WallStreetBets vs WallStreet: It's not about the money anymore | Hacker News Reader

WallStreetBets vs WallStreet: It's not about the money anymore

thinkingthrough.substack.com

344 pointsmaddynator458 comments

Once again, this insistence on viewing 'Wall Street' as a monolothic entity. The largest asset management firm on Earth holds over 9 million Gamestop stock, none of the big banks that received bailouts in 08 are affected by this, 99.9% of hedge funds are not affected by this, high frequency traders are probably making a bundle. Institutional money was long Gamestop before this story entered the public consciousness. The idea of governments stepping in to bolster hedge funds is ludicrous, the whole point is that the government and SEC is hands off with them.

Ultimately, a few medium-sized hedge funds were caught doing something stupid and the market has rightfully taught them a lesson. It's great that retail investors got in on a high-level play like this and made money.

> high frequency traders are probably making a bundle.

I've heard from a former colleague at a major HFT firm, that they hit their entire revenue target for the year, just in the past week.

That is very interesting to hear! I imagined that this was the perfect storm for HFT. Lots of retail investors using default exchange routing settings via brokers like Robinhood and ETrade that sell their order flow. Meanwhile these retail investors are buying small amounts of very volatile equities! Lots of opportunity to rack up lots of pennies.

So RobinHood is stealing information from the poor to give to the rich? To make them richer? Surely I am not the first to notice this irony.

Then one of two thing is true.

1) they are lying to you. Look at how much the stock has traded, Its alot but its nothing compared to how much SPY trades in a year. There just wasn't' anywhere near enough trading volume to make an entire year in one week even if they participated in every trade that Gamestop had this past week.

2) they lost money last year so any profit beats last year's pnl?

GME has been trading at $2 spreads. SPY trades at $0.01 spreads.

Or (3) they got hit on some GME paper at the outset out of pure luck, and printed the gamma much higher. SPY volume is higher but SPY doesn't realize like GME has.

I can tell you're in the industry because you say pnl instead of p&l haha.

Or the spreads/volatility of GME is big/frothy enough that they can make much more per trade

What kind of self-respecting HFT firm has revenue targets? Surely you're talking about P&L.

Trading revenue. As in “Goldman reported trading revenue of $X”

They're nearly the same thing in the hedge fund's case. Most of them take some variant of 2&20 still, so 20% of fund profits is their revenue.

Sure, but Gabe Plotkin is the uber-wallstreeter. All the rich-but-average Chosen Ones who get internships because of mommy and daddy look at what guys like him accomplish and think, "someday that too can be mine."

This is like that scene in 300 where Leonidas makes Xerxes bleed. The point isn't that Wall Street has fallen. It's that, for once, Wall Street is fallible.

I can't see how that's the case. They aren't going to suffer for this, let alone personally.

Even if the fund tanks, they can set up a new one, probably with sympathetic money or just cruise off into the sunset with their millions.

They're so disconnected that losing billions doesn't matter?

The problem is bigger than originally conceived then.

Loosing billions still hurts a lot I would guess.

You don't think losing his fund would have any personal or reputational effect on him, just because he has plenty of money to live, or do something else?

I don't buy it.

While I enjoy the esprit de corp of this particular discussion, the recurring allusions to "David vs Goliath"-esque tales are rather cringe-inducing and really speak to the maturity level of those involved (if that wasn't already clear by their "tendies").

The image I have in my head is less LOTR defenders or David(s) vs Goliath, and more of a horde of zombies that broke through a barrier and jumped some guards, but are about to be mowed down by a well-armed group behind a barricade. This isn't going to end well for the retailers - but hell if isn't sending a message.

Also the collateral damage is going to be more interesting to follow than the financials themselves. Already Discord and RobinHood painted themselves as enemies of the people - whether this was their least bad option legally, or they were influenced by Wall Street is immaterial - it's already viewed as the latter. Couple that with other high-profile bans by social media platforms this year (and it's not even February!), and I can see a lot of regular people all across the political spectrum who feel abused by big, rich companies. I think the last time we saw this kind of energy on the Internet, it led to Scientology protests, Occupy WallStreet and the Arab Spring...

I would have imagined you could read the business category of any major news outlet on any given day and see the fallibility, but I think you're right that that may be a common interpretation of this event.

How is disabling purchases and broker-wide outages not bolstering hedge funds?

It's government intervention no matter how you look at it. Just because it's not a direct capital infusion does not make it any less bad

Not sure if I missed something but did the government intervene here? I thought it was all private entities that stopped the trading?

The line is blurry.

There was an immediate and emphatic appeal to the regulators, and the way the SEC works is often by encouraging self regulation. The CEO of the NASDAQ even went on air to ask for more SEC regulation.

This isn't unusual, it's pretty much how "government intervention" via the SEC, and a lot of other regulatory bodies, actually works.

How is disabling purchases and broker-wide outages not bolstering hedge funds?

There are hedge funds on both sides of this bet. So this intervention is both helping and harming "hedge funds" in equal measure depending on what side they have taken.

Buying vs. Selling Short do not carry equal amounts of risk. They are not balanced sides of the equation.

Trading through Royal Bank of Canada's platform has been down all morning.

https://financialpost.com/news/fp-street/rbc-online-banking-...

>It's government intervention no matter how you look at it.

Is it? Do we have some information on that yet?

Why does disabling purchases help?

It prevents more people from piling onto the short squeeze?

(It also prevents J. Naive Trader from buying into this train wreck and losing a bucket of money when the bottom falls out, which it will.)

in the current situation, I don't think that private buyers trying the short squeeze (for which you have to hold) are really the driving force anymore. I think someone at robinhood had the (good) idea that at the current price, most people can realize a nice buck (by selling), while allowing them to buy a stock, which will probably go down a factor of 200 over the next year and currently fluctuates -50%/100% on a 20minute schedule required a casino license.

The whole idea of the short squeeze is that the hedgefunds can't buy anything anymore and the lenders want their stuff back. And if they are still overshorted and the lenders don't like to bleed them first, before initiating the squeeze I don't think that this somehow hurts retail investors. Maybe it benefits the lenders who can nicely bleed both shortsellers and the WSB+muskalike-crowd, but at the current price, where the stock has actually gone up quite a bit but stabilized, it seems quite clear that this thing is decided by the lenders now. Do they want to play the crazy game for a near bankrupt company and demand their loans from Melvin or Co. (which would probably result in fast default and them not seeing a substantial amount of their shares again with the others reduced to a pennystock) or do they just sail along, taxing the narcissistic sociopaths on one side, while slowly selling off their actual stock to then be bought by those and returned to them. I guess they decided for option 2 and I think they are not as dumb and chaddy as they look to you ;).

Exactly.

Just take a look at the shareholders and count how many shares those institutional have: https://money.cnn.com/quote/shareholders/shareholders.html?s...

It's Wall Street vs Wall Street - redditors were just the catalyst, and will be left holding the bag.

What's surprising is all the concern for redditors here and elsewhere; whilst the overwhelming vibe from r/wsb is this meme resulting in squeeze is strictly personal and not at all business for most that are holding on.

The rest (presumably greedy) are either making money or losing money because they're either riding up with the market or down. That's a feature of the zero-sum game that the financial system has been reduced to both the benefit and the detriment of the greed that's on all sides of the table.

Because the vibe you would want to make for a pump and dump scheme is an emotional hold it forever mindset.

There's no distinction between the two, if you have that mindset you will be left holding the bag even if you think you won.

Right now it looks like retail investors stuck it to Wall Street and made some money because GME is still over $400/share this morning. Everyone holding GME can look at their app and feel great.

But not everyone is going to be able to sell it at $400... or even $100 in some cases. It will be interesting to see how everyone feels after the sell off.

GME is still over $400/share this morning

Guess what's changed in the 56 minutes since you posted this?

GME: $265.00

Though I think it had dipped into around $380 by the time of parent post, and heading down. But someone bought at $430 this morning.

Is this a surprise? Tons of people wanted to buy GME this morning and were mad that Robinhood was preventing them.

We won’t know for days who makes money and who doesn’t. It certainly won’t be everyone.

Sure, once the squeeze is over they'll be holding expensive stock in a fundamentally near-worthless company. But then, they're probably Bitcoin believers too.

I think the argument remains that GME is not fundamentally a near-worthless company and some of these investors are probably right that it was hugely undervalued by all the funds shorting it (maybe not to the tune of $400 a share, but many of those investors have seemed to have been whales, not average joes). Retail is down in the pandemic, but it is not out. My opinions that GME is the biggest pawn shop operation in the US makes me look down on the shops from a high horse that I don't currently feel a need in my personal life for pawn shops, but America as whole will always need pawn shops.

https://www.powercycletrading.com/what-is-a-high-short-inter....

