> Social Capital’s Chamath Palihapitiya jumped into the controversial name, saying in a Tuesday tweet that he bought GameStop call options betting the stock will go higher. His tweet seemed to intensify the rally in the previous session. The stock ended the day 92% higher at $147.98.
This is growing into a bigger problem. The thought of Twitter influencers (example with E. Musk / Etsy, yesterday [1]) heavily moving the value of stocks with a simple tweet is not really reassuring. The SEC should start investigating properly into it, from personal benefits to bigger company wide fraud, the regulators need to act before this is the new norm.
Here is a link to the audio podcast version of CNBC's "The Halftime" report. The link puts you 11 minutes into the show, where the interview with Chamath Palihapitiya begins.
Palihapitiya is a regular guest on this show, but was invited to appear today because of the extraordinary price action in the common stocks of GameStop ($GME) and AMC Entertainment ($AMC) resulting from short squeezes on each stock.
The remarkable thing about what Palihapitiya says is that he criticizes the institutional investment community which operates hedge funds who use excessive leverage to bet against small investors who-- in this case-- have bet that the stock is oversold.
At one point today 140% of the total number of shares of $GME stock had been shorted (meaning it was borrowed and sold to others, with the expectation that the investors who borrowed the stock would be able to buy the stock back as shares of $GME fell from inflated levels).
The interview makes extensive reference to the /r/wallstreetbets, https://www.reddit.com/r/wallstreetbets, subreddit and constructive analysis of the trade setups for these stocks.
"Instead of having ‘idea dinners’ or quiet whispered conversations amongst hedge funds in the Hamptons these kids have the courage to do it transparently in a forum,” he said. “What it proves is this retail [investor] phenomenon is here to stay. There are 2.7 million people inside wallstreetbets. I think they are as important as any hedge or collection of hedge funds.”
"Palihapitiya claimed the best research on stocks done by retail investors inside wallstreetbets is nearly indistinguishable from the best research on Wall Street. “That edge is gone. Now all of a sudden, retail can be on the same footing and they don’t have to be the ‘bag-holder’ to Wall Street.”
I think a lot of people in this community will be interested in the idea that members of a subreddit can compete with institutional investors when the institutional investors' theses about a stock are either incorrect or so crowded that almost no one can make money trading with the institutional investors' strategy.
At one point Palihapitiya criticized CNBC host Scott Wopner for defending the way things have always been done on Wall Street at the expense of the Robinhood investment crowd. Palihapitiya argues that the Robinhood crowd, the /r/wallstreetbets subscribers, should win and the institutional investment community should lose when the "smart money" gets the trade this wrong.
> "I thought it was incredible. [...] ...the "smart money" gets the trade this wrong."
I assume you're referring to the ' '. Whether GME is worth $5 or $30, the stock rose to $500, and that's not fundamentally a misunderstanding of value. funds cooked the grenade too long (to use another ), and and the crowd slapped it out of their hand before they could throw it. Boom.
I really thought this was a good articulation on Chamath’s part and would love HN to chime in with their perspective.
Edit: Couple of stand-out comments he made, paraphrasing:
‘The best wsb due diligence can be indistinguishable from top hedge fund due diligence, the funds don’t have an edge’.
Right. It doesn’t take a genius to know GameStop will have a hard time in a cd-less world and full digital download marketplace. It also doesn’t take a genius to know GameStop will not go to zero dollars (so don’t short to that level).
Love the defense of the intellect of the retail investor and a group that doesn’t need to be coddled, great defense against the patronizing and condescending suggestions.
Second edit: Jim Cramer recently peddled Raytheon’s earnings up. I’m not a genius but they got the earnings from laying off 16k people. Ok, how many quarters can you do that for? This is a play someone can consider (in either direction). We’ve got brains I think too.
He is exactly right. The powers that be (dark money) have long sought to remain in control of their subjects. Just because we don't have monarchies doesn't mean we don't have a few elite who few themselves as rightful directors and owners other all things on Earth.
They have manipulated markets through various institutions and making knowledge so hard to come by without going into massive debt in order to maintain their elevated status.
In their arrogance though, they thought they could reverse the trend of the democratization of their power to the masses, and have literally tried to move heaven and earth in order to remain in power and reverse the trend.
My curious position is I think they are realizing that the trend is irreversible, that power eventually will always diffuse to the masses eventually as no system is perfect, there will always be leaky abstractions, and I have no doubt they have a nuclear option in their back pockets to try and quell the massive shift of power that seems inevitable at this point. Question is, what is that nuclear option?
SEC is apparently now investigating. If they take the side of hedge funds then there's going to be another occupy wall street movement, this time with millions of pissed off retailers, robin hood, ready to take class action lawsuits.
And definitely agree. The other famous Chamath video was also great, but this one was just fantastic. Spot on with what's going on.
I also took notes on how effective it can be to remain cool
as a cucumber and calmly explain a fundamentally sound
mathematical position against an emotional attack.
Note: I also wouldn't be surprised if some smart folks on Wall Street are now doing a clever counterattack where they are going long momentum and the short is a decoy, and then will pull the long profits and then also profit on the short. So I think smart Wall Street money will profit off this more than average retail, but no one will make out better than that reddit user who started the whole thing (forget their name)
The part about transparency and speaking openly really struck a chord with me. Every time I have tried to be transparent about investing and speculation here on HN I’ve been shot down with downvotes, despite that anyone following my advice over the years would have made massive amounts of money. I think people just get scared when you talk about money so openly.
The stack on this story so far (newest ones at the bottom—if I've missed any, can you let me know at hn@ycombinator.com? this is sort of an experiment and we may eventually write software to support building lists like this collaboratively):
Manually aggregating the onslaught of related links. Very useful
You didn't think that you'd be able to avoid this in the future, now did you? You've established a precedent (at least for huge, fast moving (disruptive) events) :)
Here's my comment I wrote earlier in my submission that was removed because it was a "dupe" (and I seem to have been throttled as a result of this transgression):
I'm a bit of a centrist leaning to WSB:
- I will agree the fundamentals are off. AMC, BB, GS compared to its industry competitors market cap and valuation doesn't make sense.
- Counter to the above argument, it shows the cracks in the system: Many stocks are simply valued based on votes that traditionally has been in the favor of large institutional investors who are also guilty of market manipulation and closer, faster access to new information that the retail investors do not have.
Overall, I am very worried that we are on the final stretch of the equity bubble that started as a result of the Feds printing money, buying up corporate debt, violating the US constitution. We are witnessing a departure from fundamental valuation and straight into a manic stage.
- I disagree that retail investors have an edge in information rather that existing fundamental analysts employed by large firms never had an edge at all and simply a mouthpiece for whatever price is desired by a select group of institutional hedge funds.
TLDR: I am pleased the little guys are winning but also very worried that we are on the final manic phase of a classic equity bubble we've witnessed two decades ago.
edit: HN is throttling my comments after my CNBC video was removed for being a duplicate so to answer:
"Why is it different now we've been in a bubble for the past 5 years"
This is just the latest version - there was the crypto bubble in 2017, then the MJ bubble in 2018 (and XIV volatility collapse), now this.
I think crypto proved to us that you don't need any sort of fundamentals - price action beats all (and defines the narrative) in the short term. We've also become a meme-based and tweet-based economy (and Donald Trump / the pandemic surely help speed that along)
Wall Street is a large scale gambling operation with a public-backed safety net. Apparently they don't like it when people call this out. And they definitely hate it more when outsiders start beating them at their game.
One of the roles of the fed is to prevent financial markets from suffering liquidity induced meltdowns. It’s a basic service that benefits everyone, like roads or the post office.
So to summarize – large, fully private financial institutions are so entrenched in the economy that them going under would be catastrophic for everyone. They also occasionally take massive risks with their money to make larger profits, and when those backfire the government has to bail them out with public money.
And all this is totally not a gambling operation with a public safety net?
The issues affecting liquidity were systemic - it did not just affect large institutions. And of course financial institutions are entrenched in the economy, that is the entire point of financial institutions. Capitalization requirements were too low and they are now much higher — but that meant bank shareholders on the whole did extremely poorly in the financial crisis. And unclear what you mean “bailout with public money” as direct investments in debt and equity instruments by the treasury in 09 were done on extremely favorable terms and were collectively quite profitable for government shareholders.
Did you forget about AIG and Merrill Lynch? BoA was "strongly encouraged" to buy Merrill. And the Fed just loaned AIG a boatload of money. All the banks got loads of direct (via capital infusions) and indirect support (the "Fed put" on steroids).
The owners of bank equity did fine while the working class got screwed. This is the environment the millenials started their investing opportunities in. That the game is rigged was made explicit early on in most millenials' investing career.
