Taking credit card advances to YOLO into short-dated OTM call options is drug-addict level desperation. People joke about YOLOing their inheritance - and I suspect there’s some reality to it. Their parents’ entire life’s wealth can’t dig them out of whatever hole their in.
The CNBC guys freaking out is incredible. Their Cramer feud is gold. But... this trend is different than people picking random internet stocks in the 90s. It’s desperate.
In 1999, people under 40 were gambling large sums that, if lost, could be made back through x months of work.
In 2021, people under 40 are gambling any random ad hoc payment they receive in the attempt of calling it a career.
The reason? 10% of our country have great jobs, and the rest have none. That is a result of policy.
https://www.census.gov/data/tables/time-series/demo/income-p...
I'm not here to argue a failed economic system in this thread, but the motivation behind wsb's nihilism is exceptionally clear.
https://www.pewresearch.org/fact-tank/2020/09/04/a-majority-... (A majority of young adults in the U.S. live with their parents for the first time since the Great Depression)
https://www.cnbc.com/2019/02/11/this-is-the-real-reason-most... (66% of bankruptcies are tied to medical issues)
https://www.theatlantic.com/ideas/archive/2020/02/great-affo... (The Great Affordability Crisis Breaking America)
[edit] There's a lot of reasons for the increase in the actual price of accommodation. They're largely driven by local ordinances. Setback rules, minimum size rules, minimum number of bathrooms/closets/etc all - all sorts of code things.
Further, in major metros city councils refuse to increase supply to meet demand - to benefit existing landowners.
One solution to this is national zoning rules like Japan has.
While incomes have indeed gone up in real terms, mandatory living expenditures for all Americans who don't consider a park bench to be shelter have also gone up in real terms in a more than proportional manner.
https://www.theatlantic.com/ideas/archive/2019/02/new-americ... (Globalization)
https://www.lynalden.com/money-printing/ (Assets bubbles from central reserve QE)
https://fred.stlouisfed.org/series/WALCL (Fed Total Assets)
As for housing, the cost per square foot, adjusted for inflation, is only 12% higher than it was in 2000. (Moreover this doesn't account for the major improvements in new housing stock, such as fire safety, attached garages, swimming pools, high ceilings, central A/C, high-capacity electrical circuits, etc.) The median cost of housing has only gone up, because consumers have demanded substantially larger homes.
And this ignores the fact that mortgage rates are substantially lower than historical averages. Even accounting for our bigger, nicer homes, the percent of expenitures on shelter has barely budged from 18.7% in 2000 to 19.1% in 2019.
[1]https://www.bls.gov/cex/2019/combined/age.pdf [2]https://www.statista.com/statistics/682549/average-price-per... [3]https://www.bls.gov/cex/2005/standard/multiyr.pdf
I'm not ignoring these at all, and it should be clear where these lie on Maslow's hierarchy versus shelter, healthcare, and earning potential (education) [1]. Mortgage rates being low only means you're bidding up scarce assets further by borrowing with the little income you have. This attempts to sell affordability in the same way a car dealer salesperson sells you on the payment, not the price.
And transportation? The average price of a new car just surpassed $40k [2]. There's a reason 7 year car loans have become common [3].
[1] https://www.reuters.com/article/us-usa-fed-dudley-ipad/ipad-... (“I can’t eat an iPad.”)
[2] https://www.usatoday.com/story/money/cars/2021/01/07/new-car...
[3] https://www.npr.org/2019/10/31/773409100/the-7-year-car-loan...
In nominal terms, the inflation rate of new cars was in aggregate 3.5%[1] since 1995 (not 3.5% per year, 3.5% total.) Over the same period, household after tax income increased by 111% in nominal terms. Therefore the affordability of a new car, for the average household, doubled over the period.
Moreover the average longevity of a car increased from 8.5[3] years to 11.9 years[4]. That means the amortized cost of one year of car ownership, in terms of household income, has fallen by a factor of three.
[1]https://www.in2013dollars.com/New-cars/price-inflation/1995-... [2]https://www.bls.gov/cex/1995/aggregate/age.pdf [4]https://www.caranddriver.com/news/a33457915/average-age-vehi...
https://www.pewresearch.org/ft_dual-income-households-1960-2...
Two large expenses, health and housing, have skyrocketed in the past two decades.
You should compare workforce participation from 1999 and 2021, and you should compare savings rates by age bracket.
Truly, this is a speculative bubble that is going to pop very, very hard.
It's actually somewhat rational. Say you just graduated college and make 30k as a waiter. You scrape together savings, loans, CCs, etc. and pull together 20k. Take that to Robinhood 2-3x it with margin and place a 50k bet that has a 8% chance to pay off 10x. If you "win" you're up 15 years of wages or more. If you lose, well, you declare bankruptcy and shit gets wiped. It's not like you were buying a house or a nice car on 30k a year anyways.
I think you might be in a well paying profession
The average salary for people with a college degree is about $50k: https://www.indeed.com/career-advice/pay-salary/average-sala...
Throwing $500-1000 a month into OTM options trading can generate life-changing amounts of money. That's like the lease payment on a 3 Series BMW. So it's pretty sustainable for working pros.
Not if you're buying options (calls or puts to open). Maybe you're thinking about short selling, or selling naked options.
(I skipped a few obvious steps.)
> Say you just graduated college and make 30k as a waiter.
This is only rational in the US