The Battle of GameStop
paranoidenough.com
paranoidenough.com
Well put. I was explaining to a friend of mine a few weeks ago why cynicism is so prevalent in our generation: we graduated in 2008 where banks, not our parents, got the bailouts; we got stuck with thousands in student debt; the dream of marrying a pretty wife and having a few kids, working for a company for 40 years, and retiring in Cabo is a relic of the 1950s; we lived with our parents until our 30s, and in spite of being so "connected," we are more lonely, have less friends, and are having less sex than previous generations; unless, I guess, you count the COVID shutdowns screwing young people yet again.
It's a never-ending shit-show. At least some of us are getting rich in /r/wallstreetbets.
This is sad because most of what you've said can be applied to lotteries as well, which historically has been criticized as being a "tax" on the poor. The end result is the same: people putting themselves in a worse place financially (on average), just so they can cope with their bleak existence.
I'm not familiar with the Powerball, but I'm guessing that's for a prize of somewhere around $5 for a ticket price of $2. Hardly relevant, is it?
We saw this happen in 2008 with Volkswagen. 1% of the total shares were floating because Porché had purchased the remaining, the rest of the shares were owned by institutions and they were not selling them.
This has nothing to do with the ratio of short shares to float. What happens if there are 300 shares floating, 20 short shares, and nobody sells?
But how is having short interest of 140% of the float different from having short interest of 80% of the float?
(Honestly asking and don't know, everyone please only answer if you have knowledge of how these kinds of things work and are able to identify and explain away the relevant confusions.)
However, it looks very clear that GameStop is allowed to hold on to a bunch of shares it can sell directly in the stock market, since it did exactly that:
> Happily, GameStop does have an ATM offering going. It put it in place on Dec. 8, 2020, when the stock was at about $16.35. The way these things work is that GameStop disclosed that its bank could sell stock—up to $100 million worth—“from time to time” at GameStop’s request “consistent with its normal trading and sales practices”; it did not disclose any particular schedule, and has not yet reported if any shares have been sold, or how many, or when. So I don’t know if GameStop had sold the whole $100 million before Friday’s wild run, or if it had any stock left over to sell; if it had any left over, I don’t know if it sold it all on Friday. I hope it did!
that's not necessarily true.
Quoting Matt Levine[0]
> There are 100 shares. A owns 90 of them, B owns 10. A lends her 90 shares to C, who shorts them all to D. Now A owns 90 shares, B owns 10 and D owns 90—there are 100 shares outstanding, but 190 shares show up on ownership lists. (The accounts balance because C owes 90 shares to A, giving C, in a sense, negative 90 shares.) Short interest is 90 shares out of 100 outstanding. Now D lends her 90 shares to E, who shorts them all to F. Now A owns 90, B 10, D 90 and F 90, for a total of 280 shares. Short interest is 180 shares out of 100 outstanding. No problem! No big deal! You can just keep re-borrowing the shares. F can lend them to G! It's fine.
[0] https://www.bloomberg.com/opinion/articles/2021-01-25/the-ga...
Same thing happened to Volkswagen, only 1% of the shares was available for purchase and they had to close their positions.
The problem with this argument is that there's always an "expert" that can justify your speculative positions.
We can find plenty of experts rationalizing some stocks or history, all with convincing narratives. But can you find a expert explaining the numbers which came up in lottery last night with such a believable narrative (wrong or right)?
Isn't that what fortune tellers are? The only difference is that most people know that trying to predict the lottery is bullshit, but most don't think that's the case for stocks despite evidence to the contrary (eg. that actively managed funds underperform passive funds on average).
Nor me. I worked throughout all of undergrad. My work paid for my grad degree. I have an MSEE and am looking at $50k of student debt. My income is such that I expect the only way my debt will go away in the next ten years is through PSLF. Owning a house before I’m 40? I’m not so sure. Where exactly is the YOLO? The generation didn’t piss anything away. We’re getting shafted.
Are you still working in a job requiring that degree, because if so, that does seem like you're getting shafted (especially compared to the equivalent on the CS side of EE/CS).
You don't see a problem with a motivated, hardworking, educated individual meeting the market at a price that keeps them below what previous generations consider middle class? That is not indicative of an issue to you?
> You don't see a problem with a motivated, hardworking, educated individual meeting the market at a price that keeps them below what previous generations consider middle class? That is not indicative of an issue to you?
I think people are trying to understand if you are working at or below your regional market value. That said, it sounds like a problem local to your region. I think if you look at Glassdoor you'll find that you're well below the national average, and I don't think it's just Silicon Valley inflating the national average. (I have an EE degree as well and on graduation it seemed like $75K was a pretty reasonable starting salary most places with lots of room for growth).
The people who aren't doing well aren't the ones who didn't drink, lived at home and did math degrees as far as I can tell
Some of those things are not like the other. I studied computer science, plenty of people partied and as far as I can tell, people who studied humanities like literature had to work more. It was not easier major in terms of how much you have to work. I liked computer science, so I am always surprised about how many people seem to hold resentment toward those who studied less fun majors.
In any case, miniscule amount of population majored in women’s studies and they tend to cluster in top universities and from richer families. Meaning, it is not major drag on their future.
Majority of students go for practically sounding degrees - like various business related degrees. They tend to learn to like them somewhat, but generally are not intrinsically motivated to be accountants or what not at first. They are not making childhood passion based decisions, but the "what gets me job" decisions.
Unfortunately, many young people and their parents didn't understand this dynamic of watering down and still believe that the degree opens a path to a better life, while the truth is, most people are just not talented enough to be employed into demanding and well-paying office positions that most of us here work in. The Universities are silently running a scam, taking advantage of the obliviousness of young people and their parents by selling them a way to waste 4 years of their lives in exchange for a lifetime of debt... It sounds really horrible. At least here in Europe education is free so you "only" spend 4 years doing things that won't help you in life later.
Luckily, the stories of people who graduated only to sell shoes or coffee are now prevalent enough to make the next generation more aware of the real value (or lack of thereof) of a degree in something non-commercial from an average university. In my family, I now see younger people more often deciding that higher ed is not for them and going straight into trades.
I don't believe that's true at all. Historically, in the US anyway, a university education was a wealth signal more than an intelligence or work ethic signal.
Need or want?
We've spent 30yr trying very hard to remove individual judgement and responsibility from the corporate world. Most employers larger than say ~75 people likely have enough process built up that they can skate by on people who mindlessly follow process with a few talented people sprinkled about to spice things up.
>while the truth is, most people are just not talented enough to be employed into demanding and well-paying office positions that most of us here work in.
The hardest part about working as a programmer is getting your first job as a programmer which usually means suffering through Calc 3 you'll never think very hard about again. Getting a pay stub is on FAANG letterhead doesn't automatically equate with intelligence though many here may keep telling themselves that. The bulk of the SWEs and SREs in those companies are just going through the motions and reacting to situations as any other person operating under the same constraints would. Besides basic problem solving ability that all humans have and a background with experiences that qualify you for the job there's nothing special about it.
I think it's need. There's plenty of chairwarmers hired as senior managers in my place of employment. The company would be doing radically better if these people were genuinely talented and dedicated, but apparently it was too hard to hire such folks, so we got those impostors instead. The whole department is a mess as a result. And it's mostly the same across the whole org. The world just doesn't have that many talented and dedicated people, and also a lot of them decide to just launch their own businesses instead of being a part of some corporate charade.
> Besides basic problem solving ability that all humans have and a background with experiences that qualify you for the job there's nothing special about it.
Are you aware of basic problem solving abilities of average human? They're... not that great. Intelligence plays a key role in constructing good ad-hoc working theories as to the hidden/internal state of the mess you're currently working with. Smart people are just better/faster at it and the more complex the problem is (and we're working with problems of huge complexity - often with codebases that are to large to understand within a lifetime), the more important that becomes. Not to mention that there's plenty of people who just don't tolerate (emotionally) uncertainty too well, and they feel terrible at jobs like ours, preferring to be a supermarket clerk or doing something else with minimum uncertainty, exploration and decision-making. For example, my mother once worked with a woman who has severely stressed over having to learn to operate a new kind of cash register (and she was a clerk at a store). Imagine how well would she do in the world of front-end development...
The only hard part about the literature classes was how much reading was assigned (often 300+ pages before the next class, per class, which might be 2 days later). But for the most part you could skim them just enough to take the pop quiz for the day and then get the parts the professor wanted you to know from the lectures, although I did my best to actually keep up with the reading. Tests and essays for lit classes were super easy for me, mostly just required parroting back what was covered in the lectures.