Which banks went out of business? Weren't many (all?) major banks about to be insolvent before getting saved by their buddies (aka, future bank Directors) in government?
Which hedge funds received bailouts? This insistence on viewing Wall St as a monolithic entity is just asinine. I can assure you the investment bankers at Goldman are not losing any sleep over GameStop.
Hedge funds didn't receive bailouts because they had all shorted the housing market. They instead made large profits while a large chunk of the country lost their jobs and homes.
Meanwhile hundreds of banks and other financial institutions did get public funds. The state did not take any ownership, and some of them still haven't paid back billions. The profits generated since then – all directly due to the bailouts – have been private.
2008 was the worst year by far in the history of hedge funds, almost all lost money and hundreds of funds closed. They certainly did not all short the housing market, in fact there's several books and a Hollywood film about the few outsiders who did.
It's pretty incestuous though. Mortgage backed security market got started at the Salomon Brothers before fumbling it to Morgan Stanley before GS ultimately decided when to pull the rug on it all. Citadel might not be a bank but market making is one of it's core functions much like them. Names might change but I bet many of the same players move between these firms.
If you feel that another comment is wrong, the way to respond is to show how it's wrong, include additional relevant information, and avoid name-calling. Then we can all keep learning (and also kick the can down the road a bit regarding the part where we degenerate into flaming spears and tribal warfare).
I get that the GP comment was also a provocation without much information in it, but these things are matters of degree, and the right direction to go in response to provocation is exactly the opposite to the way your comment went.
These comments are groundless libel. Why your rules would protect them is beyond any explanation. I have never once been the person shoveling BS on this forum. But you treat your posters like a bunch of thin-skinned babies. Some deep self-reflection would do these passive-aggressive egomanics some good. I've been around the engineering community long enough to know how these self-important trolls work. You should know it by now as well Dang. I frankly don't know what you are trying to save them from except maybe you pity them.
"Their" clients are a bunch of rich people who control media companies, donate to politicians, etc.
The Secretary of State of Massachusetts was on TV pushing a 30-day trading halt on GME. That doesn't strike me as something that particularly falls within his ambit, and I genuinely wonder what motivated his appearance there.
there is no safety net for hedge funds (or indeed, any investment company that's not a proper deposit taking bank). The GFC was an anomaly - and banks got bailed out for taking on risks that they shouldn't have been (and only some - lehmens got owned and they didn't get bailed out). The bailouts were more about stablizing rather than saving the gov't buddies, despite what the conspiracy narrative likes to make (of course, it _did_ save the banks, so believe what you will).
I think the funniest part of this entire phenomenon is that Robinhood is now taking money from the rich and distributing it to the masses in a more literal sense. At least for now.
On a more serious note, I don't get how a stock can be 140% shorted. Does that mean once you return a portion of the shares you borrowed you have to rebuy part of it and return it again? Also when would these short sellers get margin called?
Yea money is flowing from hedge funds who are short to retail investors as the stock runs up, but once it inevitably moves back down it will be the retail bag holders inflicted with massive losses.
People say that, but plenty of hedge funds and other investors will lose money too. It’s not “hedge fund win, retail loses”. There is a mix. Not just do some of the shorts (maybe many?) lose money, some of the hedge funds on the buy side will get caught too if this comes down fast enough.
Hmm, i wonder how accurate this article is, particularly around melvin capital's positions.
If they only had put options, why did they need a $2.5B bailout this week? I was under the impression they also had short positions or sold naked calls in order to get into as much trouble as they seem to be in based on the bailout announcement.
Or were their put options' value being used as basis other leveraged investments?
Don't understand how they could have lost $2.5B on just put options.
> Melvin Capital Management, which managed $12.5 billion at the start of the year, had lost nearly 30% for the year through Friday due largely to its array of bets against companies including GameStop, said people familiar with the fund.
Quite interesting that parent article, as detailed as it is, somehow missed a much reported 30% drawdown.
No, in the end, it will be the mob who will lose money, and it will invariably go into the pockets of more institutional vested interests who end up picking up the pieces cheap. Really Roobinhood is feeding fish to whales, over time.
He didn’t have any answer as to the fate of new bag holders he created with his tweet. That was irresponsible. His plan to make hedge funds disclose their positions daily as some kind of a solution to overleverage makes no sense whatsoever. And he’s delusional about research skills of WSB posters as compared to Wall Street analysts.
um, I don't follow wsb, but based purely on what you said, you don't back your comments either. So much for taking the high-horse. Chamath at least has the$$ to show for.
I anticipate ours won’t be a popular opinion on here, because the whole “stick it to the man” narrative is tempting, but I have to agree. I listened in on a Clubhouse room today where people were teaching each other how to options trade and I couldn’t help but think, these are the people, not Wall Street, who are going to be left holding the bag.
very true. I often think of Blackstone's mega home run trade with Hilton Hotels. They bought it at the wrong price at the wrong time (pre GFC). But someone, they were able to over-default on the debt and still retain control and when they ended up selling it was a huge home run for Blackstone. Of course, the original bond holders got the shaft.
> I listened in on a Clubhouse room today where people were teaching each other how to options trade
oh no.
that's really bad.
Options is one of the really fast ways to lose your shirt. I mean, they are known for that. I expect they were talking about doing it on margin too. :-/
I agree that he ignored a few important questions. There is the very real possibility (and it's more like a certainty) that regular people will join the bandwagon too late and get hurt. When hedge funds get hurt, they still have plenty of money to survive. When I see posts (although who knows if they are real) about putting your life savings on something like this, losing that money has very serious real-world implications.
This all is certainly highlighting that these systems have been fundamentally unfair for a long time, but that doesn't mean that real people won't be hit hard financially as a result.
I don't know, maybe I'm just far too conservative with my money to do something like this.
I have a hard time feeling sorry for anyone who loses large amounts of money on risky gambling like this. Especially for anyone willing to put their entire life savings on the line--if it wasn't this they would find some other stupid way to lose all their money.
Who cares. It's the stock market. You aren't guaranteed a profit. It doesn't give a shit about protecting you. People have been making stupid financial decisions for decades...some people are going to make a lot of money and others will lose their shirts. Same with the bitcoin people, the tesla people, etc etc.
This isn't new...there are gamestops every couple of years. This is just an extreme version in a year when everyone is online 24/7.
Given that the short interest continues to rise (I saw estimates > 200% of float) it is possible there will be very few people left holding the bag after most sell to shorters covering their positions.
The price will crash. No one knows when hype will die out and people will stop jumping on the bandwagon, but I'm sure those hedge funds that are covering their short positions aren't going to stick around for the fall.
Those hedge funds covering their short positions have already acknowledged their fall by covering. The whole point of the short is sticking around for the fall.
I mean the fall from the current extremely high price to a reasonable valuation. Retail investors will be the only ones left carrying the bag when that happens.
Gamestop isn't going to stay at $300. You seriously don't think its going to crash back down to reality? The only ones still in the stock during the fall will be retail investors. So yes, the hedgefunds were hurt, but there will be a lot of pain for the retail investors that jumped on the bandwagon too late and don't get out soon enough.
>He didn’t have any answer as to fate of new bag holders he created with his tweet.
Perhaps, but like his response to this question pointed out: neither did wallstreet when they left the US population as bag holders for all their damage in the past (ie, 2008).
Additionally, the only people left being bag holders here so far are the hedge fund (and their copycats) taking such an absurd short position.
Or to further add to your point, we literally have frothy equities because we had to print our way out of the last debacle.
They are complaining about a necessary situation they created lol. We need to stimulate investment to get out of the last crisis (that was the plan all along). What are these cats complaining about?
As long as the price keeps going up, there's no bag to hold yet in this metaphor. We're still at the part of the heist where the vault is being emptied.
Let me put it this way, if someone bought GME over the last few days and sold it at 3x what they paid, what fraction of that gain (on average) came from a hedge fund covering a short vs. from another retail investor buying in? The assumption seems to be that it comes purely from a short cover but that’s not at all obvious to me.
I agree. The holding the bag metaphor comes from a gang of thieves robbing a place and then leaving a patsy behind with all the evidence of the crime and none of the loot. Right now, in my opinion, a lot of the Robinhood faction of the gang are funneling into the vault thinking Joe Wallstreet is that patsy, not realizing that the savvy senior members bailed out an hour ago and the cops are about 2 blocks over and closing. There doesn't have to be just one patsy after all.
The whole metaphor discounts the "I just want the shortsellers to burn b/c anarchy" aspect that some people are claiming, which honestly I think is believed by very few and projected onto many more who really just want quick money.