> Short interest as a percentage of float above 20% is extremely high

> A high NYSE short interest ratio means that the stock market as a whole is vulnerable to a “short-squeeze.” It could rise quickly if new economic data, political news, or other types of information are released that make investors more optimistic.

GME was shorted 140%.

No idea if 20% being risky is sage advice but it seems like you're totally right: some hedge funds took on a massive risk, the market saw the opportunity and played the other side.

I'm pretty stupid on this, but how does one short for +100% is that not naked shoring ?

From https://www.bloomberg.com/opinion/articles/2021-01-25/the-ga...:

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.

Entity A holds 100 shares and lends 80 to B, who shorts it by selling it to C, who lends 60 to D, who shorts it by selling it to E.

Now there are 240 long positions (100 A, 80 C, 60 E), and 140 short positions (80 B, 60 D), for a net 100 long, as before.

Short interest is 140/100 = 140% of the shares outstanding.

When you short a share, you borrow a share from someone who owns it and sell that share to someone else.

If the person who bought the shorted share lends it to someone else to short, one share has been shorted twice.

They are naked shorting. This is why wsb is so eager to destroy them.

When you buy a share and return it to the lender, you can buy it again from the lender. 200%, not naked.

This story is far less dramatic than the media is making it out to be. Short-sellers are a fringe group within the industry who often totally fail on trades (short selling is a pretty risky bet with an unlimited downside). This situation is definitely not monumental or new. Retail investors have been pumping stocks for the last 100 years. They contributed to the crash of 1929 and the dot com bubble, for instance. No they didn't have a subreddit to express themselves, they instead were driven by newspapers and pundits to direct their trades, but a similar premise nonetheless.

A lens to look at this through is - "why is short selling allowed?" Advocates cite increased "liquidity." But, does society really benefit? Short-selling really just lets trading firms extract value from the failure of others. In that sense - professional trading firms that participate in short-selling could be grouped into a monolithic "Wall Street" in the sense that they are extracting value without a benefit for society.

Most advocates argue that short-sellers help find the accurate price of a security, in service of the broader market goal of capital allocation. People who argue that markets should be long-only wind up advocating for frauds and failures to be mispriced in the market.

Liquidity is not usually the primary benefit. That’s usually the argument for high frequency trading firms.

A company existing is not just automatically a good thing. If there weren't any Gamestop stores anymore that opens up the retail space for, say, Micro Center or Fry's Electronics to step in and fill that role and do a better job, create more jobs, etc. That's true also for all the other resources Gamestop consumes, their exclusive contracts with businesses, pre-order bonuses, underpaid labor, whatever.

There's a term, 'Zombie Corporations' for businesses that are both stagnant and also generally aren't very beloved by their customers, but are still able to stay in business due to some localized monopolistic factors. Those kinds of companies exist in every sector and still 'make money' but they're usually the kind of companies short sellers target.

Getting rid of them is not some fundamental ill of society - yes it could in theory make some people lose their jobs, but it also keeps the economy going. If this kind of things didn't happen it would be impossible for new businesses to come up and with those new businesses new job creation, new ideas, etc.

The act of shorting a stock puts downward pressure on the stock price, similar to the way buying a stock puts upward pressure on it.

Suppose you see an ongoing pump-n-dump---sketchy pseudoinformation being passed around to raise the price of a stock someone has already bought, so they can sell later. If you short the stock, you act to reduce the price excursion and potentially help the eventual victims.

Suppose it's not a pump-n-dump, but rather "irrational exuberance"---people buying a stock and raising the share price for non-economic reasons. Short selling applies alternate pressure on the stock price, reducing the effects of a subsequent correction.

No, advocates cite improved "price discovery". You know, the only rational reason why stock markets exist in the first place.

Personally, I am not a fan of shorting but in addition to "liquidity" there is also "price discovery". Using excess leverage to short and floating 150% of the shares short is potentially a problem but the same would be true if it was the reverse (ie. buy or long positions). Price manipulation is the real problem here.

Given more capital and a reasonable amount of time, the short sellers in this instance will be correct. The value of the GameStop stock using commonly accepted valuation methods of our day is much lower than $300 or even $100 per share. Unfortunately brick-and-mortar companies with declining revenue and no visible growth prospects are valued differently than high flying tech stocks. Keep in mind that I understand the rules of the game dictate that shorts can be squeezed and the share does not have to trade at the commonly accepted valuation.

If stocks prices being close to their true value is beneficial to society, then traditional short selling is also beneficial.

Another reason is hedging, a form of insurance.

because it’s a free country. why would we restrict people from taking loans and who is the government to say the loan has to be denominated in dollars instead of shares?

short sellers have also discovered a lot of fraud companies because they have a monetary incentive

and for society as a whole, we should want the markets to price things accurately. things that are overpriced just means capital that isn’t being used somewhere else efficiently

it may seem ugly but capitalism is creative destruction. it’s an evolutionary system, the weak need to die so the strong can thrive

I was wondering if this was really a pump and dump made to look like a short squeeze. Now I'm 100% convinced that this is what it is. All those people buying a couple hundred shares via Robinhood are going to lose their shirts.

> a few medium-sized hedge funds were caught doing something stupid and the market has rightfully taught them a lesson.

Individually, what they were doing (shorting that stock) might have been perfectly sensible. That they collectively overshorted made them vulnerable. I'm not convinced yet that it was stupid.

All those institutions are interconnected. A large hit to one player can cascade to the wider market as they're forced to sell off other positions to put up additional capital. That could cause additional sell-offs for more leveraged players. And so on... The phrase "too big to fail" exists for a reason and it's smaller than you think.

Forcing big leveraged players to sell is fantastic for everyone else. There will be a lot of cheap stocks to pick up for everyone else.

Assuming that you are in cash or another asset class that isn't being sold off.

> Ultimately, a few medium-sized hedge funds were caught doing something stupid

Shorting a company that sells a physical product in malls during a pandemic is stupid? It seems their intuition is correct but there was a black swan event.

Shorting a company to the extent that you have enough leverage to go bankrupt? Not the brightest move. Shorting it so that you may not be physically able to satisfy the sales? That's window-licking territory.

Like everything, it’s a matter of degree.

Would I start a company to sell physical video games, in malls, in a pandemic? Hell no.

Would I short it to the extent that it the shares become ‘rare’ enough to induce a lot of demand? Also, hell no.

Both extremes are....not clever.

Some retail investors made money. The rest that are still jumping in will lose a lot as the stock returns to it’s correct price over time.

As repeated Reddit, the shorts are still oversubscribed and the short squeeze has yet to start. Retail investors are around 15% -- there are many index funds that are invested, perhaps they might be the last ones holding? Even so, I'll be damned if I understand anything about this.

I think it's interesting that "accredited investors" (e.g. 1MM in assets) can unionize to play in the stock market (e.g. hedge funds) but that the majority of Americans aren't permitted to unionize due to SEC rules. They are stuck with index funds. It's like we only allow top earners to be wolves and force everyone else to be sheep.

So the smart money is to short it?

Hehe.

Yep, and this is a particularly silly article. One group of investors caught another group making a spectacularly poor decision. It just happens that the first group are retail traders (I'm not sure I would call them "investors").

>> this insistence on viewing 'Wall Street' as a monolithic entity.

That's not a fair statement. "Wall Street" isn't viewed as a monolithic entity. It's viewed as an entity, or industry. In fairness, Wall Street is even more insular than other industries that we happily refer to as a group: Petrogas, real estate developers, silicon valley, etc.

Thank you, I appreciate this level headed response. The populist outrage fueled by anonymous Reddit users who are often either lying outright or wildly speculating is completely out of control.

We really need to get those vaccines out, people are going insane...

Why is betting on the decline of an off-line video-game chain stupid? I'm surprised GameStop is even still in business.

I agree with this mostly, but you can't deny that the swift action Wall Street firms/brokers have made to protect the interests of those effected hedge funds.

What is worrying, is that a lot of people are going to be left holding the bag.. And I dont see this retail trading squeeze not hurting some regular retail investors..

I'm wondering about this. I was a little skeptical of the whole David-vs-Goliath bring-down-wall-st thing. But if it's really true that this is just one small and low-relevance hedge fund getting their ass handed to them for doing something dumb, then why does it feel like there's a whole machine trying so hard to tear down /r/wallstreetbets and distort the entire retail investing market to stop it?

Why did Discord ban their server on a flimsy pretext right at the height of the attention? Why is there a sudden flood of articles about how this is all so very concerning in the mainstream financial press? Why are they mobilizing the universal weapon of calling everything they don't like Nazis?

