Just what is the conclusion of this market insanity? Some of these stocks clearly have no value. I had a friend of a friend who at a whim bought a million or so of some penny stock that went up 10X in a matter of days and cashed out.
Is this the future of retail trading? An expensive game of chicken? I think many people, including myself to extent, believe there is always some NX stock around the corner. The FOMO is intensifying I guess. When you have stock like $SNDL almost double in literally a day it seems rational to spend your time trying to find the next one than to do the tried and true method.
Sure, but you would think reality would have more of an impact than simply speculation. To an extent the stock market is a game of chicken since prices are ultimately derived from expectations, but what happens when the expectations are no longer attached to reality?
Buying a weed stock for example can be speculating on Biden's likelihood of legalizing it and the subsequent boom, but there are stock that literally have no products, a single employee and the entirety of the volatility is based on random internet musings. Pump and dump is nothing new, of course, but the internet's ability to cascade this surely will have some implications for better or worse.
Oh, reality will have an impact, sooner or later. What happens when expectations are no longer attached to reality is "irrational exuberance", aka "a bubble". We're in the mania phase of the stock cycle. It's starting to feel like 2001 again: pet supplies ON THE INTERNET!!! Big money, big prizes, big expensive Superbowl ad!
Partly the problem is that we're at the tail end of the business cycle, partly the Fed has been keeping interest rates low so anyone that needs yield (pensions, etc.) has to move out of bonds into stocks, and partly retail traders have been stuck at home spending their vacation money on the Robinhood casino. And stocks are up 30% on the year and 80% from the local minimum in March, so now everyone that is short on money says "I should play the market".
> Isn’t this how stock markets work? Actual company performance is just a relatively minor signal for the chicken.
In my experience, actual company performance is a very huge signal. You just need to zoom out and look at longer timeframes. The stocks with the highest prices and gains over the long term are those with the highest profit and growth potential.
Like Tesla? Wouldn't Tesla have to have a monopoly on the entire automotive industry to realise their P/E? And as for profit they don't make any at the moment, IIRC
Tesla is probably overvalued, but it's also not as simple as Tesla == cars. They're also one of the leading players in grid level battery storage (a market that will be huge soon). I don't think any other auto manufacturer is involved in that.
IIUC Tesla's value comes in part from failed bets against it. Investors looking to make a buck off its imminent failure were instead forced to pay out, in greater proportion, hedges made on those short bets, when it survived.
The same thing happened with GME, just on a shorter time scale and with the completely out-of-context event of retail traders being shut out of the buy side of market trades for several days. We do not know what would have happened had GME continued to be freely traded on a day it had reached over $500 a share premarket.
Nope, this has happened many times throughout history. It doesn’t really persist for many reasons, one of the primary being how many people get burned on the dump phase of the pump and dump. The people that bought GME at $300 are not likely to return for more sick gains.
> The people that bought GME at $300 are not likely to return for more sick gains.
Unfortunately that sounds a lot like saying "The people who lose all their money at the casino are not likely to return to the casino," which... well...
Serious question, where do you draw the line between investing and gambling? The original case for GME was built on solid fundamentals and I’d say not really gambling even though you were going up against hedge funds trying to short it into bankruptcy. Buying in at $300 is almost certainly gambling.
But where’s the line? Anything over book value? Anything over some PE ratio? If so, you basically can’t invest in anything these days.
Uncertainty based on incomplete data. With an investment, you have most of the data about a given venture as it stands at the moment in front of you; only the future is uncertain. With a gamble, you have profoundly incomplete information about the venture in its present state. This is often a feature for the "house", who can use this information asymmetry to manipulate odds.
$300 wasn't gambling if you were throwing in based on an understanding of gamma and short squeezes and GME's standing on the week of the 25th. That information was complete and supported the thesis, "If I buy at $300/share I should be able to sell at a profit in the near future." (And,this turned out to be correct; selling before trading opened would have netted an up yo 65% return.) It was, however, ultimately a gamble, because of incomplete information about the solvency of retail brokerages (and the ability of "the house" to manipulate odds by increasing collateral requirements without explanation).
Unfortunately, this revelation marks the entire financial market as essentially a casino.
It is a very compelling question, and I don't have a real answer to it. I'll have to echo bsanr2's take as I believe they've explained it better than I could hope to.
For every 1 retail investor you hear talking about how they made a million dollars on lucky trade, there are 10 people who lost just as much without publicizing it, and there are 1000 people who made a lot of money simply buying and holding "boring" index funds for long periods of time.
I always think of this whenever a friend says they are trying day trading. A couple weeks later I will wonder how it went and realize it must have gone bad, because they would tell me if it went well lol.
>there are 10 people who lost just as much without publicizing it
Ironically enough, that's why I like the spirit of WSB, because people readily post insane losses and celebrate them just as much as they celebrate wins (tagged under "loss porn" iirc).