For Computer Science classes (in particular the programming assignments), if I couldn't figure out how to get something working, I ended up sitting in the computer labs for an extra 10-20+ hours until I could, because otherwise the best I could hope for on the assignment was a C. Professor's office hours were usually a joke for me, I even got told once "If you didn't get it in class I can't help you now," which I thought was the whole point of office hours. Didn't have Stack Overflow or Youtube or even very many tutorials online back then either to help out.
Also I had several friends who pursued various humanities majors, and it never seemed like they were ever as busy as I was. I even thought maybe I picked the wrong major at one point because I was spending so much of it stressed out about classes (that's actually the main reason I minored in English, I spent a semester only taking English classes, considering changing my major, but didn't end up doing it).
Now that I've ended up working in software engineering, I wish I'd had the foresight to have done joint degree in computer science and literature. Applying NLP techniques to literature would have been a blast.
My Religion degree, esp. when we got to things like post-modern criticism and Hegel, were leap-years more difficult than anything we had to study in computer science. So, yeah, I take umbrage to people saying that the humanities are easy.
(The Religion degree was incredibly interesting, too, though ultimately not terribly practical for anything but law, and I wasn't really interested in doing that.)
To your point, though, studying just for interest is probably not prudent, and it's also probably not prudent to study humanities if you're not prepared to attain a subsequent degree/go on the academic track.
> Majority of students go for practically sounding degrees - like various business related degrees. They tend to learn to like them somewhat, but generally are not intrinsically motivated to be accountants or what not at first. They are not making childhood passion based decisions, but the "what gets me job" decisions.
I welcome some evidence here. I’m very skeptical.
Source: https://educationdata.org/number-of-college-graduates
For bachelors degrees: 432,077 STEM 386,201 business 244,909 healthcare 44,262 liberal arts 82,621 education
So business is approx 9 times more popular than all of liberal arts combined with the vast majority of the rest being made up of degrees that would seem to be things that make money.
Looking at the pie graph breakdown by field business is the largest section not including "Other fields": https://educationdata.org/wp-content/uploads/76/bachelors-pr...
So appears the person you're responding to is exactly right.
Did you go to a 4 year private school (possibly a non-Ivy)? I feel like you are describing a class of Americans who are oblivious to their privilege, but are mistakenly labeled as the working class who’s problems would simply be solved if they stopped buying avocado toast and switched their Starbucks for water.
I assure you your classmates who went to private 4 year school on dad’s dime do not reflect the majority of working class millennials. For many millennials they are more worried about being wiped out by a trip to the hospital that would cost the price of 3 lifetimes of lattes
I still saw this behaviour a ton, and it wasn't people living large off of daddy's money, it was people living large off of way too much student loan money.
People would take the maximum loan they could get even if they were living at home with no expenses, just so they could afford a party lifestyle
> I assure you your classmates who went to private 4 year school on dad’s dime do not reflect the majority of working class millennials.
I wasn't talking about working class millennials, but millennials in general.
> For many millennials they are more worried about being wiped out by a trip to the hospital that would cost the price of 3 lifetimes of lattes
Yeah, we have private health insurance and that really sucks for those who don't have access to decent insurance. But that doesn't justify living it up in school. Note also that I'm not even blaming millennials per se; our society failed to teach us personal responsibility, and it went even farther by creating a loan program and dumping us into a predatory university system with the vague guidance that we should follow our dreams, have a good time, and everything will just work itself out. Of course the majority of us took the bait and lived it up. Worse still, we graduated into an economy that was worse than what our parents dealt with. Excuses abound, but nevertheless, our generation YOLOed pretty hard even though the YOLOing wasn't evenly distributed.
That's what you get when your system is designed to give money easily to young people who don't understand the consequences of major financial debt.
Blaming this on the individuals is leaving aside that there are huge incentives to behave like that in the US: lack of financial education during formative years, a society based on consumerism and status, a society which provides easy access to a huge amount of capital through student loans.
From the outside it looks extremely predatory, even more when this easy money flows into universities increasing tuition prices, the same pressures on housing prices get in play here, with the difference that a mortgage is potentially dismissable if you go into bankruptcy.
Who exactly designed the system that way? Banks (aka capitalists) were not very keen on doing this exact thing for the risk reasons, and now the government ended up backing most of the educational debt for some reason (aka socialism).
And I'm sorry, the moment you use "socialism" to describe the government backing private loans from institutions that are privately held you lost me. This is not even close to a semblance of socialism, this is your government trying to live by the ideology of "free market everything" and patching the holes created by this ideology with a more expensive (and dumber) solution.
If higher education was free for every citizen, subsidised by taxes, you could call it a socialist-ish policy. Having to pay "market price" for your education through government-backed loans to private banks is far, very far from socialism.
I'm not an ardent capitalist, but I think education is an area that would have been better off without government tampering, or perhaps with less-clever tampering. The good bit about our student loan program is that it normalized higher education (perhaps too much to the extent that many would have been happier and more successful in the trades). The bad bit is that government put all risk on the students, allowing for students to elect into programs that wouldn't have a good return on investment--something that virtually no bankers would have signed off on. As a result, two things happened: 1. millions of students annually opt into careers with poor job prospects on the other side and 2. the price of higher education inflated (something like tenfold) to meet the availability of student loan money (and without any corresponding increase in value) because the system isn't steering students (and their loan money) toward programs that deliver. I think if we allowed students to default on their loans, we would see loan prices fall 80% or more ($8K instead of $40K).
No, I am sorry. When government forces financial institutions to give loans to everyone applying without risk analysis it IS socialism, aka “democratic control over the enterprise”. No capitalist in their right mind would give hundreds of thousands of dollars to pay for underwater basket weaving degrees and expect to see the money back.
No one has a degree in underwater basket weaving.
- am I doing it right?
And this is for a global pandemic. You think they're gonna do anything if people choose to make risky-ass bets that don't pan out?
That easy money is driving malinvestment and it will just fuel any future bubble that inevitably ends up popping.
Lottery is too improbable but some other things ”no rational person would do” can be ok. Main thing is to get over with it soon and protect the downside.
Of course if you get lucky you need to be contempt with the nice head start and switch strategy to doing the boring rational things. Not sure if these qualities are often found in one person.
This is indeed, after all, a website about founding startups.
No shame in gambling your way to wealth if you don't care about the social signaling.
Perhaps most humans cannot truly be atheists, but will always be caught by something to believe in.
In any case, I have mixed feelings about in which direction society is heading.
On the one hand, I think this game of social ascension is the same as before, only the dream changed: we have no illusions of having a well paid job that affords us house, cars and a big family, at least not without acquiring a huge debt.
On the other hand, on average, we have much more access to information. The average joe is much more educated and have higher buying power than 100 years ago.
I think we can't really look at the present comparing with what once was, because we live in a time of its own. We have to reassess the current configuration, fight to keep what we acquired in terms of freedom and equality, but try to fix the perceived feeling of separation, loneliness and helplessness together.
This almost certainly results in a worse average outcome, because of diminishing returns on income. Winning a 10M jackpot won't bring you 10,000 times the happiness compared to finding $1000 on the ground.
Suppose that there are 1,000 basement-dwelling redditors (okay, it's a caricature). Each has their basic needs taken care of, but not much money, and not much scope to improve their lot in life. What little money they have doesn't get invested, but spent frivolously.
Suppose 1,000 such people could all put in $500 and give it to a randomly selected one of them. That person wins a life-changing amount of money. They suddenly have their prospects upgraded - they can travel, buy a house, live in some comfort, pursue a dream career. Couldn't it arguably be rational for all 1,000 to participate in that game? Doesn't it make sense that the utility curve is convex, not concave - that $500,000 is more than 1,000 times better than $500, when compared to $0?
After all, suppose that $500 was a year's spare income. Even saving for most of a lifetime would only yield $20-30,000, nothing like enough for many of the opportunities that half a million would make possible. And a lump sum at age 65 could be much less useful than one at age 25. Losing the $500 might barely make a difference to one's quality of life.
Now suppose that to participate in this lottery, they have to pay 10% of the money to Wall Street, or high frequency market makers, or whoever. Couldn't it still be a rational choice for each of the 1,000 to participate?
To the person with 10 million dollars, doubling their wealth is nice for them but likely won't result in a major change in lifestyle and what they could or couldn't do before. Maybe they go from a large house to a larger house. For the person that makes 30 thousand a year, doubling it makes a huge difference in how they live. The disposable income amount doesn't double, it's likely many many times higher, because it was such a relatively small portion before.
The same thing applies to one-time payments. It would make sense in your example even if the payout was much less (like $10k) but still affected the group similarly (i.e. if they had less disposable income). That amount of money is a huge to people that have little disposable income.
