The full comment, should it be edited or removed later:
"I don't work on the trading floor, but I'm an attorney who services a variety of financial institutions, including broker/dealers.
This isn't the exciting, hilarious answer you want, but a lot of people had no idea it was even happening until the past 48 hours, and even now, it's mostly just a funny news article about some internet trolls making a bubble.
This is a big deal to the shorting community, but to the other 99% of the financial world, nobody gives a shit.
As much as young people on the internet like to imagine this as an epic, David vs Goliath, Wall Street vs Main Street showdown for the history books, from a bird's eye view it's actually just a brief dumpster fire where a couple hedge funds lost their shirts betting on one little small cap stock. It has happened before, and it will happen again.
In 6 months, nobody will remember or care, except that (maybe) it will become more difficult for retail investors to trade options.
And not because the greedy hedge fund oligarchs forced the SEC to crack down on retail investors. But rather because, when this is all said and done, there is going to be a black hole where most of these retail investors' brokerage accounts used to be, and the SEC and brokerage community will be lambasted for failing to protect unsophisticated investors from a bubble.
I have been monitoring the WSB threads, and while the WSB veterans know that they're making a suicide charge for the memes, they have brought thousands of naive, new investors with them - who predominantly think that they're going to somehow come out on top, not realizing that they're cannon fodder for the more savvy WSB users to exit with gains.
Redditors never seem to stop and think about why the WSB guys know so much about derivatives trading. Or how they seem to know how to access and read from a Bloomberg terminal. Or why there are so many users there that can seemingly drop tens or hundreds of thousands of dollars on complicated meme plays.
How do you think that WSB knew that GME was open to a short squeeze and a gamma squeeze play?
WSB's power users are younger finance bros. It's 30-something investment bankers and portfolio managers memeing with each other and cosplaying as "autists."
If you didn't know what a gamma squeeze was 48 hours ago, you are their exit strategy and the down payment on their next Porsche."
In the beginning everyone on wsb was saying they would hold the stock until it went 0 just to mess with the hedges. Then it got over 100$ and the narrative changed to holding until it hit 10k$. Quite the difference
I saw a meme on WSB - photo of a main guy and quote 'What is an exit strategy?' u/deepfuckingvalue'
Ie the main guy behind the squeeze. He already took profit of $13M but somehow he is made into this hodl till 0 martyr?! WTF are those people on?
This really is starting to have all the halmarks of crypto bull rush with hypemen trying to get their exit as high as possible before it all starts to loose momentum and tumble off a cliff.
Its fun to watch though. A lot of fun. Plus more people are becoming aware of how rigged the whole financial system is, how its a boys club that will attack any outsider at sight.
> Plus more people are becoming aware of how rigged the whole financial system is, how its a boys club that will attack any outsider at sight.
Are they though? I mean the idea that hedge funds are rigging the system is so well established in the public psyche it drove the meme stocks in the first place.
If people's conclusions from all this are that Melvin Capital lied about unwinding their shorts and Robinhood rigged it for them but those nice people saying BUY AND HOLD YOLO on reddit were fighting their corner, has the state of their knowledge advanced?
I am not saying that everyone understands what is happening, but there are a lot of people who took interest and educated themselves on how the stock market works and what is happening.
Two of my friends got into trading because of this (and not in fuck the system way).
Oh, I don't doubt some people will inform themselves and some people will make some good decisions as a result. Just unconvinced that it'll be a net improvement in the state of public knowledge
If significant numbers of people become deeply committed to beliefs which are clearly incorrect to rationalise being duped into losing money on a meme, I'd argue that was pretty negative.
This happens in ponzi schemes too, people will find a scapegoat rather than feel their ignorance or greed was the problem. Here it's Robinhood and hedge fund conspiracies and Wall street playing by different rules. When MMM ponzi scheme (https://en.wikipedia.org/wiki/MMM_Global) peaked everyone was furious about people writing negative editorials and government warnings not to jump in.
I nearly put a reference to MMM true believers actually voting Mavrodi into Parliament to give him immunity from prosecution for defrauding them in my original post.
Wonder if any hedge fundies shilling GME on WSB whilst betting big in the opposite direction are bold enough to try that if the SEC comes after them...
If those are the only 2 things you've taken away, then you haven't been paying attention. Yesterday's whole "Reddit moves to silver" narrative plastered all over mainstream financial media was a pack of lies. Bots have been flooding the subreddit with misinformation. And today eToro accidentally triggered a massive sell off of their users' $GME by incorrectly setting their stop loss.
Sure, we've all seen the movies; "hedge funds cheat" is not new information. But this is all very out in the open and very directly targeted at retail investors. There's a lot of noise being made and everyone has taken notice. I would argue the state of everyone's knowledge has advanced.
This: there's definitely misinformation going on both sides (both on wsb and the media). You can't really trust anyone in a full-fledged war, and I think this is one of those situations. For those who didn't put money on this, let's wait and see how it goes.
Although the truth is, retail traders are incredibly disadvantaged due to immense informational asymmetry. Hedge funds probably have access to all the data they want (for example, Citadel having access to Robinhood trade flow), but ordinary people have to first wade through all the misleading information both on mainstream media and on social media, so it's a pretty hard fight. But regardless of the results, I think there would be much more distrust towards financial institutions and mainstream media overall due to this event, and this would be only the beginning of 2021.
Ironically, your last statement is kinda completely inverted.
A bunch of financially illiterate newbies who don't know half the terminology and don't understand the underlying math have gotten tricked into thinking that "it's all rigged" or "it's all a scam" and that they're going to get rich quick by participating in the scam. Completely oblivious to the fact that the only scam happening is to them.
Trump-supporters think the election was a scam and barged into the capitol. WSBers think the stock market is a scam and bought GME. Same thing, different day.
> Trump-supporters think the election was a scam and barged into the capitol. WSBers think the stock market is a scam and bought GME. Same thing, different day.
Isn't it? Look at what they've been doing lately to make the GME stocks go down. The small guy always loses.
The rate of the drop is certainly in part due to the inability of many retail investors to continue to buy it at a way overvalued price. But the price drop was inevitable, it is (at the time of this comment) overvalued now. Its revenue is hovering around $1 billion per quarter but it's not profitable. Last year it lost half a billion dollars, and even more in 2019.
Did those supporters just barge into the capital on their own though? Or were they directed to do this to create a specific political outcome, just like the naive WSB “investors”?
I was thinking that all of Trump's conditioning to make people think that the news is all fake and disinformation for a cause has ruined people.
For example, there were reported that Melvin closed last week. People thought it was fake news. In the article they reportedly lost 53%. If they lied about it, that would be exceptionally serious. Yet, everyone called it fake news, to their own detriment it seems.
I don't think so; WSB is too large for that on Reddit, and if anything Reddit is much more anti-trump than anything now. This is more center-left people joining in, similar to BLM in tone I think. Not the same overlap but I'm sure there are some too.
I read the WSJ article on u/deepfuckingvalue, but I couldn't put together if he was behind the trade or if he genuinely thought GME was undervalued, started buying some a while ago, and became a wsb hero during the squeeze just because he happened to be there first, and someone else orchestrated the squeeze.
That article also felt like it missed some key reporting details, and I was surprised he talked to reporters, so I halfway wondered if he did have a larger role, but got this out there to shape the narrative in case the SEC comes knocking.
He genuinely believed it was undervalued, and it was at the time. There is a lot of opportunity to grow in different segments, from esports to PC Building (there really is a shortage of Microcenters and Newegg shops compared to Gamestop shops).
It was somebody else who figured the short squeeze was possible during mid September.
If you look up roaring kitty on yt, you can see his thesis on gamestop atleat 6 months back, he bought in I think in 2019. The stock was more valuable than the price on a fundamental level then caught some huge investors, board change, better than expected sales due to the console cycle.
The analysts were also not understanding its potential and probably misunderstood greater online sales revenue as moving away from physical disk instead of just a huge growth of free games with in game transactions adding a larger share to the gaming revenue pie.
I've seen "The analysts were also not understanding its potential" a few times and this is mostly incorrect. I know there were large value funds who had looked at GameStop and there was another primary reason the stock price was so low: management.
Value investors totally understood that there was a well-liked brand here that still had huge cash flows. And they knew all the bear cases about the move to digital and the retail biz dying.
A main reason there were value funds who analyzed GameStop and came to the "neutral" conclusion was that the old management team wasn't making any big moves to even attempt to turn around the death spiral.
DeepFuckingValue and even Michael Burry were half-wrong in their original thesis: just using cash flow to do stock buybacks was not necessarily going to turn GameStop around.
It wasn't until Ryan Cohen got involved, got on the board, and started pushing for serious e-commerce and digital initiatives that the stock and story majorly turned around and caused the momentum trade.
They sell physical copies of video games. In the ear of digital content, even worse companies are selling game passes - ie rent our game catalog for a month. This is literally Blockbuster vs Netflix of video games world.
The hedge funds were trying to prey on Gamestop's dying corpse, and WSB players figured out how to take advantage of it.
I think the reality is the WSB big guys needed to hype up the short squeeze and 'sticking to the man' to cause the boubble. And it worked out great.
That in itself is not bad, but it will become a problem when the main players start to slowly exit, the greedy middle will have (what is it called) stop sells set up in case of fall, and then it will quickly collapse and who will be left with their pants down waking up in the morning to see its all gone?
The "I am holding till zero" crowd.
The idealists are always taken advantage of by the shrewd leaders of any movement.
If you take part, just pay attention to it, and exit or at least take some profit when you start seeing signs of it.
It being a dying company doesnt mean it wasnt undervalued.
Gamestop was being sold below its Net Current Asset Value, that is, if you took all of its cash in the bank and used it to pay off all of its debts, you would have more cash in hand than if you had not bought gamestop.
Not unusual for a company expected to lose money. Yeah, sure, I'd pay $90 for a bag of 100 $1 coins, but not if there's a hole in the bag and half are going to spill out before I get home.
Digital content is king, but physical copies are always going to have a market- collectors do want physical boxes for their display shelves. Though certainly the company does need to pivot into something bigger.
I'm not sure if the comparison to Blockbuster is as comparable, as renting media probably has different dynamics from buying media. And games, which cannot be rented except in a few specialty subscriber services such as Apple Arcade, will have different dynamics from movies or shows that can be rented.
I think amount of physical games is declining in real terms, though. I actually buy a lot of them, as one of my weaknesses are portable console systems. I've noticed that new releases are much harder to find in general now; Limited Run's entire business model is based on the fact most smaller games are digital first or digital only.
Also no, the current decisions for the retail stores make me feel like they will lose a lot of goodwill if they transition. The stores barely keep any stock on hand at all, and are increasingly being emptied of goods. I'm legitimately worried they will shutter them all soon; 3 local gamestops where I live have closed in a year or two.
I've actually seen ideas brought up that they don't necessarily have to (only) transition to digital. They already are planning to transition to selling PC parts at their physical stores; I've seen people suggest they also sell physical board games as well, which has had somewhat of a renaissance this past decade. I've definitely seen the remaining big box bookstores (pretty much Barnes and Noble at this point) move out of their core content in a similar fashion.
GameStop could also take advantage of physicality and become community spaces for eSports events or even tabletop gaming, collectible card game tournaments, etc. Basically become general "geek" stores and not just gamer stores.
If you watch his videos from this summer, he genuinely believed they were undervalued, and would talk for hours about why - and essentially became a laughing stock for putting so much behind a failing bricks'n'mortar highstreet retail.
I'm not even sure this is a redemption story - just a plot twist that made a funny story, much funnier.
> Plus more people are becoming aware of how rigged the whole financial system is, how its a boys club that will attack any outsider at sight.
And there are also indications of illegal practices (naked short selling), people are asking themselves why stock purchase settling takes two days instead of either seconds (or, to account for an option to unwind mis-trades, hours) which was why Robinhood and others suddenly found themselves in a dire need for cash, and why/how Robinhood can afford their cheap fees (because they're selling off the data of their users).
The most important part that the world learned from $GME is another: the big promise after 2008ff was "we learned from our mistakes, regulations were passed to rein in dangerous speculation"... and $GME proved undeniably that this has not happened, not during the Obama admin and certainly not under the Trump admin. Wall Street still is a casino, not a stock exchange.
(disclosure: holding a couple dozen AMC and NOK for the lulz)
Reminds me of the Goonswarm in Eve Online. They'd recruit a bunch of newbies from the Something Awful forums and use them as shock troops in giant battles.
The new recruits had no hope of actually establishing themselves in the game. They were just cannon fodder in someones strategy.
The difference, of course, is that one population was just playing a game in a novel way. Doing this by fibbing to real people who bet real money is fraud.
It's a really interesting game, and really cool things happen in it, but I wouldn't play it unless you find space-sims inherently interesting.
Your character gets better the more time you invest in playing the game, so you gotta be dedicated. Also, traveling is ridiculously dangerous because 1 wrong jump, and BOOM!, you're dead and your ship is gone. That's about where I stopped because I lost my ship, its upgrades, and they also destroyed my escape pod, so IIRC, I had to start my character from scratch? Idk, really cool game but also really frustrating.
That was posted 4 days ago, long before the ladder attacks and disinformation campaigns desperately trying to shift attention away from GME. People need to understand the risks involved and not sink their life savings, but there is definitely more going on here than what you'd see in a crypto pump and dump. When a hedge fund shorts 120% of available stock, then retail investors don't sell, and aren't swayed by every trick in the book... something is going to give.
Yeah I think if your going to make a cynical post calling everyone idiots you should address some of what happened like the low volume trading, curve ball from brokers preventing trades etc.. There was a lot of chaos in the last few days idk if you can just write it all off as suckers getting played
Color me cynical, but I don't think most traders on a trading floor would particularly care about the opinion of the attorney who "services" their institutions lol. And if he doesn't work on the floor, then he hasn't seen the day-to-day and the culture in its natural state.
I don't understand why so many people feel the urge to psycho-analyze a publicly available subreddit that currently has 8.2m million subscribers. I can just read it an make up my own mind. It would be one thing if they provided specific links, but most of the time it's just wild generalization.
As far as coverage, I liked this explanation of internal mechanics of stock trading:
> I don't understand why so many people feel the urge to psycho-analyze a publicly available subreddit that currently has 8.2m million subscribers.
Because we're genuinely curious how such a large and seemingly well-connected community could have been so mind-bogglingly wrong about something ("how short trading works") that should have been an unambiguous truth.
Even now I'm still seeing people screaming about "hold the line" and inserting endless rocket emojis as the stock drops below 35% of its peak. People are still arguing on this very site that all that is needed is for the WSB community to refuse to sell to cause some kind of magical short call that isn't coming. People still insist that short leverage greater than 100% means an infinite price spike at some point in the indefinite future. People still think that the short leverage staying high (on a very clearly inflated stock!) means that the early players didn't exit positions.
This was a scam. I mean, we don't know exactly by who yet, but it's abundantly clear that all these people were lied to to get them to buy a security that was just obviously a target of a pump and dump.
what is the truth though?
As someone who only knows about stocks from 'big short' film and 5min video on youtube and wsb thread. I genuinely curious what are the ways this could play out.
is there a deadline on short sellers to close their positions?
what is reasonable limit for the stock to go to?
what happens if hypothetically nobody of wsb would sell their stocks?
So, a short squeeze is a real thing. The stock going up means that the people holding an underwater short need to rush to buy to close their positions before they go farther underwater. This then makes the stock go up faster. That's indeed what happened last week.
But you don't need to buy back all the stock, just enough such that you have enough flexibility to hold the stock across the inevitable peak and drop. In a consumer brokerage, this generally takes the form of a "margin call" and the brokerage will often buy stock for you out of your margin so they don't get caught holding the bag, and eventually can seize your whole portfolio to make themselves whole (the regulations there get complicated and I'm not expert). It's an absolute thing, and you lose all your money. But that's not how it works for a hedge fund, the nature of which is to have access to financing regular people don't. They can just cut a deal with bigger players to get through, and that's how Melvin seems to have managed this.
To be clear: Melvin made an outrageously inappropriate bet, got caught, and lots a ton of money. But they're out now and the story is over. Now GME is just a bubble like any other bubble, fed by naive investors believing it will go up when it won't.
