Wall Street Is Looking To Reddit for Investment Advice (wsj.com) 43
Wall Street professionals tell everyday investors what stocks to buy. But now they have to follow some of these amateurs for signs of where the market is headed next. From a report: Venerable institutions Goldman Sachs Group and Morgan Stanley are tracking the retail trading frenzy, and hedge funds in New York and London have employees combing through the internet forum of Reddit, Twitter or chat startup Discord in search of trading opportunities. They turned to these sources following a period of market mayhem dominated by amateurs on Reddit's WallStreetBets and the Robinhood Markets Inc. trading app who collectively boosted the shares of GameStop Corp. and other companies that had fallen out of Wall Street's favor.
"It's more art than science because it's uncharted territory," said Simeon Siegel, a BMO Capital Markets analyst who has spent his career covering retail companies. One analyst who turned to WallStreetBets this year for insight was Priyesh Mehta, 26, who advises Cayman Islands-based hedge fund Bovell Global Macro Fund. He said he never considered that a group of traders could band together on online forums with the aim of jolting prices, but as GameStop's shares rose in January he downloaded the Reddit app on his phone, made an account and joined the forum.
For the next few weeks, he spent hours on the platform, familiarizing himself with its design. Mr. Mehta quickly learned that the place to pay attention to was the daily thread of people's trades. He began to recognize names of accounts that posted frequently, an indication that those users may have more sway with the group. Mr. Mehta still monitors the forum and warns Bovell's fund manager of highly mentioned stocks that could see volatility. He is also looking for potential stocks that the firm could bet against. "I never thought that retail traders would actually gain this much power in the market," he said.
"It's more art than science because it's uncharted territory," said Simeon Siegel, a BMO Capital Markets analyst who has spent his career covering retail companies. One analyst who turned to WallStreetBets this year for insight was Priyesh Mehta, 26, who advises Cayman Islands-based hedge fund Bovell Global Macro Fund. He said he never considered that a group of traders could band together on online forums with the aim of jolting prices, but as GameStop's shares rose in January he downloaded the Reddit app on his phone, made an account and joined the forum.
For the next few weeks, he spent hours on the platform, familiarizing himself with its design. Mr. Mehta quickly learned that the place to pay attention to was the daily thread of people's trades. He began to recognize names of accounts that posted frequently, an indication that those users may have more sway with the group. Mr. Mehta still monitors the forum and warns Bovell's fund manager of highly mentioned stocks that could see volatility. He is also looking for potential stocks that the firm could bet against. "I never thought that retail traders would actually gain this much power in the market," he said.
Signs of the Apocalypse (Score:2)
Hurricanes, plagues, terrorists, depending on reddit for investment advice.
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It doesn't actually say they're using reddit for investment "advice," it just says they're using it to keep track of the meme stocks, and they bet both ways on them.
Posting Trades? Sure.. (Score:1)
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Not me. I post advice on companies I *think* are going to do well, don't invest and then watch everyone else make money... so there.
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Retail traders have all the power in the market (Score:3)
and always have. They're just asleep at the wheel with their 401K being invested in everything while knowing nothing about it and paying some parasite management fees for passive funds (usually their own, layered, for extra fees).
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paying some parasite management fees for passive funds
The management fee for my index fund is 0.02%.
That is negligible.
With fees so low, I am happy to let someone else manage my money while I focus on my job and family.
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I think you are off by an order of magnitude at least there— 0.2% exists for a few Dow, NASDAQ, and S&P index funds but much more often the fees are hidden in other places beyond management fees per-se. My 401k is famous for that crap.
Personally, I haven’t found it hard to beat the index funds by 3-5 percentage points return in any given year, and significantly more long-term. (YTD I am below the index funds though, but 12-month still above.)
An additional 3% over 30 years is 2.4x the money
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"Index fund" these says usually means an ETF, and there are no "hidden fees."
SPY has a net expense ratio of 0.0945%, and that's the biggest one.
He's probably in SPYX, which is at 0.20% exactly.
(Source: Fidelity)
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That’s what they say but they take money out in other ways beyond stated management fees. Sometimes it is how dividends are reinvested, sometimes the bid/ask spread, sometimes the premium between spot price and net asset value. All of these things in the end impact your return on investment.
GP stated 0.02%; I agree with 0.2%.
Re: Retail traders have all the power in the marke (Score:2)
IShares SPY is like 0.03%: https://www.ishares.com/us/pro... [ishares.com]
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SPY is the stock symbol, it isn't a generic abbreviation for S&P 500 index.
IShares core S&P 500 index has the symbol IVV, and does indeed have a Net Expense Ratio of 0.03%.