The implication you're making here is that these people wouldn't mind losing $500/year, because it's otherwise being spent "frivolously". I don't think this is true because if you're spending it on something, you're getting joy out of it, otherwise you wouldn't be spending money on it in the first place. For reference, $500 can buy you a game console or several games, which can provide you with tens or hundreds of hours of entertainment.
If it's really the case that the $500/year is being spent frivolously (ie. being spent on things that don't bring joy), then the correct course of action would be some sort of intervention that forces them to save, so they receive a large enough lump sum that can be used productively. We sort of see this happen with tax refunds, where people are basically forced to save throughout most of the year, the IRS gives it back at the end of the year, and they spurge the refund on a big purchase.
>Doesn't it make sense that the utility curve is convex, not concave - that $500,000 is more than 1,000 times better than $500, when compared to $0?
What makes you think that? I think it's generally accepted that money has a diminishing returns on happiness. I guess if you go to the extremes there's some ranges where it doesn't apply (eg. it's hard to do anything fun with a $5 bill), but there's also nothing preventing you from saving up the money.
>After all, suppose that $500 was a year's spare income. Even saving for most of a lifetime would only yield $20-30,000, nothing like enough for many of the opportunities that half a million would make possible.
You're off by a factor of 2. Factoring in a 6% inflation adjusted return, you end up with a return of $77,380 if you do this for 40 years.
Things that bring me joy are being able to donate enormously to solve social problems in my quality. I can say for certainty that it will bring me 10,000 times happiness.
Damn. I've never considered the psychological effects of the lottery system, but in a way I think you hit the nail on the head.
Anyways, in the GME scenario it appears that most retail investors are actually in a better place financially because of it.
I wonder who will be the actual winners when these shorts end. In the meantime, let's enjoy the show.
some of these accounts "Rose up from nothing" by investing an entire portfolio of 50+ thousand dollars into extremely risky options. Either this is suspect or I'm out of touch with the average joe's risk tolerance.
with that said, if someone spent $225 on lottery, and won $50k, no-one would bat an eye.
Don't take my word for it, take Louis Rossmann's, somebody known to stand for the little guy.
Kind of like, if one domino falls, then the rest will tumble.
Essentially the housing market bubble was people going long using worthless collateral.
I personally don't care if more people maintain this belief - but more and more funds are definitely starting to pay attention.
You could do this once a month - pick a heavily shorted low/mid-cap company and squeeze the crap out of it and reap what PE firms and institutions have sown
I fully expect the establishment to pressure the SEC to crack down because it's a new challenge and they're losing.
The only story here is that it is retail investors who are profiting off it rather than some other insider hedge fund.
Where have I heard this before?
” As adolescents and young adults in the 1980s and 1990s, Xers were dubbed the "MTV Generation" (a reference to the music video channel), sometimes being characterized as slackers, cynical, and disaffected.”
Or just the theme song of “Good Times”, a sitcom from the 70’s.
-Socrates
Back in the 70s, Carter at least seemed to care about the American family’s wallet.
Now, America votes for a clown ex-president like Trump, thinking he’ll actually do something for them. Instead, he just surrounds himself with a bunch of other crooks.
And I highly doubt that Biden will do anything different to send America on a different trajectory.
I don't see the attraction but when you consider all the overhead costs that come with living traditionally I can see why it makes sense.
FWIW a non-trivial minority of people in the residential building trades have been doing this for years. They move north and south with the construction seasons.
As a nomad in an RV you don't have a fridge, a shower and the price of the RV loses value over time compared to a house.
And then, after screwing up the 2008 crisis, they stopped building homes. And the homes that were foreclosed on, they allowed the rich corporations to buy them up for pennies on the dollar.
You call this a real estate market? It’s a god damned scam!
So what does that leave us with? Millennials that have a lot of student loans, low pay for decades, and now, they can’t even buy a home.
How wonderful it is that a dilapidated entry level home is now $700,000. Good luck paying for that, when you couldn’t even afford to pay for a $500,000 home.
Families are delayed. Marriages are delayed. Kids? Good luck even affording to pay for a family, with your $800,000+ mortgage.
Thanks America. You f*cked us. But sure, your rich buddies are even richer.
Like, it was worth that when you bought it several years ago? I mean, I live in the midwest too, where it used to be possible to get a modest home in the burbs for about that price. But those homes are now gone, they disappeared over the past few years as they were purchased in all-cash transactions by flippers who threw some paint and flooring in them before selling them for twice the price.
Housing in the cheap areas is being hit really hard. Lots of areas are seeing coastal-levels of YoY price inflation. Mine is ~18% YoY according to Zillow.
Unless you work in healthcare. Then you can be wherever.
$700,000 buys you a house with a single used toilet. Sold as is.
Isn't it simply that masturbation and pornography have become relatively more attractive propositions than they were in the past?
My dad was able to go to a steel mill and make huge amounts of money plus overtime and insanely good benefits. Housing was extremely affordable. Very low debt from trade school. Women wanted to have kids and settle earlier. Women today care about their careers. People don't want to get into relationships with people saddled with debt and making no money.
While materially there are a lot of benefits to our modern world, no one is really free. To get sex nowadays, you better be attractive. Because on Tinder there are thousands competing with you instead of 20 in that one bar. Most people get very little likes, get depressed, and give up. I don't blame them. It's soul crushing.
Women getting married and having children later should mean more opportunities for casual sex, not fewer.
Boomers have not forced younger people to find hookups on tinder. The argument about competition makes no sense. Everyone can't be outcompeted.
If a generation has chosen only to have sex with its most attractive members, how did that happen? Why does it leads to less total sex? Why is this the fault of older people?
Either way, your first comment is false. Sex is not free. I can't go outside and instantly have sex. I need a partner who is willing - which is, again, not free.
> Women getting married and having children later should mean more opportunities for casual sex, not fewer.
You're conflating "should" with "What is." You think it "should" mean more opportunities - but you haven't given any evidence that it actually should, and society shows that there is less sex. So this is false.
> Boomers have not forced younger people to find hookups on tinder. The argument about competition makes no sense. Everyone can't be outcompeted.
The argument makes perfect sense if you would get over your need to protect boomers, which is an odd strawman.
People don't want to settle. Now that they see they have potential access to more attractive mates, they are less likely to settle for someone less attractive and in turn others are less likely to settle for them. The benefits of having a partner just aren't there anymore, and the younger generations are far more risk averse (not just with sex: “It’s part of an overall trend toward less risky behavior since 1990, including not only sex but alcohol use, risky driving, and criminal activity,” Dr. Arnett told Healthline.") than the lead fueled baby boomers.
Young people can't consent until 18. While boomers aren't forcing anyone to use tinder, society has impressed these things upon youth. It's unfair to say that children and adolescents have free agency. They don't.
> why blame older people for your generation having less sex?
If you think it is the responsibility of older people that younger people aren't having as much sex, then why?
If not, then what are you challenging? I didn't say that there was more sex going on, not that student debt was great, not that Tinder was awesome.
Your whole argument seems to be 'there is less sex available because fewer people want to have sex'. This is, of course, a somewhat one-sided view of the situation. It does not contradict my suggestion that younger people are choosing to have less sex. Nor does it disprove the theory that the availability of alternatives to in-person sex has made it less attractive.
Those statistics are easily gamed. For one, salaries aren't that high in the cheap COL areas and there aren't any jobs or room for advancement in Tusla. Sorry, that's just the facts. There are plenty of shitty places to live for cheap. But there is no hope of ever advancing or growing yourself - which is extremely important for a nation - advancement.
> and there are still plenty of single women who aren't spending all their time looking for someone a little bit snazzier on Tinder.
This is irrelevant- less people are partnering up and less people are having sex. Single women exist - they're working and focusing on their careers, not settling down.
> The dollar's buying power is less than what it was 20 years ago, meaning what you earn doesn't stretch as far as it once did. Government statistics show that while household income has been steadily increasing, it has failed to keep up with the pace of inflation. In addition, the cost of buying items like houses and automobiles has increased at a rate that outpaces the rise in inflation.
- From the BLS
So let's be clear - it costs way more now to buy a house and a car. You need to spend 4 years not working (and not saving) and going to school to make an OK salary while taking on tens of thousands of debt (avg debt is 30k). Healthcare is extremely expensive. Computers are replacing more and more tasks. And what about people who aren't smart enough for engineering school? Which is most?
Costs are rapidly outpacing gains for the common man. And we're surprised people are anxious and don't want to marry and have wanton sex all the time? They can barely pay the bills.
The movie "Network" has all the same anxieties, (our country has been bought by the highest bidder, the air isn't fit to breathe, etc.)--if things are broken, they've been broken for 50 years, so I'm not convinced that the kids aren't all right.