Nobody cares about these two hedge funds in particular, but they are concerned in general about retail investors having some way to band together to move a (very small) market. If it can happen to one fund it can happen to any random fund on Wall Street and that kind of risk and uncertainty can’t be allowed.

Same mentality when companies that try to fight unions forming, even those forming at their competitors. A few Amazon employees want to form a union? The entire retail industry will suddenly show their support for Amazon. Can’t set the president of allowing the little guy anywhere to get used to being able to band together and take collective action.

Because like anything that gets suddenly popular, r/wsb and discord wsb got flooded with spammers.

don’t forget the pensioners whose money is in the hedge fund

Unconvincing. We're all playing in the same pool. It only takes one upset stomach to set off a chain reaction.

>the market has rightfully taught them a lesson

Has it? What leads you to believe that THIS is the time investment firms will stop being reckless?

Where did I say that? They've been taught a lesson via losing a lot of money, and now they know will be a lot of eyeballs on any future trades of a similar nature.

Ah the good old "it's just some bad apples", the system is great, trust it.

I'm not talking about good vs. bad, but winner vs. loser. This is Wall St vs Wall St with retail investors taking some off the top on one side. This is not retail investors vs Wall St.

They are blocking buying, and only allowing selling GME, BB and others.

How is this not evidence of a corrupted free market system? A CEO of one company can call up his connections in retail trading platform firms, CNBC, and Nasdaq and protect his profits? Why is Reddit the scandal and not that?

Reddit is full of rocket emojis and YOLO jokes. But what we see here, especially with the moralizing about gambling, is an elitism on full display.

The people are sick of it.

Robinhood is a free service. The customers don’t pay anything. If the order internalizers decide to stop paying them for their order flow, then they have to route to the exchanges. which charge fees.

Trading is still ongoing at the exchanges. It’s just the free platforms, where it’s shut down. If someone wanted guaranteed access to the exchange, then they shouldn’t have used a free broker. Are you saying that Robinhood should be forced to continue providing a free service at a loss?

Yes. They should be forced to provide the service they promised. It’s not my fault their business model is failing for a particular ticker on a particular day.

If they can’t, then some advance notice is needed. Making this decision instantly without giving customers time to move their holdings elsewhere is not okay.

That being said, I’m surprised people are still using them for day trading. They don’t have a great track record.

> They should be forced to provide the service they promised

Read the TOS. This was never promised.

>It’s not my fault their business model is failing for a particular ticker on a particular day.

As I see it, regardless of how it should be, one needs to accept that trading with RH has limitations/trade-offs compared to a "proper" brokerage. I get your statement, but like you said, their track record already speaks for itself.

> It’s not my fault their business model is failing

"You" (well not you but you get what i'm saying) picked the service...

If folks are capable of investing directly in stocks they should be expected to understand the ramifications of picking a free service like Robinhood.

They ESPECIALLY should with all this populist banter going around...

If you put the wrong oil in your car because you got it for free, and your engine failed then whose fault is it? If it's the wrong grade then it's the wrong oil, even if it says it's "high performance*".

I'm a casual investor at best. I have some investments as savings through the bank, and use WealthSimple Trade here in Canada. It charges fees. It hasn't gone down. I still wouldn't trust it for any volatile action as they alert me well in advance that they have a delay of about 15 minutes. I don't expect anything more from that. I also wouldn't buy anything with the intention of time-critical sells there. If I cared more, I'd seek using a higher-performing platform. (Also worth noting, they never pinched any buys or sells during this fiasco. What's the old adage: "you get what you pay for". I don't see how this situation is any different)

Should, as in ethically? Surely not legally.

It's not just robinhood, platforms that charge commission such as IBRK [1] have halted the trade of options (which is different from not allowing buying) but it definitely suggests some behind the scenes coordination for all these online brokers to all decide this today.

[1] https://www.axios.com/robinhood-gamestop-restrictions-370adf...

Options are different than equities. The possibility of losses far exceeding the initial position is easily possible. If the customer loses all their money, the broker is in the hook.

IB clearly is concerned about the credit risk, when the stock could literally rise or fall by a factor of ten in a day. They’re still allowing trading in the underlying stock.

I'm saying they should be sued. So, yes, I am saying that. If you buy securities you can't sell, you're pinned and that's not right, is it. I'm not sure if Robinhood traders signed up to that. Free doesn't matter.

They still allow selling, just not buying.

Robinhood has a free version and a paid version. Both account types are blocked from trading GME, NOK and other securities.

This doesn't really answer the main question above. How is this not evidence of a corrupted market system?

Free market assumes that buyers can make their own decisions. This is a fundamental requirement. If you are "free" to decide something, but then your decision gets overridden when it doesn't suit a particular third party, you aren't really free. The mechanism of enforcement and excuses given afterwards don't change the fundamentals.

I don't known if the kind of publicity they're getting right now is good for them. They could end up losing way more.

Allowing trading in only one direction is clearly market manipulation and should be slammed by the SEC.

This is the second day in a row I've been unable to log in to Ally Invest, a service I absolutely pay for.

Robinhood is not free. You are paying through PfOF. Just because you're not aware that you're paying more for your trades doesn't mean it's actually free. And, as others have pointed out, they have a version of their service which is paid and is exhibiting the same behavior.

interactive brokers is a paid service and they actually pretend they are different by not sharing their flow with Citadel etc... even they blocked trades on options on these symbols.

Robinhood is not entirely free. Just sayin..

Absolutely yes. If you can't provide a free service, then do not advertise it as a free service.

I just checked my TD Ameritrade account. I couldn't call up any information on GME.

Same policy applies to paid Robinhood and other paid brokers.

Yes, this is the bed they made for themselves.

> Are you saying that Robinhood should be forced to continue providing a free service at a loss?

This seems like an honest framing of the situation!

> They are blocking buying, and only allowing selling GME, BB and others. How is this not evidence of a corrupted free market system?

I can almost guarantee you that this decision was made to protect retail clients -- not as part of some conspiracy against them. It's very clear that retail is going to lose their shirts in the end of all of this, and by blocking new buy orders, the brokerage is effectively protecting its naive clientele.

Come back to your comment in a month, and I think your perspective will have shifted.

I sincerely doubt that many retail investors expect to make money on this. I have a couple buddies who made robinhood after seeing this on the news just for the opportunity to make a hedgefund bleed. I was in the same boat, but I already had an account.

No matter how paternalistic the intent may have been on Robinhood's end, the message is all the same to us on the outside: the game only has rules when we get to win it

Guarantee as soon as the hedge fund guys are all safely out of their positions and stopped their losses, Robinhood and the other retail brokerages will suddenly be like "Well, we did a great job and protected retail clients! All done with that trade limiting business. Back to normal, everyone."

You don't think the shorts are getting a chance out of their positions here?

Slight miscommunication -- what's happening is they're preventing any new positions from being opened. You can close positions, whether short or long.

You are right that a big part of retail will be left with enormous losses. But that doesn't in any way excuses brokers who manipulate price letting only SELL orders in

If they only allow sell orders, who is buying what is sold?

It's not Robinhood's responsibility to protect retail clients. They are not financial advisers. By doing this they have violated their mandate. Why? Maybe it's for their clients, but when you consider their incentives, that seems at best suspiciously convenient, and at worst deliberate market manipulation to save their ass.

How is Robinhood in danger through all of this? My understanding is they make money by selling order flow. If anything, they're losing money by halting trades?

What I don't understand, is why the only candidate that would really do something about this, from either party (Bernie), doesn't get a look in by "the people". The same people who are sick of it also shout "socialist" at the people who want to change things. Slugs voting for salt.

People have had enough, it's not just WSB anymore. The community of retail investors in GME is far beyond WSB. It's people that are frustrated with the 1% getting bailed out time and time again and them not seeing a dime at their tax dollar expense.

So they're going to show Wall Street who's boss by gambling away their grocery money? (Some will make out but I suspect the vast majority will lose big--money at least some can't really afford to lose.) I have trouble conjuring up a lot of sympathy but that's almost certainly uncharitable as I'm sure there will be stories of serious individual loss.

I have seen very little evidence of people investing money in the stock market that is not budgeted as “gambling” (ie disposable income). WSB embraces the idea that memetrading is gambling. This is not a surprise to anyone but a few outsiders.

Then you have not been paying attention to WSB for very long. It's full of degenerate gamblers, so many loss porn posts come from people saying, "How will I pay my rent this month?"

Most of the time, WSB is a community to commiserate about losses and lie about gains.