Discovering it years ago was what, imo, gave me a solid mindset when it comes to losses incurred by trading. I don't think that seeing only crazy wins without any crazy losses would have set me on the right track or allowed me to keep my mindset healthy. The fact that people there treat crazy losses just as normal and worthy of positive attention as crazy wins is imo the biggest gem and differentiator in the whole thing.
How are they decorrelated? The most valuable stocks are still those of companies that earn very large amounts of profit, or have lots of potential to grow.
In theory stocks for valuable companies are valuable since you own a part of something valuable - however for that value to be liquidated without a trade to another party the company itself needs to be acquired. It turns out that valuable acquisitions happen pretty often in the tech space due to how undervalued the network effect is by the stock market but - when a normal company is acquired it is after having shed the majority of its value. Exiting the market in the final sense really only happens with failure - instead it's closer to an act of better against the failure of the company in question - believing it will remain solvent for a long period of time.
That, at least, goes for dividendless stocks - for dividend stocks the math changes a bit and more valuable companies are valued since there is an expectation that they will continue to pay current - or higher - dividends for a long time with individuals still able to leave the market by pawning off their shares. But, at EOD - it's essentially the same math but with a bit of extra fudging in one category.
This market can stay irrational longer than most of us will be alive. Let that sink in, this is the new normal. You can either sit on the sidelines waiting for things to become "rational" and then invest feeling safe making rational 4% gains a year, or you can get in now and make real money.
One thing is clear, when things rationalize and become "normal", many people who were investing now are still going to be sitting on their irrationally made gains while you dust off your cash and prepare to jump in.
> This market can stay irrational longer than most of us will be alive.
What are you basing this on? It doesn't follow any past experiences nor any of what I read. Sounds like what people said right before it tanked hard
> You can either sit on the sidelines waiting for things to become "rational" and then invest feeling safe making rational 4% gains a year, or you can get in now and make real money
Or, like me, opt out of the FOMO and live life without injecting your money in a cancerous gambling machine no one understand and is being manipulated by things like reddit or Musk tweeting gibberish
> many people who were investing now are still going to be sitting on their irrationally made gains while you dust off your cash and prepare to jump in.
Like in 1929? Or 2008? I won't need to dust off my cash because there are plenty of other things to invest in other than stocks
> Sounds like what people said right before it tanked hard
1. People have predicted 19 of the last 2 recessions. Waiting it out because the market will tank hard in the future is a fool's game.
2. As long as capitalism keeps working, and our governments keep catering to the rich and powerful, the market will recover after it tanks hard. As of 2021, this is a pretty safe bet to make.
> Like in 1929? Or 2008? I won't need to dust off my cash because there are plenty of other things to invest in other than stocks
I'm glad you brought up 2008. Let's assume the worst case scenario.
Anyone who invested a lump sum into the S&P 500 at the peak, on the night right before the crash, in 2008, would have tripled their money in the past 12 years, between gains and dividends.
That's a 10% year-over-year rate of return. And that's the worst-case scenario.
If you are so convinced that a crash is coming, do the prudent thing, and maintain a 70/30 ratio of stocks to bonds or cash, and re-balance every month. You'll lock in your gains during bull runs, while having the capability to capitalize on any losses when the market slides.
What you shouldn't do (unless you plan to be dead in a decade or two) is sit out on the sidelines, day after day, month after month, year after year, watching your money lose its value. What you also shouldn't do is to day trade, invest in weird financial instruments you don't understand, overleverage yourself for the purpose of speculating on illiquid investments (including but not limited to real estate), trade on margin, or throw all your money into meme stocks.
> As long as capitalism keeps working, and our governments keep catering to the rich and powerful, the market will recover after it tanks hard. As of 2021, this is a pretty safe bet to make
This is what I have believed for a while now. "Stonks only go up" is a meme, but I think there's at least an inkling of truth to it.
There's too much wealth tied up in the stock market for it to actually fail.
What are you investing in? There’s nothing else to put your money into right now that gives you good returns except maybe your own business.
Real estate is the obvious alternative, but real estate is shitty and worse than stocks IMO. Every year many real estate investors go bankrupt, they get sucked into the idea of buying multiple properties and using mortgages thinking it’s a safe form of leverage until one day your property values collapse, rents fall below the mortgage payments, and now you don’t have enough cash flow to pay mortgages every month and can’t simply sell the properties to pay off the loans because you owe more than what they’re worth. Guess that means you go bankrupt.
The stock market is not a “cancerous gambling machine” unless you’re YOLOing on shitty meme stocks and options.
One of the reasons r/wallstreetbets got created was they felt that the buy & hold strategy wasn't going to work for them (hurt from the crash of 2008, were being taken advantage of, general disillusionment, etc.), so they'd rather bet big and hope for a winner. The culture there celebrates winners, but they also admire the people who go down in flames.