I'd make the joke about married couples not having sex, but it's too painful. ;)
Women can't vet men over the internet so it basically boils down to how good you look in a picture.
>My dad was able to go to a steel mill and make huge amounts of money plus overtime and insanely good benefits. Housing was extremely affordable.
It's because inflation was still doing okay back then. Inflation eats away at capital unless it is invested productively and by productively I mean primarily by gainfully employing people and providing value.
For the average worker that is very good because they do not have much savings and even if they did their savings grow much slower than the savings of the rich. Once everyone is employed the cat and mouse game begins. Workers can go for the best paying employer and that drives their salaries upwards. Higher salaries reduce the relative value of assets because you have to pay people more for the same work but the value of your assets does not increase fast enough to catch up.
With deflation you don't have to do anything to increase the value of your assets. You just wait and watch wealth inequality grow.
A quick solution is to simply increase capital gains taxes and reduce dividends taxes. Deflation gains will be taxed more. Productive income will be taxed less.
Except we have had bull markets for several years now. It has been an excellent time to be in the market. S&P500 returns for the past 5 years:
2016: 9.54% 2017: 19.42% 2018: -6.24% 2019: 28.88% 2020: 16.26%
https://fred.stlouisfed.org/series/M1
A bunch of money gets dispensed, mostly to the rich corporations. Instead of helping their employees they dump it into stocks of quality companies.
There was also a large amount of stimulus checks and unemployment bonuses that went to the same destination. Hence RobinHood having a record year. That's unrelated and somewhat contrary to the feds-bailing-out-big-business narrative though.
Why not take a gamble?
Exactly. Interests rates at 0%, wages stagnating and the system has been setup so that I'm essentially forced to participate in the market (otherwise I miss out on salary). AND these hedge fund idiots are feted as geniuses for their stupid plays.
I am basically at 110% cynicism regarding my 401k and would lose but an hour of sleep if it disappeared tomorrow. Fuck it, I'm all in!
Big ask to expect teenagers to be able to project the marginal benefit of college education (inherently uncertain and speculative) and to also estimate the real, not nominal, burden of the loans to the future (again, inherently uncertain and speculative). And it's tough to make that judgement when many US high schools treat college education like a necessity. Also important to remember that education debt is unique, it's not dischargeable. Unlike any other type of investment debt, borrowers don't have access to bankruptcy, meaning that an investment in education that doesn't work out follows you around for life like an underwater mortgage you can't be rid of.
However, I do agree that one should have little to no student loan debt. I am a millennial and was able to graduate without student loan debt. I went to community college then transferred to a state school. I earned a scholarship to do a masters in computer science. Then I found a six figure income job at a medium sized company not FAANG or some startup. All I did was found a degree that had a high ROI by googling which was at the time CS.
I think that is the problem... As the US economy shrinks as a percentage of the world economy, you would expect an average life experience in the USA to slowwwly move closer to an average life experience around the world. The latter is moving "up", sure, but there's still a huge gap to move down into.
But, they still teach kids in the USA to expect great life for average effort (or frankly as far as I can tell lately, regardless of effort). I don't think any other country in the world has this mindset; I like what appears to me to be the mindset in some Asian countries (I could be wrong but it seems to me like you are expected to try hard to do better but not in any way led to expect you will) is much healthier.
This is a once in a life time black swan. No one is factoring in populism in their investment thesis yet. Whoever can figure out populism well enough to predict it first stands to gain a lot of money.
Citadel Securities pays tens of millions of dollars for Robinhood order flow.
I know they rebate Robinhood for order flow (I've even commented about it [1]), but I thought events like this were hard for MM firms to capitalize on because of the unpredictable nature of the price action and the high cost of hedging (there are no shorts available, how do you even delta hedge in that situation?).
Am I missing something?
Populism of a companies stock doesnt really change the performance of that company. GME will implode eventually and the newest suckers or WSB will be left holding the bag.
only has such an effect if those people who invested in the stock market has more than their risk tolerance invested.
If anything, WSB celebrates the crazy volatility that can occur with the stocks of interest, and with it the chance to either win big or lose big.
Now, r/bitcoin on the other hand...
But I love the thoughts and agree with the analysis
Do you honestly believe these people aren't motivated by profit, when they are clearly entering long positions with the intention of driving up GME's price? It's straight up doublespeak.
I threw in 1k with the hope that it will cost some billionaires a lot of money. I'm ready to lose it. Shorts already lost 100+ billion this month.
So now you're out $1000. You contributed to a scheme which ironically was a net loss for retail. If this were really not about making a profit, you'd see people donating their gains or buying shares for other people, and nobody would be cashing out. Are you still in the trade? What are you going to do with your gain/loss?
Its still a bubble, people are still doing it for financial gain. Its just marketed as "doing this will screw hedge fund managers" to generate more hype.
Its not a new phenomena, its just a new marketing strategy.
https://twitter.com/HenryEnglert/status/1353773947804917760/...
// What does this mean for GameStop? Because of traders’ bullish sentiment, a previously failing company is now in the position where it can leverage the overnight increase in value to make real, substantive changes to its business. GameStop can pay off debt through the issuance of new shares or make strategic acquisitions using its newly-valuable shares. [9] A struggling company could become solid simply not because of a change in the underlying business, but because investors decided it should be more valuable. //
It's like the show Billions, actual wallstreet does what wsb is doing ALL THE TIME. You make money when someone else loses money, it's simple.
Except this time, the money isn't staying in the fraternity, it's being distributed out to the common folks.
Can't have that it seems.
What WSB daytraders are trying to do is to bleed out these hedge funds by buying in and holding. The stock doesn't even have to increase and the damage to the big hedge funds is already happening, see the situation that Melvin Capital is in. To those who participate it is a david vs. goliath situation.
The thing is, what they are trying to do is not that dumb and actually quite interesting, but they won't get anywhere by remaining "civil". They need this to spread and be on the frontpage of Reddit constantly. Negative or positive press helps, because more regular people want to participate if they hear about it.
I think that this will go down in history. Constant timeouts, organised selling at certain intervals, unnatural spikes, we've yet to hear about the shady stuff that keeps this stock from surging even faster considering the current "virality".
Where Congress (legislative branch) has been unwilling to pass any new regulations upon social media, the SEC (executive branch) is going to shut down these sorts of forums when they become disruptive.
Having worked in this field, while the SEC can sometimes be slow to act, the fact that it made the front page of the WSJ, it is only a matter of time before that hammer comes down.
...and Reddit isn't going to fight for this form (or any form) of Free Speech.
Revolving door doing what it does best.
While Billions is one of the more realistic shows about finance, it is far from accurate enough to be compared to real life.
The asset bubble is an unintended consequence, it's the "lesser evil". But it's again the rich get richer.
just like they harassed andrew left and attacked his family just for him saying he disagrees with the stock
But will this happen? Massive inflation post-Covid isn't really that far fetched. I think there will be no return to the beforeworld.
When they blow up, they talk to their media contacts and lay the blame on retail day traders ganging up on them and start a new fund.
Edit:
The money was made over a 100 trades
Option prices move every day.
There do exist, in fact, some people who are very skilled at making money trading options. Some people do it for a living with rich people's money, and many of them have the same skillset/education as the general HN audience.
If this guy actually made millions over the course of dozens of trades, it makes more sense to let him talk than to downvote him and tell him that he's just an aberration of probability lol. Like, what do you gain by that? If he's lying, humor him and enjoy the conversation. If he's telling the truth, pick his brain.
My view is that most people don't talk publicly about windfalls, so if someone's willing to do it on a throwaway it's way more useful IMO to tease information out of him than to marginalize his comments. That's also the best way to determine whether or not he's lying.
If he's consistently lucky, then he's good.
Probabilistic tails are narrow but they do exist. By that, I mean you shouldn't assume that something isn't worth discussing just because it is improbable. That approach stifles the free exchange of thoughts and ideas, and neglects the reality that some people are in fact talented at things that most people can't do.
PS I didn't say you specifically downvoted the guy, but we as a collective have downvoted several of his comments on this article, and you as an individual are trivializing his (claimed) experience as luck.
Personal note: I really don't know why you would bring attention to yourself over this
People are adult, if a simple comment makes you YOLO your life savings on options you probably had a lot of issues to begin with.
https://news.ycombinator.com/item?id=25878201
IOW, they're lying for Internet points.
Par for the course, really. Wait better because their main source of income might not be related to a gamble
Step 2 - Do not buy leveraged options at the wrong time [0]
[0] https://knowyourmeme.com/memes/be-attractive-dont-be-unattra...
