>Consequently, finfluencers cause excessive trading and inefficient prices such that a contrarian strategy yields 1.2% monthly out-of-sample performance
And there you have it. Just another wonderful grift brought to us by social media.
Ron Paul rode a crappy, racist, "financial newsletter" into a congressional dynasty and near presidency. This monster wasn't created by social media, but it certainly has flourished with its help.
Edit: correction as Paul Sr was never a senator. He still published a racist newsletter. It bore his name. He profited from it willingly.
He was an editor of a paper that published a racist opinion piece which he disavowed and apologized for allowing it to be published. Also, congressman, not senator. Just for some non-mouth-foamy context.
I’d say hyperbole is the monster - and HN is just about as susceptible to it as Facebook is.
He was the publisher, not the editor. Had he been an editor, his later attempts at walking away would have been even more laughable. It’s not like it was some random gig. It was in his name.
It's only a dynasty if it includes multiple people. His son is a senator. He never was.
> near presidency
Which race was that? In 1988, he got a full 400,000 votes. In 2008 he got 3% of the vote in the primary, in an election Republicans were almost certainly going to lose no matter who they nominated. In 2012, he got 10%.
Start with all the people who are interested in finance, take out from your group those whose day jobs are working out for them, and your remaining group is the set of those who like finance and need to make ends meet. 'Finfluencers'!
This is a complete speculation on my side, but could it be that anti skilled influencers are targeting a different business model? Namely, if they are being paid to promote the products, their incentives would align with reaching as many people as possible. If that holds then we have people who focus on good trading vs people who focus on getting followers... and then the differences are snowballed by engagement algos.
> could it be that anti skilled influencers are targeting a different business model
Yes, they're entertainment. Some people invest in the market for long-term returns. Same savvily trade short-term effects. Others are there to gamble, and their gains are first and foremost hedonistic. If you're playing the game to play, anyway, why not have a sassy MC? (To be clear, I have nothing against gambling. I do have a problem with promoters who muddy the line between it and investing by repeating conspiracy theories.)
Also, it would make sense that they would be more likely to be paid for promoting poorer performing stock rather than what would be able to sell itself on its own merits.
I noticed several decades ago that companies preaching that gold was a good investment were selling gold. Why would you sell something that was a good investment? Why not hold onto it yourself?
The answer is that when someone wants to dump a lot of gold, they hire a company to reach out to doomers and sell them gold.
Same for used time-shares, investments in farms, etc.
I'm pretty sure this isn't true regarding gold. I.e., that some firm has a lot it wants to dump and then spends money convincing people to invest in gold.
Gold is liquid, and the vast majority of it is not held for investment purposes. That is, even if you convinced some people to invest in it, it would not matter much regarding the price.
And consider the costs involved in getting people to actually consider and then act on this recommendation?
But if you have a reference link that refutes this, please provide it.
>”vast majority of it is not held for investment purposes.”
“Vast” may be going too far.
Each year, gold acquired for investment or by central banks is about the same as that acquired by the jewellery industry.
Not the greatest link, but a section down the page shows gold demand in 2022 was jewellery 46.58% and investment plus central banks 46.85%. Tech makes up the remainder. I’m sure a better googler could attain a better reference.
I suppose it comes down to perceptions of the words vast and investment. Some jewellery is held as investment, and state holdings are more than just investment.
Good is a non-productive asset. If you buy gold and just hold it, you earn nothing, especially if the price never goes up. Good just sits there tying up your money. If you buy gold low from people willing to sell at a discount (e.g. cash for below market gold jewelry), then you sell at full retail value, you’re making money.
> Not surprising considering a monkey throwing darts at the S&P 500 will outperform the best analysts in the world.
The best analysts/managers in the world are pulling consistent 30-50% returns over the past 20-30 years. See Citadel hedge fund for example (and not the HFT Citadel Securities).
The problem is, these “profits” are taken by the analysts and managers by way of incentive and performance fees, thus leaving the passive investor/LP with barely break-even risk adjusted returns.
It’s possibly similar to the “tout” phenomenon in sports betting. Guys that can actually beat the books at a good clip aren’t usually selling that info, they’re using it to enrich themselves.
Citadel is generally a bad example to use, as it’s exceptionally likely their performance is at least partially due to tax shuffling shenanigans and other regulatory violations. One can infer this because it’s exceptionally unlikely for them to have that performance even as an outlier using legitimate means
It’s based on the fact that their reported returns are so absurdly far on the long-tail of being an outlier as to suggest there is more to it than “they’re just good.” I don’t know for sure—but it’s close enough that I’d bet a lot of my own 7-figure net worth on it.
Also, I only know of WSB from articles I’ve read: your implication is rude and uncharitable at best.