As far as "what happens if WSB doesn't sell?", the answer is nothing. WSB doesn't hold the full capitalization of GME. There are plenty of other shares out there being traded, and the price of those trades is what you see on the ticker.
It's hard to say because every source I can find shows institutional ownership is 120-160% and I don't know how it's possible to own more than 100% of a thing. I suppose that could all be the short positions leading up to the recent drama.
Stock creation of this form is not entirely unlike the money creation that happens with fractional reserve banking. A short squeeze is crudely analogous to a bank run with that mental model.
(I have no market position on any individual stocks... because I don't consider myself sufficiently well-educated to do it. So take that grain of salt as you see fit).
> some say they are, some say they aren't. Is this in fact true?
The ones which said they are out are out. There isn't actually any evidence that they stayed in. There is a lot of frenetic speculation on reddit that they're still in, which is mostly the result of redditors cargo culting bad "game theory" to support their own priors that hedge funds will always lie no matter what. I have written many comments about this in the past couple of days; suffice it to say that these conspiracy theories are based in basic trading illiteracy and misunderstood jargon, mixed with a heavy dose of emotional investment.
On the other hand, there is good evidence they actually closed out when they said they did: the hedge funds getting burned when GME was at $50 and $100 simply wouldn't exist anymore when GME hit $300, $400 or $500. They would have been margin called and it would have been game over.
And finally - yes, some funds are short GME right now. But that's not because they were short at $4.5, it's because the current price is dissociated from reality and all the smart money wants to short the peak.
There's not a single "deadline", each short seller has their own contract with their own terms and conditions.
So since it's a rotating cast of characters, it is entirely possible that the very early short position holders have all taken their lumps, and the current short sellers sold their borrowed shares for $100's of dollars each, and now have the ability to hold on for quite some time.
Sure and also the short options themselves have a price tag. That cannot be very good for an option against a stock in that state.
Also I think this is being over-analyzed. Reading the comments the majority of users there don't claim they really know all the details. To me this is a protest against hedge funds.
Ironically, in their attempt to protest hedge funds, they have probably handed over large amounts of money to hedge funds. Sure, the funds that got slammed by the short squeeze were hurt, but as more redditors started piling in to buy shares and buy options, other hedge funds took advantage of the situation. Who do the WSB crowd think is selling them shares or call options at this point?
There is no specific deadline for short sellers, only interest payments and margin maintenance requirements. If a short seller fails to meet margin maintenance requirements, they will have to close the position or deposit more assets as collateral within a few days or their brokerage will take action for them. This is the classic short-squeeze scenario -- short sellers are forced to close the position to meet margin requirements, and in doing so they drive up the price of the stock and trigger margin calls for more short sellers.
Eventually Gamestop could be forced to issue more shares to improve the liquidity of their stock, and wsb would be less relevant.
My guess is that in a week or two we will be hearing sob stories from people who bought GME at the peak thinking the price would go higher. At this point the wsb crowd is lining the pockets of hedge funds who are taking advantage of the situation -- unsophisticated investors trying to profit from a short squeeze are an easy target.
Short sellers have two days to borrow and deliver shares, and if they don't do that, they can be subject to a buy-in (I think 3 days later) for failure to deliver. They don't really manage that back office stuff themselves; their prime brokers do.
Shorts also have to pay a large amount of interest to remain short, because they are borrowing the shares that they sell. Indicatively, I see the short rate at around 12.5% annually. This is not terribly high. You can look at the short rate as a quick-and-dirty, but more granular across time, proxy for short interest.
People are acting like GME is the only stock that has ever short squeezed. TSLA has squeezed repeatedly and its valuations have stayed high despite the company not turning a profit ex regulatory credits. We've already exceeded "reasonable" for GME so it's all a question of price action at this point. The main factor that makes GME's squeeze such a huge deal is that it was driven by a self-deprecating crowd of people sharing thoughts publicly, rather than some famous billionaire steering the money of several other famous billionaires.
There's no law that says every trade has to be justified on a fundamental basis. Some people trade technicals. Others trade sentiment. Still others trade volatility. The price is the price. If BTC can go to 30k then GME can go to 1k.
Another interesting factor is that, if short-sellers were reluctant to cover at $4, then there are bound to be many firms that are short stock (or long puts) here around $100. As long as there are shorts out there, it can squeeze again from shorts covering or market-makers hedging gamma. If nobody from WSB sells, then it's a question of the rest of the market participants (computers, market-makers, hedge funds, retail, you name it) pushing around the spot price. IMO it's a very interesting situation. We don't get FTD and short interest data very often -- bimonthly and on a lag -- so there's a lot of uncertainty. I share your genuine curiosity.
> we don't know exactly by who yet, but it's abundantly clear that all these people were lied to
We definitely know who lied to most of these people: themselves. They let themselves get swept away in a tide of rocket emoji and never stopped to think about (or cared to learn about) the mechanics of the trading situation. Sure there are a few exceptions (this /u/deepfuckingvalue seems to know what he's doing, several others too), but I'd wager that 99% of the 6 million new subscribers were either seeing red with "fuck Wall Street" fury or green with greed.
Have you been in the presence of a large community before? People turn their brains off in large groups.
It's even harder when it turns into a crowd and people are cheering on whatever is happening. Especially if there's moderation removing any messages of dissent.
Add in that short interest data is either not timely from the every two weeks official report, or incomplete/of unknown accuracy from the third party reports. And that anyway, it doesn't have any indication of what price the shorts sold for, and it's easy to see how people saw 130% short interest a few weeks ago and turned it into a squeeze, and see 130% short interest at the end of last week, and it's not squeezing anymore. Shorts @ $20 got out (at a high cost), and new shorts @ $300 got in, so the reportable short interest is the same, but the new shorts are probably getting out soon at a high profit.
From my perspective, one of my friends daily posts idiotic, factless garbage in our discord. He doesn't trade stocks but reads Reddit religiously. He constantly says he has no investment in either side but what do I think about (Citadel blackmailing Robinhood or some such garbage). I am thoroughly convinced that if he weren't currently jobless and lacking bonus money, he would've bought GME at 300, thinking it was going to the moon.
I think the core issue is, there is a significant number of people who only get their news from what is upvoted on Reddit, and what is upvoted on Reddit not only has no correlation with actuality, factuality, or reality, it also follows a lot of really nasty biases due to the upvote system. For example, another chat I'm in with a lot of Europeans had this one Portuguese guy last March posting daily fear mongering about the US burning down from Covid. I finally figured out after a week of it that all his headlines were coming from the Covid subreddit. I went and looked, the top 80 stories were all US based. No mention of Italy, Spain, UK, or any other European countries who were having similar rates at the time. I'm not convinced this guy even realized Covid existed in Europe at the time.
The moral of the story is, if you're going to try to form an opinion on something you know nothing about, you NEED to consider at least 2 different positions, and a lot of these people who fell into the conspiracy trap only considered 1. (And yes, even though Reddit is an aggregator, it is just 1 source).
You sure talk in certain terms. I would think someone claiming to understand the issue at such a more sophisticated level than WSB would know better than to think one can fully understand the situation. Regardless of the outcome, there was a pile of gold to be made with your certainty if there was any credibility to back it up.
Do you have a finance background and relevant expertise, or are you just another armchair critic getting his word in...looking at where the price has moved and arguing "of course it has!". in this case, what makes you any different from those you're condescending?
It's new territory for all of us, why pretend otherwise?
> Even now I'm still seeing people screaming about "hold the line" and inserting endless rocket emojis
I've been saying of WSB since before this debacle exploded, these are bots. The same bots that have run many other meme-y subreddits like r/the_donald, the same bots that are kingmakers on twitch. Spamming emoji-laden slogans as non-sequitur replies to comments nested 3 layers deep is a telltale sign.
I can't be the only one who sees this? Maybe the whole internet is bots. Maybe I'm the only non-bot.
Because we're genuinely curious how such a large and seemingly well-connected community could have been so mind-bogglingly wrong about something ("how short trading works") that should have been an unambiguous truth.
I see it differently. The GME situation highlighted disparities in market access and shed light upon loopholes in short-selling regulations (including the bona-fide market-maker exemption) that allow market participants to sell delta that they can't find.
I also think the caveat of using the epithet "pump and dump" is that you should have some evidence that the initial information was false or misleading. As it turns out, Melvin was extremely short, as were others, and everyone who got involved prior to the squeeze had ample opportunity to make money. Not every hyped name that rallies immensely and then sells off aggressively is a "pump and dump." The stock is still up 20x in a year.
Furthermore, WSB today is just a pile of bots and newbies who heard about it on local news. It isn't representative of the WSB who caused this in the first place. There's been several announcements by the mods about really bad bot activity, with examples promoting both sides.
For a comment that is this cynical, I think it's largely correct. I've been struggling to communicate how a million retail clients are going to lose their life savings (or more) in this (and what comes after it) and get burnt badly, ending with devastation and even suicides, but it appears to fall upon deaf or otherwise indifferent ears continually, so it seems like the cycle simple cannot be helped.
I hesitate to ask -- do we really think people are stupid enough to gamble away lots of money they can't afford to lose?
I'm hoping that instead there are hundreds of thousands of people who only bought a couple of stocks, understanding that they were likely to lose the money.
If you assume that half the posts on WSB are true, and then assume the usual 100:1 poster:lurker ratio, that’s thousands of retail traders who’ve dumped student loans, college funds, retirement, life savings, etc. into the stock. Obviously this is not a precise or highly accurate estimate, but it is an estimate.
> do we really think people are stupid enough to gamble away lots of money they can't afford to lose?
Yes. Yes we do. Because "people" have done exactly that in every previous stock market bubble, and at every casino, and in sure-fire get-rich-quick "investment" schemes, and 3-card monte games...
A better way to frame the question is "do we really think people as a whole have gotten fundamentally smarter since the last time this happened?"
Whether you should or should not, you can. That is why there is a designation that seperates professionals from retail, and why retail isn't allowed to invest in some things.
All of this stuff has been happening for over a century. This isn't unknown.
Yes. Look at the history of the dot com bubble bursting in 2000 or the 2008 financial crisis and you’ll find tons of people who were massively exposed, often writing books or blogging about how they were making crazy amounts of money, and then the party stopped and their can’t-lose “investments” weren’t.
Every decade or so you’ll find people who didn’t pay attention the previous time learning about the market the hard way.
A colleague at the time of the 2008 crisis was unable to retire. His stock portfolio (he was overinvested and did not balance his risk properly, especially considering his age) dropped from near a million to about $100k practically overnight. He owned his house (good), but the capital that would've carried him easily to the point where he could use his 401k and later receive social security was gone. He had to work several more years than planned. People don't consider risks very well.
I was working at an Ivy and had coworkers (all professional staff, finance adjacent - theoretically above average preparedness) shift their investments into bonds, locking in losses at close to the bottom of the market. It hurt hearing people talk about that and knowing that it was too late to recover anything.
I've seen multiple posts, some here on HN, claiming that GME is mathematically guaranteed to surpass $1000. If people actually believe this, why wouldn't they put every spare dollar into it?
They probably have, and now are posting trying to convince some other fool to buy and thus make it true so they can sell at $1000. This is called "pump and dump", and it is illegal.
I was at the supermarket saturday and overheard 2 people talking (shouting really) about the price of Gamestop and how it was BS that Robinhood only let them buy 5 shares. It was pretty surprising to me that this had spread so much. But yeah I definitely believe it.
> I hesitate to ask -- do we really think people are stupid enough to gamble away lots of money they can't afford to lose?
Oh. Yes. Yes, yes, yes. And it's not just the stupid people. Isaac Newton famously lost a fortune in speculation.
That's the thing about manias. It takes over and so many people all over go broke by the end. They are famous for it: they are a predictable and repeating tragedy.
Recognizing a mania is one of the first lessons someone who wants to do anything with stocks beyond INSERT 15% INTO VANGUARD 500 INDEX should do.
Some, including Michael Burry (who‘s hedge fund profited almost 500% during the 2008 crisis) even go as far as calling index ETFs, like that one you mentioned, to be a bubble!
There were students when I was in university who spent their student loans on Bitcoin. They had to take a year off to do an internship to earn some money.
One of the jobs of financial markets is to correctly distribute capital. Moving money from people who do dumb things with it, to people who don't, is a good thing because more capital ultimately ends up in the right place. A good thing economically over all that is. The individuals losing the capital are likely butt hurt. But they should have stuck to indexes...
This does not match my model of people at all. I did have a gambling problem as a teen so I know those brain chemicals very well and they are not conductive to anything other than greed. If there's promises of easy returns / free money, you'll find tons of fools ready to jump in.
They've already bought into the narrative that WSB is "their side" and long the stock, while hedge funds are all "the enemy" and shorting the stock. Plus conspiracy theories about hedge funds (and not liquidity issues) forcing Robinhood to disable trading.
So even if they lose everything they won't blame WSB, they'll just demand Congress make short buying illegal or something.
The issue here is the motivations have diverged from what is in the extant model of the market. There is no economics textbook that accounts for market participants buying stocks to watch them crash as a form of entertainment, which is true for a non-trivial subset of people holding GME right now. So if you need to model the market you now have to account for a very non-rational force, which is a big deal as it won't go away. If everybody who crowd-funded Bernie Sanders figures out they can punish a publicly-traded company who just laid off a few thousand workers, shit will get weird.
> There is no economics textbook that accounts for market participants buying stocks to watch them crash as a form of entertainment, which is true for a non-trivial subset of people holding GME right now.
same modulo motivation holds for the irrational and allegedly illegal shorts these people are claiming to be calling out ...
> ...So if you need to model the market you now have to account for a very non-rational force, which is a big deal as it won't go away...
Rational or non-rational force is irrelevant, as long as it brings liquidity onto the market.
The democratization of the market we all witnessed in the past decades injects more liquidity into the good old zero-sum play. In a somber way, it's a "savings squeeze" strategy.
This. I've been reading a lot of WSB posts lately and the main sentiment doesn't seem to be "let's get rich" but "let's make them bleed". Many people don't care about losing that money too much and the whole situation is probably funny and entertaining.
Exactly my thinking. Buying inflated shares is an extremely efficient protest of the lack of regulation.
This time last year I was sleeping on floors, trudging through the snow to knock on doors in New Hampshire in hopes of producing thoughtful political dialogue. Unfortunately I don't think that had nearly as much impact as a few hundred bucks of meme stonks.
> If everybody who crowd-funded Bernie Sanders figures out they can punish a publicly-traded company who just laid off a few thousand workers, shit will get weird
Not sure what you mean by this + how $GME relates to Bernie and his supporters?
If you can't get regulators to hit companies that you think are bad actors, you can get a bunch of Robinhood traders to do some street justice on their share prices.
EDIT: If there were real money to be made doing this, it would already be happening. But people being willing to throw around significant capital and probably lose it, just for the satisfaction of hurting someone else, is interesting.
> WSB's power users are younger finance bros. It's 30-something investment bankers and portfolio managers memeing with each other and cosplaying as "autists."
> If you didn't know what a gamma squeeze was 48 hours ago, you are their exit strategy and the down payment on their next Porsche.
You have to click through to the deletion log. And I only found it because I knew beforehand that it was there somewhere. Hint: There is no "View History" tab at the top, it's a link in the middle of the body.
The "memes" and talking points surrounding GME on reddit remind me a lot of the early days of the 2016 trump campaign on reddit. I would not be surprised if there was a large overlap of "influencers" between the two.
To use the vernacular, I am very bullish on this take.
In 2016, the Internet discovered they can mess with politics.
In 2021, the Internet discovered they can mess with finance.
There are other instances of this, but the general theme is people who traditionally only operate on the Internet occasionally discover ways to have an impact on the "real" world. They get so drunk with power, they do something stupid with it, and the rest of the world sighs as we get to work cleaning up the mess they've made after they get bored.
Yeah. Copying my post from yesterday's thread -- which only looks more and more real today with increasing rationalization leading to explanations like that hedge funds are "short ladder attacking" GME.
------------------------------------------
The claims and the consequences are very different, but I definitely get the same sense I got reading Q stuff when I skim the current WSB page.
- The media, government, and elites are conspiring against us.