People are willing to spend money on their memes like they are for their genes
But in all seriousness, for the past 12 years, there has been no fundamentals. Why? Because the Fed juiced the market with Quantitative Easing. Thereby flooding the market with infinite money.
Literally, all you had to do was to buy and hold.
Honestly. Even if I lose everything (I am up >200%) in January alone, I will be glad to see those greedy jackasses bleed.
This is pretty different from YCombinator's startup investment. No one has to lose for YC to win. The money ultimately comes from customers of YC-funded startups, who are in theory engaging in positive-sum trade (getting more in value than the money they paid for it). On average, people are earning lots of money investing in startups.
To be clear, options trading does have value in terms of letting people buy insurance and providing a price signal in terms of how many people believe prices will go up or down, but this is comparatively marginal and doesn't affect the options traders themselves.
wall st money was lost on gme, not made. Market makers got killed trying to hedge those deltas, over and over again (it is impossible to statically hedge an option you have sold with a long/short position in the underlying tho in some cases like far ITM options, you can pretend like you can because the options delta is 1)
But don't pretend that that means everyone can do it, because patently they can't: you won your bets, a bunch of other people lost theirs. No value that wouldn't otherwise have been created got made, you just shifted the balance of how the rewards are distributed in your favor, and away from someone else.
As a system for distributing the benefits of economic production, allocating it to the winners of a complex iterated social game seems suboptimal. Like if we used 'Among Us' tournaments to distribute food.
But hey, glad it's working out for you.
In the long run, statistical iterations (that you have modeled/researched correctly) will give you positive returns with a very high confidence.
Situations like in this post are obviously not that. I have a trading strategy that I execute over hundreds of trades per year based upon financial modeling and financial statement analysis. There's a little luck involved, but over many trades, the luck aspect cancels itself out.
It's like rolling the dice. If you bet on getting a certain number, and roll once, it's luck. If you bet on averaging a certain number and roll 1000 times, there's virtually no luck at all.
The stock market is detached from reality. It creates its own universe. The efficiency we're talking about here is self-referential - it's not efficiency in producing object-level value, it's efficiency in enriching participants of the stock market. Which depends as much on the company itself as it depends on the hype the funds and the shareholders can make around it.
That WSB can tank or revive companies just for teh lulz only shows to demonstrate how the stock market is an universe of its own.
Skepticism is healthy, but in this case, it's closer to ignorance.
The ability for corporations to go to the open market to secure capital is contingent upon a high liquidity of buyers and sellers present and actively participating.
The market doesn't exist without "primary" buyers and seller acting on behalf of their company to issue new stock (raising capital) or buying back stocks (returning capital (or via dividends)). Between these two types of transactions, there are participants that are constantly estimating the value of these share. If the price of the share deviates too far from what the company thinks it's worth, it will actually trigger one of those two events.
Options are just another more efficient mechanism to make these estimations on a specific timeframe. They allow traders to have a very specific thesis on what is mispriced and place a trade on it.
Without these trades, the market would lack liquidity, and companies would see an increase in their cost of new capital - which is bad for everyone because it means companies wouldn't invest in growth, equipment purchases, new jobs, etc...
Derivatives are critical even to primary market participants. Farmers looking to secure their pay for future crop deliveries. Banks looking to remove interest rate risk on mortgages they've issued. Shipping companies looking to remove the risk of fuel fluctuations on their future transport costs.
Fluctuations of cost inputs and uncertainty of future revenues can be a company death sentence as they cause cash flow shocks. They have real value to the economy.
Often, they are only possible if there is a liquid market of people willing to take the other side of these transactions. Narrowing the spread between buy/sell prices on these derivative contracts allows more companies to be able to afford them, and that makes many low margin businesses able to exist at all.
Despite all the hate on social media, these markets have material value. ...even if there are these anomalies like this Gamestop incident.
I imagine the SEC is going to shut down that Reddit sub because these types if activities actually destroy liquidity but discouraging short sellers.
Regulation plays an important role in keeping markets running smoothly.
Once you have served every customer the only way to make more money is to take customers away from other competitors, or grow the market as a whole. Traders do not influence the size of the market, they only increase efficiency, so the expectation is that you run into diminishing returns stays.
There is more than enough liquidity in the markets. Any more liquidity is not providing any value.
>Without these trades, the market would lack liquidity, and companies would see an increase in their cost of new capital - which is bad for everyone because it means companies wouldn't invest in growth, equipment purchases, new jobs, etc...
The Fed is already taking care of that. The bigger problem is that there is no reason to invest the Fed money and grow the market.
However it takes capital to do this. It's not just about liquidity, investors basically influence the cost of capital for each company which has a big impact on how many customers each company can serve.
Proponents would say that it is efficienct in funding ideas that are more likely to succeed, with the partecipants in the stock market taking a commission for the transactions.
the aggregate success thrown off by the stock market is a measure of the usefulness of the stock market.
participating in that is what enables to stock market to provide its usefulness.
so, yes, success on the stock market is a function of usefulness in the real world.
Stretching the brake analogy it would be similar to noting that just because you are pressing more your brake pedal it does not mean that your car is slowing down faster, sometimes you need an ABS
If inflation is low you can do the dumbest things imaginable and as long as you make your money back you can keep doing the dumb thing over and over again.
If there was decent inflation you would have to have at least some expectation of a future gain because inflation and by extension the increased interest rates would cause your net 0 investments to be a net loss.
It does NOT say that any individual investment decision that produces a reward for the investor must necessarily have improved the allocation of capital to maximize value.
Options trading in particular has only indirect market-making effects on how the primary capital allocation market works. The existence of the options market helps the primary market discover efficient allocations (the theory goes). Participating in the options market has a side effect of increasing efficiency, but the way the options market allocates rewards is less connected to the information value that your trades contributed to the market.
There’s an investment product some governments sell called a ‘lottery bond’. People buy the bond, then periodically, rather than every bond being redeemed for a small premium over its value, one randomly selected bond is redeemed for a much higher value.
As a thanks for participating in that bond market and letting the government use your capital, instead of a predictable investment return the government offers a chance of a life changing lottery win.
This isn’t better or worse than a traditional bond offering, it just offers a different strategy for allocating the rewards for investing some capital in that government.
The person who wins a lottery bond didn’t do anything better or different than a lottery bond loser - both of them contributed the same value to the market in terms of increasing capital allocation efficiency. But the rewards were distributed unevenly - which is by design and both of them knew that going in.
Options traders take the same deal. Playing the game has the chance of winning big; participating in the game has a side effect of producing value. And the way the rewards are allocated for playing... don’t matter too much.
Of course they matter. If they didn't matter, then participants wouldn't participate. ...and if they didn't participate then the market would have less liquidity. ...and higher liquidity is ALWAYS a good thing.
The health of a market can be characterized by the persistence of liquidity.
If the options traders decide to armwrestle to decide which of them gets to keep the $1m, the market doesn’t care.
...but there is an ecosystem of traders intertwined and many of them are primary market participants, so the market does care, because the "gamblers" are providing liquidity to the legitimate participants.
I invested in NVidia after recognizing GPU shortages due to ML continuing hype. I switched to AMD after recognizing their Zen CPUs are slowly beating Intel. I switched to TSMC after realizing their accomplishments are significant part of M1 and Ryzen advantages.
My stock portfolio's growth is over +50% yoy over last five years on average (geomean).
The way I explain this to myself is that trading firms focus on economic fundamentals, which can not show upper hand in a specific technology. They are trying to recognize the later, but it requires understanding tech news articles, and best NLP AI methods are not there yet, whereas our brains can handle that task, especially if it is withing our own expertise.
If that theory is right, you can beat the market, but you have to be real expert in the area you are trying to trade in, and probably a few linked areas too.
But I think from a broader perspective, I’ve made huge leveraged bets on VTSAX/SPY/IWM on stimulus news. Very obvious that financial assets will inflate with each extra fed move.
They're not investors. Their money doesn't help the company.
[0] https://www.sec.gov/Archives/edgar/data/1326380/000119312520...
It's not clear what view the SEC would take if they fast tracked an ATM offering now. Hertz were told to knock it off, but they were literally trading in bankruptcy. There's a pretty good argument to be made that issuing more shares is if anything the responsible thing to do to in response to increased demand, since it would help to correct the anomalous price rally.
This comment about having made millions leveraging on SPY and QQQ over the course of 100+ trades doesn't check out, given that a few days back, this commenter created this throwaway account to complain about finding it hard to quit their job at Amazon because the pay is so good.
https://news.ycombinator.com/item?id=25878201
IOW, they're lying for Internet points.
I'm paying attention now, but I'm worried I missed the boat already.