Reminds me of a phenomena calling merchanting clans[0] on the video game RuneScape.
It would start with a small group of players convincing a bunch of casual players to join their clan and buy out as much of the supply of a specific item on the market as they could. They claimed if everyone held on to the items for two weeks the price would rise and they'd all get rich.
Of course, the leaders would then sell their items one week in. This would cause the price of the item to drop, resulting in the other members of the clan panic-selling all of their items. The price of the item would then crash resulting in most players losing their money.
Eventually the game developers made the organization of such clans a bannable offense since too many casual players were losing a lot of their wealth participating in these events.
> And he’s delusional about research skills of WSB posters as compared to Wall Street analysts.
I think it's a mistake to take his comments as applying to WSB as a whole. I agree WSB posters, collectively, are mostly clueless. But there are absolutely people in there who know what they're doing and have put a lot of thought into their strategy.
I agree, it feels dishonest to start out by saying "where was that message in 2008?" and then within seconds "guess who was right about Tesla?".
By that logic, Wall Street was "right" for years, because housing prices just kept going up and up and up and up. This story didn't end yesterday, it's entirely possible that the Tesla shorts were "just premature" the same way that the people who started shorting the housing market in 2005 were premature (and took a beating during those years).
And the praise for /r/wallstreetbets seems a bit excessive considering that by his own admission, he only just learned about them a couple of days ago. I don't know how much time he's spent there but I'm not sure that his read on the place is especially accurate.
>And he’s delusional about research skills of WSB posters as compared to Wall Street analysts.
Certainly there's a crowd on WSB that are just sheep, but there is a minority of WSB posters that produce quality research and analysis. The idea that Wall Street insiders are elite, a different breed, is mostly a myth. There are smart people working Wall St to be sure, but there are lots of smart people working elsewhere.
>He didn’t have any answer as to fate of new bag holders he created with his tweet.
I don't know what answer you expect him to give. Are you saying that people shouldn't be allowed to tweet their trades? Also it's ridiculous to think WSB isn't full of bagholders - I've seen people blow up their accounts on completely ridiculous trades they had researched on their own. Are you saying people shouldn't be allowed to make bad trades?
Chamath answers the question correctly; the question you're asking implies that you don't think retail should be trusted to invest. If that's truly what you think then say it proudly.
> He didn’t have any answer as to the fate of new bag holders he created with his tweet. That was irresponsible.
I have to say up front, I find this kind of attitude incredibly infantilizing and condescending.
Exactly how many "bag holders" did Chamath "create"? (Hint: Zero.) Obviously the "bag holders" are assuming the risks themselves, as is (absent any evidence to the contrary) Chamath. They're on a forum literally called "Wall Street BETS" (emphasis mine). If a millionaire announces he's playing the slots and subsequently wins the jackpot, is he "responsible" for everyone else who subsequently plays slots?
(He didn't make this argument as well as he could have, but Chamath himself points out that when Goldman or AIG played stupid games, everyone else was conscripted into being the "bag holders.")
Also, exactly how many people are we even saying Chamath influenced? How many people were undecided about making the GME trade and then said, "welp, Chamath is long so YOLOOOOO?" And how many of these people traded irresponsibly (e.g. overleveraged, invested their life savings)? I would bet the number is small, even negligible.
> His plan to make hedge funds disclose their positions daily as some kind of a solution to overleverage makes no sense whatsoever.
Correct me if I'm wrong, but I don't think he ever proposed this as some sort of affirmative plan. What I heard was him pointing out the asymmetry of which entities are required/voluntarily publish their positions. If hedge funds had done that, the 136% thing would never have happened for obvious reasons. I interpreted it more as a response to the interviewer's pearl clutching about the market having no "integrity" because a stock price deviated from the "fundamentals" for a time under some bizarre circumstances.
> And he’s delusional about research skills of WSB posters as compared to Wall Street analysts.
If you're correct, then you can easily show us your short positions contra WSB research/herd mentality/irrationality/<pejorative> and we can track how well you end up compared to WSB.
>(He didn't make this argument as well as he could have, but Chamath himself points out that when Goldman or AIG played stupid games, everyone else was conscripted into being the "bag holders.")
This - this is the point that seems to keep getting lost. The Big Guys get bail-outs constantly - hell Melvin got a float of $3B over this mess.
That says more about the fundamental problem with the system than it does any given individual. When I see stuff like this that tries to push blame on an individual for tweeting I have to immediately scoff because it totally gives cover to the system that gives people a very healthy amount of rope to hang themselves with in the first place.
This isn't a defense of the guy by the way since all of this schtick is to ride positive PR as a billionare looking to enter political office in a climate where people aren't exactly enthused about billionares.
Eh, I'm not sure there's clear moral responsibility when talking your own book.
However, he does come off as someone who doesn't understand what he's talking about:
* comparing WSB "research" with proper fundamental analysis
* daily position disclosing is unrealistic and unrelated to what's going on
* doubling down on the retail vs wall street narrative and talking about the mortgage crisis, when Melvin Capital is a buy-side institution, not a sell-side institution.
* generally painting WSB users as "curageous" for expressing their views in a public forums when a. everyone is using aliases and b. WSB is cery similar to one of those pump-and-dump penny stock IRC chats, just at a much larger scale.
He might appear to be confident and informed but, for someone who is familiar with the industry, he just comes off as being full of bullshit/having a hidden agenda.
I disagree with Chamath’s take. Chamath sounds intelligent but it’s misplaced. It’s like analyzing Black Friday stampedes with the rationality of product quality assessment, better customer service, and overall better shopping experience. No. That’s not why these people are rushing in. Black Friday stampedes are a cascading phenomenon of FOMO + price trickery. It’s a giant mob with irrational behavior. Let’s not polish it too much. WSB is a cesspool (even after sterilizing it) of awful logic and herd thinking. The real losers are going to be average Joe’s who jumped into this with their Robinhood accounts and got their savings wiped out.
Chamath, Naval, Elon etc all belong to the narrative of decentralization and crypto with their own vested interests. Just the other day I was listening to Naval’s interview with a New Zealand media house - dude is literally urging people to buy Bitcoin.
Unrelated, but I’m going full bonds/cash after seeing the insanity today’s market is, not just GME but look at TSLA, etc. I can stay irrational longer.
It’s really not a cesspool. Outside of the frenzy, they do a solid job (when things are quiet) of finding cheap stocks with a potential to move within a year.
Even GME, before the phenomenon, the subreddit was mostly targeting 40 dollars around April earnings. The short squeeze was a real tactical play, but most people weren’t 100% on that as the main catalyst (as in, most people really thought the ps5/Xbox sales would be realized at earnings time beyond the ridiculous short position of bankruptcy).
I’ve been following it for 7-8 years now. Lots great DDs that didn’t turn out as well. After sterilization (ignoring 99% of the nonsense comments), I just see more guess work than anything else. Before GME, there was RiteAid, we all know how that panned out.
So we can’t knock a community for throwing ideas out there. I’ve gotten ideas from WSB that have led me to other ideas. It’s an alright subreddit, but to disparage them as dumbasses is a little much (they do enough of that to themselves as is).
No doubt, there is some good stuff in there as well. A few DDs are very in-depth and surprisingly good. I don’t think the whole subreddit is like that.
"Due diligence". It used both as a tag for posts that try to give real analysis, as well as a meme to describe terrible or humorous logic for making trades (e.g. "DPZ DD: everyone at this party just agreed that Dominoes Pizza is the best pizza, go long DPZ", stupid stuff like that).
Even Wall Street has losers, of course not every DD will touch gold. People in a forum like HN would ought to know Wall Street has been gamified for the longest time. People will gamble irregardless if they do so on the stock market or not. The people calculated enough to make money knows the sort of risk they are taking. The earth continues the spin - the only difference is that some retail investors having started taking note of what has been happening and are capitalizing on it. Chamath or Elon and their vested interests are irrelevant - backing democratization or individual investors isn't a bad thing.
So it's a cesspool and yet you have followed it for 7-8yrs? Please! It definitely has amazing value for you to follow it for 7-8yrs, there are few things that I have used for 7-8yrs. I have been following it since last year and it's amazing. Sure, you have to dig out the gem, but it's like mining for gold or diamond. Gotta do the work.
Yeah, periodically I've puttered over to WSB and looked around. It's not a shining jewel of analysis on a normal day. Right, now it's a pure stampeding herd of FOMO with metaphorical taxi drivers giving stock tips. Which is pretty canonical bubble material.
I think some of the fundamental analysis on WSB is sound, but doesn't support the existing valuation. The "short squeeze" play is interesting, but I don't have access to the ticker and book to read the details on what is actually going on. It's stampede material.