Personally, I am getting "dot-com" vibes from the market, back when lots of people lost money day-trading on companies with no value. I'm selling right now, not buying.
Same, but with negative real interests rates all over the world I don't know where else I can park my savings. I've been buying low-volatility stocks in boring sectors (utilities, etc) that pay good dividends.
That depends on your timeframe, acceptance of risk, liquidity needs, and the other usual suspects. I will reevaluate my decision in about 6 months, so I'm happy to keep it in cash for now (earning bupkis, but very low risk and easily used to buy in again).
> When you have stock like $SNDL almost double in literally a day it seems rational to spend your time trying to find the next one than to do the tried and true method.
Sure, it seems rational if you overestimate your likelihood of picking the right one in advance. Kind of like the lottery.
This is why the class warfare elements of the narratives around the whole WSB/GME situation have always seemed naive to me. It isn't that hedge fund people are any greedier than any other group of people, it is just they have greater opportunity to be greedy assholes. You give the WSB people an opportunity and unsurprisingly they turn into greedy assholes too. The people involved on each side are more similar than they are different.
And for every hedge fund that was short GME, there were several who were long and cashed in. Not exactly a victory for the 99%.
It seems to me the "we'll all get rich sticking it to the hedge funds" stuff was some combination of sincere belief and pure window-dressing to get more people to buy into the pump. And for the people left holding the bag, a way to feel better about their losses.
“We’ll all get rich sticking it to the hedge funds” was comically naïve given that the entire strategy was to hold no matter what and never sell. Every time it would go higher the narrative just adjusted the target price upwards. “$1000 is not a meme” et al. As if the price would go up to infinity dollars.
If you don’t have an actual exit strategy—especially on a time-dependent play like a short squeeze—you’re the sucker who’s losing their investment.
Hint: T+2 settlement in a time where a stock price is highly volatile means that brokerages are forced to pony up more collateral. Robinhood is such a bad brokerage, it didn't have the funds to do so and was cut out by the clearinghouses.
Selling of GME would roll back the amount held by Robinhood, lowering collateral.
> was comically naïve given that the entire strategy was to hold no matter what and never sell.
That was ingenious. Since tulip mania mob chased penny stocks in pump and dump schemes in order to make money. Giving class war narrative to the mob was revolutionary.
Yeah it's super sketchy -- I wonder how many of the people encouraging the "class war" thinking had a stake in it, were long on gme -- including possibly institutional investors.
(What, like institutional investors never use social media to manipulate markets? Legal or not? Now you see why it's not crazy for the FTC to investigate wsb, right?)
But I think there is still a story here about why the "class war" narrative was so effective and popular... there is clearly an appetite for some class war... that can be used to manipulate people, or...?
The parts of wall street that lost were part of the 1%. The part of wall street that won were the funds that managed teachers' retirement accounts.
This is the narrative. It doesn't matter which narrative makes the most sense or is the most correct, it only matters which narrative spreads the most and the quickest. The narrative that wins will always be the victory narrative.
> And for every hedge fund that was short GME, there were several who were long and cashed in. Not exactly a victory for the 99%.
Mudrick Capital Management shorted GME at the peak and made at least $200 Million from the whole event. Mudrick Capital also benefited from AMC, to the tune of hundreds-of-millions.
They didn't even punish the shorts: a lot of shorts sold at $300 or $400 and made bank.
>This is why the class warfare elements of the narratives around the whole WSB/GME situation have always seemed naive to me.
None of the original WSB community that initially invested in GME subscribed to that nonsense. It was only ever about making money. The narrative was hijacked by the social media crowd that piled in on the pump two weeks ago and subsequently made the subreddit unreadable, and the media ran with it. It really reminds me a lot of what happened to 4chan in 2007 with "Project Chanology".
But not really. There is income inequality but wealthy people go broke all the time as do non-wealthy people get rich. The wealthy are a moving target.
The only change I'd make here is by "perceived wealth" instead of "wealth" I know there's plenty of people who look rich and are treated as such that are a bad market turn away from losing everything because they spent all their money on looking rich.
Yes, you are right that is how class is traditionally defined. However that doesn't match what is often observed in the dialogue on WSB and other places that are trying to engage in class warfare against the rich. The focus is usually on greed that helped the rich accumulate wealth, motivates them to want to hold on to that wealth, and how the less wealthy people's desire for a piece of that wealth is somehow more noble.
Not necessarily. Attempting to force a sea change in the proportion of capital ownership is undoubtedly class warfare, and further, perusal of WSB will find most GME posters expressing some variation of an intent to hold their shares until they're either absolutely worthless or are in a position to force the aforementioned sea change (e.g., mass sells as prices that would ruin not only the hedge funds, but also brokerages and possibly banks).