But it kind of goes against the story that this is “the people” against Wall Street. “The people”, by and large, do not have a ton of spare gambling money sitting around. “Upper middle class folks with spare disposable income vs Wall Street” isn’t quite as persuasive a hook, though.

You must be missing a rash of people outside of the wsb sphere trying to create accounts with brokerages, have no idea what investment is, and trying to buy GME or others.

Those are the ones who would be left holding the bag when the music stops.

One of the most popular posts on WSB right now is somebody bragging they're putting their entire life savings in GameStop. I personally know people buying Gamestop that shouldn't be. It's pretty scary.

This is not just a WSB thing anymore, it was front-page news on every news service yesterday.

Nobody is gambling money away. The sentiment is that they are knowingly _throwing_ it away to send a message.

Are we talking about cutting your own nose off to spite someone else's face?

So you're saying they're even dumber than they appear at first glance? Sorry, but pissing money away (or actually likely giving it to some Wall Street institution) to send some ill-defined "message" really can't be called anything but dumb.

Very paternalistic to assume that people are gambling away their grocery money and should be stopped now that the short squeeze has become much, much more likely. Meanwhile ANY other security also has the chance to go to 0, but RH doesn't stop you from buying.

I don't care if Robinhood bans trading or not. Don't have an account with them and likely never will. Aside from some fairly obvious things (states generally shouldn't advertise their lotteries for example), people should be able to do whatever they want with their money. And it's probably pretty fruitless to try to stop them from doing so in general.

I don't think he's arguing FOR stopping the trades. I think he's worried about the folks participating financial well being.

We worry about that (people's retirement savings and so on) anytime we see market corrections, a given company go under, and etc... it's not an unusual concern.

Occupy Wall Street was just 10 years ago. It was the longest demonstration in a lifetime. Nothing changed. How did nothing change? What message does this send?

> How did nothing change? What message does this send?

nothing changed because camping out in a park for a few months without making any actionable, specific demands as a group is not a good tactic for effecting change. BLM was a bit more specific with their demands and have already received a few (if token) concessions.

The reason nothing changed with OWS is because they couldn't voice a clear message. Everyone knows they're being defrauded but the fraud is complex and difficult to communicate so instead you have this disorganized protest that amounts to very little change.

Tax the rich. Distribute the wealth that was stolen from the backs of the workers. It wasn’t said clearly because we were living in a post 9/11 era where uttering words like “socialism” was still unpopular.

Enough is enough. The only thing keeping the guillotines from coming out is a thriving middle class. Oh wait, that’s been stolen. It badly needs fixing and fast.

That sitting around playing drums and smoking doesn’t accomplish anything productive.

That’s called being civil. Would you prefer they instead break the law to have their voices heard? Do you want wall street suits to fear for their life?

Investing in stocks/crypto for average people with little to zero experience was not nearly as simple as today compared to 10 years ago.

The only way things will change, I'm convinced, is for everybody to vote out the incumbent every time. Occupy Wall Street didn't work, riots and looting wealthy areas didn't work, raiding the capitol building didn't work. The corruption is dug in.

Voting out the incumbent breaks all these decades long (multi-generational?) relationships with the elites. They will probably reform the relationships to a degree the first time, but if congressional membership dramatically changes every 2 years, those relationships will weaken over time.

To whomever disagrees, please help me understand your reasoning.

The lesson from Trump is that blindly going against the incumbent may simply replace them with somebody less competent and more corrupt.

I too hold money at a stock brokerage just in case a revolution starts.

Feel like the platforms are helping out hedge funds by making it challenging to put more pressure on the short squeeze before Friday. Sounds a bit like a cartel in co-ordinating activity under the guise of "reducing risk exposure" - shepherded on by the Financial media.

Trade itself is no longer on technical merits (except those in early) but have you looked at valuations across the stock market these days -- everything is off given pandemic. So that line of reasoning by all the financial talking heads just proves they don't understand the moment.

It's pretty reckless behavior for sure but its more about rage and control then anything imho.

That everything is off is just your assessment which a lot of people disagree with. When it's difficult to do business and make better use of the money then equites are more attractive place to keep your money. This is especially true with a lot of additional money supply and low interest rates. It makes perfect sense to me why we had the run we had during the pandemic. Anything else would be a big surprise.

Right ... that works until you have decide to move your money out of equities. At which point it is a race to the exit. Once the next rotation happens don't get caught being flat footed.

And I disagree - I do think everything is off (not just the markets being highly volatile). With many people making record money this year and human suffering being at the highest levels and considerable outrage everywhere, it feels like something is breaking down in society (at least North America). There is something very amiss right now, which I am sure we will be able to determine with the benefit of hindsight. Hopefully we can pick up and move on quickly post pandemic.

I am not attaching a judgement to my assessment. It's just an observation that equites are worth more when money supply increase and new business opportunities are difficult to come by.

If you have a box producing 4k usd per year people may want to pay around 100k for it on normal times but when you can't find any other investments and the government is pumping money into the economy then suddenly the box becomes way more valuable. It's after all better to buy it for 150k even if it produces 3k instead of 4k than to just your money in the bedroom mattress. This same mechanism that causes stocks to rally every time a big player (EU or US) announces another QE round

As someone who is not very educated in finance, I'm curious how to interpret today's events. Is nasdaq/robinhood/everyone else transparently manipulating the market on behalf of hedge funds? Or are these standard mechanisms in place for preventing the stock market from swinging wildly out of control? I don't know if it's standard to completely block trading on one or more stocks.

WSB has basically recreated a "boiler room", which is an ages old scam where a small group of insiders would encourage people to buy stock, drive them value up, and then the insiders dump the stock. The key insight here is that for every person selling the stock and making millions, somoene has to be buying. There's a narrative about short squeezes forcing a small number of hedge funds to buy stock, but in practice many of the people buying the stock at the inflated price are retail investors hoping to get rich quick. A few retail investors will get rich quick, but that money will come from the people who join the party late and can't get out before the price drops back to earth.

The trading stops and laws that exist to prevent this kind of wild volatility are basically because for 90% of people, this is not good. By the time your parents read about this in the paper and log into their TD Ameritrade accounts to "invest", they'll be in that group of people left holding the bag.

This all reminds me of the crypto ICO's a few years back. Build a tonne of hype around something, get a vast number of people who don't really know what they're doing to put in their money, and then the big investors get out, tanking the price for everyone else.

In all the talk of conspiracy around this I'm surprised nobody is discussing the possibility that larger investors are likely manipulating/hyping the WSB community. The WSB community is acting untouchable but I get the feeling in the end they'll be the ones losing their money.

In this case people buying stock weren't hoping on a greater fool to sell it to later. By a large margin, more shares were sold short by a handful of hedge funds than even exist. As the price rises the expectation was/is they are forced to buy back to cover at any price.

It's entirely possible a majority of retail investors make a killing and a few large funds get liquidated. At least it was until the coordinated action to protect those hedge funds today.

Thats not the same narrative I see on reddit. People are okay with losing as long as the big sharks are hit hard. It seems like an emotional reaction not a boiler room

It's not a pump and dump if there's a legitimate reason to think the stock will be worth more for reasons other than the pumping itself which there is due to the short squeeze.

What's the difference between reddit users taking action on the advice of other reddit users and everyday folks taking action on the advice of CNBC talking heads? In both cases, someone is saying, "This security might be a good buy."

its not really whats happening. Reddit has identified that there are more outstanding short shares than stocks. So in effect they are doing more of a blockade. Effectively, if buys continue, the hedge funds they will have to buy more shares than exist to get out of it, at a rediculous price.

Do you not know the short-to-float context for GME? I suggest you read up on it; the retail movement isn't a pump-and-dump.

People were saying the same when Tesla was 350$. Some suckers (e.g. me) actually believed them.

This is categorically false.

I would wait a few months and read the write-ups by people who have had time to ferret out the details and look at various angles.

There are a lot of "hot takes" and people thinking all this fits some "narrative". But I think there is just a lot going on and I'd be cautious about assigning too much meaning to any of it without a lot more information, which we won't have right away.

Don't you think the honchos at Robinhood got the call from the man last night ? Its a coordinated ban of serfs from buying up AMC GME BB. Its got too hot for them.

No I don’t. I think the market makers/internalizers who are normally on the other side of retail trades want no part of the irrationality around these symbols so they pulled their orders.

There is no one on the other side of the book so Robinhood can’t execute. It’s standard market dynamics that anyone whose traded before understands.

That a bunch of new retail traders are about to learn an expensive lesson on execution/liquidity risk is a normal cycle.

Yep, though the man could just be their lawyer saying hey this was our target market so let’s do our own meta risk mitigation here.