Sure, I've got a little in AMC/GME, but even if we, ahem, "go to the moon", because, eh, why not, it's a fraction of a fraction of my net, why not pick up a few bucks on the side. =)
The vast bulk of my investments are perking along in Vanguard index mutuals and will not even notice GME.
Not a huge Chamath fan, but holy crap does destroy these utterly worthless CNBC questions.
> "It doesn't mean that the investors that were short the stock were fundamentally wrong" - at around 28:00
Did he not hear that 136% of the shares were short? Anybody, LITERALLY ANYBODY who shorted past 100% deserves to lose everything. It's fundamentally stupid and fundamentally wrong. The shorts are not getting screwed, they deserve what they get from this.
Then he goes on to retail investors being the ones who are sometimes going to get hurt?
How did such terrible, poor, awful analysis get a position on TV? If he had any point, he never ever made it.
The short positions were at huge multiples of float for a long long long time before the stock price started to rise, allowing them to unwind their short position, no? This is not a new, sudden situation, it's been planned for a long long long time.
The people in WSB do know they're playing a wildly risky game. They know it's wild. They know it's gambling. They know there will be bagholders. There were also plenty of savvy people on this early, understanding the bull case that Michael Burry pointed out and the potential for a short squeeze.
It was the hedge funds who went over 100% short who were foolish here, not the momentum trading WSB crowd who helped cause the squeeze.
The interviewer and just about everyone else I've heard are missing the squeeze part of this. Yes, GME isn't worth $20+ billion. But Volkswagen shouldn't have been the most valuable company in the world in 2008, but it was. Short squeezes are just part of the market. Good on WSB for piling in.
Yeah I remember this article 20 years ago (!) pretty vividly. It was a 15 year old kid who made hundreds of thousands of dollars pumping up stocks on Yahoo message boards.
I think somewhere in this article is where I learned that the stock market is a pretty efficient mechanism of transferfing wealth from the middle class to the rich ...
to me it looks like a virtual "Occupy WallStreet". To scare and make squeal the fat hedge funds shorts. Kind of fun. It wouldn't last for long, though the shorts will probably be looking over their shoulders for years to come. The movement's rank-and-file will probably get hurt while the leaders will probably do fine. "Investing" is just not an applicable term here - i mean you aren't investing buying a ticket for rollercoaster ride, you're buying fun and amusement. Or a chance to make your voice and discontent heard. At least that is what seems to be sold to the rank-and-file.
Old school view here would probably see classic "pump-and-dump" by the few "leaders" who incited that frenzy. SEC though seems to lag far behind in understanding and dealing with the power of social media.
(Anyway, thanks for the surprisingly nice AMC ride, i happened to have a bit in a gamble that they would survive the lockdown. )
The Chamath Craze is ridiculous. The guy is a stock promoter through and through. It's really sad to see people fall into this guys trap.
He has an incredibly story (coming from nothing) but lets look at his career:
He "leaves" (aka fired) Facebook for being a D*ck head. Nobody is willing to work with him because he is rude and a jerk. His direct reports would cry regularly. Steven Levy talked about this in his book on Facebook.
He starts a VC fund. The fund has no "major" wins. For a guy writing checks in 2011 he didn't get any of the big wins. The VC fund literally "burns down" as Axios put it because he divorced his wife and was chasing a girl in Italy rather than being in the office.
Now he SPACs worthless companies selling them off to retail traders who think he is Warren Buffett. He is a salesman. The guy is on CNBC every other day.
I get the "holding truth to power" narrative is attractive but Chamath is not our saviour. I would argue he is just as bad as any other hedge fund manager. Taking advantage of retail investors.
Chamath talking about protecting the little guy is like Steve Cohen talking about respecting securities laws.
Yes, I am pretty pro WSB just like chamath. I think he is wrong about the "research" that is happening though. There is a bull case but not a $25 bil mkt cap one.
Chamath's comment was that there is a lot of great market analysis happening on WSB every day, on par with that of large hedge funds, so it isn't wise to treat the forum as just a joke. The interviewer twisted that into him saying that WSB thinks $350 is the correct price for GameStop. No one – least of all WSB – thinks that. This is purely a play for squeezing the shorts.
He became a billionaire from Facebook stock not from venture investing.
EDIT: That's according to him. I wouldn't be surprised if the guy overhypes his assets. Also his divorce likely cost him half (they got married before he joined FB).
I agree. Just look at the guy's twitter lately. He was hyping up some "huge" potential SAAS company and stringing people along. You could tell because in the comments you could see people speculating about which SPAC that information was associated with. It caused about 5 SPACs he is associated with to rocket up and then when he finally releases the information it is a smart lock company (latch) and not associated with any of his SPACs...which later sold off.
I was on reddit watching this speculation frenzy unfold. These idiots follow this guy's words and then spin rumors off of them....then those rumors circulate in this echo chamber until everyone is saying the same thing.
Then you have stuff like GME and AMC. I'm not surprised at all what is happening because there are so many people that just see the next big trend and just pile in.
It's just as ridiculous as the fact that r/wsb insiders are obviously abusing their positions to get rich at the cost of newcomers, basically constructing a public pyramid scheme, while everyone there keep repeating it's a way for the average person to avenge wall street, because that shit really works with the average young reddit person.
I find this, similar to the arguments against robinhood and extremists on social media, basically boils down to treating people as sheep and wanting to protect them from themselves.
I think it is a stretch to say r/wsb insiders are obviously taking advantage of newcomers. You can’t spend much time with WSB without developing some financial literacy, and there are compelling ideas. It is not just flexing and hype. Also, I don’t think there is a precedent (such as the pyramid scheme) for what they are doing in the market.
I think there is some truth to your mention of young Reddit person being vulnerable, but I think it is risky trying to protect them with regulation.
You have a very nice view from the outside. The sub is misunderstood. Self deprecation and arrogance of being both ignorant and reckless are, at least for me, defining characteristics of the members. They don't take themselves seriously at all.
Most times WSB talk about normal stocks and positions and the gains or losses thereof. A few like TSLA, PLNTR and now GME hit the mainstream airways are meme stocks. Losing money and bragging about is about as big a kudos as gaining as much.
The level of organisation and criminality you might think exists isn't there at all.
> He starts a VC fund. The fund has no "major" wins.
Box, Slack, Yammer, Palantir. I guess I don't know what the definition of "major" is, but those seem decent. The VC fund did eventually "burn down", but not because of bad investments but because he had some personal issues.
I don't have a strong opinion about him as a person. I just don't understand why a criticism was that he was a bad VC. It seems like he probably came out OK there.
Palantir was obv the biggest win. By major I mean over 50 bil market cap. He was literally writing checks during the best founding period ever (2008-2013) and didn't get any of the huge companies (Stripe, Uber, Airbnb, etc.).
lol, that is nonsense. Palantir's success, for example, is entirely due to covid. It would still not have IPO'ed today without the insanity taking place today due to the fed buying corporate bonds and keeping insane/illogical interest rates in place. Time is valuable, unless you live in the fed's mind.
Even before COVID he would have been an early investor. That means he invested in what IPO’ed as a 5 billion dollar company at basically the ground floor (the company is now 60 billion).
Yammer was bought by MSFT for more than it was worth (and likely more than it was valued at when he invested).
man you dont know this guy or his life story. people say all kinds of stuff in books. who cares about his dating/marriage life? That is really low to bring that kind of stuff up in this context. the fact that this is the highest comment speaks to how toxic this community has become.
His "VC" fund is a social good company that prioritizes people's wellfare over profits. and who cares if its a success or failure, VC is hard.
He isn't a hero and he isn't a "Dickhead". He's just a human.
If you don't know him personally you really shouldn't be making these kinds of baseless adhominem attacks.
Reading your comment history, its nothing but black and white opinions and pointless preferences.
I am leaving this community forever. This whole place has gone down hill. There are no more hackers here. There is no more real discussion of anything. I feel bad for paul graham. This website is a disgrace.
Okay, I’ll take the bait. As someone with direct experience with the topic at hand, who has worked with / remains friends with people with direct experience regarding the subject of this conversation, I can say that many of the assertions of the parent ring true to me.
And, in fact, the stuff you don’t know is even worse.
Steve Jobs, the example that always gets invoked here, was a horrible human being. Did that make him wrong? No, it didn't, it made him an asshole. And Chamath being an asshole doesn't make him wrong here either. Is Chamath Steve Jobs? No, but who cares. I found what he said interesting, and probably right in ways that make people uncomfortable.
Which probably explains why folks are bringing up his love life.