A popular (and not altogether unbelievable) narrative is that the DTCC forced the shutdown of share buys through its "margin call" on brokerages' collateral requirements (a sudden shift despite a week of unprecedented volatility in GME et al.) on the precipice of just such an "infinite short" scenario.
The priorities of each group on the other side of a victory are clearly different: entrenched money will continue on as always. WSB would have paid off their consumer debt, donated to worthy causes, or invested directly in themselves or new ventures, without the limitation of interest-bearing loans or the judgment of denial-happy lenders.
I think your entire comment is inaccurate in this context.
The class warfare narrative is complete nonsense for another reason.
There is nothing inherently wrong with being short a stock - and even if there were, shorts create new long positions, when they are opened! A stock that's 130% shorted has 230% of its shares held by long positions. If long positions are so virtuous, then short sellers should be commended for creating so many of them.
Shorts are a market way to deflate bubbles before they grow too big. I understand that people who only want to see the numbers of their positions grow are displeased by any negative sentiment about them, but people who want to buy into long positions benefit from lower prices.
Shorts just make a lot of people very upset. You'd never see /r/WSB trying to crash a stock price to kill a hedge fund, because sticking it to the shorts doesn't tickle the brains of people who think that shorting is somehow worse than all the other stuff that hedge funds do.
But they achieved their goal! The price increased incredibly due to the collective pressure. But of course nobody can keep the price of a stock at such levels for a long time. Even if everyone who bought GME had hold their shares, the prices were destined to fall to more sustainable levels.
The squeeze was actually cut short, because trades from Robinhood were halted for GME as well as some other brokers (all at the same time). Nobody knows how high it would've gone, but it's certainly significantly higher.
You can also look at trading volume. It would have gone a lot higher had there been no intervention from Robinhood. I am not claiming there is a conspiracy here - I realize Robinhood didn't have the cashflow for these deals and had to halt trading.
How long do people expect a short squeeze to last? It came and lots of working class people made millions. Those who came in after the fact and held “with diamond hands” expecting to stick it to institutional money lost out because they became over zealous. Robinhood also cut short due to liquidity reasons but even if that wasn’t the case, Robinhood has been blocking buys of highly volatile stocks since before I quit using it in 2017. Most of those were penny stocks, sure, but the point remains there was nothing special about GME except for it being expensive and in the news.
WSB made Martin Shkreli an honorary mod after he became infamous for jacking up the price on that medicine. They are self acknowledging greedy assholes and always were.
The WSB definition of class warfare seems to be trying to pull the guy on the rung above them down whilst simultaneously kicking the guy a rung below them in the face.
It is basically a viral/social media version of John Nash's So long sucker[1]
Everyone keeps trying to tell "journalists" that these moderators are widely considered frauds who were rejected by the community a long while ago, but I guess actually comprehending the thing you're reporting on isn't very useful for a journalist who is actually just running interference on behalf of the financial elite.
As usual the times is great at telling a story, but in this case one built entirely on a cropped screenshot. See https://i.imgur.com/KZGwIw9.png for the reality of the naked profiteering the mods were planning.
I think it's more interesting how Reddit responded to it. Their willingness to quickly roll the heads of folk pouring months of their lives into moderation suggests perhaps they capitalize on these dramas to shore up control of their own communities. It makes a lot of sense from Reddit's perspective to not have any superstar moderators be seen to 'own' or have excessive user loyalty from the group they're responsible for. Such things could easily lead to exoduses or public spats with the admins that could be overall bad for the site.
Also consider the public rationale ("we don't care why, disruptive folk will always be removed") applied to moderators when in both of these uproars, it was actually a single user ("SpeaksInbooleans") responsible for lighting the fires. AFAIK he is still a member of the group
Wow, where did you find that screenshot? It completely changes the narrative of what happened. Why isn't this well known on the subreddit? The current mods (after the admins stepped in) keep saying they're the "good ones" and u/zjz is endorsing that.
I got the screenshot from one of the deposed mods, who has been around since 2012 (I'm one of the earliest sub members FWIW, but never a mod), he was part of the last cohort of "good ones" following the deposing of the sub founder. This person certainly is not a friend, I'd generally struggle to befriend the kind of personality attracted to Reddit's system of moderation, and especially not after already witnessing the many concealed knives.
Hopefully this also answers the question of why you haven't seen it before.
Is any of this unexpected? Not at all, it's Reddit, this is structural. That's why I find the actions and encouragement from the admins far more interesting.
As usual the times is great at telling a story, but in this case one built entirely on a cropped screenshot
The article makes it clear, this is not based on a single cropped screenshot. It's based on many screenshots, a Discord discussion, a discussion in a moderators-only group, and interviews with six confirmed moderators.
I got that much, and I only read half of the article.
They did mention it. Did you read the article? From the article:
> When reached on their new Twitter account, the top moderators said they wanted to strike a movie deal, but were planning to give any proceeds to charity.
“Them trying to make it look like we are cash grabbing is so dishonest,” the moderators wrote.