The change they want is for more people to play the wsb game. And for more people to believe that the game has many winners. The mistake is that their message was untruthful, it was an exaggerated attempt to create hype.
Or. It was a user lying to make them get attention on the internet and feel better for a short amount of time, but I like my first idea as it's directly called out in the subject we are discussing. Thanks for unveiling it!
edits - I think its also like if you say something is important enough, it becomes important. So if wall street are still debating if wsb is or isnt actually relevant it means they already are. So the message is twofold. Firstly it's a "play the game, we need the hype" but more like "these comments have importance in itself because we say so". It's similar to meme magic - to say that 4chan memed Trump into office is utterly ridiculous, in reality they didn't. But enough people believed they might have and looked into it and thought maybe they did, that the effect of 4chan became important. A magic trick is about what you think you saw after you leave the theatre.
edit2 - and even my comment reinforces the effectiveness of the strategy just by commenting on it!
Edit: Saw he worked at FAANG and is 30, so there's a pretty good chance he also started with investing million(s).
HN, let's not lose our perspective. There are millions of "essential" workers, like daycare, teachers, elderly caregivers, laborers, etc. that didn't get a lick of compensation for their risky labor in COVID times. Many of these people had NO choice to stop working and NO choice to work from home. These are truly essential individuals who work for minimum wage or less, while truly making "peasant money" here.
And Reddit being Reddit you can never really be sure whether organic interest is pumping the stock or if they are being manipulated by an astroturfing campaign. If day trading weren't a conflict of interest for me I'd be looking into doing something like that (and consequently not blabbing about it on HN).
I'm sure there was some bull case for the company, and it might have had a snowball's chance in hell around $14 or even $20/share. But at $60+ ? What on God's good earth is supposed to make the company worth that much?
right now though the chaos has nothing to do with the underlying value. now it's all about the squeeze. but that's never been part of the bull thesis
If enough people want GameStop to succeed then it will. Ironically it’s the same thesis that wealthy SV investors go by when they decide to invest in a startup. Except the word invest is usually misleading. Most of the time they’re just looking for a vehicle to inject capital and influence, and the people and product are interchangeable parts used to achieve a a profitable outcome.
More like – if enough people want GameStop to succeed then it has a slightly better chance of succeeding than if they didn't.
Chances are that it is still a bubble that will eventually pop, like most others before it.
The sentiment story is that if enough people want to pay $150 a share for approximately $0/yr in earnings, they will. What this glosses over is the reason for the sentiment, the question: "why do people want to pay this?"
Traditional stories analysts tell would have people pay $150/share because they expect $8-$15/yr. This story is that people will pay $150/share because people want a way to say 'fuck wall street' and 'fuck analysts' and have unreasonable expectations of becoming wealthy. The former sentiment is sustainable in a way that the latter story kinda isn't.
Counterpoint:
"Most analysts" are hum-drum Wall Street hacks who cover dozens of companies and don't really have a clue about how the lion's share of them are run. I remember a few years back there was one analyst who kept talking about how NAND keeps getting cheaper and that's hurting memory suppliers...but the analyst's metrics didn't normalize for advancements in NAND speed nor the maturing of capital investments, so the analyst was basically looking at totally expected price declines over time and interpreting it as for some kind of static commodity while claiming it as a bear thesis.
A few of them are really clever and knowledgeable. The rest are chumps.
It's extremely difficult to judge GME based on regular metrics because their long-term outlook is a function of strategy and their short-term survival is a function of COVID. Sure, the company sells stuff that you can buy online, and sure, they sell it at malls and other places where nobody goes these days, but its stock was over-shorted and this was going to happen sooner or later anyway.
Maybe my numbers are off, so correct me if I'm wrong....At today's closing price, GME, which has $6B/yr revenue, is worth a sixth of BBY, which has 43B/yr revenue.
GME sells consoles and consumer electronics in addition to games, so I'd put BBY on the short list of comps for sure. But if you think the product mix is so different as to make them incomparable, that's ok. Pick a better metric and explain why GME was accurately priced at $260mm market cap when the company does billions in revenue.
Then, go back and explain why AMD was worth $2/share in 2014.
Then, go to every other heavily shorted name and wave your hands around looking for reasons to justify obviously overshorted valuations.
The market is broken, at least retail investors are benefiting for once.
A share of AAPL now costs $139, a share of GOOG costs $1860. How would you compare the two companies based on that? How does the price of a single share relate to whether or not the company has positive or negative earnings?
Either stock is terrifying.
Which is exactly why Wall Street and financial media is denigrating it. They hate that they don't have the edge, or a monopoly on profits in this case.
$AMD was at $0.15, AMD was the only company besides Intel that actually had x86-64 patents. Intel would have never let AMD fail because they would be a monopoly and that is worse than leading a duopoly.
Notice the bean counter Intel ceo, the yields getting worse over time, the performance not improving besides a 1-2% year over year and Intel getting complacent, repeatedly to screwing over the customer with requirement of buying a new motherboard with every new release.
AMD was a steal for anyone in the know.
Counter argument 2:
Any price target posted by Citron was wrong.
Counter argument 3:
Why would any analyst give a proper price target when they can screw you over?
Counterpoint 1: AMD was a chipmaker with skilled engineers on staff and a growth story where they could seize market share with better technology. Gamestop is a retailer with retail clerks on staff and a story where increasing competition from PC and console app stores slowly eats away at their market share. Exact same thing, right?
Counterpoint 2: Saying the price target is wrong is one thing, and may in many circumstances be eminently defensible. Saying the correct price is $50-$150 is another.
Counterpoint 3: This exemplifies the thinking going on here. "I don't understand the stock market and think someone is screwing us over. Let's define our own alternate reality, and gang up on them for revenge! Revolution!" Last time we saw that show was January 6. For a few people, who get out at the right time, this will be a much more successful revolution, but on the whole, it succeeds only with a transient disruption, and harm the individual would-be revolutionaries the most.
Ouff.
> AMD was a chipmaker with skilled engineers on staff and a growth story where they could seize market share with better technology. Gamestop is a retailer with retail clerks on staff and a story where increasing competition from PC and console app stores slowly eats away at their market share. Exact same thing, right?
Do your due diligence this is just one, https://www.gmedd.com, there have been many others and they all converge to the same argument. GME is worth much more than the $10 PT given by analysts.
> Counterpoint 2: Saying the price target is wrong is one thing, and may in many circumstances be eminently defensible. Saying the correct price is $50-$150 is another.
Except citron was wrong in every single price target they have given by more often than not an order magnitude, except for 1. If you pay enough attention, you will see that many of the same 'pages' play both the bull and bear game, if only to come out and say they were correct.
> Counterpoint 3: This exemplifies the thinking going on here. "I don't understand the stock market and think someone is screwing us over. Let's define our own alternate reality, and gang up on them for revenge! Revolution!"
Had you done your due diligence and paid attention to the situation as it unfolded, you'd have seen that the market made sense, the stock was over shorted and in no way reflective of the actual price targets created by various models and analyses such as the one I linked above.
> Last time we saw that show was January 6. For a few people, who get out at the right time, this will be a much more successful revolution, but on the whole, it succeeds only with a transient disruption, and harm the individual would-be revolutionaries the most.
We saw that show in every single revolution. This only reinforces the belief that the average proletariat is getting screwed over and manipulated by the same class of people. Hint, it was the proletariat that paid for the greed, not the institutions, the hedge funds or the MMs. It is the proletariat that are stuck between a rock and a hard place, it is the proletariat that are getting manipulated into intra class wars.
OK, I'll pay $300 for a stock that will be worth $169 in 4 years assuming that Ryan Cohen has 100% chance of using is legendary Ryan Cohen powers to seize digital game sale margins from all the walled gardens, because somebody on WSB bought a domain name and used orange and green highlights in a spiffy PDF.
The reality of wealth building is that short term it’s always 0 sum game, long term it’s a way to get rich.
That means that there is in some ways infinite demand... every single share currently owned HAS to be bought by a short seller at some point, in order to return it to the borrowed actual owner... so as long as all the current owners hold fast, they can sell their shares for as high as they can go.
It doesn't even matter if the company itself is worthless, the demand is there.
You are right about the zero sum in this case, though... it just might be the short sellers who are left holding the bag.
Gamestop has the same problem that drove other retailers like suncoast, sam goody, strawberries, and many other ones out of business; you cannot survive the digitalization of your primary products.
Gamestop relies on console systems and videogames both new and used to make the core of its primary business. These are what draw people into their locations and to their web site, and allow add on sales like memberships, warranties, collectibles, and accessories to be sold. They generally go to malls, either interior or open.