- Info that says short interest has decreased / shorts have covered is propaganda and should be ignored.
- Info that says short interest is still sky-high is to be believed without question.
- Parties who were on our side of the bet but are now advising caution (e.g. Burry or S3) must be malicious or compromised, can't possibly be genuine.
- Mix of facts with misunderstood interpretations thereof: 140% short interest is very high (fact), 140% short interest should not be legally possible (misunderstanding).
- The dark truth we are about to reveal (counterfeit stocks?) has been going on for a long time, but now the wool will be lifted from the eyes of the nonbelievers.
- Your continued belief in "the plan" is important. You must keep the faith!
- "The Event" will take place on X date, but when it doesn't, no problem: it was always going to be Y date that It Happens.
- We all KNOW our version of the story is right. What particular pieces of evidence are so rock-solid and convincing? Oh, well, there's SO MUCH, but it's not my job to spoon feed you the facts. If you don't know, you clearly haven't been paying attention and should do your own research.
- If somebody published something saying that we're wrong, it means that "They" are scared of us. We must be getting close.
I don't know whether WSB's narrative is right or wrong, which is why I am on neither side of this trade and merely watching with interest from the sidelines. They could very well be correct about all of this.
I also am not trying to allege that being a "GME to the moon" person makes you a "Q person". They are completely different sets of beliefs. All that I'm observing is that the marketing of the ideas is similar.
Thanks for laying that all out so I don't have to. Here are some other examples I noticed.
"Memes" that are outright out of a WW2 propagandist playbook with phrases like "Hold the line" or the WSB kid with sunglasses seen taking out the enemy.
People trying prove their devotion to the cause is so much higher than their fellow brethren. "For every upvote I'll donate to the campaign/I'll buy stock in GME"
I never read Q stuff, but from watching how this has unfolded on WSB I thought to myself "this sounds exactly like what the Q stuff must be like". That sucks, because I would hate to lose the raw WSB energy to this.
I have seen several articles in the past week outright rejecting the idea that anyone is in on GME for the "cause" of shitting on the funds (even if it turns out ineffective). If I see an article failing to recognize the legitimate populist (and correct) element of the moment, while hand-wringing about the fund managers, my bullshit detector goes off.
Also, can you explain, or link, or anything, as to why shorting more shares than there are to trade a good thing? Why short selling is legal at all?
Shorting seems like a terrible tool in society, a way for people with money to gamble, win big, but occasionally fail so hard the federal government needs to step in.
Why short selling is legal at all? Well, why not? There are two or three parties to every short, all engaging in the activity because they expect to benefit.
1. The lender of the stock, who gets interest payments like any other lender
2. The short seller, who of course expects to pocket the difference if the stock goes down
3. The person who buys the stock from the short seller, presumably expecting it to go up (this party could, knowingly or not, be the same person as #1)
Sure, the short seller is taking the risk of a massive loss in a scenario like this, but that's their problem. And if they fail so hard they can't possibly return what they owe, then it becomes the lender's problem. But that's true of any loan, so it's up to the lender to set the terms in a way that limits their risk (e.g. not lending to "risky" borrowers, not lending too much of what they have in reserve). What's the difference with other forms of lending?
In the movie "The Big Short", weren't the short sellers the heroes of the tale -- the ones who really looked into the underlying assets, looked past the exuberance and overconfidence, and found the system to be rotting?
I think there's two things here. One is the case of the said underpricing. That's the theoretical role that short selling. The second is that it's a fantastic weapon to use against less sophisticated, less coordinated retail investors.
From what I understand here, large quantities of short selling can be a self-fulfilling prophecy. Drop the price with shorts and let panic set in. Retailers sell due to panic, dropping it further. This goes into a nice little spiral, which lets the shorters cover.
You could also argue that this current situation falls into a "short and distort" category as well if you take the media into consideration.
> Drop the price with shorts and let panic set in. Retailers sell due to panic, dropping it further. This goes into a nice little spiral, which lets the shorters cover.
What makes manipulating the price with short selling worse than manipulating the price with buying?
Your reference to "short and distort" suggests you're surely familiar with "pump and dump". They are two sides of the same coin. In both, it's not the stock trades themselves that make it a scam, it's the misinformation fed to the suckers on the losing end of the deal.
Because a short is a sale without actually having the stock for in possession. Combined with stock loaning and sufficient capital, it allows shorters to distort market pricing with something orthogonal to the core dynamics.
Ultimately I'm skeptical of price manipulation theories that rely on executing big trades to artificially move the price, as opposed to moving the price via changing trader sentiment about the underlying asset.
There is a chance trader sentiment latches onto a price change and you start a herd movement just by making a big trade, but I think it's a LOT harder to pull off than it sounds.
My gut feeling here comes from another environment, PredictIt betting markets, where both the number of traders and the size of the investments are capped so the markets are smaller.
The order books there are also directly visible, so you can calculate how much it will cost to move a market price by a given amount.
There are many markets on there with order books thin enough that a hundred bucks will move the price by several percent.
You can experiment with this manipulation on a middle-class salary there, and you'll find that unless you accompany your price swing with a compelling pump story in the (unregulated of course) message board, it doesn't last long enough for you to get out.
Some of the really small-cap cryptos might be another example of a playground to try stuff like that out in.
I think most traders in both short and long positions are not attempting manipulation, and just expecting that the market will naturally move to a more realistic (in their view) valuation of the stock.
Here are the mirror scenarios as I see them. The price-moving influence for a given capital investment is no different between the short-seller and the long-buyer.
And in both, it cuts both ways -- the trades you make exiting your position have a market force opposite to the trades you made creating it.
There's no free lunch. Winning either trade requires convincing other traders that the higher or lower price is a fair one.
That could be done with false info if you're a scammer, or it could be real info if you are just trying to make some money off pointing out the truth (see Nikola).
Scenario A:
I am a short-seller. I borrow $100M worth of stock from a broker, and sell it with a market order.
My sells chew through the bids on the order book, highest bid first, moving the last share price number down as I fill the standing orders of everybody buying at X, then at X-1, then at X-2, etc.
But I haven't affected the ask side of the order book directly. Those people are all still offering high prices to sell, I just jumped the line ahead of them and told all the buyers "I'll beat that price! Get your cheap shares here!".
I hope that some of the people on the ask side see the movement, panic and either execute market sells or at least lower their sell limits, so that I can buy the shares back cheap.
But they might not, and if they don't, I'll have to buy back higher than I sold. I really need for this to catch on and cause a frenzy, because in moving the market down I sold a lot of my shares at bargain prices!
To make money on those I'll need the price to sink even deeper so I can buy them back at extra-bargain prices.
In trying to keep the price low as I repurchase shares, I'm fighting against other smart traders who see that none of the fundamentals have changed, do not wish to sell low, and may even be competing with me to buy low.
I'm also fighting against myself in a way, because just as I put downwards pressure on the price by selling this huge number of shares, I'm now putting upwards pressure on the price by trying to buy them back.
Scenario B:
I am a buyer. I borrow cash to buy $100M worth of stock with a market order. (You may ask who would lend me that much cash, but in scenario A they don't lend $100M of stock to just anybody either so we're comparing apples to apples)
My buys chew through the asks on the order book, lowest ask first, moving the last share price number up as I fill the standing orders of everybody selling at X, then at X+1, then at X+2, etc.
But I haven't affected the bid...
>If I see an article failing to recognize the legitimate populist (and correct) element of the moment, while hand-wringing about the fund managers, my bullshit detector goes off.
link?
>Also, can you explain, or link, or anything, as to why shorting more shares than there are to trade a good thing? Why short selling is legal at all?
>Shorting seems like a terrible tool in society, a way for people with money to gamble, win big, but occasionally fail so hard the federal government needs to step in.
Are you referring to the last financial crisis? If anything that was caused by the long side, not the short side.
shorting gives incentive to uncover companies which are overpriced - this is good for uncovering frauds, debunking pumpers, and for simply getting the fundamentals in the open so the market can price it more accurately.
yeah the "Deepstate" is now "Hedgefund + Mainstream Media"
if you actually swap out the words, it reads almost exactly like the Q conspiracy and the other crap Trump supporters been echoing in their chambers.
I wonder if there is a math formula to these conspiracy/pseudo realities. They seem to have very similar structures and literally just the variables are different each time.
Coupled with attaching legitimacy to numbers (your account is too new therefore untrustworthy, you have lot of karma points so you can't be lying), it would be very easy to paint any type of narrative while signaling trustworthiness.
Also, people often claim to be part of X or in position Y without any verification to win confidence.
Literally the psychology of confidence man has now taken the form of some integer attached to a username in a database somewhere.
We also see this blind trust in large numbers on Instagram and Youtube where the number of subscribers and likes automatically signals importance, legitimacy when all of it are easily manipulated, paid for.
100% agree. Of course the connection is going to be very difficult to prove if it in fact exists, but I also got the same vibes. Large masses of people making an objectively bad decision on the basis of hyped up memes disseminated by grifters and other bad actors.
It depends on which echo chamber you look at. Reddit at large has long been libleft. If you read comments from posts that hit front page, you will find overwhelming support for left-leaning policies (exception: Reddit has a distinct pro-gun streak).
You had to go to specific subreddits to see the type of exuberant, memespeak support for Trump. In 2016 that was r/The_Donald. By the time we got to the 2020 election that subreddit and any replacement that got too close to it was banned. But you could still find the same vibe on TheDonald.win, an independently hosted recreation of the subreddit. Or on the chan sites.
The meme culture of The_Donald never constituted the mainstream image or talking points for Trump. it wasn't promoted or even referenced directly by the Trump campaign. But it was a weird world where you never knew exactly how serious people were about their love for Trump -- it was so obviously exaggerated as to look like satire, but the participants were at least somewhat serious: they really did want Trump to win.
Gun ownership isn't left/right, it just happens that of the two private organizations that operate our republic, one of them defends gun ownership more than the other.
I agree with you in principle, but in US politics gun rights have unfortunately been lumped on "the right" (see: lack of 2020 Democratic primary candidates not supporting an AWB), so I thought it was worth pointing out that particular blip.
The front page of WSB could very well be a QAnon forum. Everything is a conspiracy. All the players in power are fully united against them. If you aren't 100% bought in to the cult, and do as much as advise people to be cautious, you will be silenced.
edit: seems like quite bit of self-professed geniuses actually bought into the "David vs Goliath" meme, not realizing they just transferred a huge chunk of their wealth to coked up finance bros working remotely in front of their bloomberg terminals, shitposting on r/wsb behind Tor to pass the time and pump up stocks.
edit: what are the outcomes? WSB will be banned and its moderators, people who posted DD will be sued in civil court. Retail options trading will be severely limited. People who have been pumping the stock up on social media will be reprimanded.
It's a given that no one feels sorry for Wall Street. But when I read these sob stories about retail "investors" losing everything, I get the impression I'm supposed to feel bad for them...
I still don't understand how they successfully managed to make people think buying shares of a bankrupt company for $350 a pop was a good idea. They pitched it as the new BTC or TSLA but it really is just a text book example of pump and dump. They're not "owning wallstreet", at best they're owning a few investors/entities who took way to much risks, and that's it. The smart ones bought their shares at $5 and sold last week at the peak, any one getting in from now is suffering from massive FOMO.
Ronbinhood &co enabled this by gamifying trading, people are just one click away from betting their entire savings based on random social media posts amplified by mainstream media over coverage.
If you learn about something like this via mainstream medias or your friend who had no idea what trading was 2 days ago you can be 100% sure that you're too late to the party
edit: ok, not bankrupt, but clearly not going in the right direction. Either way, not anywhere close to make investors rich quick
I don't see what they have going for them. Squeezed by big ecommerce game stores and subscription services and free-to-play games on all sides. Customers seem to hate their meme-rific trade-in policy "Cyberpunk 2077? best I can do is $5".
Gamestop is nowhere near bankrupt. One of the reasons that the trade took off is that Gamestop still has cash on hand and has reasonable (if declining) revenue. On their current trajectory they will go bankrupt, but it could take years. On fundamentals they could be a $20 stock but they were at $4 and still being heavily shorted, which made some people angry.
I don't think people were angry that the price was undervalued, the anger came about when it became apparent that hedge funds had been over-shorting the stock to the point of potential naked short selling.
I have heard no claims of naked short selling that came with any evidence. Not saying that it hasn’t happened, just that there are other explanations which seem to be more relevant / explicatory here.
Briefly: a share which has been sold short can be sold short again by the person who buys it from the borrower/short seller. In practice, this often occurs due to regular market mechanics when a particular company is a hot short target. All that's required is a widespread consensus that the company's financials suck (in not so few words).
Alice lends his 1 stock to Bob. Bob sells it to Charlie (but is still on the hook to return it)
Charlie lends his 1 stock to Dave. Dave sells it to Eddie (but is still on the hook to return it).
There is only 1 stock being traded here, but there are two loans (shorts) out on it with obligations to return it.
What's really fun is that Alice and Charlie may not even know that they've lent their stock. Their broker, having a substantial amount of the stock pooled across all accounts they manage, may lend it out and still let Alice and Charlie trade their "share" -- since if Alice wants to sell, the broker can always sell on of the other shares from their pool. As long as the broker keeps a decent amount of shares still in their possession, and as long as all accountholders don't try to liquidate at the same time, it's fine. Even if you DID try to liquidate your position and whoopsie, the broker actually lent out all their shares and there are none left for them to sell, the broker could buy your share obligation with cash and you wouldn't know the difference between that and selling it to another shareholder.
This is the type of thing that gets some people's back up. It all sounds very "precarious" as you say. There is a reaction that says, whoa, that's way too complicated and abstracted, this whole thing is a house of cards just waiting to collapse. But it's kind of like a long-lived piece of software, which accumulates complexity from the need to deal with a complex world. Only new programmers have the urge to tear it all down and start from scratch -- because old programmers have found that the "new" system ends up reinventing the complexity of the old as it discovers the same problems and missing features of the "simple" approach. Today you see this happening with cryptocurrency.
> What's really fun is that Alice and Charlie may not even know that they've lent their stock.
last i checked brokers _cannot_ just loan out random alice and charlie's shares.
only once you've got a margin account and you've gone into debt can they use your shares. if you've got a margin account and you didn't read the contract, well... god help you, nobody else can.
as i understand it, loaned shares generally come from large institutional investors. the folks managing your index funds make extra money by loaning the underlying shares. (maybe that's what you meant? but the prospectuses for index funds make it clear that they do this sort of thing.)
Yeah, I don't mean to imply that this is necessarily happening to anybody who's holding a stock. It depends on your broker and the terms you've agreed to.
On some brokers it's an opt-in thing and you get to reap the rewards (interest) of lending out your shares. A friend of mine has been doing this with QuantumScape stock and collected a sizeable amount just from lending it through its December run-up, in addition to the direct gains.
My impression is that the zero-fee brokers like RH are the ones more likely to do this without your opt-in consent (of course you do agree to it across the board in their terms), but I'm not an expert.
I think Robinhood will loan out your stock and keep the money. This and sending order flow to Citadel are how Robinhood makes money, instead of from commissions.
> only once you've got a margin account and you've gone into debt can they use your shares.
As I read my customer agreement with ETrade, they are allowed to loan out my shares, even if I do not have a current margin balance. (It reads to me that they are pledged as collateral at all times, but I am not a lawyer.) It seems unlikely and inefficient that if I paid or traded my margin balance down to zero that ETrade would demand delivery of any shares I'd previously lent.
Claims do not have to be true for people to get angry about it. I'm attempting to explain the narrative of emotion, not what necessarily happened in the market. I'm responding to the last sentence about "which made some people angry."
>> On their current trajectory they will go bankrupt, but it could take years.
A company with declining revenues, but lots of cash on hand, is ripe for takeover and liquidation. That places GameStop right alongside the quintessential takeover target: New England Wire and Cable. That was a good movie. Whether from bankruptcy or takeover, this could be the last party for GameStop.