In paragraph 27, after spending paragraphs 3-26 documenting the public reaction to a dramatic half-truth revealed in paragraph 2. This is called storytelling. You're likely aware article order is deeply important, but if not, consider reading https://slate.com/technology/2013/06/how-people-read-online-... . The bottom line is most visitors likely only read the half-truth.
Having worked with writers in these very fields, I can assure you they write with the intention that you read the entire article and anything but reading the entire article is an unintended incomplete communication. A protocol broken, if you will. Not a conspiracy to hide the truth. Them potentially maybe donating to charity is not the lede.
That's perhaps unsurprising.. it certainly would be far from the first industry to suffer from institutional blindness to any inconvenient metric that might challenge a self-stated purpose
You could say that about anyone or anything at any time and to any end including wild, unsubstantiated conspiracy theories. I don't think it's very constructive.
Kind of ancillary to the story, but can someone explain to me why "Hollywood" would even need any specific individual to be on board with a movie about this? It seems you could compose a character from many of the generic aspects without any specific viewpoint, and the entire point of this phenom was there wasn't a specific individual. I'm no screen writer but why couldn't you create the next "social network" or "big short" just from all the feedstock material?
They don't necessarily legally -- not even if they are making the story about specific individuals. You don't generally (in the USA) have a right to get paid for, or to control, someone telling a story about you, journalistically or fictionalized.
But it makes it less likely you'll get sued and have to deal with it. And you've paid off the subject to not go to the media and be like "that's not how it happened at all, they are liars!" And I guess if what you did could be considered defamation that'd be a reason they could win a lawsuit.
But it's kind of just how hollywood does it. Somebody could decide to try not to do it that way if they wanted, it's not clear it's strictly legally required in almost any case at all.
I wonder if, in this case, they needed something akin to a translator to make it a little more accessible. I’m only in my early forties and have seldom felt as old or out of touch as I do reading WSB.
I remember being young enough that urban dictionary was funny. Now it’s reference material.
This whole thing is hilarious to me. And kinda sad.
The narrative that this was somehow David sticking it to Goliath was laughable. A bunch of people spotted an opportunity and managed to profit from it. Good for them. But a bunch of hedge funds jumped onto the long side too.
What's more encouraging the mass buying frenzy is classic Ponzi scheme material. And shock, horror I see there's a potential securities investigation. With all the people jumping in at $300+, someone was going to sell first and everyone else would be left holding the bag.
Anyone involved in this pump and dump isn't profiting from hedge funds. They're profiting from the naive, uninformed, greedy and foolish who are jumping in on this far too late.
Likewise, the narrative that Robinhood or its owners were somehow defending hedge funds also doesn't hold water. Robinhood Instant lends money so people can buy immediately. They borrowed nearly $1B to cover these loans and the buying frenzied posed a potential existential threat to RH.
Calls for everyone to hold were equally self-serving and were never going to happen. Sufficiently large markets just don't work that way. Markets only work at all because eventually everyone acts in their own best interests.
And now we have these David wannabees sparring over movie deals.
I said at the time: this is a one-off. Hedge fund risk managers won't be caught out with so much open short interest again. I hope some of the paper millionaires cashed out and didn't ride this all the way up and then all the way down.
But encouraging other people to buy when you already own is at best ethically questionable.
I suspected this as soon as I saw several big investors going on CNBC to talk about how this was a revolt against the man. my warning alarm started ringing after all of that.
> Calls for everyone to hold were equally self-serving and were never going to happen. Sufficiently large markets just don't work that way. Markets only work at all because eventually everyone acts in their own best interests.
Maybe I've just reached a level of satisfaction or achievement in my life that I think the following, which I'm sure is no new opinion.
Fame / wealth / etc. merely are avenues to lay bare the person you are inside to the world. All your material needs and short-term desires catered to, curiosities satisfied about what that standard of living is like, and when that's all achieved what really comes out is who you are inside. People get to find out who you really are. You find out who you really are.
Sure, money is nice, but you can only buy so much to satisfy your needs. Hedge fund billionaires and WSB college students who just made $10k on their stock trade have one thing in common -- money or fame alone won't solve what keeps you up at night after the money part of the problem is gone.
I'm sure this perspective is just a product of my particular personality though. I'm sure there are people who don't find any problem getting gratification from wealth, or even better, are able to turn it into something productive for their and others' lives.
Well said. With enough to say FU at any time, enough to move on a dime, to cover insurance for several years out etc., life is good - no worries. With too much beyond that I've found it can turn on you in many ways, mentally, physically, spiritually... family and friends... I ridiculously wish taxes kept going higher each rung of the ladder until 99% so I could know my limit.
I don’t usually care to comment, but you really make a great point. And it also makes it odd that people hold up rich people as if they are great, when if you objectively look at a lot of their actions they seem more akin to psychopaths.