Do you not understand the concept of high frequency trading? Citadel is a market maker, there is nothing sinister or shady about how they make money. It’s all done in accordance with the law and reported quarterly.
Probably worth adding: there's also one that tracks Cramer's bets, and as of today, its performance since inception (both March this year) is (minimally) better than the inverse one:
In other words, tracking what finfluencers say and doing the exact opposite of what they recommend is a money-printing machine (at least, until too many investors adopt that strategy).
Sounds like a watered-down version of the 90s. I feel like everyone was a “stock trading genius” back then, and “finance gurus” were so plentiful you couldn’t avoid them.
Every generation needs to re-learn the financial mistakes of the previous one I guess.
> Every generation needs to re-learn the financial mistakes of the previous one I guess
why is that accepted as inevitable law of nature?
every generation does not need to learn the ravages of war. or the risk of snake oil salesmen in domains such as food, or medicine or any mass consumption good or service
yet in the financial domain "a fool is born every minute" is somehow ok.
there is definitely the thrill of gambling but I suspect fewer people would succumb to it if before every finfluencer inspired transaction they had to click on button that said:
"I confirm that I am an idiot and the money I am about to lose is not essential either for myself or anybody that depends on me"
It’s more of an observation. And it applies to the examples you have. In fact, I can’t think of a bigger realm for snake oil salesmen than I the realms of food/nutrition and alternative medicine
I've spent many years on trading forums and I've noticed an interesting phenomenon. Which makes perfect sense if you think about it:
Bad advice is upvoted, good advice is downvoted.
The reason is simple:
1. 98% of traders on trading forums lose money
2. people generally upvote what confirms their beliefs
Since most forum users lose money, what they will upvote in general is bad advice.
This is why they all believe in stuff like technical analysis, elliot waves, and other bullshit like this, because they see that everybody else upvotes and talks about this. Blind leading the blind.
So maybe the reason these "antiskilled influencers" are more successful, is because they approach trading in the same way as their followers believe is "correct".
Now, let’s apply the Gell-Mann amnesia analysis to this insight:
If this is true on trading forums, what other forums is it true on?
Is it true on technology forums? Are 98% of participants in tech forums making bad engineering decisions? Are they upvoting things that confirm their beliefs?
> Is it true on technology forums? Are 98% of participants in tech forums making bad engineering decisions? Are they upvoting things that confirm their beliefs?
One of the main differences is that users on technology forums (thinking of something more like HN rather than r/technology or other technology-related subreddits) are typically professionally employed in those fields. So while the advice on tech forums might not be the best, it is usually not asinine or downright moronic.
As for trading forums? Typically they are overwhelmingly filled with people who have never even been employed in finance in any capacity at all, and it definitely shows.
This is a pretty good question. I wonder, where else would this apply?
Also how does the pareto principle work here? 20% of the people produce 80% of the outcome, so the finfluencers are the 20% that produce 80% of the "advice" on forums and social media, which is based on the feedback that 80% of the people give which is based on their already established beliefs, because the other 20% of the people there are the ones that actually know stuff but aren't big enough to contrarest the 80%.
Research like this does make me wonder about what percentage of anti skilled finfluencers are actually the malicious case rather than misguided. That is to say, the case where they peddle some position they know will do poorly and secure a short / contrary position themselves. That way they are effectively doubling how they can monetize their audience, once as ad-revenue, and a second by profiting from audience losses. It's probably impossible to control for something like that, but it's interesting to think about.
> It's probably impossible to control for something like that, but it's interesting to think about.
Not impossible at all, SEC has already started charging crypto influencers for peddling pump-and-dump schemes. Most shitcoins you'd see on TikTok/YouTube/Instagram (I'd wager 90%+) were purely P&D schemes, where influencers/founders would seed LPs, drive up liquidity, and then pull the rug.
Malice is, in many ways, a key ingredient to success in many spaces. While people will rarely admit it to others, many who are successful often operate knowing that wealth is something you take not something you make. The more you understand the desires and motivations of those who you are taking from the easier it is to take from them—be it from consumers or labor.
When I see people who have a hard time "breaking through" and are always struggling, it's often because they lack the perspective necessary.
It would likely only work if the instrument being invested in was small and illiquid (i.e., that pumping it up would actually move the price). Otherwise it would be a waste of time.
I've really only heard of this in penny stocks which are illiquid.
This would not work in liquid markets like rates, fx or equity indexes.
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[ 4.9 ms ] story [ 119 ms ] threadAnd there you have it. Just another wonderful grift brought to us by social media.
Edit: correction as Paul Sr was never a senator. He still published a racist newsletter. It bore his name. He profited from it willingly.
I’d say hyperbole is the monster - and HN is just about as susceptible to it as Facebook is.
It's only a dynasty if it includes multiple people. His son is a senator. He never was.