> Which probably explains why folks are bringing up his love life.
yep - people here wants those who are virtuous to be more successful than those who aren't. 'cept in real life, there's no correlation, and logically there wouldn't be. In fact, the more of an asshole you are, the more likely you'd be able to take advantage of people to succeed.
I do know his life story because he tells it in every interview he gives. I understand what you are trying to say but just because I have not met him doesn't mean that I can't criticize him.
His VC fund had LPs that lost money. I don't think they really give a shit about "welfare over profits". Once it's a family office yeah sure preach about welfare over profits but remember he had a fiduciary responsibility to his LPs which he (likely) broke.
"No more real discussion". This is what real discussion looks like. People LOVE chamath and I am explaining what I see is wrong about him.
I agree with the comment that @mysore has written in a response to this but I wanted to add my two cents as well.
I mean if you have a disagreement with his ideas, it makes sense to debate them/attack them but on a post about his comments on the WSB debate you've tried to take his personal life and accomplishments to the cleaners.
> Yes, I am pretty pro WSB just like chamath. I think he is wrong about the "research" that is happening though. There is a bull case but not a $25 bil mkt cap one
And that's after you've already mentioned that you're pretty pro WSB. Is he wrong though, WSB posters identified, correctly, that they could use the GME short interest in their favour by squeezing the folks on the other side of the trade. @chamath never mentioned there's fundamental research to support a $25 billion market cap.
I don't know the backstory on his time at facebook but from all the articles I've read on his VC fund, he returned north of 30-40% / year while it was active. When commenters have pointed out his wins, you've discounted it as 'oh, but it's just one company' or something along the lines.
Additionally, Steve Cohen isn't really a fair comparison - that dude's company was literally shut down for insider trading - it's a whole different ballgame that Steve Cohen pretty much got away without so much as a slap on the wrist though.
Also the world is littered with people who've made poor decisions / decisions that are suboptimal to the external observer but I think given you don't have a microphone into their personal stuff, it seems really disingenuous to use that to disparage him.
It's hard to know who is good, and in the banking business apparently being famous matters.
The guy from Shark Tank, Kevin O'Leary can raise a fund just by virtue of that, being a known brand.
He seems like a person with good intentions, but just kind of a hustler, not a bad one, I don't think he's starting pyramid schemes - but I also don't think he has anything to contribute.
We're in a new era of Twitter/Youtube experts with a ton of populism via RobinHood and ETrade Retirees so we're going to have to live with the talking heads.
pretty good arguments from both sides here and lots to learn; although, Chamath has many valid points he is also really good at skirting around some of the questions. hubris on both ends.
What I don't get is that, if this trade (140% short) was really so obviously wrong. Could a wealthy hedge fund not simply have made the same bet as the million strong WSB army, but even more pronounced? Why isn't a Carl Icahn short squeezing these guys if it's so easy and obvious? Simply buying calls and buying stocks and forcing a short squeeze, could a bigger established fund have made this bet?
I think the general answer would be no, because at the end this fund would be a bagholder of $350 stock that's worth about $30, and when trying to get rid of it the price would crash down.
My question then is, how are we somehow thinking that WSB doesn't have the same problem? The only issue is that the bagholders will be retail. It's being played off like some giant win to WSB. When really, those who have closed their positions have won, probably a select few. There's probably a lot more that are bagholders who're yet to feel the pain, which inevitably comes as everyone agrees that outside of the temporary short squeeze, this stock is not worth much more than $30.
They realistically are. It's pure media fiction (and scapegoating) that a bunch of regular people are somehow moving markets. In practice they're just the smoke screen for the actual wealth making plays against their peers that screwed up in this scenario.
Even if WSB users and other retail holders held like, 30%, Burry holders 3%, and Cohen holds 10%, there is still more than 50% out there which may be bought by others. There aren’t enough interested Americans to buy the rest of the company.
Other hedge funds and big investors are in on the action. These shorts got caught in a bad spot and now they are paying for it. Once all the retail traders get screwed in the media, others on Wall Street will quietly take their bonuses and go out for drinks or a new car. Nobody will report how much money they made. Why would they?
Not sure how reliable it is but according to SA, 78% is owned by institutions https://seekingalpha.com/symbol/GME, the part owned by retail should be truly small. How this narrative of retail being in control is being pushed by the media is indeed very strange.
>I think the general answer would be no, because at the end this fund would be a bagholder of $350 stock that's worth about $30, and when trying to get rid of it the price would crash down
Explain why they'll be holding $350 stock when the hedge fund who was shorting the stock has obligation to return all the stock that it borrowed. All these stocks will leave them, so why it matters if the stock is $350
Granting that I'm not really familiar with these things, it seems like the short sellers simply don't have the money to cover their positions at $350/share. They could try to buy back all the stocks, but they would run out of money long before they finished. Given that, they would most likely skip the crap and jump straight to declaring bankruptcy. So it doesn't seem like they really need to buy the stock at $350. At a lower price, where they could feasibly pay for it all, they might give it a go, but as it stands there is no chance. I haven't seen anyone else saying this, but I also don't see any way around it.
I was one of the first if not the first people to post weekly options yolo on WSB that gained traction years ago, I get a bit more into it in other posts.
Most of these top firms have a specific pipelines from top ivy schools, they are very very selective for a specific person usually from an upper class upbringing.
I think Chamath has a point in that there's a lot more people capable of understanding the dynamics of options than are given credit for.
There still seems to exist this hubris in wall street that unless you went to those top schools you aren't capable of understanding derivatives and most of those institutions won't even interview you for a position if your CV isn't prestigious enough. Yet time and time again you see these funds blow up.
That being said its amusing how people just ran with the caricature of a fresh out of high school, blue collar upbringing, degenerate CBOE options pit trader who you would find smoking weed during trading hours and coked out pounding drinks at Ceres after hours with an autistic antisocial 4chan twist(heard stories from people who knew floor traders like this).
It seems like a lot of the professionals can't see past the tongue in cheek self deprecating humor to realize its an act that people play up.
In my opinion Zero Hedge is more doom and gloom boomer centric and racist/hate filled. Despite Wall Street Bets use of what would be considered foul and derogatory language, giving back and donating to charities is encouraged. There was a post showing a donation of $420.69 encouraging others to donate gains to an autism charity given how freely the term is thrown around and how the majority of the community is a self proclaimed autist.
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[ 3.2 ms ] story [ 115 ms ] threadThis is growing into a bigger problem. The thought of Twitter influencers (example with E. Musk / Etsy, yesterday [1]) heavily moving the value of stocks with a simple tweet is not really reassuring. The SEC should start investigating properly into it, from personal benefits to bigger company wide fraud, the regulators need to act before this is the new norm.
[1] https://edition.cnn.com/2021/01/26/investing/elon-musk-etsy-...
Palihapitiya is a regular guest on this show, but was invited to appear today because of the extraordinary price action in the common stocks of GameStop ($GME) and AMC Entertainment ($AMC) resulting from short squeezes on each stock.
The remarkable thing about what Palihapitiya says is that he criticizes the institutional investment community which operates hedge funds who use excessive leverage to bet against small investors who-- in this case-- have bet that the stock is oversold.
At one point today 140% of the total number of shares of $GME stock had been shorted (meaning it was borrowed and sold to others, with the expectation that the investors who borrowed the stock would be able to buy the stock back as shares of $GME fell from inflated levels).
The interview makes extensive reference to the /r/wallstreetbets, https://www.reddit.com/r/wallstreetbets, subreddit and constructive analysis of the trade setups for these stocks.
According to a related CNBC article, https://www.cnbc.com/2021/01/27/chamath-palihapitiya-closes-...:
"Instead of having ‘idea dinners’ or quiet whispered conversations amongst hedge funds in the Hamptons these kids have the courage to do it transparently in a forum,” he said. “What it proves is this retail [investor] phenomenon is here to stay. There are 2.7 million people inside wallstreetbets. I think they are as important as any hedge or collection of hedge funds.”
"Palihapitiya claimed the best research on stocks done by retail investors inside wallstreetbets is nearly indistinguishable from the best research on Wall Street. “That edge is gone. Now all of a sudden, retail can be on the same footing and they don’t have to be the ‘bag-holder’ to Wall Street.”
I think a lot of people in this community will be interested in the idea that members of a subreddit can compete with institutional investors when the institutional investors' theses about a stock are either incorrect or so crowded that almost no one can make money trading with the institutional investors' strategy.
At one point Palihapitiya criticized CNBC host Scott Wopner for defending the way things have always been done on Wall Street at the expense of the Robinhood investment crowd. Palihapitiya argues that the Robinhood crowd, the /r/wallstreetbets subscribers, should win and the institutional investment community should lose when the "smart money" gets the trade this wrong.