It would seem to me that copyright might be the issue here. I don't see why telling the story of a similar incident requires that anyone be compensated. Unless they want to use real names.
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[ 2.6 ms ] story [ 116 ms ] threadThe consensus is that they are ready to give 1 star reviews on rotten tomatoes and imdb when the movie releases.
https://subredditstats.com/r/wallstreetbets
Is this the future of retail trading? An expensive game of chicken? I think many people, including myself to extent, believe there is always some NX stock around the corner. The FOMO is intensifying I guess. When you have stock like $SNDL almost double in literally a day it seems rational to spend your time trying to find the next one than to do the tried and true method.
Isn’t this how stock markets work? Actual company performance is just a relatively minor signal for the chicken.
Buying a weed stock for example can be speculating on Biden's likelihood of legalizing it and the subsequent boom, but there are stock that literally have no products, a single employee and the entirety of the volatility is based on random internet musings. Pump and dump is nothing new, of course, but the internet's ability to cascade this surely will have some implications for better or worse.
Partly the problem is that we're at the tail end of the business cycle, partly the Fed has been keeping interest rates low so anyone that needs yield (pensions, etc.) has to move out of bonds into stocks, and partly retail traders have been stuck at home spending their vacation money on the Robinhood casino. And stocks are up 30% on the year and 80% from the local minimum in March, so now everyone that is short on money says "I should play the market".
Give it a year or so.
In my experience, actual company performance is a very huge signal. You just need to zoom out and look at longer timeframes. The stocks with the highest prices and gains over the long term are those with the highest profit and growth potential.
Tesla are putting their eggs into cars which are extremely hard, and batteries which will be a commodity long before Tesla can extract enough value.
The same thing happened with GME, just on a shorter time scale and with the completely out-of-context event of retail traders being shut out of the buy side of market trades for several days. We do not know what would have happened had GME continued to be freely traded on a day it had reached over $500 a share premarket.
Nope, this has happened many times throughout history. It doesn’t really persist for many reasons, one of the primary being how many people get burned on the dump phase of the pump and dump. The people that bought GME at $300 are not likely to return for more sick gains.
Unfortunately that sounds a lot like saying "The people who lose all their money at the casino are not likely to return to the casino," which... well...
But where’s the line? Anything over book value? Anything over some PE ratio? If so, you basically can’t invest in anything these days.
$300 wasn't gambling if you were throwing in based on an understanding of gamma and short squeezes and GME's standing on the week of the 25th. That information was complete and supported the thesis, "If I buy at $300/share I should be able to sell at a profit in the near future." (And,this turned out to be correct; selling before trading opened would have netted an up yo 65% return.) It was, however, ultimately a gamble, because of incomplete information about the solvency of retail brokerages (and the ability of "the house" to manipulate odds by increasing collateral requirements without explanation).
Unfortunately, this revelation marks the entire financial market as essentially a casino.
Ironically enough, that's why I like the spirit of WSB, because people readily post insane losses and celebrate them just as much as they celebrate wins (tagged under "loss porn" iirc).
Discovering it years ago was what, imo, gave me a solid mindset when it comes to losses incurred by trading. I don't think that seeing only crazy wins without any crazy losses would have set me on the right track or allowed me to keep my mindset healthy. The fact that people there treat crazy losses just as normal and worthy of positive attention as crazy wins is imo the biggest gem and differentiator in the whole thing.
That this is all a game. Stocks are completely decorrelated from value production and are mostly purely speculative vessels.
We're in a weird limbo state that will probably crash hard sooner than later.
That, at least, goes for dividendless stocks - for dividend stocks the math changes a bit and more valuable companies are valued since there is an expectation that they will continue to pay current - or higher - dividends for a long time with individuals still able to leave the market by pawning off their shares. But, at EOD - it's essentially the same math but with a bit of extra fudging in one category.
This market can stay irrational longer than most of us will be alive. Let that sink in, this is the new normal. You can either sit on the sidelines waiting for things to become "rational" and then invest feeling safe making rational 4% gains a year, or you can get in now and make real money.
One thing is clear, when things rationalize and become "normal", many people who were investing now are still going to be sitting on their irrationally made gains while you dust off your cash and prepare to jump in.
What are you basing this on? It doesn't follow any past experiences nor any of what I read. Sounds like what people said right before it tanked hard
> You can either sit on the sidelines waiting for things to become "rational" and then invest feeling safe making rational 4% gains a year, or you can get in now and make real money
Or, like me, opt out of the FOMO and live life without injecting your money in a cancerous gambling machine no one understand and is being manipulated by things like reddit or Musk tweeting gibberish
> many people who were investing now are still going to be sitting on their irrationally made gains while you dust off your cash and prepare to jump in.
Like in 1929? Or 2008? I won't need to dust off my cash because there are plenty of other things to invest in other than stocks
1. People have predicted 19 of the last 2 recessions. Waiting it out because the market will tank hard in the future is a fool's game.
