop Saga on Netflix while enjoying a Crowned Head cigar and Maker's 46 French Oaked.

https://www.netflix.com/title/81424332

 

[BNM]

Took the day off. Watching Eat the Rich: The GameStop Saga on Netflix while enjoying a Crowned Head cigar and Maker's 46 French Oaked.

https://www.netflix.com/title/81424332

Same people who applauded guys from “The Big Short” for sticking it to Wall Street decide to stick it to those shorting a stock to stick it to Wall Street and, in turn, stick it to those left holding the bag late. Oi!

 

[justsomedude]

Repos coming into auto auctions have allegedly doubled in recent weeks…

#greatesteconomyever

https://twitter.com/x/status/1588995049064632322

 

[DrStrange]

From Cox Automotive full article here: https://www.coxautoinc.com/market-insights/auto-loan-defaults-are-increasing-but-we-are-not-heading-into-a-repo-crisis/#:~:text=Cox Automotive estimates that the,and 1.7 million in 2019.

"At 1.98%, the loan default rate in 2021 was particularly low – far from the more historically normal level of 2.9% seen in 2019. In the first quarter of 2022, the loan default rate jumped up to 2.27%, higher than in 2021 but still below historic norms. The rate declined in the second quarter, averaging 2.02%. With high used-vehicle values, low unemployment, historically high wage and income gains, and a still-elevated level of loan accommodations, the loan default rate year to date in 2022 remains very low at 2.14%.

We expect the default rate to increase through the remainder of 2022 and reach 2.3% for the year, thanks to 42-year high inflation and growing concerns about recession. An auto loan default rate of 2.3% would be a 16% increase from 2021 but would still be among the lowest levels in the past 15 years."

Odd, I find plenty of sources saying car loan defaults are below historical norms. Maybe if we took the very lowest month of the pandemic for loan defaults, when used cars were worth the most money ever and matched that to the worst period of 2022? Maybe then we could find a doubling of the loan default rates.

Call me dubious -=- DrStrange

 

[justsomedude]

Wait a second.. what the hell thread is this?

 

[justsomedude]

Odd, I find plenty of sources saying car loan defaults are below historical norms. Maybe if we took the very lowest month of the pandemic for loan defaults, when used cars were worth the most money ever and matched that to the worst period of 2022? Maybe then we could find a doubling of the loan default rates.

Call me dubious -=- DrStrange

That's what sucks about "news" these days... you can literally find "proof" to support your own narrative...

Lisa Beilfuss Popeo, who covers the economy for Barron's, recently reported that vehicle repossessions have doubled among “prime” borrowers, which includes consumers with good credit scores.

And that quote is from July.

 

[BNM]

So, it seems I got booted from the Reddit & the stock market chat? No notice but it no longer appears anywhere in my history or in a search. A bit funny and odd.

 

[Saoliver]

So, it seems I got booted from the Reddit & the stock market chat? No notice but it no longer appears anywhere in my history or in a search. A bit funny and odd.

Went to the politics forum.

 

[Rieguy]

So, it seems I got booted from the Reddit & the stock market chat? No notice but it no longer appears anywhere in my history or in a search. A bit funny and odd.

It was moved to the "Politics" section, which you have to opt in to in order to be able to even view it. The 2022 Law Change PayPal thread is likely headed that way too, if you want to enjoy that before it gets the ax.

 

[BNM]

Well, I’ll be…

 

[DMack]

So, it seems I got booted from the Reddit & the stock market chat? No notice but it no longer appears anywhere in my history or in a search. A bit funny and odd.

Wondered why it disappeared too…

 

[justsomedude]

TSLA to $1,200?

 

[justsomedude]

 

[BNM]

And it still has a ways to go to reflect accurate valuation.