I agree with him.
I assume you're referring to the ' '. Whether GME is worth $5 or $30, the stock rose to $500, and that's not fundamentally a misunderstanding of value. funds cooked the grenade too long (to use another ), and and the crowd slapped it out of their hand before they could throw it. Boom.
No?
Edit: Couple of stand-out comments he made, paraphrasing:
‘The best wsb due diligence can be indistinguishable from top hedge fund due diligence, the funds don’t have an edge’.
Right. It doesn’t take a genius to know GameStop will have a hard time in a cd-less world and full digital download marketplace. It also doesn’t take a genius to know GameStop will not go to zero dollars (so don’t short to that level).
Love the defense of the intellect of the retail investor and a group that doesn’t need to be coddled, great defense against the patronizing and condescending suggestions.
Second edit: Jim Cramer recently peddled Raytheon’s earnings up. I’m not a genius but they got the earnings from laying off 16k people. Ok, how many quarters can you do that for? This is a play someone can consider (in either direction). We’ve got brains I think too.
They have manipulated markets through various institutions and making knowledge so hard to come by without going into massive debt in order to maintain their elevated status.
In their arrogance though, they thought they could reverse the trend of the democratization of their power to the masses, and have literally tried to move heaven and earth in order to remain in power and reverse the trend.
My curious position is I think they are realizing that the trend is irreversible, that power eventually will always diffuse to the masses eventually as no system is perfect, there will always be leaky abstractions, and I have no doubt they have a nuclear option in their back pockets to try and quell the massive shift of power that seems inevitable at this point. Question is, what is that nuclear option?
https://twitter.com/rsg/status/1354513379529027584
And definitely agree. The other famous Chamath video was also great, but this one was just fantastic. Spot on with what's going on.
I also took notes on how effective it can be to remain cool as a cucumber and calmly explain a fundamentally sound mathematical position against an emotional attack.
Note: I also wouldn't be surprised if some smart folks on Wall Street are now doing a clever counterattack where they are going long momentum and the short is a decoy, and then will pull the long profits and then also profit on the short. So I think smart Wall Street money will profit off this more than average retail, but no one will make out better than that reddit user who started the whole thing (forget their name)
https://news.ycombinator.com/item?id=25932598 ("Chamath Palihapitiya on Wallstreetbets [audio]" <-- you are here
https://news.ycombinator.com/item?id=25904779 ("How WallStreetBets Pushed GameStop Shares to the Moon") 2 days ago
https://news.ycombinator.com/item?id=25908084 ("The nihilism of r/wallstreetbets") 2 days ago
https://news.ycombinator.com/item?id=25868680 ("r/wallstreetbets set to private after increased media coverage") 5 days ago
Edit: This story is breaking my stack metaphor, and a graph metaphor would be too complicated.
These are all significant threads with interesting articles that are different enough from each other that I don't think we'll merge them:
https://news.ycombinator.com/item?id=25930214 ("GameStop Is Rage Against the Financial Machine") <-- currently on the front page
https://news.ycombinator.com/item?id=25930488 ("How r/WallStreetBets gamed the stock of GameStop")
https://news.ycombinator.com/item?id=25929443 ("Robinhood, Trading 212 and others go down amid AMC and GameStop stock frenzy")
https://news.ycombinator.com/item?id=25929110 ("GameStop Opened at $300+ Today") - not an interesting article but the thread is better
https://news.ycombinator.com/item?id=25926953 ("The GameStop Fiasco Proves We’re in a ‘Meme Stock’ Bubble")
https://news.ycombinator.com/item?id=25927254 ("GameStop Short-Sellers Reload Bets After $6B Loss")
Edit 2: these just in:
https://news.ycombinator.com/item?id=25934186 ("Nasdaq says they will halt trading if a stock has unusual social media chatter")
https://news.ycombinator.com/item?id=25933581 ("GameStop Mania Reveals Power Shift on Wall Street")
Edit 3: and now this:
https://news.ycombinator.com/item?id=25935511 ("Discord bans the r/WallStreetBets server")
https://news.ycombinator.com/item?id=25935746 ("WSB Went Private on Reddit")
Edit 4: https://news.ycombinator.com/item?id=25936521 ("Where do we go from here and who is going to step up to help us?")
https:&#...
have you considered open-sourcing parts of HN so the community could create features to automate menial tasks like this?
this could free up your valuable time for other things.
> This video contains content from NBC Universal, who has blocked it on copyright grounds.
Would it be too complicated, or do we lack the tooling to visualize it properly? :). Graphs are good.
https://d.tube/#!/v/qwewerrty123123asdzc/QmaPHajW8GKmYGqGZC5...
Hopefully it will be infrequently necessary. But I suspect that we're living in "interesting times".
You didn't think that you'd be able to avoid this in the future, now did you? You've established a precedent (at least for huge, fast moving (disruptive) events) :)
I'm a bit of a centrist leaning to WSB:
- I will agree the fundamentals are off. AMC, BB, GS compared to its industry competitors market cap and valuation doesn't make sense.
- Counter to the above argument, it shows the cracks in the system: Many stocks are simply valued based on votes that traditionally has been in the favor of large institutional investors who are also guilty of market manipulation and closer, faster access to new information that the retail investors do not have.
Overall, I am very worried that we are on the final stretch of the equity bubble that started as a result of the Feds printing money, buying up corporate debt, violating the US constitution. We are witnessing a departure from fundamental valuation and straight into a manic stage.
- I disagree that retail investors have an edge in information rather that existing fundamental analysts employed by large firms never had an edge at all and simply a mouthpiece for whatever price is desired by a select group of institutional hedge funds.
TLDR: I am pleased the little guys are winning but also very worried that we are on the final manic phase of a classic equity bubble we've witnessed two decades ago.
edit: HN is throttling my comments after my CNBC video was removed for being a duplicate so to answer:
Take a look at the M3 supplyhttps://fred.stlouisfed.org/series/MABMM301USM189S
do you see that vertical line right at the beginning of 2020?
that's what is different now. We are now in a bubble withi in a bubble.
I think crypto proved to us that you don't need any sort of fundamentals - price action beats all (and defines the narrative) in the short term. We've also become a meme-based and tweet-based economy (and Donald Trump / the pandemic surely help speed that along)
And all this is totally not a gambling operation with a public safety net?
The owners of bank equity did fine while the working class got screwed. This is the environment the millenials started their investing opportunities in. That the game is rigged was made explicit early on in most millenials' investing career.
Meanwhile hundreds of banks and other financial institutions did get public funds. The state did not take any ownership, and some of them still haven't paid back billions. The profits generated since then – all directly due to the bailouts – have been private.
If you feel that another comment is wrong, the way to respond is to show how it's wrong, include additional relevant information, and avoid name-calling. Then we can all keep learning (and also kick the can down the road a bit regarding the part where we degenerate into flaming spears and tribal warfare).
I get that the GP comment was also a provocation without much information in it, but these things are matters of degree, and the right direction to go in response to provocation is exactly the opposite to the way your comment went.
I'm not trying to save anyone—just HN!
https://hn.algolia.com/?dateRange=all&page=0&prefix=false&so...
https://hn.algolia.com/?dateRange=all&page=0&prefix=false&qu...
If you know a better way to do that, I'm all ears. There are a lot of constraints on this problem.
Source? Clearly "they" dont like losing money but the rules are clear.
The Secretary of State of Massachusetts was on TV pushing a 30-day trading halt on GME. That doesn't strike me as something that particularly falls within his ambit, and I genuinely wonder what motivated his appearance there.
there is no safety net for hedge funds (or indeed, any investment company that's not a proper deposit taking bank). The GFC was an anomaly - and banks got bailed out for taking on risks that they shouldn't have been (and only some - lehmens got owned and they didn't get bailed out). The bailouts were more about stablizing rather than saving the gov't buddies, despite what the conspiracy narrative likes to make (of course, it _did_ save the banks, so believe what you will).
On a more serious note, I don't get how a stock can be 140% shorted. Does that mean once you return a portion of the shares you borrowed you have to rebuy part of it and return it again? Also when would these short sellers get margin called?
If they only had put options, why did they need a $2.5B bailout this week? I was under the impression they also had short positions or sold naked calls in order to get into as much trouble as they seem to be in based on the bailout announcement.
Or were their put options' value being used as basis other leveraged investments?
Don't understand how they could have lost $2.5B on just put options.
> Melvin Capital Management, which managed $12.5 billion at the start of the year, had lost nearly 30% for the year through Friday due largely to its array of bets against companies including GameStop, said people familiar with the fund.