Kieth Gill (AKA u/deepfuckingvalue AKA Roaring Kitty), the original GME bull on WSB, mentioned a PE takeover as a potential exit in his first GME video in July 2020
> On their current trajectory they will go bankrupt
...what?
this whole thing started because some high-profile redditors were bullish on GME, and then it turned into an anti-1% movement once the short positions were discovered.
so, there are two activities: speculation and investing. the whole problem here is that unwitting retailers were tricked, thinking they were investing when really they were "speculating" (more accurately called a pump and dump scheme). now its morphing into this "jail the oligarchs" nonsense because the people that lost money think they were wronged, when really it was their own damn fault the whole time.
>> The smart ones bought their shares at $5 and sold last week at the peak
Loosing a bet doesn't make you a not-smart investor. High risk ventures can be part of any portfolio. In a game of high risk and high returns most bets don't work out. I don't think any less of hedge fund people who "lost their shirts" on this. That is a normal part of the game.
The first time $350 was hit Reddit investors were still building up momentum - it wasn't a bad play given all the money pouring in. I personally executed several trades at and around $350 and all were profitable. The frenzy eventually died down and at that point there was no turning back. I feel sad for all my friends stuck holding shares they've bought hoping for the MOON!
> Loosing a bet doesn't make you a not-smart investor.
People who never traded in their life and bought GME at $350 because reddit promised them big returns (I know a few in my friend circle) aren't smart investors taking part in a risky venture, they just suffer from fomo and have no idea of the risks
People who bought a few weeks ago may have made a risky calculated move though, I'm not denying that.
People who bought a long time ago and fomented the whole thing for a massive profit are definitely the only one I'd call smart, low risk, perfect execution, comfortable exit.
No one will make me believe that the people who bought at $350 are just as smart and taking the same risks as the people who bought at $5. They're not playing the same "game" you're talking about. Head or tails isn't the same as "guess the number I chose between 1 and 5000"
> People who bought a long time ago and fomented the whole thing for a massive profit are definitely the only one I'd call smart, low risk, perfect execution, comfortable exit.
I don't know if "being the subject of an impending SEC investigation for market manipulation" makes for a low risk, perfectly executed, comfortable exit ;)
That's not to call their position indefensible, but I suspect some of the people who fomented the thing will have to defend it.
I think the legislation that may come from all of this is to limit margin accounts. When I signed up for an online brokerage years ago you couldn't trade on margin, which meant no option trading or day trading since when trading without a margin account, your cash has to clear. You had to go to their office and fill out forms and have a minimum balance.
With Robinhood everyone gets a margin account and the brokerage clearly can't support it with the tiny balances so many of their users carry. Their business model has forced other brokers to follow by offering free trades and everyone is on a margin account. This is a poor practice.
I'd support requirements like ensuring balances of at least $10k or more to qualify for margin. Robinhood is purposely designed to encourage day trading and other margin trades many users don't understand or that the infrastructure (not just RH, but the clearing houses, etc) can't and shouldn't support.
There's going to be a whole new world of pump and dumps like never before as so many people are hungry for quick money now and taking risks with their rent money they shouldn't be.
For what it's worth, the original guy betting on GME had a smart and well researched hypothesis and I hope he made his fortune. But the lemmings following have no business in this kind of thing.
While the greater fool strategy may generally be a losing one over enough iterations and time, it is very possible to make huge money on these plays in the short term. It is not always irrational to buy into an overpriced asset.
For example GME was wildly overpriced at $100 relative to basically every metric and yet it would have been an incredible buy.
I'm not advocating that anyone actually do this, I'm just saying that you are over simplifying by only acknowledging the value side of the equation.
The problem is that you need to sell quickly to take advantage of a short squeeze, and the people who bought at $200 could have made a big pile of money last week -- but if they still have those shares today, they will probably never recover their losses. Right now GME is trading at slightly more than $100/share, and while it might spike again tomorrow it will probably continue to decline. The squeeze is over and by now the remaining shorts are hedge funds who sold when the share price was above $300.
No, they didn't pitch it as a BTC or Tesla. Clearly you haven't been following at all what is happening. The pitch was to cause a short squeeze and then selling when it happens. So that only losers would be the short selling hedge funds.
So the idea is everyone who buys late can sell high and jump off the ship at the same time? Maybe I'm missing something, but if a whole bunch of people offload a stock, wouldn't that drive the price down, meaning a lot of people outside of the original short-sellers would still lose money?
> The short sellers. They are short so they must buy the stock to close out their positions.
This is incorrect. Short sellers only need to close out their positions if:
1. They cannot maintain them. If they can raise funds ( which they did ) they can maintain the positions. In fact they are probably shorting more, short averaging up if they can get a locate. GME yesterday was on a hard to borrow not on non-borrowable list.
2. Their shares are called back.
GME looks like a crazy stock around 1998/1999 ADEP(?), I think, which went from sub 3 to over 75 two days before Thanksgiving peaking with a couple of trades over 97 followed by a quick crash into teens and a really slow side into pennies. Some of the short sellers covered by putting up classified ads buying stock certificates from the cause the short squeeze by asking to deliver the certificates crowd a few years later.
I think you misinterpreted what I said. Rephrased: "in order to close out their positions, they must buy the stock". I didn't intend to state that they would close them.
I will say though, price going up forcing short sellers to close out (due to margin calls, fear, whatever) is not some made up thing..it's called a short squeeze. I do not know what will happen with GME.
> I think you misinterpreted what I said. Rephrased: "in order to close out their positions, they must buy the stock". I didn't intend to state that they would close them.
They do not need to close out their positions until the stock becomes non-borrowable, causing their position to be called in.
> They cannot maintain them. If they can raise funds ( which they did ) they can maintain the positions
I think at this point for a lot of people its "hold until they can't maintain, this isn't about money it's about screwing over the man!!!!" - as they say the market can remain irrational longer than you can remain solvent.
The people they targeted borrowed liquidity and may have even short averaged up. To be honest, in the end, the net effect of this thing may be something similar to a pump and dump.
I feel bad for the retails that are really gonna take it on the chin. At the same time, I'm sticking to my guns. We have to let all the people who lose in this thing fail, or nothing will be learned. It will need to be painful for people to be more careful in the future.
> everyone who buys late [...] Maybe I'm missing something
The narrative on WSB was that you wouldn't be "late" buying in even late last week at $350, because the goal post was raised to $1000. Many people guessing it would go to $5000. Others saying $10,000. Followed by lots of rocket emojis.
Considering how people have witnessed the recent crypto rally generate insane returns, I can see how new / naive investors might think they're getting in early at $350. Especially when it was all over the news late last week and a giant billboard encouraging people to buy GME in time square just yesterday.
Edit: The timesquare billboard was actually last Friday. And only ran for 1 hour.
Cryptos at least have (somewhat theoretical) use cases with many unknowns that Gamestop Stock does not. In the end you will own stock in a dying retail game company and a pump and dump isn't going to keep its value up very long.
And then the hedge funds said they did indeed sell their short positions, but no-one believed them and the rise continues. There is no way the only losers will be hedge funds at this point, lots of retail investors will lose money.
Yeah. So a bunch of shorts closed their position at maybe $50 when the price was skyrocketing, and then reopened their position at $300 or $400 (if they timed it with the peak).
I'm not sure why people expect the short interest to change at all. If shorts thought it was worth shorting at $15, they sure as hell would be shorting at $300 or $400.
And that price has declined by 80-90% in the last week along with the percentage cost to borrow. It's still expensive to borrow GME but if you have an idea that a stock is going from 500 to 0 in a week or two you don't care about the cost to borrow.
A lot of new shorts have also jumped in when the old ones left. The old shorts haven't necessarily bought back in, especially if they're running cautious after getting their faces ripped off.
That is unlikely the case. Closing the short would require them to write massive losses. Their best strategy has always been wait it out. They most likely purchased a bunch of options to lock in their losses from getting worst and are waiting for the price to drop back down.
I may be incorrect but I believe that data is somewhat outdated from the previous FINRA short interest report; it looks like the next report is due to be shared today, Tuesday Feb. 2 at 6-PM and the next on the 9th.
So, we'll potentially see if that is indeed the case either tonight or on the 9th which I believe will have the most recent data as the one this evening will already be outdated.
Feel free to invest based on that evidence, but I won't be joining you.
How often are news stories promoted in paid-for ads on social media? Do you know? If you don't then you're basing a decision on one piece of data with no context.
4. Short interest only matters when a company gets bought out. At which point, the short interest is entirely rolled back to 0% and short-sellers take the ultimate loss.
Beyond that, it could go to 100%, 200%, or whatever people feel like. There's nothing special about 100% short interest at all.
If you click on "GME" on that page, it will take you to Yahoo Finance. And if you go to the "Statistics" page, you will see that the number is from January 15th. The >100% shorts number is wild disinformation at this point.
it's exactly this kind of misunderstanding that caused this particular herd of new investors to lose out. I've noticed a lot of people making definitive statements of wsb, even though when pressed they admit they don't know squat. This is one of many reasons I like hn better in general --- people don't usually pretend to know what they're talking about.
The rise does not continue, the stock is trading at 98ish bucks right now. Anyone still in is very much holding a bag right now. Yes I understand trade volume is apparently low, but the momentum is likely dead and I don't see Robinhood magically opening up the playing field again. They don't have the liquidity.
WSB would need to convince people who are already burned to move to a broker like Fidelity and start it up again.
Edit: Not to mention that yes the short positions that exist now likely exist at a price point well above the original shorts.
I have no horse in the race, but the press about the hedge funds closing their positions was rather suspicious, along with the silver thing right after.
> but who are the "losers" when stock goes from $350 to, let's say $7?
Nonsavvy retail investors who believed in the hype and bought when the stock was significantly overpriced.
Sane retail investors who are about to enter a whole new world of requirements to get a margin account.
> Also, who are the "winners" on that $350 -> $7 journey?
The hedge funds who were willing to bet on the stock price dropping from $20 and who would've almost certainly increased those bets when the stock was in the $300s.
That's the irony, the hedge funds they were targeting, unless they were run by borderline imbeciles, increased their short bets. It's like WSB designed this attack never having heard of short averaging.
People will say that the hedge funds cheated somehow to come out whole, but the reality is that the attack was extremely poorly designed. (And that's being charitable and assuming that this was an attack and not simply an out and out pump and dump.)
Time will tell but my little finger told me that there will be plenty of losers, that the wall street people supposedly "owned" will be 100% bailed out, and that nothing of interest will change at wallstreet. The only thing that will change is that mobile trading apps will get major nerfs
> No, they didn't pitch it as a BTC or Tesla
It was a figure of speech, "we'll transform your $300 in $10000 in 2 weeks". People internally think about all the past opportunities they missed, we're talking about life changing money for a lot of people
I think the promise of money being the driving factor for this is probably a strawman argument, at least as far as the WSB community itself. If you browse it, you'll see 'lossporn', with people posting screenshots of their personal losses on the stock performance. I don't think anyone prefers that to lose, but there are very definitely true believers.
Of course, as soon as it was covered by the news media, it draws people in who don't share that mindset and do stupid things. so... yeah
Banks are prone to bailouts, hedge funds are not (in the traditional sense of taxpayer money, not private investment).
Many banks control trillions of dollars. Hedge funds almost always have less than $50B, usually by one or two orders of magnitude. If a bank fails, it's actually a problem for the government. If a hedge fund fails, it's barely a blip. If the limited partner was smart, it will also only cause them a single digit percentage decrease in their portfolio.
Hedge funds can amplify a systemic risk, but they would not really be targets for a bailout, the banks would be.
The current (and historical pitch has always be to "cause a short squeeze and hold indefinetely...). Literally every other message is about "do not sell"
Anyone who is long any stock has an incentive to encourage others to "not sell", whether the stock is going up or down. (The pump-n-dumpers are still incentivized to "pump" all the time, even while they're dumping.)
The hype had nothing to do with the fundamentals of the company. It was about short squeeze and gamma squeeze. The pitching point to buy the stock was that if all the retail investors buy and hold the shares, then ultimately squeeze would drive the price higher. Partially this is true and more than one squeeze happened for GameStop.
But for other shorted stocks like AMC, Blackberry or Nokia I'm not sure if the squeeze ever happened and I feel sorry for the people who are still clinging on to those stocks. It could take months, or maybe years to sell them with a break even price.
From what I've seen on Reddit and TikTok, many involved are young and holding to make a point, regardless of the pump. A portion of these are also hoping to make it rich, and get rich quick schemes rarely pan out.
What if they've been tricked into buying now to cover the exit of early investors? People keep saying it's not about the money but the ones who keep quiet are making millions
In today's QE-Infinity Climate - it's not unreasonable to see Chewy's executive management turning GME into a successful e-commerce and brick and mortar play.
The e-commerce business is valued at 10x in QE-infinity terms, on adjusted EBITDA, which means it's not far fetched for the story to become $888/share right now.
The only thing missing is a constant parade of upgrades from the analysts.
Maybe if Gamestop pivots to e-commerce they can eventually come up with some way that you could buy a game online and have it delivered fully digitally, without even having to wait for shipping. Especially if they had vendor lock-in, where the games you've purchased digitally are available to you on any device -- but only through your GameStop account. Every time you log into your GameStop account to play the games you've purchased you would see the front page of their store with all the new games they've listed and the sales they're promoting.
That business model could really be worth $20B. It would be huge. Like what Netflix did to BlockBuster, but for video games.
But what's going to be their platform? Consoles? Doubt it, the manufacturers have a lockdown on the platform. PC? They might be able to enter, but they're going to have their work cut out for them considering there's steam, epic, and a plethora of first-party launchers (eg. origin or uplay).
They're only 20 years too late on that. We now have huge established players who do that already very well. Steam and Xbox, Playstation, AppStore, Epic Store, all platforms already have a good store and a bunch of second and third tier stores. We also already have commoditized the "CD-key" reseller space with G2A and a hundred others.
Roaring Kitty (Deep fing value)'s first video from 6 months ago on $GME answers your questions. It started as legitimate investing with some memes on the side, and then turned in memes with some legitimate investing on the side.
This is indeed how it started. Bloomberg's Odd Lots podcast also had a recent episode with one of the other main guys behind the original, fundamentally driven trade. It's well worth listening to. He makes some good points that the company was indeed undervalued in the teens and lower. Obviously, that is no longer where it is trading, and unless they turn into the Amazon of video games somehow, a valuation of well above $100 seems excessive.
Well, in 2020/2021 you start by framing it as "us v. them" where "they" are immoral people having a good, successful, happy life at the expense of you (somehow, details are not important - we live in a post-truth anti-intellectual timeline). Somehow these hedge fund fat cats are rich and I'm poor! Sprinkle in some millennial defeatism ("I'll never be able to afford a house like my boomer parents so why not YOLO my savings?"), add memes, and frame it as some giant way to get back at the 1% without any actual hard work. Then you sit back, watch it unfold, slowly and quietly exit your position as the stock skyrockets, shop for a new yacht.
Robinhood accounts were net selling most of last week. All the big holders were already gone by this Monday. Only bagholders left.
What is surprising is that this happens in every pump and dump, 100% of the time, and people act like it is a low probability outcome.
Brokers are going to make an absolute bomb: I have seen the spread on GME was as much as $1 at times, and the stock was doing 50m/day. In the past year, retail investors have been overtrading as well, big year for brokers. But GME was not really a big battleground stock for hedge funds, it was too small.
I don't know what regulators can do but the current situation on wsb is just funnelling cash into the pockets of people who are saying one thing and doing another.
If anyone actually thought this was going to be successful, they were caught up in the biggest tulip-bulb delusion in the last 20 years. Melvin Capital may have lost a ton being caught off guard, but I bet they made all their money back shorting at the top. I said a few days ago that retail doesn't have enough power to make a real difference, and it was hedge funds and prop trader that were really moving the stock, especially when new highs were being hit. There's simply not enough money for retail to propel a stock like that.
And now retail will lose all their money. Everyone on reddit claiming "Hold the line!" is likely those same hedge fund/prop traders trying to squeeze every dollar from these poor retail suckers.
The goal posts of an exit were successfully moved several times in the course of the rise. From 100 to 200 to 300. Some of the initial traders successfully exited at the original meme price of $420.69. The fact that it was _so_ successful is why people even then began to beat the drum of a $1000/share exit. Even now the price has has settled around $90 which is probably at least twice its "fair" value of $20-$40.