It's right there on your link: IVV though I wrote the above before clicking it.
You should have said, "IShares IVV is..."
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Personally I think anything at or under 0.5% is fine for most folks. But
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It isn’t as much “hiding fees” as looking at long-term rate of return compared to the index. The 401k fee structure is disclosed, but not many people read the fine print. I adminstered my company’s 401k for a while; I forget the term used, but its net effect was reducing the rate of return on funds about 1-1.5% compared to the index. Half the money paid for the “financial adviser” for the plan, and the other half was for Fidelity’s paperwork management.
Not Uncharted Territory (Score:2)
Smart Tech analysts were watching /. since ‘98. Hell, I even met a guy in ‘98 who was scouring AOL, IRC, and other Web 1.0 sites with an automated spider to track positive and negative reactions to various companies/stocks.
Accuracy is likely to only be a few points better than the average analyst, but hey
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I always wondered why anyone fell for that game. (Score:1)
Obviously, they tell you to buy what they just invested in.
Obviously the stock went up because they invested in it.
Obviously that's the actual reason, and a certain event is just an excuse.
The relationship between what happened and if the stock went up or down, never actually made sense, did it? ^^
It was obvious too, that somebody would come, to dethrone them. Because: Internet! Duh.
You're free to call me jealous now. Jealous I've got a conscience and can't harm people... So jealous! I swear! ;)
not advice...trends that may make them money. (Score:5, Insightful)
They aren't looking for advice they are looking for the trend of what the crowd/mob is doing or about to do that may affect their trades and/or positions.
If you get in front of the mob/crowd or simply know where they claim to be going, then you can use that to your advantage.
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Thats exactly what I was going to say. The most ridiculous thing is the reddit crowd can pump the market and buy options ahead of time before they lead everyone to buy, making millions in the process at the expense of others.
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Re: not advice...trends that may make them money. (Score:1)
Exactly - last Jan while GME was going on I figured out the game was to squeeze the shorts and buy cheap out of the money call options ('lottery tickets') and saw a random tweet about AMC. Hmmm, AMC has a big short interest, has not popped yet so bought 4 near term calls with money I could sacrifice. Next day BOOM - have never seen so little get so big so fast. Largely lucky.
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The big thing WSB proved is that a coordinated "assault" of a couple million smooth-brains can really wreck a market. Get couple million people to buy a thousand dollars worth of stock and you suddenly have a hedge funds' worth of power. It also helps that there's a bunch of actual veterans in that group who are scouring financials and looking for short squeeze opportunities and what not. I'm not sure it's really a bad thing, when tons of companies are trading on P:Es of 100, 200, 300+, why not prop up a f
Horrified, angry, and not shocked simultaneously (Score:2)
So the best of the best, the most expensive parasites around...need to turn to random schlubs on reddit? I simultaneously am not surprised to learn investment bankers are shitty and incredibly overvalue...but yet, I want to screan "FUCK YOU" to them for having the gall to rely on reddit.
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Yes. I met a higher up in an investment bank when he was building a 27,000 sq ft house in one of the most expensive suburbs in the country. One yearly bonus paid for most of it.
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I thought Actuarial Accountants made more?
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incorrect (Score:2)
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No. Wall street is figuring out new ways to collud (Score:2)
On slow pre internet days, a nice weekly "round of golf" or "some bridge" was enough to collude, coordinate and exchange insider information.
Internet and smart phones opened new ways to collude and fix prices better but also increased the chances of being snapped together and the hangers on, side bet artists cotton on to the moves of the big boys much faster too.
Now this reddit thing seems to be anonymous enough and there is enough noise, and ma
Hedgies r fuk (Score:2)
WSB (Score:2)
WallStreetBets is a bunch of shitposters who don't know any more about investing that anyone else. Some of them get lucky occasionally and will post bragging about their tendies.
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Looking For Suckers (Score:3)
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Or they short it at the peak
"He is also looking for potential stocks that the firm could bet against."
When he says, "I never thought that retail traders would actually gain this much power in the market" it isn't necessarily what people think. Stock language is narrowly parsed. What people say often means the opposite of what it sounds like they said, because they mean it narrowly and literally. Here, he means "power" in the ability to move a price. He isn't saying they benefit; they move it up, and then it
Wall Street traders aren't geniuses (Score:2)
John Brunner had it right (Score:2)
In The Shockwave Rider with the Delphi pool.
Easier way to make money (Score:2)
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Gamestop is wildly overpriced because pros saw it was overvalued, shorted it, and then the WSB crowed started trading up the value of the stock because they have feels for GameStop. The only reason GameStop is trading near $200 is WSB.
No, not advice. Intelligence gathering. (Score:3)