A bit of both. If you are running a fund and down 50% from the events over the last few weeks, it's your fault. At the same time, stocks shouldn't be moving 100% each day.

I'm also quite ignorant of investing and also contract law, but technically, Robinhood's recent disabling of buying new options or shares [1] falls under their terms of service [2]:

You agree that, without notice, _Robinhood may terminate these Terms and Conditions, or suspend your access to the Service or the Content, with or without cause at any time and effective immediately._ [...] Robinhood shall not be liable to you or any third party for the termination or suspension of the Service or the Content, or any claims related to such termination or suspension.

tl;dr: we can change what you can do on Robinhood at any time for any (or no) reason at all, and you can't do anything about it.

[1] https://old.reddit.com/r/wallstreetbets/comments/l6w4uo/robi...

[2] https://d2ue93q3u507c2.cloudfront.net/assets/robinhood/legal...

I am not a lawyer, but I assume that they would not get in trouble for contract breach but rather for market manipulation.

If you buy stock with the purpose of pushing the price up so that other people will buy it, that’s market manipulation.

What WSB crowd is doing is market manipulation. That's illegal. WSB is doing everything openly and even celebrating it. Getting mad when openly breaking the law is not rational response. https://www.law.cornell.edu/uscode/text/15/78i

Brokers like Robinhood are reacting because they want too keep SEC out of their asses and prevent SEC doing something even worse to their customers.

Stock Markets like nasdaq are reacting to volatility, like they usually do in abnormal situation.

Not so clear cut. If you hype stock to PROFIT from it by selling before it crashes, that is market manipulation. If you hype stock because you believe it is an amazing opportunity, and you happen to diversify before it crashes - that is talking about things in public.

A bunch of people hyping each other up? Also talking in public about what they like. If that moves markets? That happens.

If that opportunity is a short squeeze (which it still appears to be - newest data I can find is GME is still at 120%+ short interest), then it gets really really confusing - and I'm not sure how this is going to sort out.

People going on public news networks saying they've 'got out' and other articles talking about folks no longer being short - that would be clear market manipulation if not true.

> What WSB crowd is doing is market manipulation.

Shorting GME more than number stocks exist is not market manipulation? HFT isn't? Bailing out greed isn't?

Why is this notion of market manipulation such a narrow one-way street?

Sorry, but what WSB is doing is free speech. Any analyst can get on TV and announce a price target. What WSB is doing is no different. WSB is a transparent group and everything they say can be read by the public.

That seems to be the minority view among pundits and analysts, and disregards the large amount of funds jumping into the fray to squeeze the shorts.

Trading against shorts instead of fundamentals isn't market manipulation.

WSB is not buying the stock with the purpose of pushing the price up beyond realising that by buying and holding, it makes covering short positions more difficult to cover.

It is not illegal.

It's not that clear as far as I can tell (and from reading commentary from people far more knowledgeable than me).

Matt Levine's column from 2 days ago, for example, goes over some of those questions to a decent degree: (possible paywall)

https://www.bloomberg.com/opinion/articles/2021-01-26/will-w...

I have watched this mess from afar and the tone of the conversation has changed from "Hey, here is an opportunity to make some money off a mistake some hedge funds are making" to "Smash the system". Exhibit A - this idiotic article.

You cannot use the tools of the system to beat the system.

Here is the thing about hedge funds - they hedge. They hedge in the morning, hedge in the afternoon, eat some hedge for dinner and get in a few rounds of hedging in down at the hedge club before going to bed dreaming of hedges. The clue is in the name. They don't typically make huge loses or gains for a single stock, they are happy to make a consistent gain every day.

The vast majority of hedge funds are making stacks of small gains off this nonsense and anyone who doesn't cash out at the right time is going to be hosed. Do you know when the right time to cash out is? No? Sucks to be you.

Honestly I am worried. Mob investing has collapsed economies, brought down governments, and ruined more lives than can be counted during the last 150 years, and I don't see how this is different.

This is completely ridiculous and will all end in tears. I am actually glad that some pressure is being put on Reddit and the brokers to cool things off - there are opportunities to cash out big time but a lot of the small players are going to lose money.

"hedge fund" doesn't really mean hedging. It is just a fancy (high fee) name for "actively managed" that usually uses more exotic strategies than buy and sell based on earnings reports.

> You cannot use the tools of the system to beat the system

I'm wondering if this is true. What would be some examples from history in which precisely this happened?

This is a poor quality submission to this forum.

I've been in WSB for ages, and it was, is and will always be about the money.

It is mostly about the money, but it is also very much about memes, chicken tenders and fucking with the establishment.

What these journalists got wrong or are lying about is wsb being mainly an anti-establishment movement.

Sorry, no. Memes and chicken tenders, sure, but WSB doesn’t push any agenda. Pro or against. Stop misguiding people.

We must not be reading the same subreddit then. There are many, many references of fucking with people or "sticking it to the man", and there have been for years.

Whether that constitutes "pushing an agenda" (your words, not mine) is up for debate. For example, do political anarchists "push an agenda"? Maybe not, maybe that's an oxymoron in a sense (the agenda is that there's no agenda) - but they are certainly "anti-establishment" (my words).

What makes you an authority on wsb or on anything else to be able to mandate that I "stop misguiding people", anyway?

It's about the tendies. And you get tendies for loss porn as well as gainz.

The endgame here is fascinating to me.

The people who got in early will suffer least when GSE finally crashes and burns. But the poor suckers who bought it at $150 are going to be in big trouble. They're all trying to stay strong and hold long because that's the way to make the hedge funds suffer, but the smarter ones will figure out that their only chance to not lose their shirts is to be in the earliest 5% of scabs to get out, and then it's going to be a bloodbath when everybody gets trampled running for the exit door.

Meanwhile a couple of hedge funds go under while the rest just call it Tuesday.

>But the poor suckers who bought it at $150 are going to be in big trouble.

These people could get out at this moment with a 100% return. The entire premise here is that as long as there's a ton of these short positions that need to be covered then you should have less worry about being the person who's left "holding the bag" than normal. Yes, if you hold long enough you'll regret it. And there will be plenty of people who will lose a lot of money by doing this. But you should have more confidence than normal that the floor is not going to fall out from under you in the next 24h or so.

$468 at the peak to $196 in the span of an hour...

> Meanwhile a couple of hedge funds go under

Which means that the money the hedge funds lost is redistributed among all who held the stock. It's not that the money vanishes. That's why people hold until the hedge funds go under.

> Which means that the money the hedge funds lost is redistributed among all who held the stock.

No, the hedge funds are being forced to buy, so their money will be redistributed to whoever sells them the stock. That won't be WSB if they keep buying,

That's not really how the stock market works. The money does indeed "vanish" insofar as it was ever there to begin with.

The idea isn't to hold forever

It's to hold until the hedge funds are forced to buy at any price to close out

I bought at $350. It's all about the hodl.

I bought at 325 and sold 2/3 at 470. Now I basically can't lose money on the overall, but I'm still in it till the moon on that 1/3.

I don't know- there must be institutional players on the long side by now right? Either way, _eventually_ someone will be left holding the bag when the stock comes back down to earth.

Retail traders are literally locked out of buying new shares... they were a scapegoat the whole time.

$GME is up 11% as of the writing of this post. Who is buying it?

This is actually making me angry to watch.

-edit-

I had like one share - Robinhood just sold my shares without me ordering it. Dunno what happened there.

I just checked my TD Ameritrade account. I'm able to buy GME just fine (though I didn't hit the "confirm" button).

I know RobinHood messed up here. But... they never had a good reputation to begin with. Its an open secret that RobinHood's entire setup is kind of crap.

> $GME is up 11% as of the writing of this post. Who is buying it?

Robinhood isn't the only investment platform that allows trades on NYSE obviously. Evidently though, it had the highest volume when it comes to GME it seems.

It's annoying. The regular guy should be able to profit off this too.

I was at the gym yesterday and heard like 5 people talking about stocks: gme, amc, bb. Everyone is trying to get in on this and they're trying to stop it. They bogged gme at open to scare people and now it's back up. If they didn't remove the option for users to buy they surely would have bought the dip.

I had a pending market order fill at opening but now by brokerage mobile app won't log me in.

Only some brokers were locking it out. Most of the traditional big names did not.

hedge funds that shorted have to buy to close out their position, they need to buy.

This is literally an event that options / derivatives were made for.

If you're a long GME holder who feels like this price is temporary: you can buy calls or sell puts (bull-trades). Or, you can sell calls or buy puts (bear-trades).

