Comment by qeternity | Hacker News Reader

Comment by qeternity | Hacker News Reader

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> There is a tone of condescension against an entire generation of millennials painting them uniquely as jack-asses

This is not unique to millennials. Go back to every retail-participated bubble and you will find this condescension (and deservedly so imo). The stories of strippers in Vegas buying multiple McMansions in 2006 come to mind.

You points about relative return measures (ROI) having large base effect issues miss the point of what's going on: it's not the magnitude of the swings which are notable, but rather the circumstances around which they're occurring.

Enron was a massively complex business, and the true value of its assets was thus a massively complex question. HTZ does not enjoy this same conundrum. Other financially impaired but high name recognition names have had similar behavior (AAL, DAL, to name a few). Robinhood have lowered the bar to trading, that children are now "playing" the markets when they get bored of Minecraft and Fortnite (this is not hyperbole). And then you have one strata above who are likely the real problem and have been active in every bubble in recent memory. Financially unsophisticated adults have indoctrinated with "buy-and-hold" from the likes of Warren Buffett without understanding the edge cases likes bankruptcies (incidentally, Buffett sold all his airlines holdings which are now a retail favorite).

Simply put: people don't understand what they're doing and that's what makes this so amazing. They think "people aren't going to stop renting cars" or "people aren't going to stop flying" and so they buy the stock, cocksure that over the long-run they will be rewarded. The future outcomes of HTZ common shares is pretty certain, and not at all consistent with current retail behaviors.

Except those buying HTZ are not quite "buy and hold" people?

I assume most of them are just doing gambling. They are fully aware that HTZ is going to be worthless in near future, but they buy the share anyway because they believe they can sell it off to someone else before the last minute.

A funny thing is that if Hartz indeed issies new shares, it makes the game a lot less favorable for those gamblers...

There are A LOT of buy-and-hold types in Hertz. They are still gamblers, but their time horizon is long and they are influenced by the low share price. I have a few smart, well educated friends who fall into this category.

The average Silicon Valley-Er makes $150k/yr. putting $1k into 2021 LEAP options could be worth $30k if the company makes it out of bankruptcy. I’ll turn off my servers for a month and YOLO them odds

And putting 5 dollars into a lottery ticket could turn into 40 million.

> A funny thing is that if Hartz indeed issies new shares, it makes the game a lot less favorable for those gamblers...

These gamblers are irrational. They might double down, or manage to find new gamblers, or sell before this even happens. Nobody knows what will happen, and it doesn't really matter.

> They think "people aren't going to stop renting cars"

Do they? Nobody buying this stock thinks Hertz is going to recover.

They think "I'm bored and buying this worthless stock is risky and fun".

That is valuable to some people, and hence why the stock price is up.

Hertz selling more shares to try to save the company is pretty dumb, because that is not what it share holders want.

Hertz new share holders want to see the company and stock burn as much people as possible in the most spectacular way possible. That's what Hertz has become.

> Do they? Nobody buying this stock thinks Hertz is going to recover.

You should have a chat with them. People absolutely believe this. Same goes for airlines and cruise lines. I'm a former hedge fund trader, so I've had many of my friends come to me lately, and seek advice. I often ask how they're making money now and they say (for instance) things like "I walk/drive by Starbucks and I see people still buying coffee, so I bought SBUX". They're not doing any sort of real analysis, but their pseudo-analytic abilities are reinforced by the Fed. They don't really think that they were right because everything went up, they think it boils down to common-sense theses like the above.

Reading WSBs, those buying Hertz right now know they are idiots, and do it anyway, knowing that they will probably lose all their money, but hoping that if they do not, they can buy a lambo.

/r/wsb are not the ones driving this but rather the millions of new accounts at zero-cost brokers, hours and hours of boredom, and possibly stimulus checks

Don’t forget about the market makers either. Robinhood and other brokerages sell data on the positions their traders are entering to their market makers (like Citadel). Then the algos front run the trade, and you end up in a situation where a stock like HTZ can rally exponentially in a day.

The flip side is how Ford generates killer sales in China, China has the population of America in a single city, yet analysts look at a few recalls on a new model redesign and knock the shares down 50%

Common-sense fundamentals take a back seat to technical analysis and HFT algos these days

If China actually had the population of the US in a single city, they wouldn’t be selling cars. There wouldn’t be enough physical space. People would take the subway.

May be you’re not actually looking at things in a common sense way.

If a city had more than 300 million people even subways wouldn't be enough. Maybe Asimov-inspired mass treadmill walkways (imagine massive things like airports but increasing in speed as you get further from the sidewalk).

USA = 328.2 million

Shanghai = 24.28 million

(2019 numbers)

And RH hasn’t just lowered the bar in usability, but in trading commissions.

Who knows how many of those 150k RH users with HTZ own just $5 or $10 of it.

Nobody would’ve spent $8 in commissions to buy $10 in stock, but in RH you can.

Never saw any figures of what %age RH holders own in HTZ, which matters a lot more.

The only advantage RH offers now is free options trades, nobody charges for equity trades any longer.

Since December basically all major banks have zero commission trading.

> The future outcomes of HTZ common shares is pretty certain

But say they get to the point where their balance is positive because they sold a lot of stock, wouldn’t the price of that stock go back up to the original $20 (or maybe $10, since they basically doubled the amount of shares).

you're talking on a real abstract level, but what do you companies do with the money they raise on th epublic market? I see 3 broad choices: (1) return it to other investors? That would make this essentially a ponzi scheme. (2) Fund expansion in their business? In this case that would likely accelerate the rate at which they turn money into smoke. (3) Buy time to either restructure or significantly change their business model? THis what I think the new investors are betting on (the rational ones at least) but it seems like a real, real long shot, so even the most analytical is attemping to pick the trifecta.

No, there's no way to escape the laws of dilution.

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