Quite interesting that parent article, as detailed as it is, somehow missed a much reported 30% drawdown.
oh no.
that's really bad.
Options is one of the really fast ways to lose your shirt. I mean, they are known for that. I expect they were talking about doing it on margin too. :-/
This all is certainly highlighting that these systems have been fundamentally unfair for a long time, but that doesn't mean that real people won't be hit hard financially as a result.
I don't know, maybe I'm just far too conservative with my money to do something like this.
This isn't new...there are gamestops every couple of years. This is just an extreme version in a year when everyone is online 24/7.
Perhaps, but like his response to this question pointed out: neither did wallstreet when they left the US population as bag holders for all their damage in the past (ie, 2008).
Additionally, the only people left being bag holders here so far are the hedge fund (and their copycats) taking such an absurd short position.
They are complaining about a necessary situation they created lol. We need to stimulate investment to get out of the last crisis (that was the plan all along). What are these cats complaining about?
“So far” is carrying a lot of weight here.
The whole metaphor discounts the "I just want the shortsellers to burn b/c anarchy" aspect that some people are claiming, which honestly I think is believed by very few and projected onto many more who really just want quick money.
It would start with a small group of players convincing a bunch of casual players to join their clan and buy out as much of the supply of a specific item on the market as they could. They claimed if everyone held on to the items for two weeks the price would rise and they'd all get rich.
Of course, the leaders would then sell their items one week in. This would cause the price of the item to drop, resulting in the other members of the clan panic-selling all of their items. The price of the item would then crash resulting in most players losing their money.
Eventually the game developers made the organization of such clans a bannable offense since too many casual players were losing a lot of their wealth participating in these events.
[0] https://runescapeclans.fandom.com/wiki/Merchanting_Clan
I think it's a mistake to take his comments as applying to WSB as a whole. I agree WSB posters, collectively, are mostly clueless. But there are absolutely people in there who know what they're doing and have put a lot of thought into their strategy.
By that logic, Wall Street was "right" for years, because housing prices just kept going up and up and up and up. This story didn't end yesterday, it's entirely possible that the Tesla shorts were "just premature" the same way that the people who started shorting the housing market in 2005 were premature (and took a beating during those years).
And the praise for /r/wallstreetbets seems a bit excessive considering that by his own admission, he only just learned about them a couple of days ago. I don't know how much time he's spent there but I'm not sure that his read on the place is especially accurate.
Certainly there's a crowd on WSB that are just sheep, but there is a minority of WSB posters that produce quality research and analysis. The idea that Wall Street insiders are elite, a different breed, is mostly a myth. There are smart people working Wall St to be sure, but there are lots of smart people working elsewhere.
I don't know what answer you expect him to give. Are you saying that people shouldn't be allowed to tweet their trades? Also it's ridiculous to think WSB isn't full of bagholders - I've seen people blow up their accounts on completely ridiculous trades they had researched on their own. Are you saying people shouldn't be allowed to make bad trades?
Chamath answers the question correctly; the question you're asking implies that you don't think retail should be trusted to invest. If that's truly what you think then say it proudly.
I have to say up front, I find this kind of attitude incredibly infantilizing and condescending.
Exactly how many "bag holders" did Chamath "create"? (Hint: Zero.) Obviously the "bag holders" are assuming the risks themselves, as is (absent any evidence to the contrary) Chamath. They're on a forum literally called "Wall Street BETS" (emphasis mine). If a millionaire announces he's playing the slots and subsequently wins the jackpot, is he "responsible" for everyone else who subsequently plays slots?
(He didn't make this argument as well as he could have, but Chamath himself points out that when Goldman or AIG played stupid games, everyone else was conscripted into being the "bag holders.")
Also, exactly how many people are we even saying Chamath influenced? How many people were undecided about making the GME trade and then said, "welp, Chamath is long so YOLOOOOO?" And how many of these people traded irresponsibly (e.g. overleveraged, invested their life savings)? I would bet the number is small, even negligible.
> His plan to make hedge funds disclose their positions daily as some kind of a solution to overleverage makes no sense whatsoever.
Correct me if I'm wrong, but I don't think he ever proposed this as some sort of affirmative plan. What I heard was him pointing out the asymmetry of which entities are required/voluntarily publish their positions. If hedge funds had done that, the 136% thing would never have happened for obvious reasons. I interpreted it more as a response to the interviewer's pearl clutching about the market having no "integrity" because a stock price deviated from the "fundamentals" for a time under some bizarre circumstances.
> And he’s delusional about research skills of WSB posters as compared to Wall Street analysts.
If you're correct, then you can easily show us your short positions contra WSB research/herd mentality/irrationality/<pejorative> and we can track how well you end up compared to WSB.
This - this is the point that seems to keep getting lost. The Big Guys get bail-outs constantly - hell Melvin got a float of $3B over this mess.
This isn't a defense of the guy by the way since all of this schtick is to ride positive PR as a billionare looking to enter political office in a climate where people aren't exactly enthused about billionares.
However, he does come off as someone who doesn't understand what he's talking about:
* comparing WSB "research" with proper fundamental analysis
* daily position disclosing is unrealistic and unrelated to what's going on
* doubling down on the retail vs wall street narrative and talking about the mortgage crisis, when Melvin Capital is a buy-side institution, not a sell-side institution.
* generally painting WSB users as "curageous" for expressing their views in a public forums when a. everyone is using aliases and b. WSB is cery similar to one of those pump-and-dump penny stock IRC chats, just at a much larger scale.
He might appear to be confident and informed but, for someone who is familiar with the industry, he just comes off as being full of bullshit/having a hidden agenda.
Chamath, Naval, Elon etc all belong to the narrative of decentralization and crypto with their own vested interests. Just the other day I was listening to Naval’s interview with a New Zealand media house - dude is literally urging people to buy Bitcoin.
Unrelated, but I’m going full bonds/cash after seeing the insanity today’s market is, not just GME but look at TSLA, etc. I can stay irrational longer.
Even GME, before the phenomenon, the subreddit was mostly targeting 40 dollars around April earnings. The short squeeze was a real tactical play, but most people weren’t 100% on that as the main catalyst (as in, most people really thought the ps5/Xbox sales would be realized at earnings time beyond the ridiculous short position of bankruptcy).
It’s a pretty sensible subreddit.
The point is that they actually write out real strategies/positions as "DD", and you can make your own decisions.
I think some of the fundamental analysis on WSB is sound, but doesn't support the existing valuation. The "short squeeze" play is interesting, but I don't have access to the ticker and book to read the details on what is actually going on. It's stampede material.
Sure, I've got a little in AMC/GME, but even if we, ahem, "go to the moon", because, eh, why not, it's a fraction of a fraction of my net, why not pick up a few bucks on the side. =)
The vast bulk of my investments are perking along in Vanguard index mutuals and will not even notice GME.
> "It doesn't mean that the investors that were short the stock were fundamentally wrong" - at around 28:00
Did he not hear that 136% of the shares were short? Anybody, LITERALLY ANYBODY who shorted past 100% deserves to lose everything. It's fundamentally stupid and fundamentally wrong. The shorts are not getting screwed, they deserve what they get from this.
Then he goes on to retail investors being the ones who are sometimes going to get hurt?
How did such terrible, poor, awful analysis get a position on TV? If he had any point, he never ever made it.
The people in WSB do know they're playing a wildly risky game. They know it's wild. They know it's gambling. They know there will be bagholders. There were also plenty of savvy people on this early, understanding the bull case that Michael Burry pointed out and the potential for a short squeeze.
It was the hedge funds who went over 100% short who were foolish here, not the momentum trading WSB crowd who helped cause the squeeze.
The interviewer and just about everyone else I've heard are missing the squeeze part of this. Yes, GME isn't worth $20+ billion. But Volkswagen shouldn't have been the most valuable company in the world in 2008, but it was. Short squeezes are just part of the market. Good on WSB for piling in.
"At the close of trading Wednesday, Utah-based Iomega was worth more than Hershey Foods and had twice the market value of Apple Computer."
https://www.deseret.com/1996/5/23/19244215/fools-rush-in-sen...
I think somewhere in this article is where I learned that the stock market is a pretty efficient mechanism of transferfing wealth from the middle class to the rich ...
https://www.nytimes.com/2001/02/25/magazine/jonathan-lebed-s... -- Huh didn't realize this article was by Michael Lewis, makes sense
https://www.nytimes.com/2000/09/21/business/sec-says-teenage...
https://en.wikipedia.org/wiki/Jonathan_Lebed -- wow he was the first minor prosecuted by the SEC!
Old school view here would probably see classic "pump-and-dump" by the few "leaders" who incited that frenzy. SEC though seems to lag far behind in understanding and dealing with the power of social media.