If you own a ton of the underlying and are willing to be "forced to sell" the stock, selling calls would be a marvelous option to benefit from the uncertainty of the situation. Worst case scenario, you end up holding the GME stock (ie: lost the game of musical chairs). But you'll be paid for that risk.

This helps sketch why derivatives for stocks should not be legally tradeable. The stock isn't supposed to be an investment vehicle, but a tool for steering the owned corporation.

Indeed, this entire situation is analogous to the economics of running a GameStop-like trading post, where preorders are allowed. The store wants to sell lots of preorders in order to stay afloat even outside of release seasons, and customers want to purchase preorders in order to guarantee a low price for hyped releases. This is just like the original purpose of derivatives, which were to ensure that foodstuffs would be fairly priced for both farmers and grocers, even when prepaying for not-yet-grown crops.

One would hope that GameStop would not sell preorders that it cannot guarantee from game publishers; if a game publisher promises only 100 copies to a particular brick-and-mortar, then they would be in big trouble if they took 140 preorders.

Now, folks generally agree that GameStop's business model is on the way out. The stock should not be worth much, because there is not much to say about the future of the corporation, and so not much point in participating in corporate governance. But instead, it is overly-shorted, with about 140% of shares sold short. That is no longer in the spirit of derivatives, but is now a magic trick.

[0] https://en.wikipedia.org/wiki/GameStop_short_squeeze

From what I understand, BlackRock has a long stake.

https://www.sec.gov/Archives/edgar/data/1326380/000083423721...

>BlackRock Inc. trimmed its holdings in Gamestop, Inc. (NYSE:GME) by 18.23% during the 4th quarter, according to the company in its most recent Form 13G/A filing with the SEC. The firm now owns 9,217,335 shares of GME, which represents 13.20% ownership.

That mostly means that BlackRock customers have a long stake. BlackRock and other asset managers own the shares because they are part of the funds and ETFs that they manage for others. They are not really theirs.

Fidelity, BlackRock, Vanguard, Morgan Stanley. All the usual players. Combined they own nearly 40%

I mean the market cap is only $25B.

GameStop just also got $100M-$1B in free advertising (maybe someone in the ad biz could weigh in with a better estimate on that).

If the GameStop management allocates their newfound wealth well, this stock is just as likely to perform as well as any other $25B company.

They could do something like sell $2B in fresh capital and invest it in a slew of gaming startups, who then suddenly have distribution figured out.

Lots of creative ways they can not squander their windfall.

I know nothing about their management, but have seen many many people get a double and then hit a grand slam.

All comes down to the management.

My understanding is retail investors are buying stock now at $200/share, with the expectation that institutional players will be forced to buy it back at +$200/share to cover their shorts.

This will leave the original holders of the shares (the ppl the shorters borrow the money from) with a stock worth less than $200, but maybe more than their original purchase.

If the retail investors don't "get out", then definitely a few will be caught with the bag, but I think its mostly going to be institutional investors paying crazy prices for this stock.

Current price is $400 actually. Seems to be a very fast moving stock however, it probably will be dramatically different in price by the time someone reads my post.

Yes, if WSB gets their way it will be the short sellers forced to buy a bunch of overpriced stock holding it after the crash. I would openly celebrate their loss.

If all the shit to stem the tide works: shutting down discord and personal trading platforms, halting trading, yada yada works then WSB will be holding the bag. I wouldn’t really mourn their loss either because it’s a meme stock bought by people who can afford to can afford to lose.

I've read /r/wallstreetbets -- it's about the money.

Apparently there's an early buyer of one of these stocks who made $40 million off of it; I last read they only sold $14 million of their position so far.

Yep, that buyer is https://twitter.com/theroaringkitty

Here [0] he talks the first time about the GME stock; the video was uploaded on the 28th of July, 2020 and the stock was at $4.03 back then.

Here [1] you can find his latest GME update; he's sitting on $50 Mio. right now, although it's quite volatile.

Here [2] you can see a post from his Reddit account on November 2019 showing his GME calls.

It's just crazy and fascinating at the same time.

[0] https://www.youtube.com/watch?v=GZTr1-Gp74U

[1] https://www.reddit.com/r/wallstreetbets/comments/eick65/gme_...

[2] https://www.reddit.com/r/wallstreetbets/comments/e3kpbc/gme_...

https://www.reddit.com/user/DeepFuckingValue

I see a lot of young get-rich-quickers there. People who want to do things like borrow money to short stocks with.

https://www.reddit.com/r/wallstreetbets/comments/l6omry/an_o...

I'm not so sure

It's definitely still mostly about the money, sticking it to wallstreet is a real but small factor and more of a fun bonus and rallying cry.

This is just a rant. There's no insight, evidence or analysis to be found in the article.

The article is very tendentious.

I despise HFT as much as the next guy, but it's mostly useless rent seeking, economically, not massive manipulation. There is money on the table in trading, and the HFT firms try to take a bigger part of that pie, rather than letting it go to their competitors or other traders (like funds or retail investors).

Next, hedge funds shorting businesses they consider overvalued is a perfectly fine activity that helps price discovery and capital allocation. To the extent that they are deceptive and manipulative, that is a problem, just as deceptively and manipulatively hyping a stock up is a problem.

Finally, note that there is no value created here. It's purely a transfer of money. A few hedge funds might lose something (though that remains to be seen - shorts have no expiry, per se, and the borrow cost is absolutely manageable over days, weeks, or even months).

But mostly, this will be a huge transfer of money from those that jumped on the long trade late, to those that were in it early.

EDIT to add: And, putting a cherry on the fine research that went into the article, the Keynes quote is from A. Gary Shilling from the 1980s.

https://quoteinvestigator.com/2011/08/09/remain-solvent/

Premature gloating. The government can always come in at the last minute with bailouts for wall street and overblown charges against the redditors.

I see that you've been HODLing some GME. Sorry bro, have to charge you with economic terrorism. Nothing personal.

When have hedge funds been bailed out by the government? Especially over a single stock? Even if a small hedge fund or two go bankrupt this doesnt affect the economy much and there is no chance the government will bail them out. This isn't all of wallstreet on the line at all.

It's all connected. Any little hiccup can trigger a chain reaction of margin calls, or worse. Remember the CDO debacle from 2008.

When Goldman, JP Morgan, et al finally take the hit, we all know that DC will rush to their aid. It has happened before, and it will happen again.

Nobody is buying these worn-out wall street apologetics.

> With their heads in cloud nine, hedge funds tried to kill GameStop ($GME). They tried to squeeze it so much that it would suffocate and die. They didn't care about the people who will be out of jobs, unable to pay their bills, or even survive.

A low stock price doesn't, by itself, kill a business and put people out of jobs. Bad management kills a business, as does being in a bad business to begin with.

> Never in their wildest dreams, the hedge funds would have thought this day would come. The tables have finally turned as the hedge funds try to gulp in their last breath of air.

We're really not talking about "the hedge funds" in this case. Just a few hedge funds who, indeed, should've seen it coming. It's not like during the subprime crisis where every large financial institution had a large exposure to them. The exposure of the financial industry to GameStop is minuscule at the scale of the system. It's also not new, in the sense that sometimes hedge funds will try to squeeze one another too

> I honestly don't believe that people are going to sell their positions on $GME stocks. As I said, they are not in for the money anymore. They are fighting the good fight, and they have the potential to win this WAR.

Maybe they won't sell, but there are cases where fundamentals will catch up with the gamers. If/when the business runs out of cash and undergoes restructuring, the stockholders will be left holding pennies.

Maybe the CEO of GameStop (notice how he's been quiet?) will be like, f--- this job, I'm selling all my stock and retiring, thanks Internet

The author seems to have bought in a bit too much into the narrative in the WSB forum. This post reads more like a regurgitation of the grandiose pronouncements you see there rather than an insightful analysis of the situation.

One of the more interesting aspects of this story, IMO, is how many people used Robinhood to grab small amounts of GameStop stock.

Robinhood is suspected of having a business model of spying on their clients and selling that data to hedge funds (https://seekingalpha.com/article/4205379-robinhood-is-making...). Essentially, this puts their own clientele at an average disadvantage in all trades; the funds buying their data can set up algorithms to front-run any RH trades and skim a little more value than the people using RH could expect to get.

In this situation, it seems it didn't matter. Even if RH sold to the shorting traders "Hey, our clientele is buying the hell out of this near-junk stock," all the signal told them was how fast the train was coming at them, not which way to go to get off the tracks.

What I find interesting is that RobhinHood has removed GME, AMC, BB, and other WSB darlings. This immediately caused massive drops before market opening. Why does this read poorly to me? I don't do much trading on RH, but I had been using it to monitor the prices as I passively follow this saga. People are upset, and I get it.