The problem is the decrease in physical games over digital kills the primary reason to go into their stores, and also prevents middlemen from existing; there is no value add to getting a digital code from gamestop as opposed to steam, ps store, etc. It also murders the high value used game and console sales because now there is less product to trade in.
That just leaves them with collectibles, which they've always been low quality and too expensive, accessories, and a tiny assortment of physical games that now they barely even have stock of. They "advertise" the top 100 games or so in their store, yet don't have stock of many of them ,and their used games are barely a shelf of them.
The problem with being an internet retailer is amazon already does what they do better; it's an uphill battle where they have no real value add. Even Amazon seems to have less and less new physical games, and they have an infinite amount of chinese sellers dramatically lowering the price of game accessories.
I don't see any way to be bullish on them because of their actual business.
edit: its not just them. There's a regional game store chain where I live, and they suffer the exact same problems. They are desperately trying to carry anything and everything geek related just to fill the store with inventory; records, collectible card games, comics, manga, crt tvs, used movies, anime accessories, model kits, etc. They actually are losing the game store focus, as used product even in the retro market is dead now...very few retro systems and games.
Granted, dogfood is waaaay different than selling digital games outside a walled garden. No one can lock you out of your dogfood.
A bit of luck, a bit of smarts. Build it and they will come?
And 4Chan a) isn't dumb, but they like doing dumb shit and b) they love brigading. Pool's closed etc.
But what's interesting is how the institutional outrage is merely fuelling the brigading.
The institutional investors crying in the media only confirms WSB's beliefs that they've found a weak spot in the institutions, so they're going to stick it in harder.
I admire their attitude, but not enough to put my money in to what feels like an giant troll.
Personally, I'm buying in the money puts expiring in 2023. No way Gamestop is doing better now, or has a better future now, than it did five or ten years, yet their stock's at an all time high? These hijinks may continue for some time, but I doubt it'll last years, price will settle and I'll hopefully make a modest profit.
On the other hand, the multi-billionaires who are loaning one another billions of dollars to batten down their GME shorts....that seems somewhat manipulative to me.
These hyper-rich guys babble on about efficient markets but they work together to corner the market on particular securities. And they don't do it in public on the internet. They use the full weight of their reputations and relationships.
This is said as someone who has made high six figures from yolo trades because I thought it would be funnier to lose the money than put it in a savings account.
Wall St are looking like they will be the losers.
https://www.zerohedge.com/markets/first-casualty-big-short-s...
Citadel must be loving their Robinhood order flow right now.
'The system' and 'Wall St' don't just play the surface game here. Cool, nice, you short squeezed a hedge fund. It's awesome but ... you bet WSBers still involuntarily shoveled money to Wall St one way or another because every single step of the game is rigged asswards and back.
They have repeatedly resorted to market manipulation to drive the price down and cut their losses, but people are not selling, there do not exist enough shares for them to close their position. They screwed up royally, they doubled down, from 128% shorted stock to 140% shorted stock, then they resorted to blatant market manipulation, using the media and painting a false narrative.
Everyone who is short has to pay the vig every day, so that hasn’t changed.
WSB is a public subreddit. Traders, pms, hedge fund guys all participate and win often bigger because they have more to play with. They pump and dump and ride the emoji rockets like everyone else.
There are only the winners, which include the $60k/yr nurse, the $600k/yr FAANG principal, and the $6M/yr Senior PM who timed their call options right.
And the losers which include the same but timed it wrong.
The engineers and finance folks who lost will have a bad week. The lower-middle income earners will have a bad year.
They are not somekind of community trying to "stick it to wall street", they are mostly just random people shitposting all the time, posting their gains and losses. Right now it's GME, before it was SPY/TSLA/NIO. No need to overthink it.
Sure the GME thing has an actual borderline smart twist to it which gives the entire community a different spin, but it's still just an outlier in the wsb timeline.
Perhaps I don't like the word "criminals" being thrown around so loosely.
Hedge funds are supposed to be allowed to naked short the stocks they don't like into oblivion, transferring wealth from retail investors to hedge funds.
The hysteria and pearl clutching at this wealth transfer being reversed is hilarious.
Naked shorting has been illegal for a decade: https://money.cnn.com/2008/09/17/news/companies/sec_short_se...
> This does not necessarily mean a lot of people are doing evil illegal nefarious naked shorting! Really, I promise! There is no special limit on shorting at 100% of shares outstanding! Here is an explanation of how options market makers (discussed below) are allowed to short without a locate, but I want to offer an even simpler explanation. There are 100 shares. A owns 90 of them, B owns 10. A lends her 90 shares to C, who shorts them all to D. Now A owns 90 shares, B owns 10 and D owns 90—there are 100 shares outstanding, but190 shares show up on ownership lists. (The accounts balance because C owes 90 shares to A, giving C, in a sense, negative 90 shares.) Short interest is 90 shares out of 100 outstanding. Now D lends her 90 shares to E, who shorts them all to F. Now A owns 90, B 10, D 90 and F 90, for a total of 280 shares. Short interest is 180 shares out of 100 outstanding. No problem! No big deal! You can just keep re-borrowing the shares. F can lend them to G! It's fine.
https://www.nyse.com/regulation/threshold-securities
It's still on the list.
You are only supposed to be able to hold naked shorts for "13 consecutive settlement days".
Now it is likely the steam has run out(gamma cascade) so they are placing their bets on the opposite side by taking over Melvin which is massively short without causing too much market impact.
I am not a financial professional, but I am not stupid.
Anyone who believes that 1. this firewall exists, 2. is up to snuff (ie. working like it should), and 3. is not being constantly undermined formally or informally is sorely mistaken.
They got themselves in this mess. Don’t be so greedy, you short more than shares that trade.
The float has been over 100% shorted for over a year. The shorts could have easily covered or trimmed their position when the stock was trading in the $3-$4 range this spring and summer for a profit but they chose not to. Book value was estimated to be $10 at that time. News came out that improved GameStop's situation and its future appeared less bleak. There should have been short covering on each of those pieces of news: GameStop paying off debt early, Ryan Cohen first buying 5% of the company, then 13%, then joining the board with 2 other CHEWY executives, the new PlayStation and XBox consoles releasing and always being immediately sold out, the microsoft profit sharing deal, huge ecommerce growth yoy, etc. But the shorts chose not to cover at all! Short float remained the same at over 100% as more new people bought into the company on the good news.
Many people may not know this but a new CEO was hired 2 years ago: George Sherman, and he's been doing a good job of turning around the company by doing unsexy things like shutting down unprofitable stores like where there's 2 GameStops in a single mall and improving their supply chain logistics and ecommerce business. 95% of all GameStop stores are 4 wall ebitda profitiable was what they said on a conference call 2 years ago.
I would also like to point out GameStop is a highly cyclical business. It depends a lot on the 7 year playstation and xbox console cycle. Look back on the historic stock chart. People think it's failing because revenue declines year over year then the stock goes parabolic in the new console release year. It's like the console cycle isn't priced in until it hits people in the face.
Nonetheless, after he published Beat the Dealer casinos greatly benefitted rather than a situation where they lost revenue from Blackjack card counters. Thousands of people believing that they could make a fortune using his system went to the casinos. Between the free drinks and the inability to focus, people lost fortunes instead. Moreover, Blackjack remained hugely popular.
You never hear about people losing money in Vegas, only about that one time someone won big. It's the same with WSB, sort of. They do lose money and lots of it. Moreover, they post the losses. It is only during squeezes like with Tesla do we hear about it in the media.
Still, at the end of the day, they invest a very, very small sum of money and can't have much influence. I thought for a while that maybe there were outside influences driving memes to get the cartel to behave a certain way, but decided they are not much of a force.
I'm not sure about that. This guy[0] lost his life savings investing in ornamental gourd futures. Its actually a pretty comical account simply to me because it seems so absurd.
[0]https://www.reddit.com/r/wallstreetbets/comments/kzoh1c/i_am...
Given that some of WSB's most famous posts are 'loss porn', you don't seem very familiar with it.
The SPY puts weren't at the beginning of 2020. I was actually one who took a huge profit from being early with SPY and DAX puts, but I also lost some money later on when SPY puts were still the rage.
The fascinating part is that you don't really know if WSB is actually the pumper. With smaller caps, that might be true to some extend. They banned mentioning of small caps with less than 1 billion in market capitalization a while ago for this reason.
WSB pumps and dumps: SPCE, LL
Certainly not: MSFT, SPY drop in Feb/March 2020, TSLA, AAPL
Probably not: HTZ
Unclear about the extend: GME, BB, PLTR
So, is WSB a driver of stock prices or is someone else driving the prices and blaming it on the "retards" on WSB? This happened in July/August 2020 with tech and one culprit was Softbank.
