A weekend topic on media and financial manias starting with the Wall Street Journal. "Now 15 years old, Zillow has long been at the forefront of real estate’s digital transformation. Its recent moves, including its shift into iBuying and its acquisition of virtual home touring company ShowingTime, are sure to solidify its position as the future of online real estate. But consumer demand doesn’t automatically mean profit, which has very much been a work in progress for Zillow."

"On Wednesday, Zillow posted quarterly unit economics for its Homes segment, which houses iBuying. That data showed Zillow making nearly $22,000 on average per home it bought and subsequently sold before interest expense. Even after interest expense, Zillow’s math shows it made positive returns on homes sold for the first quarter ever."

"Enter Mike DelPrete, a scholar in residence on real-estate technology at the University of Colorado at Boulder, who on Thursday published a blog post noting iBuyers were 'turning obfuscation of profit into an art form.' In it, he likens Zillow’s unit economics chart to 'an immaculate conception version of iBuying, where transactions magically occur without employees, customers materialize out of thin air, and technology is freely available for all.'"

"There are further expenses to account for, in other words. Lots of them. Mr. DelPrete’s math shows that, after all expenses, Zillow in fact lost $72,000 per home. That would explain why Zillow also said its Homes business lost money, even on the basis of adjusted earnings before interest, taxes, depreciation and amortization, in the fourth quarter, while it showed positive returns on a per home basis."

"The good news is that the company is making progress toward profitability. Mr. DelPrete estimates Zillow lost nearly $129,000 in the third quarter per home on the same basis. Yet the majority of the improvement appears to be driven by factors largely beyond Zillow’s control. Zillow said operational improvements such as renovations, holding and selling costs accounted for roughly a third of the improvement in returns before interest expense from the third to the fourth quarter. The majority, then, came from factors such as better-than-expected home price appreciation and faster sales velocity."

"What, then, will happen if Zillow’s economists are overly optimistic about the future state of the U.S. market?"

From Forbes. "So much has been written about GameStop stock it seems pointless to offer yet another take on its saga now. It also seems pointless to guess what motivated the Reddit crowd or why the short sellers hung on for as long as they did. All that is water over the dam, as the saying goes. At this point, the adventure carries two important and age-old investment lessons."

"One is that taking part in a buying frenzy leads to at least as many losers as winners, usually more, for there are many in the Reddit crowd who enthusiastically bought at highs and have suffered significant losses. The second is that shorting is a very risky business. Both lessons should now be clear, even when seen through the tears of those who lost. What deserves attention here is that, with a few notable exceptions, the media made a hash of covering these events."

"Outside those few experienced financial journalists, most media coverage relied on a silly and misplaced David and Goliath story. Who does not cheer as the brave shepherd boy puts down his harp and picks up his sling shot to bring down the great bully? The problem with media reliance on this Bible story is that it has very little to do with the GameStop stock episode."

"No one was being a bully, and the Reddit crowd was not especially brave, in large part because many seemed not to realize the risk they were taking in pumping up the price of a stock of a company that was running losses. With no bullying and no courage, why bring up the ancient story at all. Yet the media could not resist."

"Imagine the feelings of a late-January Reddit enthusiast who bought in with so many others late last month and is now left holding the bag with most of their 'investment' gone. He or she is hardly comforted by the gains of the few who got out in time and on whom the media has focused as if these losers are just so much unfortunate collateral damage in a gallant cause."

"Then there is the widespread and childish indignation that accompanied anything that thwarted the Reddit crowd’s drive to push up the price of GameStop stock. For instance, many of the enthusiasts generated great leverage on the price of GameStop stock by using options and buying on margin. Buying on margin requires a loan, usually from the broker."

"It is not unusual when such buying reaches large proportions for the lenders to ask for additional collateral to ensure that the buyer can pay back the obligation. Yet rather than see it as a simple and common way for lenders to protect themselves, both the Reddit crowd and many in the media saw this as an arbitrary move to thwart all the fun."

"Similar indignation emerged when trading was interrupted. These trading brakes, too, were characterized as a kind of attack on the Reddit enthusiasts. It was instead a defensive move on the part of people who wanted to avoid being pulled into a vortex of risk. To avoid such inequities and risks, markets will halt trading until sellers can be lured out. Sadly, many in the media shared the indignation of the eager buyers as if no one else’s needs mattered."

"Other than such matters, little in this whole episode deserves the moral overlay so freely used in describing these events. There was a group of people who for obscure reasons wanted to buy large quantities of a small stock. There was a group of people who thought that the buying was misplaced. They bet against each other. Some won and some lost. Millions were entertained. There is no good or bad involved, unless stupidly taking excessive risk is somehow immoral."