So you're telling me that by buying GameStop stock, I can help screw over hedge fund managers? I have not bought a single stock in my whole life, but I'm in. How do I start?

You're probably late to the party here. Reddit is holding for $1000, but there comes a point where the funds would be so unable to fulfil their shorts that any ones left holding it will declare bankruptcy rather than pay, and you lose yours too.

Even if you're willing to risk throwing away some money to "stick it to the man", it will take a while - It may be easier in the US, but I signed up to Degiro to get some shares a couple of months ago and it was a fairly lengthy process even for Europe's closest equivalent to Robinhood. Day long stops in the process for e.g. putting in a verification transaction, or for degiro to do their kyc diligence etc, and the consensus is that the finale to this gamestop thing is friday, one way or the other.

I was reading last night a few posts saying they have to cover their shorts by Friday or Monday. So will be interesting to see the fallout.

No but you can gift your money to them by doing it. Be my guest.

I can help screw over hedge fund managers?

As long as you are cool with your actions making a bunch of different hedge fund mangers richer at the same time.

What's interesting to me is that there is a populist narrative at play, but wouldn't WSB overshort a stock too if they thought they could?

Nobody would be complaining if they lost a ton of money on a stupid trade. In fact they would be posting loss porn on the front page of the subreddit and laughing about it. In fact, some WSBers did short GME and lost a bunch of money.

But when the hedge funders get caught then for some reason it's bad and Reddit or Robinhood or the government needs to step in and fix the situation. Instead, we should all be laughing over Melvin Capital's loss porn.

How do you know there isn't a russian doll scenario of sock puppets all the way down, and some other hedge fund isn't going to profit in a few months from all of this on a trade we never heard about? After all, the hedge fund industry as a whole does better, not worse, when there is lots of churn, even when that churn means places with names like Melvin every now and then go under. I admit this scenario is not likely, but still, the should statements can be misleading, and I don't recommend them.

It's funny watching the know it alls here on HN bang their heads against the wall trying to explain WSB. In the last couple days I've seen I've seen everything from "lack of sex" to class warfare. It's really not that complicated: it's a short squeeze that became something of a single-minded flash mob to discourage weak-hands from selling before the squeeze is complete. That's it. The politics and everything else is nonsense.

I would really appreciate it if somebody could explain to me how people who sell short a stock are somehow “suffocating it” or “killing jobs.” And I say this as someone who has about 18 years of investing experience. I continue to believe stock shorting is one of the most poorly understood parts of equity markets and the wrong parts are most commonly parroted by people with little to no experience with short selling themselves.

And this narrative that somehow the regular Joe is sticking it to the man and using proceeds to pay medical bills makes for good heartwarming stuff, but I take umbrage with the idea that one person’s cause is more worthy than another and so they deserve the profits not this greedy oz character behind the curtain that is likely other retail traders and HFT momentum funds (the same ones that are vilified in this movement) buying it up as it moves higher and becomes more popular. If you make money trading, great but let’s ease up a bit with the saving the world nonsense. It’s not as if gambling your savings on call options is saving the world. It’s a catchy storyline to make people feel more comfortable with the idea of gambling.

This is what I don't get either. I keep thinking of Danny DeVito's speech at the end "Other People's Money."

"You know, at one time there must've been dozens of companies making buggy whips. And I'll bet the last company around was the one that made the best goddamn buggy whip you ever saw. Now how would you have liked to have been a stockholder in that company?"

GameStop sells buggy whips. Why shouldn't people bet against them?

Exactly. And I suppose not too many are aware of the fraud that’s been exposed by short sellers who usually pay the costs associated with investigating fraud. Wirecard or Enron, anyone?

Last I checked steam/etc doesn't allow one to resell their games. So they do provide a convenient service in that regard.

The big difference is that hedge funds are gambling other people's money, while taking a huge cut (and not taking the losses).

I'm investing as well, but only with my money.

I am surprised that the cornering of the silver market in 1980 is not mentioned here. The Hunt brothers had driven the silver price to the moon, so the big guys simply had the rules at COMEX changed, which led to a sudden drop of the silver price.

https://en.wikipedia.org/wiki/Silver_Thursday

I think it's a bit of both, but to be honest, it doesn't feel like sticking it to the man.

Why? Because it's a ponzi scheme. People who made money off this already (and are not holding the line) are not the people affected by the man. I don't believe my plumber, my electrician, or the busboy at the restaurant are investing their money on GME stock using Robinhood. Who do I see doing it? My friends, mostly young white collar workers with money to invest/lose in a bid to trying to get rick quick. Your typical reddit user of sorts.

I mean, my first few years on this country, while going to college at night, I worked construction. I worked with all kinds of people, from all kinds of lives and believes. When 2008 happened, many of them lost their life savings or their houses. At that point, I was working as a software engineer already, my older colleagues lost a chunk of their 401k - which they probably have regained and built upon by now.

Sticking it up to the man? I don't think so. The end of this will be fast and painful to many.

"The fastest way to get clicks... write a story about /r/WSB" said every website/media outlet editor.

I’d just like to suggest the possibility that there’s nothing noble going on in /r/wallstreetbets and this is all being orchestrated by a small number of people taking advantage of useful idiots.

I’m not attempting to proclaim this is the truth, just giving a stray thought of mine.

Eh, I’ve seen enough viral memes in my day to believe this happened without an orchestrator.

I’m seeing so much news about this but don’t understand what’s happening. Can someone do a recap?

Institutional investors were betting that GameStop (GME)'s stock price would fall, redditors were betting that it would rise. So far the redditors are winning.

Early on, the bets had some basis in reality, but now it's become more of a speculation game.

Yesterday, two of the big institutional investors decided to fold, effectively loosing 100% of their investments. Edit: or, potentially more.

The same thing has started happening to a few other stocks.

I linked to the Bloomberg Money Stuff column a couple of other places, but I'll post the links here too for a more thorough (and humorous) overview:

Monday: https://www.bloomberg.com/news/newsletters/2021-01-25/money-...

Tuesday: https://www.bloomberg.com/opinion/articles/2021-01-26/will-w...

Yesterday: https://www.bloomberg.com/opinion/articles/2021-01-27/reddit...

>Yesterday, two of the big institutional investors decided to fold, effectively loosing 100% of their investments.

They can lose much more than the total value they initially invested into the shorts, since they have to buy back at several multiples of the price of the stock at the point they bought and they had heavy borrow costs too. That's why the hedge funds are at risk of going bankrupt - because they aren't only liable for the value they invested but they're liable for the whatever cost it takes to buy back the stocks they shorted.

Users on r/WallStreetBets have rallied around buying stocks, like GameStop ($GME), that are heavily shorted by the market (generally by larger trading firms). This buying has driven the stock prices up very very quickly, because of the buying itself and other knock-on market forces (google: gamma traps, short squeezes). The players that were short have thus lost a lot of money on their bets. r/WSB has taken a lot of pride in this and using it as a rallying cry to keep buying. It's mostly bs - everyone just wants to get rich - but it's effective and making headlines.

It's quite simple really:

1. Big hedge fund bet against GameStop stock (shorted up to 140% of the stock, it's called naked short and everybody thought it was illegal since 2008 but that's another story)

2. Lot of small-to-medium investors coordinated over Reddit to take the opposite "bet" en masse (basically buying a lot of GameStop shares) so that the price will go up and "big hedge fund" lose a lot of money.

=> The plan worked. It's a first. Hence the news coverage.

Edit: Typos and formatting

Was/is there a risk of the redditors losing all their money / just as much money a the hedge fund? Or is it like the hedge fund were betting with worse odds so have more to lose (excuse my ignorance of how shorting works!)

This isn't a naked short.

A naked short is when you short a stock without first borrowing it. It is not the same thing as having shorts past 100% of outstanding shares, since a single share can be lent multiple times.

Its twitter but this thread is a pretty nice summary https://twitter.com/MrBrownEyes2020/status/13545170672407715...

The whole thing is incredibly annoying.

I'm a moderator of /r/silverbugs and we've been getting slammed all morning with either accounts from either /r/wallstreetbets or accounts trying to make them look bad, with dozens of brand spanking new or barely used accounts spamming to buy various silver related stocks/funds.

I've banned more accounts this morning than I have in 2 years and, it really does appear that they are starting to have some impact on the price of silver with their attempts to pump stuff like SLV.

Although there is definitely a David/Goliath fairness scandal in here, this piece doesn't seem to know the difference between market makers, brokers, and hedge funds.

They're all acting in concert right now.

That's wrong, there's undoubtedly hedge funds who are the same way as WSB.

And... what would that be?