2. As long as capitalism keeps working, and our governments keep catering to the rich and powerful, the market will recover after it tanks hard. As of 2021, this is a pretty safe bet to make.
> Like in 1929? Or 2008? I won't need to dust off my cash because there are plenty of other things to invest in other than stocks
I'm glad you brought up 2008. Let's assume the worst case scenario.
Anyone who invested a lump sum into the S&P 500 at the peak, on the night right before the crash, in 2008, would have tripled their money in the past 12 years, between gains and dividends.
That's a 10% year-over-year rate of return. And that's the worst-case scenario.
If you are so convinced that a crash is coming, do the prudent thing, and maintain a 70/30 ratio of stocks to bonds or cash, and re-balance every month. You'll lock in your gains during bull runs, while having the capability to capitalize on any losses when the market slides.
What you shouldn't do (unless you plan to be dead in a decade or two) is sit out on the sidelines, day after day, month after month, year after year, watching your money lose its value. What you also shouldn't do is to day trade, invest in weird financial instruments you don't understand, overleverage yourself for the purpose of speculating on illiquid investments (including but not limited to real estate), trade on margin, or throw all your money into meme stocks.
This is what I have believed for a while now. "Stonks only go up" is a meme, but I think there's at least an inkling of truth to it.
There's too much wealth tied up in the stock market for it to actually fail.
Real estate is the obvious alternative, but real estate is shitty and worse than stocks IMO. Every year many real estate investors go bankrupt, they get sucked into the idea of buying multiple properties and using mortgages thinking it’s a safe form of leverage until one day your property values collapse, rents fall below the mortgage payments, and now you don’t have enough cash flow to pay mortgages every month and can’t simply sell the properties to pay off the loans because you owe more than what they’re worth. Guess that means you go bankrupt.
The stock market is not a “cancerous gambling machine” unless you’re YOLOing on shitty meme stocks and options.
Personally, I am getting "dot-com" vibes from the market, back when lots of people lost money day-trading on companies with no value. I'm selling right now, not buying.
Same, but with negative real interests rates all over the world I don't know where else I can park my savings. I've been buying low-volatility stocks in boring sectors (utilities, etc) that pay good dividends.
Sure, it seems rational if you overestimate your likelihood of picking the right one in advance. Kind of like the lottery.
It seems to me the "we'll all get rich sticking it to the hedge funds" stuff was some combination of sincere belief and pure window-dressing to get more people to buy into the pump. And for the people left holding the bag, a way to feel better about their losses.
If you don’t have an actual exit strategy—especially on a time-dependent play like a short squeeze—you’re the sucker who’s losing their investment.
Hint: T+2 settlement in a time where a stock price is highly volatile means that brokerages are forced to pony up more collateral. Robinhood is such a bad brokerage, it didn't have the funds to do so and was cut out by the clearinghouses.
Selling of GME would roll back the amount held by Robinhood, lowering collateral.
That was ingenious. Since tulip mania mob chased penny stocks in pump and dump schemes in order to make money. Giving class war narrative to the mob was revolutionary.
(What, like institutional investors never use social media to manipulate markets? Legal or not? Now you see why it's not crazy for the FTC to investigate wsb, right?)
But I think there is still a story here about why the "class war" narrative was so effective and popular... there is clearly an appetite for some class war... that can be used to manipulate people, or...?
This is the narrative. It doesn't matter which narrative makes the most sense or is the most correct, it only matters which narrative spreads the most and the quickest. The narrative that wins will always be the victory narrative.
Mudrick Capital Management shorted GME at the peak and made at least $200 Million from the whole event. Mudrick Capital also benefited from AMC, to the tune of hundreds-of-millions.
They didn't even punish the shorts: a lot of shorts sold at $300 or $400 and made bank.
None of the original WSB community that initially invested in GME subscribed to that nonsense. It was only ever about making money. The narrative was hijacked by the social media crowd that piled in on the pump two weeks ago and subsequently made the subreddit unreadable, and the media ran with it. It really reminds me a lot of what happened to 4chan in 2007 with "Project Chanology".
I think that's the whole issue though. They wealthy have held on to a monopoly on ... wealth.
> they have greater opportunity to be greedy assholes
That is the definition of a different class of people.
A popular (and not altogether unbelievable) narrative is that the DTCC forced the shutdown of share buys through its "margin call" on brokerages' collateral requirements (a sudden shift despite a week of unprecedented volatility in GME et al.) on the precipice of just such an "infinite short" scenario.
The priorities of each group on the other side of a victory are clearly different: entrenched money will continue on as always. WSB would have paid off their consumer debt, donated to worthy causes, or invested directly in themselves or new ventures, without the limitation of interest-bearing loans or the judgment of denial-happy lenders.
I think your entire comment is inaccurate in this context.