That was just a rough estimation. I have been following them for the last few years and my point is that they don't always win. Before 2020 (where every stock market on earth started giving huge profits) they were mostly known for their losses. In fact the only WSB stock still worth buying is TSLA. Everything else is pumped, dumped and gone.
But yeah, they don't always win for sure.
Still, there are a few gems in that sub if you know where to look imho. Do they have a crystal ball? Certainly not. But it's interesting for its different perspective.
The market is, and always has been, a ridiculous game. WSB is just showing the world. But the folks on actual Wall St would prefer no one else can see how the sausage is made.
Likely they started short positions around $10 in 2019, had a nice profitable trade, started to bleed out then doubled down and increased position as it picked up momentum. Now they are far over their head and from the looks of things, stock is going to $200.
Lots of people made tons of money shorting tesla. Until they didnt and stock kept doubling.
These guys are sophisticated little buggers:
https://www.reddit.com/r/wallstreetbets/comments/l528pz/gme_...
If that's correct, then yeah, we could potentially see a slide. I suspect it won't be massive, and it could be counterbalanced by economic growth that happens at the same time due to the reopening. Don't forget that the stimulus/bailout/money-printing is also driving the market up too.
post WW1 Germany both had a broken economy and a massive amount of foreign debt. What makes you think that similar events will take place? What prevents the economy from simply recovering in 1 or 2 years?
Probably.
The banks and hedge funds are playing the same games they've been playing for years and years.
Someone new has entered the picture and changed the game.
There is a tremendous amount of spite involved here. They hate the boomers, and they hate the institutional wallstreet investors and hedgies. And why shouldn't they? These people play with our lives and get fantastically wealthy by gambling with our retirement accounts.
I saw that some hedge fund got wiped out today by this. Sorry I won't be shedding any tears over that. Maybe the hedgies should have to learn to code.
I’m actually kinda confused by this. Are we not rooting for them in some respect? As long as I make money too and my retirement account grows what do I care if they take some off the top? The returns I get are way better than I could get on my own.
You should care because for long term investing, an actively managed fund is very likely to underperform the market. The vast majority of hedge fund managers aren't doing anything that you couldn't do yourself, i.e. pick a few stocks out of the S&P 500 and hope that they outperform the market.
> The returns I get are way better than I could get on my own.
Look into index based ETFs. They simply track an index so your performance is equal to the market's, so no handpicking stocks or gambling. They are traded like stocks, so you can probably buy them with your broker. The best part about them is that they have almost no fees - the most popular ETFs cost 0.10-0.20% per year.
If you're American and believe that the American stock market will continue to outperform the rest of the world, then an ETF like SPY (tracks the S&P 500) would be a good bet. If you'd like something more diversified, have a look at funds tracking indices like the MSCI World or FTSE All-World.
Another issue in Europe is that the accumulating ETFs (more tax efficient in most countries) tracking the Developed index have low liquidity.
1. https://research.ftserussell.com/Analytics/Factsheets/Home/D...
We're not just talking about some Wall Street traders losing some money (who can likely afford to), but regular people may suddenly be finding they can't afford to retire as soon as they had planned.
The '08 crisis was in part for a similar reason. Some hedge funds shorted housing stocks and crashed everything. We were at the risk of losing our home, my mother working for the gov was unemployed, she went to the private sector and they squeezed the life out of her.
They bring nothing useful back and play god without permission.
But you know, melvin capital is already 30% of their equity down in January.
They have everything to lose. I have nothing.
The thing is, they won (bigly) almost every year since their inception, it's a relatively minor mishap for them even if they gain nothing for the rest 11 months.
Guess what, they and their clients will be laughing their asses off and move on along with their high life.
This isn't how somebody in control acts. They even doubled down on their position and increased the number of shorted stocks in the previous week.
It's kind of crazy that your random comment on HN lead me down this path. That's why I'm a reader of HN since 2008 or so – exposure to randomness ;)
Or is that not how it works? I've never written my own options.
https://www.bloomberg.com/billionaires/profiles/kenneth-c-gr...
There's an argument to be made that it's not worth it, that you are happy enough with your low 6 figure existence, but the sentiment here clearly shows that's not the case. The sentiment here shows that people are not happy in their FANG and other engineering jobs, and they are in fact incredibly jealous of Musk, Griffin and the newly rich WSBers, and instead of admit that jealousy, they make up lies claiming that the WSBers aren't winning, when it's clear as day they are in this moment and big hedge funds are the losers.
I'm not saying WSB will continue to win, I think hedge funds will get their shit together and not get themselves into a GME-like position again in the near future. However, let's call a spade a spade while it lasts. DeepFuckingValue and his WSB brigade have scored a HUGE win, many becoming overnight multi-multi millionaires, and instead of bash them, why not celebrate them for a day.
I’ve called them out on this shit years ago. It still hasn’t changed.
Separately: Could you please stop creating accounts for every few comments you post? We ban accounts that do that. This is in the site guidelines: https://news.ycombinator.com/newsguidelines.html.
You needn't use your real name, of course, but for HN to be a community, users need some identity for other users to relate to. Otherwise we may as well have no usernames and no community, and that would be a different kind of forum. https://hn.algolia.com/?sort=byDate&dateRange=all&type=comme...
I'm not spiteful of KG and the other people who are making the real money off all the crowds at the option casino, if anything I respect their shrewdness - Citadel prints insane money on these option premiums, and as a bonus KG gets to invest in Melvin at firesale prices and probably gets to extract insane terms.
As far as 'jealous fucks working miserable engineering jobs' - I think you might be projecting a bit there :)
I don't disagree with your post overall, but do want to give some credit to the particular user being discussed. He had a solid bull value thesis that was well thought out and not at all based on memes, with the short squeeze potential being a mere afterthought. He has a great youtube channel where he explains his thesis in-depth. While he posts occasionally on WSB he does not seem to fit the wild gambler image that WSB has.
I don't have enough experience or knowledge to speak intelligently on whether his play was actually negative or positive expected value but it was not a random gamble.
Just felt the need to throw this out there because with all the attention this is getting I've seen him unfairly (in my opinion) being grouped with the admittedly large amount of people who are essentially just gambling.
Here is an hour long video of him explaining his GameStop thesis: https://youtu.be/GZTr1-Gp74U
As soon as it's reported on the news, for that stock at least it is probably too late to get in.
> more than any of the jealous fucks here will make in their lifetime working their miserable engineering jobs and afraid to take any risks in life
I'm afraid you're spot on. But I'm sure that some may say it is less risky to work at those FAANMG companies than it is to go all in your life-savings into meme stocks. (TSLA, GME, etc.)
On the other hand, building startups is also very risky, via the VC route or bootstrapped route. Depending IF you attract VCs to invest in it, its either you get acquired for >10x or IPO (might become a multi-m/billionaire), or you return their money or go completely bust.
Some play it safe whilst they watch others take risks.
If your retirement plan can't accommodate Nikkei-tier growth, you are Wall Street gambling.
hence the "taking on wall street" angle - institutional shorts are the chump, not the retail investors (and the institutions going long with them)
it doesn’t just magically stay high forever after the shorts are covered.
same cascading down effect can happen if gamestop simply issues new shares
even now there’s people on reddit who said they FOMOd in at 150 price point
The real concern I have is the millions of people who blindly trust a financial advisor fresh out of college, who has never made a profitable trade in their life. We've all been told to buy into indexes and that we can retire rich. What happens when the market doesn't grow for 10 years? Why should the market continue to grow if the US loses its economic superiority and population growth in the US slows?
At the end of the day, a share of a single stock is only worth what someone else will pay for it. The company or business behind a share does not matter for the average retail investor, since by owning shares they really don't control much of anything. This particular WSB saga is a bunch of people trying to force some hedge funds to pay them more money for their shares than they are worth. It is as simple as that.
There is room for profit-taking at every cost basis except for the very top - looking at that subreddit, there are no illusions that it will literally last forever, only that selling en masse now (when shorts are actively working together to fight back) undermines the squeeze.
Also, there are several positive externalities to a rally. Stock price is something of a self-fulfilling prophecy, partially because companies can issue shares to raise money -- or use shares to buy another company. In some cases, a rally could lead a convertible bondholder to exercise and sell shares, effectively reducing the firm's debt.
Even if this rally were to be short lived, short-sellers are unlikely to feel as comfortable selling the stock short in the future, and thus unlikely to impact the stock downward.
EDIT: ah, new account.
Yeah, there's a lot of dumb crazy bets on there, and it has become a bit different since options trading started on Robinhood, but it's still a great place to learn things and get investment ideas.
Most of the meme stocks have seemed to perform well (outside of biopharmaceuticals they memed about back then).