Market maker: guy who makes money standing in the market all day so that when you come, you don't have to wait hours for a dude who wants to buy your shipment of pork.

Broker: offers you access to the market, and often lends you money as well. Needs scale, is often a lot of marketing, both in getting the customers, and in getting the customers to actually trade.

Hedge Fund: Umbrella term for an investment company that can do a very wide range of things. They can buy art, or fund litigation. Often we just mean they buy and sell stocks, and take some of the profits when things go well.

This article feels very one sided and opinionated to me. I wish it presented the issue in a less emotional and more objective way, focusing perhaps on the details.

I'm really confused why the general public is enraged at the brokerages' decision to stop new buy orders for GME.

It's very clear that retail is going to lose their shirts in the end of all of this. By blocking new buy orders, the brokerage is effectively protecting its naive clientele.

This isn't some government conspiracy. This is a firm trying its best to operate in the best interest of its clients.

I think the large majority of the cliente is fully aware that they will lose out on this long term.

So it's not about protecting the client.

If it would be about protecting your clients it would be like your care (=a utility) not allowing you to drive into the mountains for a hike (=user action) because the weather is bad (=makes action risky).

I think no one would say that this is ok or acceptable, but if the utility is a broker and the action is buying stock on a high risk it is ok?

I agree there are some retail traders who are going in with eyes wide open. However, due to the power of greed, a significant portion is not. And, the end result will be people losing their retirement income.

So, the difference between your analogy is in the severity of the risk. Your car shouldn't let you drive into the mountains for a hike if it knows there's a 20% chance you're going to lose a limb that prevents you from living a happy life.

The brokerage (Robinhood) is absolutely not protecting their clientele. If they were, they would've explained what they were doing when they did it or shortly thereafter. The silence is an indictment.

My guess is they are staying silent to avoid legal liability in the case that the run-up continues onwards in a significant manner.

Populism seems to so often miss the point / target and seems as manipulative as anything else this rant of an article is talking about.

It's never more about money than when "It's not about the money anymore".

I think that with a stock whose worth at this point is the result of pure dutch-tulip-like speculation, the question is where is the tipping point where money just becomes too good to ignore and when people start collectively selling, making the stock inevitably plummet.

This populist narrative that WSB and CNBC are promoting is pretty weak. This looks like forum manipulation with a layer of memes pasted on top. Citron and Melvin were set up as bad guys. Someone started this. It's definitely not organic.

That said, it has definitely worked. Any idea that retail investors can't move markets is now gone.

This is market manipulation 101. I hope they pay for it, but I doubt any lawmaker is interested in investigating them.

Care to explain how this is market manipulation?

Certain brokerages are not allowing buy orders for certain stocks, but are allowing sell orders for the same stock, or other unrelated stock.

Certain brokerages also have commercial relationships with the people who are in the short position.

Feels like a conflict/abuse of your power.

Not letting people buy forces everyone to either hold or sell, bringing down the prices. Moving to a new broker takes time for approval, transfer.

Locking out a specific set of actions for a specific set of investors based on the data you collect on them while allowing one actions (sell) that inevitably drives asset price downward since that's literally the only action people can take.

I think it is about the money. It will definitely be about the debts, which were unwittingly taken on by everyone who bought on margin at these levels. The price will collapse.

The other bad assumption in this article is thinking the hedge funds are on one side of this. Some hedge funds made fortunes in the short squeeze.

The irony of all this is that ultimately people will stop buying and prices will fall. Then all the regular people who participated in this will be stuck holding falling stock. Panicked selling will ensure, crashing the price.

At the end of the day then, both institutional and retail investors will get screwed.

For anyone coming in now, dang’s recap comment provides some resources with background information on what’s happening: https://news.ycombinator.com/item?id=25933543

I am just waiting how long before Reddit itself gets sued over this. Let alone how long before someone comes for the users and gets a court to have reddit surrender information.

how this plays out is going to be very interesting and more so for who supports which side

One thing to know about the stock market is that it gives the real time price of a stock, but also the real time price to set the price of a stock (by matching the order book volume up to the price you want to reach, then maintaining it).

Well the GME short squeeze at least. It's sending a message.

Are there still people holding or opening active short positions in GME? I'm wondering how many people will be left holding the (overpriced) bag.

Are there any stats on how big the short positions are for Gamestop, how this is distributed, and whether they are getting margin calls?

this is a bit much. shorting != trying to kill a business. it can certainly depress the stock price, but so can closing a long position.

Does not seem far fetched. Killing the business means maximum profit for the shorters.

Having a short interest of about 140% is also a good indicator that they would have loved to see GME bankrupt.

In the end a short means a future buy and 140% of shares bought in the future means the price will go up eventually..

While the business dying means maximum profit for the shorters, the act of shorting isn't killing the business in any way; the price of shares does not affect the revenues of GME nor their workers jobs, it has some impact on the bonuses of the top managers and that's it.

The shorters are predicting that the business will fail (and hoping for their predictions to come true), but they aren't causing the failure, so it's misleading to say that they are trying to kill the business as long as the only thing they're doing is shorting the stock. There's a very big gap between hoping that a rich uncle dies because you'd get some inheritance and actually trying to kill him.

If the share price goes to 0 because of bankruptcy, shares don't have to be bought back/returned. That was the outcome Melvin Capital was going for.

shorts get a bad rap for being one of the more transparent cases of profiting from the misfortune of others in finance. and yes, it does create incentives to do other stuff to kill the company, but similar incentives exist with a long position (one way for a symbol to go up is for competitors to fail). so far I haven't read anything suggesting these hedge funds did anything other than take a large short position in $GME.

And in the shadows, Blackrock and the other institutional investors lending the stock in the first place probably just roll in money from the current situation.

And imho they have to initiate the "real squeeze" by wanting their stocks back. But I think they like the current situation, high enough to make the short sellers bleed, but not high enough to knock them over fully, so they can still merrily sell to them (OTC) and Jane Doe, while happily pocketing some sociopaths money for extending the lease on their remaining shares... They don't profit at all from the WSB-proposed rockt-squeeze, where the stock goes up, then trading is stopped for everyone and they can not liquidate everything and they also won't get everything back, when their borrowers default. But this is heaven for them: who could have expected that investing in a company slowly sliding to bankruptcy could be so profitable!

Here's a question. How much of the investors in funds like Melvin are actually wealthy family offices and high-net worth folk, and how much are pension funds, endowments, etc?

Because if it's the latter, then the losers here aren't billionaires and Wall Street.

I sure hope pension funds are not investing in hedge funds focused on shorting stocks.

Watching events in USA in last month makes me really worried about relying on computer related stuff from US.

Trump's Social Medias,

Parler with AWS and the rest,

Reddit Warning to WSB so they had to close for a few hour(s),

Discord Ban to WSB,

RobinHood Scam

scam follows scam basically, no wonder people are angry when "just a few" control everything HARD.

This land is no full of freedom in any sense

huh. i always thought there wasn’t any money in saving the world. guess i was wrong.

Moderna has created a few billionaries:

https://www.forbes.com/sites/giacomotognini/2020/11/12/mit-s...

I have a lot of trouble with this frame. Yes, hedge funds are bad. Yes, it's hilarious watching those shorts get squeezed. No, WSB are not modern Sherwood bandits trading on Robinhood. They are also engaged in what is pretty clearly a criminal conspiracy to commit securities fraud (and yes, a deliberate attempt to trigger a short squeeze is securities fraud), and they're doing it on an open internet forum. This is not going to end well for anyone involved.

Demonizing your enemies and styling yourself a hero of the people does not protect you from prosecution. We just saw that in the capitol not three weeks ago.

As for GME? Yes, that stock is coming down. Yes, the hedge fund can probably arrange financing to hold longer than the bandits can. Yes, it's probably going to be the "little guys" holding the bag at the end of this.

It's criminals all around as far as I can see.

I'm not convinced that a plot formed openly on the internet actually qualifies as a conspiracy.

I'm sure things would have worked out differently for Nixon had he distributed a press release regarding an up-coming DNC burglary beforehand.

Assuming you're correct and this behaviour is illegal, who could the SEC prosecute?

The ultimate instigator, u/deepfuckingvalue, posts nothing but screenshots showing his position, without further comment. There don't appear to be any specific organizers within the group, and many posters claim that they are buying simply because they "like the stock." That would be a risible position for an institutional investor, but as these are individual retail investors it seems like it would be tricky to prove malfeasance.

> yes, a deliberate attempt to trigger a short squeeze is securities fraud

Can you provide a source for that statement?

> Yes, it's probably going to be the "little guys" holding the bag at the end of this.

I agree 100%.

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