There is nothing inherently wrong with being short a stock - and even if there were, shorts create new long positions, when they are opened! A stock that's 130% shorted has 230% of its shares held by long positions. If long positions are so virtuous, then short sellers should be commended for creating so many of them.
Shorts are a market way to deflate bubbles before they grow too big. I understand that people who only want to see the numbers of their positions grow are displeased by any negative sentiment about them, but people who want to buy into long positions benefit from lower prices.
https://finance.yahoo.com/news/robinhood-bars-users-from-buy...
You can also look at trading volume. It would have gone a lot higher had there been no intervention from Robinhood. I am not claiming there is a conspiracy here - I realize Robinhood didn't have the cashflow for these deals and had to halt trading.
I don't think anything in my comment implied the short squeeze hasn't already ended. I said it was cut short, not that it's still going.
-George Orwell, Animal Farm
It is basically a viral/social media version of John Nash's So long sucker[1]
[1]: https://en.m.wikipedia.org/wiki/So_Long_Sucker
I think it's more interesting how Reddit responded to it. Their willingness to quickly roll the heads of folk pouring months of their lives into moderation suggests perhaps they capitalize on these dramas to shore up control of their own communities. It makes a lot of sense from Reddit's perspective to not have any superstar moderators be seen to 'own' or have excessive user loyalty from the group they're responsible for. Such things could easily lead to exoduses or public spats with the admins that could be overall bad for the site.
Also consider the public rationale ("we don't care why, disruptive folk will always be removed") applied to moderators when in both of these uproars, it was actually a single user ("SpeaksInbooleans") responsible for lighting the fires. AFAIK he is still a member of the group
Hopefully this also answers the question of why you haven't seen it before.
Is any of this unexpected? Not at all, it's Reddit, this is structural. That's why I find the actions and encouragement from the admins far more interesting.
The article makes it clear, this is not based on a single cropped screenshot. It's based on many screenshots, a Discord discussion, a discussion in a moderators-only group, and interviews with six confirmed moderators.
I got that much, and I only read half of the article.
These all refer to exactly the same thing.
How do you suppose the article's tone would change had they mentioned in the second paragraph plans to donate any earnings to charity?
> When reached on their new Twitter account, the top moderators said they wanted to strike a movie deal, but were planning to give any proceeds to charity.
“Them trying to make it look like we are cash grabbing is so dishonest,” the moderators wrote.
But it makes it less likely you'll get sued and have to deal with it. And you've paid off the subject to not go to the media and be like "that's not how it happened at all, they are liars!" And I guess if what you did could be considered defamation that'd be a reason they could win a lawsuit.
But it's kind of just how hollywood does it. Somebody could decide to try not to do it that way if they wanted, it's not clear it's strictly legally required in almost any case at all.
https://www.indiewire.com/2019/09/hustlers-life-rights-holly...
I remember being young enough that urban dictionary was funny. Now it’s reference material.
The narrative that this was somehow David sticking it to Goliath was laughable. A bunch of people spotted an opportunity and managed to profit from it. Good for them. But a bunch of hedge funds jumped onto the long side too.
What's more encouraging the mass buying frenzy is classic Ponzi scheme material. And shock, horror I see there's a potential securities investigation. With all the people jumping in at $300+, someone was going to sell first and everyone else would be left holding the bag.
Anyone involved in this pump and dump isn't profiting from hedge funds. They're profiting from the naive, uninformed, greedy and foolish who are jumping in on this far too late.
Likewise, the narrative that Robinhood or its owners were somehow defending hedge funds also doesn't hold water. Robinhood Instant lends money so people can buy immediately. They borrowed nearly $1B to cover these loans and the buying frenzied posed a potential existential threat to RH.
Calls for everyone to hold were equally self-serving and were never going to happen. Sufficiently large markets just don't work that way. Markets only work at all because eventually everyone acts in their own best interests.
And now we have these David wannabees sparring over movie deals.
I said at the time: this is a one-off. Hedge fund risk managers won't be caught out with so much open short interest again. I hope some of the paper millionaires cashed out and didn't ride this all the way up and then all the way down.
But encouraging other people to buy when you already own is at best ethically questionable.
OPEC?
Fame / wealth / etc. merely are avenues to lay bare the person you are inside to the world. All your material needs and short-term desires catered to, curiosities satisfied about what that standard of living is like, and when that's all achieved what really comes out is who you are inside. People get to find out who you really are. You find out who you really are.
Sure, money is nice, but you can only buy so much to satisfy your needs. Hedge fund billionaires and WSB college students who just made $10k on their stock trade have one thing in common -- money or fame alone won't solve what keeps you up at night after the money part of the problem is gone.
I'm sure this perspective is just a product of my particular personality though. I'm sure there are people who don't find any problem getting gratification from wealth, or even better, are able to turn it into something productive for their and others' lives.