So yeah, some people purely chasing a hype lost but a lot of retail investors that had their finger on the pulse before the hype successfully called their shot and made it out the other end much richer than when they started.
actually im glad you said this. this is the core problem with this WSB/RH/GME event.
a certain percentage of people in WSB only want to light a pile of their money on fire for the sole purpose of bankrupting some hedge funds. they expect no returns and only want to cause pain to people with more money than them that they dont like.
another percentage of people (i think this group is much, much larger than the first) think bankrupting the short positions is gonna make them huge returns. they think theyre all david collectively fighting a goliath as the proletariat rises up. most of these people are sorely mistaken and will lose everything, but some will make money.
the RH trade halt (EDIT: only buying was halted, a "trade halt" technically means both) is allowing the shorts to unwind more gracefully, making the first group of people angry. theyre not getting their witchburning, or public execution, or lynching - however you want to frame it.
the problem is the second group of people think theyre being defrauded out of huge returns by an artificial exit from the short squeeze. these people are wrong to begin with. most of them were never going to make huge returns. even if they successfully bankrupted the shorts, most of them are left holding stock they bought for $100, $200, $300, or $400 a share (WSB was memeing share price was gonna go into the thousands) that is worth <$90. those people were always going to lose, they just didnt know it. but now they have a scape goat, even though they were on the wrong side of the trade to begin with.
They make astronomical amounts of money gambling on the economy, claim that they are useful to society, and pay a lower tax rate than a janitor, welder, doctor, or actual contributor to society. Then have the audacity to be upset, and go on CNBC and bitch and moan about the ignorant retail investor, and wonder why anyone dislikes them.
I think what you're trying to say is that the metaphorical "lynching" is justified given the deleterious effects of hedge funds continued existence, correct?
I know that people probably regard this as hopelessly naive, but on the 1% chance that you were asking sincerely: hedge funds are a reliable mechanism to allocate capital efficiently, which leads to economic growth which leads to gestures expansively all of this.
I dont think your view is naive. I think people read statements like yours naively.
Hedge funds reliably do what they are designed to do, as you say: funnel capital into the hands of people who will dump it back into multinational economic acceleration.
Where I think you and I might disagree is whether that's a good thing.
This is very similar to a witch hunt. WSB had no idea whether the shorters were the original hedge funds (e.g. Melvin) or random opportunists who wanted to make money from this obviously overvalued stock.
WSB is classic pump and dump wrapped up in memes. The forum deletes any postings that do not align with the current echo chamber that is pushing just a few stocks. It is a bro-filled boiler room that has suckered a lot of people. Brutal.
The key insight to why this is pump and dump and nothing more is that there was never a right time to sell for the masses on WSB, it was HLD all the way down.
If you mean that posts that don't align with the hivemind get downvoted to the point of being hidden, then yes, that is true. It's how reddit's voting system works.
In the short term, it is possible for mob mentality to take over, but in the long term, you will see this fade and WSB will return to a point where there's a little (but not much) more nuance to the conversation.
If you meant that "the forum" as in "the moderators" delete things that do not align with the echo chamber, then you are incorrect. On an absolute basis, more pro-"meme stock" content is removed than anti-"meme stock". You can verify this yourself with PRAW, or simply by refreshing /new.
yeah that explains why some high profile reddit accounts posting on r/wallstreetbets have started to deactive themselves.
I wouldn't be surprised if SEC has been archiving r/wallstreetbets. Actually they might not need to as it is impossible to delete your comment history.
I predict that we may see lot of people get penalized and perhaps even jail time for pumping up meme stocks, although it will take years.
WSB is a game ppl lose simply by playing, IMO. When I read these stories I think of Jesse Livermore-- arguably the greatest trader of all times -- who went bankrupt 3 times on the way (including the end)[1]. The only way to win is not to play.
yes, originally bought 18$ calls, averaged up a bit as it rose. Sold some in the high $200's and then some in the mid $100's. I missed the peaks but I'm content with my gains.
I think most legacy users from WSB know very well what they are doing.
I've been on this sub for 5 years and it has always been so that everytime the wsb hivemind finds a good deal it gets media attention and the number of clueless users/investors skyrockets. But people who stick around outside of these short periods under the spotlights know very well what they are doing despite the memes.
I don't believe in the theory that there are few people manipulating the entire sub for a pump and dump, rather the entire sub (the few tens of thousands regular active users) knew it was a pump and dump. That this story attracted the attention and money of thousands of clueless newbies is to be blamed on people that reported on it carelessly (medias, celebritites, etc.), not on the people who were doing their things on an internet forum expecting nothing out of it.
I like following WSB, been there for years as well. There has been some incredible gains for me -- AMD, NIO, and TLRY to name a few. They were spotted early by the sub, it's up to the individual to decide when they want to exit their trade.
Yes, I think it has too many followers right now. Perhaps it returns to 'normal' after the hype wears off. It has happened before just not to this scale.
Subreddits never return to normal after mass subscriber events. The users might not contribute, but so long as a fraction remain active on the same account, WSB posts will stay in their feed, and they will have the power to vote, and therefore dictate the content of the sub. The participating community will always be a minority, and will inevitably grow to disagree with the majority of users, nonparticipants, who simply dictate the content of the sub because of their higher voting power. The number of votes on a post always exceeds the number of unique posters in the post. I've seen it ruin several subreddits already, with easy-to-consume, low effort content swamping the frontpage.
I think if and when the newbies get burned, they will disappear and forever write off WSB as a personal scam. I'm thinking like the common folks that bought BTC at $19K in 2017. I really don't think too many of them have bought back in after they sold for a loss and likely want nothing to do with it ever again.
The big difference here is that holding GME isn't like holding BTC. Sure, many people say BTC is a scam or that it'll crash and burn, but holding through dips with BTC has historically been the correct move. I highly doubt holding GME is going to turn out well for anybody, so those losses are more "permanent" than say BTC. But you're right, a lot of people that got "burned" on BTC might not come back, but there's also a lot of people that held and are actually better off for it.
Sure, I'm not making any statements about BTC's future trajectory, just that those who bought at the last peak and panic sold near the bottom even after waiting for months or years are not coming back. Same with GME, except I'll bet a pretty penny it's not surpassing its peak again like BTC did. If you put your faith into a community (WSB) and lost all your money, you're not coming back. You might not even invest in the S&P500 for a long time because it will all feel like it's rigged against you.
All but a small percentage of the newcomers will angrily disappear once this all blows over. This is by far the largest growth wave but not the first or the last.
> this story attracted the attention and money of thousands of clueless newbies
As an exercise in this theory earlier today I looked up the profile for 5 or 6 of the top posts on the subreddit advocating for "diamond hands", and about half of them made their first post on WSB within the past 5 days. It's very clear that the users going down with the ship are not the same users who pumped it up for massive profits in the first place.
This was a unique setup for a lot of reasons. It started purely as a value play, then dynamically morphed into a growth play _and_ an attack on the shorts based on technicals. Once the price broke ~30 it then escalated into a full on short-attack and ultimately became pump-and-dump (in my opinion). The whole thing was fluid though, and its important to understand that the initial snowball was formed on the back of fundamentals analysis and through a lens of value investing, so you had plenty of "true believers" gathering together to form the initial crowd attacking the shorts.
Once it became clear the momentum was dead (i.e. when brokerages forbade buys) a lot of the "in the know" crowd had already planned their exit and took it. The only reason it hasnt plummeted to ~40$ at this point is that there were a lot of "true believer converts" picked up along the way that are now stubbornly bagholding in disbelief. This is where the _real_ pump and dump starts to occur, because this whole crowd is now on the hook for massive losses unless they can recreate the initial rise.
On the day the price was $350, I tried making a bunch of comments on HN to warn people this was a pump and dump. I got called a shill and downvoted repeatedly. Check my comment history. I hope those people got out in time.
To be fair, your line of comments was pretty similar to the wealth of sockpuppet a which were unleased on reddit to force GameSpot's stock down while pumping up silver. Even if you were one of the rare cases where there's a flesh and bone person expressing honest personal opinions, it's hard to spot the good apples in a shipping container of rotten apples.
same here. actually someone is still going through all of my comments to downvote it out of spite (I mentioned an old playstation game and apparently it was not to their liking :D).
said person seems to have no life of their own and thinks what they are doing is productive use of their time.
Didn't quite get out in time. Lost what is a lot of money to me, but very little to most people on HN. I think there is a weird dynamic with us complete investing noobs though. A lot of us are kinda poor, or at least in debt. The "yolo" strategy doesn't seem that bad in many ways.
Even though it's a lot of money to me, the unrealized gains I didn't take and the amount I lost really don't put me in a very different position. Just have to keep grinding away on student loans in either case, only a ~2.5 month swing on my estimated time to finish paying my loans from my bad bet compared to selling at the top, and only 1 month worse compared to not trying at all.
Learned some stuff too, hopefully it'll make me a better investor when I'm able to save some money starting in my mid 30s.
But actually, I had student loans and lost a chunk of money during the last BTC spike (literally bought at the very top). It set me back on paying them off which was a big bummer, but in reality, it was a moment that let me truly focus and probably put me ahead in the end. Any time a wild finance story would hit, I'd think about that BTC and remember that investing in your debt is a guaranteed return. And in my case, it was like 7%, so a good return. Now they're paid off and I get to invest like 1% of my money in fun things without worrying if I lose it.
the people who are sitting on unrealize gains are the ones that keep creating the threads with rocket emojis and some pseudo academic reasons for why the short squeeze hasn't happened yet.
The reality that they have created seem awfully like the ones that Trump supporters created including conspiracy involving the deep state, hedge fund colluding with journalists and pinning the blame on just a few people.
They are very good at hyping things up like they do over at r/bitcoin, absolutely refusing to believe that the market price is whatever they hype it to be (note that strong correlation of US equities and bitcoin when it shouldn't if it was like Gold, contrary to their storage of value argument.)
I think that WSB overplayed their hand and now will bring scrutiny and severe restrictions on retail margin option traders.
Not only that I think there will be new rules talking about stocks on social media, similar to how email spammers took advantage of the exact same FOMO narratives to pump up penny stocks in the early days of the internet.
Right now there is nothing that stops a group of people from purchasing large number of aged reddit accounts and using the downvote, upvotes to shape the narrative. The SEC has NO resources to fight this type of sophisticated mass social engineering and the laws are murky too.
> Or how they seem to know how to access and read from a Bloomberg terminal
That was exactly what I was thinking when I saw the image. I was unaware that anyone can get a subscription from Bloomberg. They cost a couple of thousands of dollars a month.
It was always stupid to assume that hedge funds were all in a giant conspiracy with brokers and the media. WSB assumed that hedge funds operate with the same "autistic" (in their words) mindset that WSB does. To WSB, the GME surge was the most important event in their lives. For the hedge funds, it was just another day, albeit a bad one. They don't require you to learn stochastic calculus just so they could fall for the sunk cost fallacy.
Imo RH and other trading platforms are the real winners here. Nothing juicier than trading fees and margin-lending fees combined with high trading volume.
Anyone who's curious about this should just go to the the sub reddit and just read 10 posts. Seriously it's not that complicated.
You've got a bunch of gamblers over there who basically treat this as if they're going to a casino. Then someone got a lucky break and everyone there swarmed around it. Some of them got rich taking money from hedge funds.
That's where it got main stream. The main stream media is responsible for the blood in the water feeding frenzy around this. WSB subreddit went up from 2 million to 8 million in like 1 week.
Anyone who's been on the internet knows, as a community gets popular, the quality of that community changes.
Anyone who's paid any attention to the news at all, knows that the quality and depth of reporting by a lot of people is garbage and misleading.
You add that all together and if you want to know anything about this, it's easier to form your own opinion, just go to r/wallstreetbets and see what you think. I personally, don't like it, I'm not a gambler.
I'm also sure I'm wrong on some of my take in here, I'm continuing to learn and read more. For instance I was all upset at RobinHood, but they have a pretty good reason for disallowing buys. Hopefully the core of that reason gets investigated and looked at by someone, but I will state that I think there is no clear outcome I'd expect from that investigation, that's what an investigation is for. You pay someone who you can, hopefully, trust to take the time to investigate because we've also seen that crowdsourced investigation is awful.
> The main stream media is responsible for the blood in the water feeding frenzy around this
Every single mainstream media host has been talking non-stop about the danger to the little guys who will lose everything from this, and how blind fanaticism on sites like Reddit & Twitter and popular celebrities are to blame for propping up the bubble. They all get called Wall Street shills for it. The mere mention of regulation risks getting them death threats. All of the frequent guests (Cuban, O'Leary, Chamath, Elon and many more) just dodge this question and continue with the "power to the people" talk. Heck Mark Cuban was on Reddit today asking people to buy more GME stock, and then defended it on CNBC right after when the host grilled him on it.
I don't like to call this gambling or casino because it's got a poor reputation. It's simply having fun while learning about the world and doing all of this together as a community. I really hate that it's judged or talked about so negatively.
There is absolutely something wrong with gambling when you are borrowing the money, or affecting your family.
As long as people acknowledge that gambling is a risk and put "at risk" money in, then it's fine. I don't even mind the losses people post on the sub reddit because there is a clear understanding on WSB that it's gambling. Many people over there talk about risk portfolio and exit strategies, it's not a place that encourages loss of mortgages, in general.
Also, there is a very clear difference between gambling and investing. Betting it all on a single stock is really the only thing I consider gambling in the market. Even if you don't like index funds and want to spread your money around it's all about your risk tolerance at that point. Even index funds are gambling in the short term.
How many people - so many opinions. Everyone can be right in some aspects of gambling, and some aren`t. In any case, this is risk + luck. I myself sometimes look at proven casinos at https://nettcasinorsk.com/ and choose 1-3 where it is possible to try my luck.
And regardless of any outcome of the game - the choice is always up to the player
>why the WSB guys know so much about derivatives trading
>access and read from a Bloomberg terminal
Those are very much the exception rather than the rule on WSB, even before the influx of green clueless redditors.
Sure there were definitely a couple of clued up people that spotted an opportunity initially, but it still feels genuinely grass roots.
Author is right though...valuation is way above it's true value & the exit is going to be a bloodbath. (And conversely some money to be made for brave new shorts)
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[ 3.2 ms ] story [ 254 ms ] thread"I don't work on the trading floor, but I'm an attorney who services a variety of financial institutions, including broker/dealers.
This isn't the exciting, hilarious answer you want, but a lot of people had no idea it was even happening until the past 48 hours, and even now, it's mostly just a funny news article about some internet trolls making a bubble.
This is a big deal to the shorting community, but to the other 99% of the financial world, nobody gives a shit.
As much as young people on the internet like to imagine this as an epic, David vs Goliath, Wall Street vs Main Street showdown for the history books, from a bird's eye view it's actually just a brief dumpster fire where a couple hedge funds lost their shirts betting on one little small cap stock. It has happened before, and it will happen again.
In 6 months, nobody will remember or care, except that (maybe) it will become more difficult for retail investors to trade options.
And not because the greedy hedge fund oligarchs forced the SEC to crack down on retail investors. But rather because, when this is all said and done, there is going to be a black hole where most of these retail investors' brokerage accounts used to be, and the SEC and brokerage community will be lambasted for failing to protect unsophisticated investors from a bubble.
I have been monitoring the WSB threads, and while the WSB veterans know that they're making a suicide charge for the memes, they have brought thousands of naive, new investors with them - who predominantly think that they're going to somehow come out on top, not realizing that they're cannon fodder for the more savvy WSB users to exit with gains.
Redditors never seem to stop and think about why the WSB guys know so much about derivatives trading. Or how they seem to know how to access and read from a Bloomberg terminal. Or why there are so many users there that can seemingly drop tens or hundreds of thousands of dollars on complicated meme plays.
How do you think that WSB knew that GME was open to a short squeeze and a gamma squeeze play?
WSB's power users are younger finance bros. It's 30-something investment bankers and portfolio managers memeing with each other and cosplaying as "autists."
If you didn't know what a gamma squeeze was 48 hours ago, you are their exit strategy and the down payment on their next Porsche."