(Anyway, thanks for the surprisingly nice AMC ride, i happened to have a bit in a gamble that they would survive the lockdown. )
He has an incredibly story (coming from nothing) but lets look at his career:
He "leaves" (aka fired) Facebook for being a D*ck head. Nobody is willing to work with him because he is rude and a jerk. His direct reports would cry regularly. Steven Levy talked about this in his book on Facebook.
He starts a VC fund. The fund has no "major" wins. For a guy writing checks in 2011 he didn't get any of the big wins. The VC fund literally "burns down" as Axios put it because he divorced his wife and was chasing a girl in Italy rather than being in the office.
Now he SPACs worthless companies selling them off to retail traders who think he is Warren Buffett. He is a salesman. The guy is on CNBC every other day.
I get the "holding truth to power" narrative is attractive but Chamath is not our saviour. I would argue he is just as bad as any other hedge fund manager. Taking advantage of retail investors.
Chamath talking about protecting the little guy is like Steve Cohen talking about respecting securities laws.
You clearly can, considering your comment hasn't been removed. Why do you think your opinion deserves to be on the top of the page over anyone else's?
It helps that there aren't very many big names with airplay in the media right now that aren't being ridiculously biased against WSB here.
>Comes from nothing
>is a billionaire
EDIT: That's according to him. I wouldn't be surprised if the guy overhypes his assets. Also his divorce likely cost him half (they got married before he joined FB).
I was on reddit watching this speculation frenzy unfold. These idiots follow this guy's words and then spin rumors off of them....then those rumors circulate in this echo chamber until everyone is saying the same thing.
Then you have stuff like GME and AMC. I'm not surprised at all what is happening because there are so many people that just see the next big trend and just pile in.
https://i.pinimg.com/originals/f3/f9/6c/f3f96c06ddc73aa35cfa...
I think it is a stretch to say r/wsb insiders are obviously taking advantage of newcomers. You can’t spend much time with WSB without developing some financial literacy, and there are compelling ideas. It is not just flexing and hype. Also, I don’t think there is a precedent (such as the pyramid scheme) for what they are doing in the market.
I think there is some truth to your mention of young Reddit person being vulnerable, but I think it is risky trying to protect them with regulation.
Most times WSB talk about normal stocks and positions and the gains or losses thereof. A few like TSLA, PLNTR and now GME hit the mainstream airways are meme stocks. Losing money and bragging about is about as big a kudos as gaining as much.
The level of organisation and criminality you might think exists isn't there at all.
Box, Slack, Yammer, Palantir. I guess I don't know what the definition of "major" is, but those seem decent. The VC fund did eventually "burn down", but not because of bad investments but because he had some personal issues.
I don't have a strong opinion about him as a person. I just don't understand why a criticism was that he was a bad VC. It seems like he probably came out OK there.
Yammer was bought by MSFT for more than it was worth (and likely more than it was valued at when he invested).
But imagine retail investors doing this out of sentiment, a la Facebook. It is even scarier and more sinister.
Thieves robbing thieves, it is best to stay out if you have ethics.
His "VC" fund is a social good company that prioritizes people's wellfare over profits. and who cares if its a success or failure, VC is hard.
He isn't a hero and he isn't a "Dickhead". He's just a human.
If you don't know him personally you really shouldn't be making these kinds of baseless adhominem attacks.
Reading your comment history, its nothing but black and white opinions and pointless preferences.
I am leaving this community forever. This whole place has gone down hill. There are no more hackers here. There is no more real discussion of anything. I feel bad for paul graham. This website is a disgrace.
And, in fact, the stuff you don’t know is even worse.
Steve Jobs, the example that always gets invoked here, was a horrible human being. Did that make him wrong? No, it didn't, it made him an asshole. And Chamath being an asshole doesn't make him wrong here either. Is Chamath Steve Jobs? No, but who cares. I found what he said interesting, and probably right in ways that make people uncomfortable.
Which probably explains why folks are bringing up his love life.
yep - people here wants those who are virtuous to be more successful than those who aren't. 'cept in real life, there's no correlation, and logically there wouldn't be. In fact, the more of an asshole you are, the more likely you'd be able to take advantage of people to succeed.
The actual problem as hinted, is it gets upvoted.
It's how Twitter has become the toxic mess it is devaluing actual content.
To grow people need to go through this stage, but it's hard to know were they can do it. Like an off topic tag.
The comment "The guy is a stock promoter through and through" was an interesting accusation and on topic, but it's lost now.
Something seems a little off lately with the sudden uptick in PR/guest interviewing/attention seeking behaviour as of late.
His VC fund had LPs that lost money. I don't think they really give a shit about "welfare over profits". Once it's a family office yeah sure preach about welfare over profits but remember he had a fiduciary responsibility to his LPs which he (likely) broke.
"No more real discussion". This is what real discussion looks like. People LOVE chamath and I am explaining what I see is wrong about him.
I mean if you have a disagreement with his ideas, it makes sense to debate them/attack them but on a post about his comments on the WSB debate you've tried to take his personal life and accomplishments to the cleaners.
> Yes, I am pretty pro WSB just like chamath. I think he is wrong about the "research" that is happening though. There is a bull case but not a $25 bil mkt cap one
And that's after you've already mentioned that you're pretty pro WSB. Is he wrong though, WSB posters identified, correctly, that they could use the GME short interest in their favour by squeezing the folks on the other side of the trade. @chamath never mentioned there's fundamental research to support a $25 billion market cap.
I don't know the backstory on his time at facebook but from all the articles I've read on his VC fund, he returned north of 30-40% / year while it was active. When commenters have pointed out his wins, you've discounted it as 'oh, but it's just one company' or something along the lines.
Additionally, Steve Cohen isn't really a fair comparison - that dude's company was literally shut down for insider trading - it's a whole different ballgame that Steve Cohen pretty much got away without so much as a slap on the wrist though.
Also the world is littered with people who've made poor decisions / decisions that are suboptimal to the external observer but I think given you don't have a microphone into their personal stuff, it seems really disingenuous to use that to disparage him.
Slack?
The guy from Shark Tank, Kevin O'Leary can raise a fund just by virtue of that, being a known brand.
He seems like a person with good intentions, but just kind of a hustler, not a bad one, I don't think he's starting pyramid schemes - but I also don't think he has anything to contribute.
We're in a new era of Twitter/Youtube experts with a ton of populism via RobinHood and ETrade Retirees so we're going to have to live with the talking heads.
Just kidding, there's no persuasive argument against WSB.
I think the general answer would be no, because at the end this fund would be a bagholder of $350 stock that's worth about $30, and when trying to get rid of it the price would crash down.
My question then is, how are we somehow thinking that WSB doesn't have the same problem? The only issue is that the bagholders will be retail. It's being played off like some giant win to WSB. When really, those who have closed their positions have won, probably a select few. There's probably a lot more that are bagholders who're yet to feel the pain, which inevitably comes as everyone agrees that outside of the temporary short squeeze, this stock is not worth much more than $30.
Even if WSB users and other retail holders held like, 30%, Burry holders 3%, and Cohen holds 10%, there is still more than 50% out there which may be bought by others. There aren’t enough interested Americans to buy the rest of the company.
Other hedge funds and big investors are in on the action. These shorts got caught in a bad spot and now they are paying for it. Once all the retail traders get screwed in the media, others on Wall Street will quietly take their bonuses and go out for drinks or a new car. Nobody will report how much money they made. Why would they?
Explain why they'll be holding $350 stock when the hedge fund who was shorting the stock has obligation to return all the stock that it borrowed. All these stocks will leave them, so why it matters if the stock is $350
Most of these top firms have a specific pipelines from top ivy schools, they are very very selective for a specific person usually from an upper class upbringing.
I think Chamath has a point in that there's a lot more people capable of understanding the dynamics of options than are given credit for.
There still seems to exist this hubris in wall street that unless you went to those top schools you aren't capable of understanding derivatives and most of those institutions won't even interview you for a position if your CV isn't prestigious enough. Yet time and time again you see these funds blow up.
That being said its amusing how people just ran with the caricature of a fresh out of high school, blue collar upbringing, degenerate CBOE options pit trader who you would find smoking weed during trading hours and coked out pounding drinks at Ceres after hours with an autistic antisocial 4chan twist(heard stories from people who knew floor traders like this).
It seems like a lot of the professionals can't see past the tongue in cheek self deprecating humor to realize its an act that people play up.
institutional traders: do coke during trading hours and smoke weed after hours
Perhaps Chamath had reflected on why a celebrity shouldn't be pumping a derivatives trade on Twitter.