> near presidency
Which race was that? In 1988, he got a full 400,000 votes. In 2008 he got 3% of the vote in the primary, in an election Republicans were almost certainly going to lose no matter who they nominated. In 2012, he got 10%.
Yes, they're entertainment. Some people invest in the market for long-term returns. Same savvily trade short-term effects. Others are there to gamble, and their gains are first and foremost hedonistic. If you're playing the game to play, anyway, why not have a sassy MC? (To be clear, I have nothing against gambling. I do have a problem with promoters who muddy the line between it and investing by repeating conspiracy theories.)
The answer is that when someone wants to dump a lot of gold, they hire a company to reach out to doomers and sell them gold.
Same for used time-shares, investments in farms, etc.
Gold is liquid, and the vast majority of it is not held for investment purposes. That is, even if you convinced some people to invest in it, it would not matter much regarding the price.
And consider the costs involved in getting people to actually consider and then act on this recommendation?
But if you have a reference link that refutes this, please provide it.
“Vast” may be going too far.
Each year, gold acquired for investment or by central banks is about the same as that acquired by the jewellery industry.
Not the greatest link, but a section down the page shows gold demand in 2022 was jewellery 46.58% and investment plus central banks 46.85%. Tech makes up the remainder. I’m sure a better googler could attain a better reference.
https://www.statista.com/statistics/299609/gold-demand-by-in....
For whole world gold holdings, the picture is similar with 46% in jewellery and 39% in either private investment or state holdings.
https://www.visualcapitalist.com/sp/chart-how-much-gold-is-i...
I suppose it comes down to perceptions of the words vast and investment. Some jewellery is held as investment, and state holdings are more than just investment.
https://www.marketwatch.com/investing/fund/sjim
The best analysts/managers in the world are pulling consistent 30-50% returns over the past 20-30 years. See Citadel hedge fund for example (and not the HFT Citadel Securities).
The problem is, these “profits” are taken by the analysts and managers by way of incentive and performance fees, thus leaving the passive investor/LP with barely break-even risk adjusted returns.
Also, I only know of WSB from articles I’ve read: your implication is rude and uncharitable at best.
Also, your implication that a company is performing illegal activity just because they're successful is rude and uncharitable at best.
https://www.marketwatch.com/investing/fund/ljim
However, the long fund is going to be closed, because "Mr. Cramer and CNBC have [...] chosen to ignore the funds, therefore there is no reason to keep the long side going" : https://assets.website-files.com/637240a49ba56f7bfbe82c84/64...
edit: not affiliated in any way with either project, btw
Every generation needs to re-learn the financial mistakes of the previous one I guess.
why is that accepted as inevitable law of nature?
every generation does not need to learn the ravages of war. or the risk of snake oil salesmen in domains such as food, or medicine or any mass consumption good or service
yet in the financial domain "a fool is born every minute" is somehow ok.
there is definitely the thrill of gambling but I suspect fewer people would succumb to it if before every finfluencer inspired transaction they had to click on button that said:
"I confirm that I am an idiot and the money I am about to lose is not essential either for myself or anybody that depends on me"
Would not be so sure of that. I suspect the "great generation" has a lot better understanding about the value of peace than more recent generations.
Bad advice is upvoted, good advice is downvoted.
The reason is simple:
1. 98% of traders on trading forums lose money
2. people generally upvote what confirms their beliefs
Since most forum users lose money, what they will upvote in general is bad advice.
This is why they all believe in stuff like technical analysis, elliot waves, and other bullshit like this, because they see that everybody else upvotes and talks about this. Blind leading the blind.
So maybe the reason these "antiskilled influencers" are more successful, is because they approach trading in the same way as their followers believe is "correct".
If this is true on trading forums, what other forums is it true on?
Is it true on technology forums? Are 98% of participants in tech forums making bad engineering decisions? Are they upvoting things that confirm their beliefs?
One of the main differences is that users on technology forums (thinking of something more like HN rather than r/technology or other technology-related subreddits) are typically professionally employed in those fields. So while the advice on tech forums might not be the best, it is usually not asinine or downright moronic.
As for trading forums? Typically they are overwhelmingly filled with people who have never even been employed in finance in any capacity at all, and it definitely shows.
Not impossible at all, SEC has already started charging crypto influencers for peddling pump-and-dump schemes. Most shitcoins you'd see on TikTok/YouTube/Instagram (I'd wager 90%+) were purely P&D schemes, where influencers/founders would seed LPs, drive up liquidity, and then pull the rug.
When I see people who have a hard time "breaking through" and are always struggling, it's often because they lack the perspective necessary.
I've really only heard of this in penny stocks which are illiquid.
This would not work in liquid markets like rates, fx or equity indexes.