I saw a meme on WSB - photo of a main guy and quote 'What is an exit strategy?' u/deepfuckingvalue'
Ie the main guy behind the squeeze. He already took profit of $13M but somehow he is made into this hodl till 0 martyr?! WTF are those people on?
This really is starting to have all the halmarks of crypto bull rush with hypemen trying to get their exit as high as possible before it all starts to loose momentum and tumble off a cliff.
Its fun to watch though. A lot of fun. Plus more people are becoming aware of how rigged the whole financial system is, how its a boys club that will attack any outsider at sight.
Are they though? I mean the idea that hedge funds are rigging the system is so well established in the public psyche it drove the meme stocks in the first place.
If people's conclusions from all this are that Melvin Capital lied about unwinding their shorts and Robinhood rigged it for them but those nice people saying BUY AND HOLD YOLO on reddit were fighting their corner, has the state of their knowledge advanced?
Two of my friends got into trading because of this (and not in fuck the system way).
I don't think you could get net negative in this situation.
Or am I missing something?
Sure, we've all seen the movies; "hedge funds cheat" is not new information. But this is all very out in the open and very directly targeted at retail investors. There's a lot of noise being made and everyone has taken notice. I would argue the state of everyone's knowledge has advanced.
Although the truth is, retail traders are incredibly disadvantaged due to immense informational asymmetry. Hedge funds probably have access to all the data they want (for example, Citadel having access to Robinhood trade flow), but ordinary people have to first wade through all the misleading information both on mainstream media and on social media, so it's a pretty hard fight. But regardless of the results, I think there would be much more distrust towards financial institutions and mainstream media overall due to this event, and this would be only the beginning of 2021.
A bunch of financially illiterate newbies who don't know half the terminology and don't understand the underlying math have gotten tricked into thinking that "it's all rigged" or "it's all a scam" and that they're going to get rich quick by participating in the scam. Completely oblivious to the fact that the only scam happening is to them.
Trump-supporters think the election was a scam and barged into the capitol. WSBers think the stock market is a scam and bought GME. Same thing, different day.
Isn't it? Look at what they've been doing lately to make the GME stocks go down. The small guy always loses.
For example, there were reported that Melvin closed last week. People thought it was fake news. In the article they reportedly lost 53%. If they lied about it, that would be exceptionally serious. Yet, everyone called it fake news, to their own detriment it seems.
That article also felt like it missed some key reporting details, and I was surprised he talked to reporters, so I halfway wondered if he did have a larger role, but got this out there to shape the narrative in case the SEC comes knocking.
It was somebody else who figured the short squeeze was possible during mid September.
That was this post: https://old.reddit.com/r/wallstreetbets/comments/ip6jnv/the_...
He even predicted the $400 price target as the time to cash out of the squeeze.
The analysts were also not understanding its potential and probably misunderstood greater online sales revenue as moving away from physical disk instead of just a huge growth of free games with in game transactions adding a larger share to the gaming revenue pie.
Value investors totally understood that there was a well-liked brand here that still had huge cash flows. And they knew all the bear cases about the move to digital and the retail biz dying.
A main reason there were value funds who analyzed GameStop and came to the "neutral" conclusion was that the old management team wasn't making any big moves to even attempt to turn around the death spiral.
DeepFuckingValue and even Michael Burry were half-wrong in their original thesis: just using cash flow to do stock buybacks was not necessarily going to turn GameStop around.
It wasn't until Ryan Cohen got involved, got on the board, and started pushing for serious e-commerce and digital initiatives that the stock and story majorly turned around and caused the momentum trade.
[0] https://www.youtube.com/watch?v=GZTr1-Gp74U
They sell physical copies of video games. In the ear of digital content, even worse companies are selling game passes - ie rent our game catalog for a month. This is literally Blockbuster vs Netflix of video games world.
The hedge funds were trying to prey on Gamestop's dying corpse, and WSB players figured out how to take advantage of it.
I think the reality is the WSB big guys needed to hype up the short squeeze and 'sticking to the man' to cause the boubble. And it worked out great.
That in itself is not bad, but it will become a problem when the main players start to slowly exit, the greedy middle will have (what is it called) stop sells set up in case of fall, and then it will quickly collapse and who will be left with their pants down waking up in the morning to see its all gone?
The "I am holding till zero" crowd.
The idealists are always taken advantage of by the shrewd leaders of any movement.
If you take part, just pay attention to it, and exit or at least take some profit when you start seeing signs of it.
Gamestop was being sold below its Net Current Asset Value, that is, if you took all of its cash in the bank and used it to pay off all of its debts, you would have more cash in hand than if you had not bought gamestop.
I'm not sure if the comparison to Blockbuster is as comparable, as renting media probably has different dynamics from buying media. And games, which cannot be rented except in a few specialty subscriber services such as Apple Arcade, will have different dynamics from movies or shows that can be rented.
Also no, the current decisions for the retail stores make me feel like they will lose a lot of goodwill if they transition. The stores barely keep any stock on hand at all, and are increasingly being emptied of goods. I'm legitimately worried they will shutter them all soon; 3 local gamestops where I live have closed in a year or two.
GameStop could also take advantage of physicality and become community spaces for eSports events or even tabletop gaming, collectible card game tournaments, etc. Basically become general "geek" stores and not just gamer stores.
I'm not even sure this is a redemption story - just a plot twist that made a funny story, much funnier.
And there are also indications of illegal practices (naked short selling), people are asking themselves why stock purchase settling takes two days instead of either seconds (or, to account for an option to unwind mis-trades, hours) which was why Robinhood and others suddenly found themselves in a dire need for cash, and why/how Robinhood can afford their cheap fees (because they're selling off the data of their users).
The most important part that the world learned from $GME is another: the big promise after 2008ff was "we learned from our mistakes, regulations were passed to rein in dangerous speculation"... and $GME proved undeniably that this has not happened, not during the Obama admin and certainly not under the Trump admin. Wall Street still is a casino, not a stock exchange.
(disclosure: holding a couple dozen AMC and NOK for the lulz)
The new recruits had no hope of actually establishing themselves in the game. They were just cannon fodder in someones strategy.
Your character gets better the more time you invest in playing the game, so you gotta be dedicated. Also, traveling is ridiculously dangerous because 1 wrong jump, and BOOM!, you're dead and your ship is gone. That's about where I stopped because I lost my ship, its upgrades, and they also destroyed my escape pod, so IIRC, I had to start my character from scratch? Idk, really cool game but also really frustrating.
Someone should make this a meme.
As far as coverage, I liked this explanation of internal mechanics of stock trading:
https://rumble.com/vdf437-gamestop-and-short-squeezes-with-a...
I also enjoyed watching Rossmann's take on the whole thing:
https://odysee.com/@rossmanngroup:a
Reddit is just one small piece of the system that this even is occurring in.
Because we're genuinely curious how such a large and seemingly well-connected community could have been so mind-bogglingly wrong about something ("how short trading works") that should have been an unambiguous truth.
Even now I'm still seeing people screaming about "hold the line" and inserting endless rocket emojis as the stock drops below 35% of its peak. People are still arguing on this very site that all that is needed is for the WSB community to refuse to sell to cause some kind of magical short call that isn't coming. People still insist that short leverage greater than 100% means an infinite price spike at some point in the indefinite future. People still think that the short leverage staying high (on a very clearly inflated stock!) means that the early players didn't exit positions.
This was a scam. I mean, we don't know exactly by who yet, but it's abundantly clear that all these people were lied to to get them to buy a security that was just obviously a target of a pump and dump.
is there a deadline on short sellers to close their positions? what is reasonable limit for the stock to go to? what happens if hypothetically nobody of wsb would sell their stocks?
But you don't need to buy back all the stock, just enough such that you have enough flexibility to hold the stock across the inevitable peak and drop. In a consumer brokerage, this generally takes the form of a "margin call" and the brokerage will often buy stock for you out of your margin so they don't get caught holding the bag, and eventually can seize your whole portfolio to make themselves whole (the regulations there get complicated and I'm not expert). It's an absolute thing, and you lose all your money. But that's not how it works for a hedge fund, the nature of which is to have access to financing regular people don't. They can just cut a deal with bigger players to get through, and that's how Melvin seems to have managed this.
To be clear: Melvin made an outrageously inappropriate bet, got caught, and lots a ton of money. But they're out now and the story is over. Now GME is just a bubble like any other bubble, fed by naive investors believing it will go up when it won't.
As far as "what happens if WSB doesn't sell?", the answer is nothing. WSB doesn't hold the full capitalization of GME. There are plenty of other shares out there being traded, and the price of those trades is what you see on the ticker.
some say they are, some say they aren't. Is this in fact true?
> WSB doesn't hold the full capitalization of GME
does anybody know how much does wsb hold approximately? very rough number would still be interesting to know.
(I have no market position on any individual stocks... because I don't consider myself sufficiently well-educated to do it. So take that grain of salt as you see fit).
If a stock is 30% shorted, that means there are 130% of shares in circulation. (And 30% negative shares.)
If a stock is 130% shorted, that means there are 230% of shares in circulation. (And 130% negative shares.)
If your numbers are correct, then institutional investors would own just a bit over half of GME.
The ones which said they are out are out. There isn't actually any evidence that they stayed in. There is a lot of frenetic speculation on reddit that they're still in, which is mostly the result of redditors cargo culting bad "game theory" to support their own priors that hedge funds will always lie no matter what. I have written many comments about this in the past couple of days; suffice it to say that these conspiracy theories are based in basic trading illiteracy and misunderstood jargon, mixed with a heavy dose of emotional investment.
On the other hand, there is good evidence they actually closed out when they said they did: the hedge funds getting burned when GME was at $50 and $100 simply wouldn't exist anymore when GME hit $300, $400 or $500. They would have been margin called and it would have been game over.
And finally - yes, some funds are short GME right now. But that's not because they were short at $4.5, it's because the current price is dissociated from reality and all the smart money wants to short the peak.
So since it's a rotating cast of characters, it is entirely possible that the very early short position holders have all taken their lumps, and the current short sellers sold their borrowed shares for $100's of dollars each, and now have the ability to hold on for quite some time.
Also I think this is being over-analyzed. Reading the comments the majority of users there don't claim they really know all the details. To me this is a protest against hedge funds.
Eventually Gamestop could be forced to issue more shares to improve the liquidity of their stock, and wsb would be less relevant.
My guess is that in a week or two we will be hearing sob stories from people who bought GME at the peak thinking the price would go higher. At this point the wsb crowd is lining the pockets of hedge funds who are taking advantage of the situation -- unsophisticated investors trying to profit from a short squeeze are an easy target.
Shorts also have to pay a large amount of interest to remain short, because they are borrowing the shares that they sell. Indicatively, I see the short rate at around 12.5% annually. This is not terribly high. You can look at the short rate as a quick-and-dirty, but more granular across time, proxy for short interest.
People are acting like GME is the only stock that has ever short squeezed. TSLA has squeezed repeatedly and its valuations have stayed high despite the company not turning a profit ex regulatory credits. We've already exceeded "reasonable" for GME so it's all a question of price action at this point. The main factor that makes GME's squeeze such a huge deal is that it was driven by a self-deprecating crowd of people sharing thoughts publicly, rather than some famous billionaire steering the money of several other famous billionaires.
There's no law that says every trade has to be justified on a fundamental basis. Some people trade technicals. Others trade sentiment. Still others trade volatility. The price is the price. If BTC can go to 30k then GME can go to 1k.
Another interesting factor is that, if short-sellers were reluctant to cover at $4, then there are bound to be many firms that are short stock (or long puts) here around $100. As long as there are shorts out there, it can squeeze again from shorts covering or market-makers hedging gamma. If nobody from WSB sells, then it's a question of the rest of the market participants (computers, market-makers, hedge funds, retail, you name it) pushing around the spot price. IMO it's a very interesting situation. We don't get FTD and short interest data very often -- bimonthly and on a lag -- so there's a lot of uncertainty. I share your genuine curiosity.
We definitely know who lied to most of these people: themselves. They let themselves get swept away in a tide of rocket emoji and never stopped to think about (or cared to learn about) the mechanics of the trading situation. Sure there are a few exceptions (this /u/deepfuckingvalue seems to know what he's doing, several others too), but I'd wager that 99% of the 6 million new subscribers were either seeing red with "fuck Wall Street" fury or green with greed.
It's even harder when it turns into a crowd and people are cheering on whatever is happening. Especially if there's moderation removing any messages of dissent.
Add in that short interest data is either not timely from the every two weeks official report, or incomplete/of unknown accuracy from the third party reports. And that anyway, it doesn't have any indication of what price the shorts sold for, and it's easy to see how people saw 130% short interest a few weeks ago and turned it into a squeeze, and see 130% short interest at the end of last week, and it's not squeezing anymore. Shorts @ $20 got out (at a high cost), and new shorts @ $300 got in, so the reportable short interest is the same, but the new shorts are probably getting out soon at a high profit.
I think the core issue is, there is a significant number of people who only get their news from what is upvoted on Reddit, and what is upvoted on Reddit not only has no correlation with actuality, factuality, or reality, it also follows a lot of really nasty biases due to the upvote system. For example, another chat I'm in with a lot of Europeans had this one Portuguese guy last March posting daily fear mongering about the US burning down from Covid. I finally figured out after a week of it that all his headlines were coming from the Covid subreddit. I went and looked, the top 80 stories were all US based. No mention of Italy, Spain, UK, or any other European countries who were having similar rates at the time. I'm not convinced this guy even realized Covid existed in Europe at the time.
The moral of the story is, if you're going to try to form an opinion on something you know nothing about, you NEED to consider at least 2 different positions, and a lot of these people who fell into the conspiracy trap only considered 1. (And yes, even though Reddit is an aggregator, it is just 1 source).
Do you have a finance background and relevant expertise, or are you just another armchair critic getting his word in...looking at where the price has moved and arguing "of course it has!". in this case, what makes you any different from those you're condescending?
It's new territory for all of us, why pretend otherwise?
I've been saying of WSB since before this debacle exploded, these are bots. The same bots that have run many other meme-y subreddits like r/the_donald, the same bots that are kingmakers on twitch. Spamming emoji-laden slogans as non-sequitur replies to comments nested 3 layers deep is a telltale sign.
I can't be the only one who sees this? Maybe the whole internet is bots. Maybe I'm the only non-bot.
Now do HN’s collective beliefs about startups...
I also think the caveat of using the epithet "pump and dump" is that you should have some evidence that the initial information was false or misleading. As it turns out, Melvin was extremely short, as were others, and everyone who got involved prior to the squeeze had ample opportunity to make money. Not every hyped name that rallies immensely and then sells off aggressively is a "pump and dump." The stock is still up 20x in a year.
https://twitter.com/EpsilonTheory/status/1355526361570541572
I'm hoping that instead there are hundreds of thousands of people who only bought a couple of stocks, understanding that they were likely to lose the money.
Yes. Yes we do. Because "people" have done exactly that in every previous stock market bubble, and at every casino, and in sure-fire get-rich-quick "investment" schemes, and 3-card monte games...
A better way to frame the question is "do we really think people as a whole have gotten fundamentally smarter since the last time this happened?"
This is why financial regulation exists. To protect people from themselves.
All of this stuff has been happening for over a century. This isn't unknown.
Every decade or so you’ll find people who didn’t pay attention the previous time learning about the market the hard way.
Oh. Yes. Yes, yes, yes. And it's not just the stupid people. Isaac Newton famously lost a fortune in speculation.
That's the thing about manias. It takes over and so many people all over go broke by the end. They are famous for it: they are a predictable and repeating tragedy.
Recognizing a mania is one of the first lessons someone who wants to do anything with stocks beyond INSERT 15% INTO VANGUARD 500 INDEX should do.
that said, I grasp that there are some odd knock on effects with so many assets tied up in what are, approximately, a derivative.
yes. https://www.reddit.com/r/wallstreetbets/comments/la53nh/help...
https://i.imgur.com/zy9I3IZ.jpg
One of the jobs of financial markets is to correctly distribute capital. Moving money from people who do dumb things with it, to people who don't, is a good thing because more capital ultimately ends up in the right place. A good thing economically over all that is. The individuals losing the capital are likely butt hurt. But they should have stuck to indexes...
Which is why step 1 is always convincing people it's such a sure thing that it's not gambling. Even if it is.
So even if they lose everything they won't blame WSB, they'll just demand Congress make short buying illegal or something.
same modulo motivation holds for the irrational and allegedly illegal shorts these people are claiming to be calling out ...
Rational or non-rational force is irrelevant, as long as it brings liquidity onto the market.
The democratization of the market we all witnessed in the past decades injects more liquidity into the good old zero-sum play. In a somber way, it's a "savings squeeze" strategy.
This time last year I was sleeping on floors, trudging through the snow to knock on doors in New Hampshire in hopes of producing thoughtful political dialogue. Unfortunately I don't think that had nearly as much impact as a few hundred bucks of meme stonks.
Not sure what you mean by this + how $GME relates to Bernie and his supporters?
EDIT: If there were real money to be made doing this, it would already be happening. But people being willing to throw around significant capital and probably lose it, just for the satisfaction of hurting someone else, is interesting.
Sure there is. Monetary policy. Cost of money is too low.
> WSB's power users are younger finance bros. It's 30-something investment bankers and portfolio managers memeing with each other and cosplaying as "autists."
> If you didn't know what a gamma squeeze was 48 hours ago, you are their exit strategy and the down payment on their next Porsche.
> This page does not exist. The deletion, protection, and move log for the page are provided below for reference.
> 02:43, 2 February 2021 ST47 deleted page Gamma squeeze (G12: Unambiguous copyright infringement of https://www.swfinstitute.org/news/83341/what-is-a-gamma-sque...)
In 2016, the Internet discovered they can mess with politics.
In 2021, the Internet discovered they can mess with finance.
There are other instances of this, but the general theme is people who traditionally only operate on the Internet occasionally discover ways to have an impact on the "real" world. They get so drunk with power, they do something stupid with it, and the rest of the world sighs as we get to work cleaning up the mess they've made after they get bored.
------------------------------------------
The claims and the consequences are very different, but I definitely get the same sense I got reading Q stuff when I skim the current WSB page.
- The media, government, and elites are conspiring against us.
- Info that says short interest has decreased / shorts have covered is propaganda and should be ignored.
- Info that says short interest is still sky-high is to be believed without question.
- Parties who were on our side of the bet but are now advising caution (e.g. Burry or S3) must be malicious or compromised, can't possibly be genuine.
- Mix of facts with misunderstood interpretations thereof: 140% short interest is very high (fact), 140% short interest should not be legally possible (misunderstanding).
- The dark truth we are about to reveal (counterfeit stocks?) has been going on for a long time, but now the wool will be lifted from the eyes of the nonbelievers.
- Your continued belief in "the plan" is important. You must keep the faith!
- "The Event" will take place on X date, but when it doesn't, no problem: it was always going to be Y date that It Happens.
- We all KNOW our version of the story is right. What particular pieces of evidence are so rock-solid and convincing? Oh, well, there's SO MUCH, but it's not my job to spoon feed you the facts. If you don't know, you clearly haven't been paying attention and should do your own research.
- If somebody published something saying that we're wrong, it means that "They" are scared of us. We must be getting close.
I don't know whether WSB's narrative is right or wrong, which is why I am on neither side of this trade and merely watching with interest from the sidelines. They could very well be correct about all of this.
I also am not trying to allege that being a "GME to the moon" person makes you a "Q person". They are completely different sets of beliefs. All that I'm observing is that the marketing of the ideas is similar.
"Memes" that are outright out of a WW2 propagandist playbook with phrases like "Hold the line" or the WSB kid with sunglasses seen taking out the enemy.
People trying prove their devotion to the cause is so much higher than their fellow brethren. "For every upvote I'll donate to the campaign/I'll buy stock in GME"
I know /r/wsb disavows politics, but I found it an interesting coincidence.
I'd say you're heavily overfitting here.
I have seen several articles in the past week outright rejecting the idea that anyone is in on GME for the "cause" of shitting on the funds (even if it turns out ineffective). If I see an article failing to recognize the legitimate populist (and correct) element of the moment, while hand-wringing about the fund managers, my bullshit detector goes off.
Also, can you explain, or link, or anything, as to why shorting more shares than there are to trade a good thing? Why short selling is legal at all?
Shorting seems like a terrible tool in society, a way for people with money to gamble, win big, but occasionally fail so hard the federal government needs to step in.
1. The lender of the stock, who gets interest payments like any other lender
2. The short seller, who of course expects to pocket the difference if the stock goes down
3. The person who buys the stock from the short seller, presumably expecting it to go up (this party could, knowingly or not, be the same person as #1)
Sure, the short seller is taking the risk of a massive loss in a scenario like this, but that's their problem. And if they fail so hard they can't possibly return what they owe, then it becomes the lender's problem. But that's true of any loan, so it's up to the lender to set the terms in a way that limits their risk (e.g. not lending to "risky" borrowers, not lending too much of what they have in reserve). What's the difference with other forms of lending?
In the movie "The Big Short", weren't the short sellers the heroes of the tale -- the ones who really looked into the underlying assets, looked past the exuberance and overconfidence, and found the system to be rotting?
From what I understand here, large quantities of short selling can be a self-fulfilling prophecy. Drop the price with shorts and let panic set in. Retailers sell due to panic, dropping it further. This goes into a nice little spiral, which lets the shorters cover.
You could also argue that this current situation falls into a "short and distort" category as well if you take the media into consideration.
What makes manipulating the price with short selling worse than manipulating the price with buying?
Your reference to "short and distort" suggests you're surely familiar with "pump and dump". They are two sides of the same coin. In both, it's not the stock trades themselves that make it a scam, it's the misinformation fed to the suckers on the losing end of the deal.
My gut feeling here comes from another environment, PredictIt betting markets, where both the number of traders and the size of the investments are capped so the markets are smaller. The order books there are also directly visible, so you can calculate how much it will cost to move a market price by a given amount. There are many markets on there with order books thin enough that a hundred bucks will move the price by several percent. You can experiment with this manipulation on a middle-class salary there, and you'll find that unless you accompany your price swing with a compelling pump story in the (unregulated of course) message board, it doesn't last long enough for you to get out. Some of the really small-cap cryptos might be another example of a playground to try stuff like that out in.
I think most traders in both short and long positions are not attempting manipulation, and just expecting that the market will naturally move to a more realistic (in their view) valuation of the stock.
Here are the mirror scenarios as I see them. The price-moving influence for a given capital investment is no different between the short-seller and the long-buyer. And in both, it cuts both ways -- the trades you make exiting your position have a market force opposite to the trades you made creating it. There's no free lunch. Winning either trade requires convincing other traders that the higher or lower price is a fair one. That could be done with false info if you're a scammer, or it could be real info if you are just trying to make some money off pointing out the truth (see Nikola).
Scenario A:
I am a short-seller. I borrow $100M worth of stock from a broker, and sell it with a market order.
My sells chew through the bids on the order book, highest bid first, moving the last share price number down as I fill the standing orders of everybody buying at X, then at X-1, then at X-2, etc. But I haven't affected the ask side of the order book directly. Those people are all still offering high prices to sell, I just jumped the line ahead of them and told all the buyers "I'll beat that price! Get your cheap shares here!".
I hope that some of the people on the ask side see the movement, panic and either execute market sells or at least lower their sell limits, so that I can buy the shares back cheap. But they might not, and if they don't, I'll have to buy back higher than I sold. I really need for this to catch on and cause a frenzy, because in moving the market down I sold a lot of my shares at bargain prices! To make money on those I'll need the price to sink even deeper so I can buy them back at extra-bargain prices. In trying to keep the price low as I repurchase shares, I'm fighting against other smart traders who see that none of the fundamentals have changed, do not wish to sell low, and may even be competing with me to buy low. I'm also fighting against myself in a way, because just as I put downwards pressure on the price by selling this huge number of shares, I'm now putting upwards pressure on the price by trying to buy them back.
Scenario B:
I am a buyer. I borrow cash to buy $100M worth of stock with a market order. (You may ask who would lend me that much cash, but in scenario A they don't lend $100M of stock to just anybody either so we're comparing apples to apples)
My buys chew through the asks on the order book, lowest ask first, moving the last share price number up as I fill the standing orders of everybody selling at X, then at X+1, then at X+2, etc. But I haven't affected the bid...
link?
>Also, can you explain, or link, or anything, as to why shorting more shares than there are to trade a good thing? Why short selling is legal at all?
https://en.wikipedia.org/wiki/Short_(finance)#Views_of_short...
>Shorting seems like a terrible tool in society, a way for people with money to gamble, win big, but occasionally fail so hard the federal government needs to step in.
Are you referring to the last financial crisis? If anything that was caused by the long side, not the short side.
if you actually swap out the words, it reads almost exactly like the Q conspiracy and the other crap Trump supporters been echoing in their chambers.
I wonder if there is a math formula to these conspiracy/pseudo realities. They seem to have very similar structures and literally just the variables are different each time.
Coupled with attaching legitimacy to numbers (your account is too new therefore untrustworthy, you have lot of karma points so you can't be lying), it would be very easy to paint any type of narrative while signaling trustworthiness.
Also, people often claim to be part of X or in position Y without any verification to win confidence.
Literally the psychology of confidence man has now taken the form of some integer attached to a username in a database somewhere.
We also see this blind trust in large numbers on Instagram and Youtube where the number of subscribers and likes automatically signals importance, legitimacy when all of it are easily manipulated, paid for.
The spirit of these meme cults seems to be, "Isn't it invigorating and hilarious how un-ironically obsessed with X we all are?"
You had to go to specific subreddits to see the type of exuberant, memespeak support for Trump. In 2016 that was r/The_Donald. By the time we got to the 2020 election that subreddit and any replacement that got too close to it was banned. But you could still find the same vibe on TheDonald.win, an independently hosted recreation of the subreddit. Or on the chan sites.
The meme culture of The_Donald never constituted the mainstream image or talking points for Trump. it wasn't promoted or even referenced directly by the Trump campaign. But it was a weird world where you never knew exactly how serious people were about their love for Trump -- it was so obviously exaggerated as to look like satire, but the participants were at least somewhat serious: they really did want Trump to win.
sHorT sQuEeZe hasN't haPPened BRo
GME is wOrTh $3o,0oo0
edit: seems like quite bit of self-professed geniuses actually bought into the "David vs Goliath" meme, not realizing they just transferred a huge chunk of their wealth to coked up finance bros working remotely in front of their bloomberg terminals, shitposting on r/wsb behind Tor to pass the time and pump up stocks.
edit: what are the outcomes? WSB will be banned and its moderators, people who posted DD will be sued in civil court. Retail options trading will be severely limited. People who have been pumping the stock up on social media will be reprimanded.
To state that another way....do you feel sorry for Gabe Plotkin?
Ronbinhood &co enabled this by gamifying trading, people are just one click away from betting their entire savings based on random social media posts amplified by mainstream media over coverage.
If you learn about something like this via mainstream medias or your friend who had no idea what trading was 2 days ago you can be 100% sure that you're too late to the party
edit: ok, not bankrupt, but clearly not going in the right direction. Either way, not anywhere close to make investors rich quick
https://gamerant.com/gamestop-out-of-business-in-digital-age...
https://gamerant.com/is-gamestop-going-out-of-business-dying...
https://edition.cnn.com/2020/09/10/investing/gamestop-store-...
https://www.ccn.com/gamestops-ultimate-destiny-buyout-or-ban...
There is only 1 stock being traded here, but there are two loans (shorts) out on it with obligations to return it.
What's really fun is that Alice and Charlie may not even know that they've lent their stock. Their broker, having a substantial amount of the stock pooled across all accounts they manage, may lend it out and still let Alice and Charlie trade their "share" -- since if Alice wants to sell, the broker can always sell on of the other shares from their pool. As long as the broker keeps a decent amount of shares still in their possession, and as long as all accountholders don't try to liquidate at the same time, it's fine. Even if you DID try to liquidate your position and whoopsie, the broker actually lent out all their shares and there are none left for them to sell, the broker could buy your share obligation with cash and you wouldn't know the difference between that and selling it to another shareholder.
This is the type of thing that gets some people's back up. It all sounds very "precarious" as you say. There is a reaction that says, whoa, that's way too complicated and abstracted, this whole thing is a house of cards just waiting to collapse. But it's kind of like a long-lived piece of software, which accumulates complexity from the need to deal with a complex world. Only new programmers have the urge to tear it all down and start from scratch -- because old programmers have found that the "new" system ends up reinventing the complexity of the old as it discovers the same problems and missing features of the "simple" approach. Today you see this happening with cryptocurrency.
last i checked brokers _cannot_ just loan out random alice and charlie's shares.
only once you've got a margin account and you've gone into debt can they use your shares. if you've got a margin account and you didn't read the contract, well... god help you, nobody else can.
as i understand it, loaned shares generally come from large institutional investors. the folks managing your index funds make extra money by loaning the underlying shares. (maybe that's what you meant? but the prospectuses for index funds make it clear that they do this sort of thing.)
On some brokers it's an opt-in thing and you get to reap the rewards (interest) of lending out your shares. A friend of mine has been doing this with QuantumScape stock and collected a sizeable amount just from lending it through its December run-up, in addition to the direct gains.
My impression is that the zero-fee brokers like RH are the ones more likely to do this without your opt-in consent (of course you do agree to it across the board in their terms), but I'm not an expert.
As I read my customer agreement with ETrade, they are allowed to loan out my shares, even if I do not have a current margin balance. (It reads to me that they are pledged as collateral at all times, but I am not a lawyer.) It seems unlikely and inefficient that if I paid or traded my margin balance down to zero that ETrade would demand delivery of any shares I'd previously lent.
From this comment: https://news.ycombinator.com/item?id=25946012
A company with declining revenues, but lots of cash on hand, is ripe for takeover and liquidation. That places GameStop right alongside the quintessential takeover target: New England Wire and Cable. That was a good movie. Whether from bankruptcy or takeover, this could be the last party for GameStop.
[1] https://www.youtube.com/watch?v=GZTr1-Gp74U
> On their current trajectory they will go bankrupt
...what?
this whole thing started because some high-profile redditors were bullish on GME, and then it turned into an anti-1% movement once the short positions were discovered.
so, there are two activities: speculation and investing. the whole problem here is that unwitting retailers were tricked, thinking they were investing when really they were "speculating" (more accurately called a pump and dump scheme). now its morphing into this "jail the oligarchs" nonsense because the people that lost money think they were wronged, when really it was their own damn fault the whole time.
> > On their current trajectory they will go bankrupt
> ...what?
This doesn't seem hard to reconcile.
If I leave Seattle driving east my current trajectory takes me to New York. But I'm not yet near New York.
That'd make their stock skyrocket.
Loosing a bet doesn't make you a not-smart investor. High risk ventures can be part of any portfolio. In a game of high risk and high returns most bets don't work out. I don't think any less of hedge fund people who "lost their shirts" on this. That is a normal part of the game.
I'm not sure what's left that is "good".
This is not a normal part of the game.
People who never traded in their life and bought GME at $350 because reddit promised them big returns (I know a few in my friend circle) aren't smart investors taking part in a risky venture, they just suffer from fomo and have no idea of the risks
People who bought a few weeks ago may have made a risky calculated move though, I'm not denying that.
People who bought a long time ago and fomented the whole thing for a massive profit are definitely the only one I'd call smart, low risk, perfect execution, comfortable exit.
No one will make me believe that the people who bought at $350 are just as smart and taking the same risks as the people who bought at $5. They're not playing the same "game" you're talking about. Head or tails isn't the same as "guess the number I chose between 1 and 5000"
I don't know if "being the subject of an impending SEC investigation for market manipulation" makes for a low risk, perfectly executed, comfortable exit ;)
That's not to call their position indefensible, but I suspect some of the people who fomented the thing will have to defend it.
- https://newrepublic.com/article/161182/bought-tens-thousands...
With Robinhood everyone gets a margin account and the brokerage clearly can't support it with the tiny balances so many of their users carry. Their business model has forced other brokers to follow by offering free trades and everyone is on a margin account. This is a poor practice.
I'd support requirements like ensuring balances of at least $10k or more to qualify for margin. Robinhood is purposely designed to encourage day trading and other margin trades many users don't understand or that the infrastructure (not just RH, but the clearing houses, etc) can't and shouldn't support.
There's going to be a whole new world of pump and dumps like never before as so many people are hungry for quick money now and taking risks with their rent money they shouldn't be.
For what it's worth, the original guy betting on GME had a smart and well researched hypothesis and I hope he made his fortune. But the lemmings following have no business in this kind of thing.
For example GME was wildly overpriced at $100 relative to basically every metric and yet it would have been an incredible buy.
I'm not advocating that anyone actually do this, I'm just saying that you are over simplifying by only acknowledging the value side of the equation.
Can confirm.
Everyone knows GME is over valued by an insane amount, who do people expect to be snapping up shares at $500?
(not saying this is indeed what would happen, just explaining the though process)
This is incorrect. Short sellers only need to close out their positions if:
1. They cannot maintain them. If they can raise funds ( which they did ) they can maintain the positions. In fact they are probably shorting more, short averaging up if they can get a locate. GME yesterday was on a hard to borrow not on non-borrowable list.
2. Their shares are called back.
GME looks like a crazy stock around 1998/1999 ADEP(?), I think, which went from sub 3 to over 75 two days before Thanksgiving peaking with a couple of trades over 97 followed by a quick crash into teens and a really slow side into pennies. Some of the short sellers covered by putting up classified ads buying stock certificates from the cause the short squeeze by asking to deliver the certificates crowd a few years later.
I will say though, price going up forcing short sellers to close out (due to margin calls, fear, whatever) is not some made up thing..it's called a short squeeze. I do not know what will happen with GME.
They do not need to close out their positions until the stock becomes non-borrowable, causing their position to be called in.
I think at this point for a lot of people its "hold until they can't maintain, this isn't about money it's about screwing over the man!!!!" - as they say the market can remain irrational longer than you can remain solvent.
Margin calls after today's close are going to be brutal.
The people they targeted borrowed liquidity and may have even short averaged up. To be honest, in the end, the net effect of this thing may be something similar to a pump and dump.
I feel bad for the retails that are really gonna take it on the chin. At the same time, I'm sticking to my guns. We have to let all the people who lose in this thing fail, or nothing will be learned. It will need to be painful for people to be more careful in the future.
The narrative on WSB was that you wouldn't be "late" buying in even late last week at $350, because the goal post was raised to $1000. Many people guessing it would go to $5000. Others saying $10,000. Followed by lots of rocket emojis.
Considering how people have witnessed the recent crypto rally generate insane returns, I can see how new / naive investors might think they're getting in early at $350. Especially when it was all over the news late last week and a giant billboard encouraging people to buy GME in time square just yesterday.
Edit: The timesquare billboard was actually last Friday. And only ran for 1 hour.
0. https://www.highshortinterest.com/
Typically these stats are updated slowly.
I'm not sure why people expect the short interest to change at all. If shorts thought it was worth shorting at $15, they sure as hell would be shorting at $300 or $400.
So, we'll potentially see if that is indeed the case either tonight or on the 9th which I believe will have the most recent data as the one this evening will already be outdated.
Linky: https://www.finra.org/filing-reporting/regulatory-filing-sys...
How often are news stories promoted in paid-for ads on social media? Do you know? If you don't then you're basing a decision on one piece of data with no context.
2. bloomberg's (unofficial) estimates says it's below 100% https://www.bloomberg.com/news/articles/2021-02-01/gamestop-...
3. even if it's at > 100% shorts, it tells you nothing about what price those shorts entered at. if they entered at $300 they're not breaking a sweat.
Beyond that, it could go to 100%, 200%, or whatever people feel like. There's nothing special about 100% short interest at all.
Those that shorted it at the high, are minting greens right now.
WSB would need to convince people who are already burned to move to a broker like Fidelity and start it up again.
Edit: Not to mention that yes the short positions that exist now likely exist at a price point well above the original shorts.
That's true for when stock went from $4 to $350, but who are the "losers" when stock goes from $350 to, let's say $7?
Also, who are the "winners" on that $350 -> $7 journey?
Nonsavvy retail investors who believed in the hype and bought when the stock was significantly overpriced.
Sane retail investors who are about to enter a whole new world of requirements to get a margin account.
> Also, who are the "winners" on that $350 -> $7 journey?
The hedge funds who were willing to bet on the stock price dropping from $20 and who would've almost certainly increased those bets when the stock was in the $300s.
People will say that the hedge funds cheated somehow to come out whole, but the reality is that the attack was extremely poorly designed. (And that's being charitable and assuming that this was an attack and not simply an out and out pump and dump.)
> No, they didn't pitch it as a BTC or Tesla
It was a figure of speech, "we'll transform your $300 in $10000 in 2 weeks". People internally think about all the past opportunities they missed, we're talking about life changing money for a lot of people
Of course, as soon as it was covered by the news media, it draws people in who don't share that mindset and do stupid things. so... yeah
Many banks control trillions of dollars. Hedge funds almost always have less than $50B, usually by one or two orders of magnitude. If a bank fails, it's actually a problem for the government. If a hedge fund fails, it's barely a blip. If the limited partner was smart, it will also only cause them a single digit percentage decrease in their portfolio.
Hedge funds can amplify a systemic risk, but they would not really be targets for a bailout, the banks would be.
But for other shorted stocks like AMC, Blackberry or Nokia I'm not sure if the squeeze ever happened and I feel sorry for the people who are still clinging on to those stocks. It could take months, or maybe years to sell them with a break even price.
Break even price? Through what, innovation? Currency inflation?
Most of them bought in highly concentrated margin accounts. They will be force sold by the broker as a result of a margin call.
The e-commerce business is valued at 10x in QE-infinity terms, on adjusted EBITDA, which means it's not far fetched for the story to become $888/share right now.
The only thing missing is a constant parade of upgrades from the analysts.
That business model could really be worth $20B. It would be huge. Like what Netflix did to BlockBuster, but for video games.
Roaring Kitty (Deep fing value)'s first video from 6 months ago on $GME answers your questions. It started as legitimate investing with some memes on the side, and then turned in memes with some legitimate investing on the side.
https://www.bloomberg.com/news/audio/2021-01-29/how-to-make-...
Just because GME-as-ownership-unit may be overvalued, does not necessarily mean it is overvalued for GME-as-contract-closure-instrument.
If you want to focus on GME-as-ownership-unit, as a share in a retail business, that's perfectly valid. But that's not the only perspective.
What is surprising is that this happens in every pump and dump, 100% of the time, and people act like it is a low probability outcome.
Brokers are going to make an absolute bomb: I have seen the spread on GME was as much as $1 at times, and the stock was doing 50m/day. In the past year, retail investors have been overtrading as well, big year for brokers. But GME was not really a big battleground stock for hedge funds, it was too small.
I don't know what regulators can do but the current situation on wsb is just funnelling cash into the pockets of people who are saying one thing and doing another.
And now retail will lose all their money. Everyone on reddit claiming "Hold the line!" is likely those same hedge fund/prop traders trying to squeeze every dollar from these poor retail suckers.
The goal posts of an exit were successfully moved several times in the course of the rise. From 100 to 200 to 300. Some of the initial traders successfully exited at the original meme price of $420.69. The fact that it was _so_ successful is why people even then began to beat the drum of a $1000/share exit. Even now the price has has settled around $90 which is probably at least twice its "fair" value of $20-$40.
So yeah, some people purely chasing a hype lost but a lot of retail investors that had their finger on the pulse before the hype successfully called their shot and made it out the other end much richer than when they started.
actually im glad you said this. this is the core problem with this WSB/RH/GME event.
a certain percentage of people in WSB only want to light a pile of their money on fire for the sole purpose of bankrupting some hedge funds. they expect no returns and only want to cause pain to people with more money than them that they dont like.
another percentage of people (i think this group is much, much larger than the first) think bankrupting the short positions is gonna make them huge returns. they think theyre all david collectively fighting a goliath as the proletariat rises up. most of these people are sorely mistaken and will lose everything, but some will make money.
the RH trade halt (EDIT: only buying was halted, a "trade halt" technically means both) is allowing the shorts to unwind more gracefully, making the first group of people angry. theyre not getting their witchburning, or public execution, or lynching - however you want to frame it.
the problem is the second group of people think theyre being defrauded out of huge returns by an artificial exit from the short squeeze. these people are wrong to begin with. most of them were never going to make huge returns. even if they successfully bankrupted the shorts, most of them are left holding stock they bought for $100, $200, $300, or $400 a share (WSB was memeing share price was gonna go into the thousands) that is worth <$90. those people were always going to lose, they just didnt know it. but now they have a scape goat, even though they were on the wrong side of the trade to begin with.
it is to me. do hedge funds do something besides fulfill their fiduciary requirement of making their investors money?
Hedge funds reliably do what they are designed to do, as you say: funnel capital into the hands of people who will dump it back into multinational economic acceleration.
Where I think you and I might disagree is whether that's a good thing.
The key insight to why this is pump and dump and nothing more is that there was never a right time to sell for the masses on WSB, it was HLD all the way down.
In the short term, it is possible for mob mentality to take over, but in the long term, you will see this fade and WSB will return to a point where there's a little (but not much) more nuance to the conversation.
If you meant that "the forum" as in "the moderators" delete things that do not align with the echo chamber, then you are incorrect. On an absolute basis, more pro-"meme stock" content is removed than anti-"meme stock". You can verify this yourself with PRAW, or simply by refreshing /new.
I wouldn't be surprised if SEC has been archiving r/wallstreetbets. Actually they might not need to as it is impossible to delete your comment history.
I predict that we may see lot of people get penalized and perhaps even jail time for pumping up meme stocks, although it will take years.
[1] https://en.m.wikipedia.org/wiki/Jesse_Lauriston_Livermore
So I wouldn't call this a gamble, I didn't buy for the memes, and neither did wallstreetbets (at first)
I've been on this sub for 5 years and it has always been so that everytime the wsb hivemind finds a good deal it gets media attention and the number of clueless users/investors skyrockets. But people who stick around outside of these short periods under the spotlights know very well what they are doing despite the memes.
I don't believe in the theory that there are few people manipulating the entire sub for a pump and dump, rather the entire sub (the few tens of thousands regular active users) knew it was a pump and dump. That this story attracted the attention and money of thousands of clueless newbies is to be blamed on people that reported on it carelessly (medias, celebritites, etc.), not on the people who were doing their things on an internet forum expecting nothing out of it.
I've been looking for alternative subs, but besides e.g. theta gang I haven't really found anything useful
As an exercise in this theory earlier today I looked up the profile for 5 or 6 of the top posts on the subreddit advocating for "diamond hands", and about half of them made their first post on WSB within the past 5 days. It's very clear that the users going down with the ship are not the same users who pumped it up for massive profits in the first place.
Same as every pump and dump ever.
Once it became clear the momentum was dead (i.e. when brokerages forbade buys) a lot of the "in the know" crowd had already planned their exit and took it. The only reason it hasnt plummeted to ~40$ at this point is that there were a lot of "true believer converts" picked up along the way that are now stubbornly bagholding in disbelief. This is where the _real_ pump and dump starts to occur, because this whole crowd is now on the hook for massive losses unless they can recreate the initial rise.
To be fair, your line of comments was pretty similar to the wealth of sockpuppet a which were unleased on reddit to force GameSpot's stock down while pumping up silver. Even if you were one of the rare cases where there's a flesh and bone person expressing honest personal opinions, it's hard to spot the good apples in a shipping container of rotten apples.
said person seems to have no life of their own and thinks what they are doing is productive use of their time.
Even though it's a lot of money to me, the unrealized gains I didn't take and the amount I lost really don't put me in a very different position. Just have to keep grinding away on student loans in either case, only a ~2.5 month swing on my estimated time to finish paying my loans from my bad bet compared to selling at the top, and only 1 month worse compared to not trying at all.
Learned some stuff too, hopefully it'll make me a better investor when I'm able to save some money starting in my mid 30s.
But actually, I had student loans and lost a chunk of money during the last BTC spike (literally bought at the very top). It set me back on paying them off which was a big bummer, but in reality, it was a moment that let me truly focus and probably put me ahead in the end. Any time a wild finance story would hit, I'd think about that BTC and remember that investing in your debt is a guaranteed return. And in my case, it was like 7%, so a good return. Now they're paid off and I get to invest like 1% of my money in fun things without worrying if I lose it.
The reality that they have created seem awfully like the ones that Trump supporters created including conspiracy involving the deep state, hedge fund colluding with journalists and pinning the blame on just a few people.
They are very good at hyping things up like they do over at r/bitcoin, absolutely refusing to believe that the market price is whatever they hype it to be (note that strong correlation of US equities and bitcoin when it shouldn't if it was like Gold, contrary to their storage of value argument.)
I think that WSB overplayed their hand and now will bring scrutiny and severe restrictions on retail margin option traders.
Not only that I think there will be new rules talking about stocks on social media, similar to how email spammers took advantage of the exact same FOMO narratives to pump up penny stocks in the early days of the internet.
Right now there is nothing that stops a group of people from purchasing large number of aged reddit accounts and using the downvote, upvotes to shape the narrative. The SEC has NO resources to fight this type of sophisticated mass social engineering and the laws are murky too.
That was exactly what I was thinking when I saw the image. I was unaware that anyone can get a subscription from Bloomberg. They cost a couple of thousands of dollars a month.
The memes are hella great tho.
Analysis: Robinhood protected from lawsuits by user agreement, Congress (reuters.com) https://news.ycombinator.com/item?id=25971125
I personally think we will experience many shaming phases of various bubbles this year.
You've got a bunch of gamblers over there who basically treat this as if they're going to a casino. Then someone got a lucky break and everyone there swarmed around it. Some of them got rich taking money from hedge funds.
That's where it got main stream. The main stream media is responsible for the blood in the water feeding frenzy around this. WSB subreddit went up from 2 million to 8 million in like 1 week.
Anyone who's been on the internet knows, as a community gets popular, the quality of that community changes.
Anyone who's paid any attention to the news at all, knows that the quality and depth of reporting by a lot of people is garbage and misleading.
You add that all together and if you want to know anything about this, it's easier to form your own opinion, just go to r/wallstreetbets and see what you think. I personally, don't like it, I'm not a gambler.
I'm also sure I'm wrong on some of my take in here, I'm continuing to learn and read more. For instance I was all upset at RobinHood, but they have a pretty good reason for disallowing buys. Hopefully the core of that reason gets investigated and looked at by someone, but I will state that I think there is no clear outcome I'd expect from that investigation, that's what an investigation is for. You pay someone who you can, hopefully, trust to take the time to investigate because we've also seen that crowdsourced investigation is awful.
Every single mainstream media host has been talking non-stop about the danger to the little guys who will lose everything from this, and how blind fanaticism on sites like Reddit & Twitter and popular celebrities are to blame for propping up the bubble. They all get called Wall Street shills for it. The mere mention of regulation risks getting them death threats. All of the frequent guests (Cuban, O'Leary, Chamath, Elon and many more) just dodge this question and continue with the "power to the people" talk. Heck Mark Cuban was on Reddit today asking people to buy more GME stock, and then defended it on CNBC right after when the host grilled him on it.
In casinoes house takes more than in stocks though and stocks are more nuanced.
There is absolutely something wrong with gambling when you are borrowing the money, or affecting your family.
As long as people acknowledge that gambling is a risk and put "at risk" money in, then it's fine. I don't even mind the losses people post on the sub reddit because there is a clear understanding on WSB that it's gambling. Many people over there talk about risk portfolio and exit strategies, it's not a place that encourages loss of mortgages, in general.
Also, there is a very clear difference between gambling and investing. Betting it all on a single stock is really the only thing I consider gambling in the market. Even if you don't like index funds and want to spread your money around it's all about your risk tolerance at that point. Even index funds are gambling in the short term.
>access and read from a Bloomberg terminal
Those are very much the exception rather than the rule on WSB, even before the influx of green clueless redditors.
Sure there were definitely a couple of clued up people that spotted an opportunity initially, but it still feels genuinely grass roots.
Author is right though...valuation is way above it's true value & the exit is going to be a bloodbath. (And conversely some money to be made for brave new shorts)