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Comment by nimbius | Hacker News Reader

>Reddit's Elegant GameStop Revolution Will Be Crushed

the best most analysts predict is an SEC or federal bailout for some hedges, but theres no way either institution can cover them all...

the fact that we keep seeing public investment firms lock out these trades and hourly hit pieces from talking heads seems to suggest hedges are all out of ideas. This is the financial equivalent of asymmetric guerilla warfare. These players don't care about losses because Their losses are the price of admission to watch your curated hedge fund burn.

The truly scary part is this is not only working, but is a repeatable strategy that will work over and over. The next internet board to lead after wsb will be just as successful at bankrupting casino firms using their own casino tactics.

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> The truly scary part is this is not only working, but is a repeatable strategy that will work over and over. The next internet board to lead after wsb will be just as successful at bankrupting casino firms using their own casino tactics.

Uh, should I be feeling sorry for the hedge funds? I can't say I find their plight particularly sympathetic.

No, they’ve made billions of the backs of everyone else for years.

> These players don't care about losses because Their losses are the price of admission to watch your curated hedge fund burn.

I'm seeing stories of people putting their modest life savings into GameStop stock. When the bubble invariably bursts, they will be left penniless. We will see people making actual, huge losses that they very much care about.

Sure, there are also the people to whom this is a game/collective action, and who can afford to lose a few hundred bucks to make a statement or have fun. But let's not pretend that that's the case for everyone. There will be painful outcomes here, with lots of people spending more than they can afford on stocks that they will only be able to sell at a tiny fraction of the current price. Stock price manipulation can be enjoyable, but it shouldn't be confused with prices going up because the business behind the stocks actually does better.

This is such a weird situation: On Twitter I see several of the same people who are usually like "Bitcoin is a scam, it's pure speculation without fundamentals" now applauding the GameStop situation just because this time the speculation without fundamentals also hurts hedge funds (but ignoring that it will hurt lots of individual investors as well).

> a repeatable strategy that will work over and over.

As long as the people playing along have the real money to put into real stocks that are not worth that real money. It would be more sustainable/repeatable if people had stopped driving up the price once a reasonable ceiling was reached.

> I'm seeing stories of people putting their modest life savings into GameStop stock. When the bubble invariably bursts, they will be left penniless. We will see people making actual, huge losses that they very much care about.

You're not wrong, but how is GME different that any other stock someone could have gone all-in on?

Nick Maggiulli posted this on a somewhat unrelated matter (some TikToker's strategy to fund their lifestyle):

> If it wasn’t obvious before, it bears repeating now—some people are going to beat you at investing. Some of them will be dumber than you. Some will be less knowledgable. Some will even be completely wrong about the future. But they will beat you just the same. There is no great arbiter of justice in the investment world. There is no cosmic force that ensures that only the knowledgable make money. If there were, then I would be a far richer man today.

> But what does exist in the investment world is the inevitable pull of fundamentals. The inescapable attraction between prices and reality. Like a moth drawn to a flame. Yes, markets will go through periods where some people make lots of money very quickly with little effort. We are seeing such a market today. But, eventually, these same markets find their way back. As the legendary Benjamin Graham once said:

>> In the short run, the market is a voting machine but in the long run, it is a weighing machine.

> So let them vote. Let them vote on which stock will be the next to double in a day. Let them vote on which non-profit will make them rich. Let them vote on what to buy and what to sell. Let them vote I say. Because gravity will eventually set in. Maybe not today. Maybe not tomorrow. Maybe not next week or even next year. But eventually it will set in.

> So there is no point in making fun of other investors because they happen to be doing better than you, even if they are using a seemingly foolish strategy. If they are truly fools, they will learn their lesson. Maybe not in this market, but maybe in the next one.

* https://ofdollarsanddata.com/let-them-vote/

> You're not wrong, but how is GME different that any other stock someone could have gone all-in on?

It's different for the very reason that we are discussing it: Because people got together to deliberately (and quite possibly illegally) manipulate it into a bubble.

shrug

I see little difference between what WSB is doing and what various newsletters or Jim Cramer does.

One of the folks has been published about why GME deserves a chance has been published his rationale since at least mid-2020:

* https://www.youtube.com/c/RoaringKitty/videos

Some people are in because of his fundamentals analysis, some are in for the LOLz, some are in as an F.U. to the hedge fund fat cats, and some are in to try to get rich quick.

> I'm seeing stories of people putting their modest life savings into GameStop stock

These people were too naive to speculate in the stock market, and had they not bought stocks, they would likely waste those savings in another naive investment.

Some naïve investments are sold more convincingly than others. Many people would go on saving until some huge, once-in-a-lifetime opportunity (like this one is made out to be) came along. Otherwise, if "they" collectively jumped on every opportunity, they wouldn't even have any life savings to waste on this one.

Either way, the OP's point was that everyone is only playing with money they can afford to lose, and that point is false.

Should we shut down casinos, as well, then? How about state operated lotteries, are those still okay?

I genuinely do not understand this "won't someone, please, think of the children?!" line of reasoning. This isn't the first short squeeze in history that led to retail winners and losers. Retail investors had a hand in the dotcom crash and the 1929 crash.

Why is it only applicable to this specific short squeeze?

Nobody said anything about shutting anything down.

I don't think it's a repeatable strategy. Institutions that didn't knew that already just learned that it's wise to monitor places like /r/WSB and possibly to hire someone to run interference and prevent the next pileup (unless one is desired, that is).

This type of interference had almost zero effect on wsb, so its hard to see it effective in the future on a platform that could most likely be decentralized.. Wsb moderators were quick to identify and remove rogue actors and go private to protect their objective. Fud was openly ridiculed and debunked on wsb.

Probably not, but neither is the manipulation and huge profits the hedge funds where making doing this sort of shorting as the moment it’s noticed you’ll get another GameStop. End of that era for hedge funds I imagien

Boiler rooms have been a thing before reddit. It's repeatable, just not likely in the near future.

The casino owners will change the rules of the game.

> the best most analysts predict is an SEC or federal bailout for some hedges

This doesn't make sense. What analysts are predicting that? Hedge funds are not core infrastructure for the government the way banks are. And individual hedge funds generally manage tens of billions at most.

If this effected a systematic market correction, I could see many hedge funds going under causing a catastrophe for brokers and banks. But I don't see why hedge funds would actually be bailed out by the government.

It is only repeatable if someone is willing to short a huge percentage of a company.

Maybe they should think twice anyway!

In one since shorting is literally trying to take advantage of someone that has faith in a company. Many times people will short a stock and then release a paper shitting all over the stock and painting it in the worst light possible (legally) to push the price down.

I have little sympathy for them. I don't think shorting should be illegal, but they know what they are signing up for.

Yeah it's repeatable, all it requires is someone to short a high percentage (say 80%+) of available stock.

These bailouts are insane. And, if 2008 and 2000 weren't anomalies, _everyone_ gets bailed out! On both ends of the transaction. The little guy trying to "day trade" and the big guy taking big risky bets.

>the best most analysts predict is an SEC or federal bailout for some hedges, but theres no way either institution can cover them all...

Why the hell should the SEC do that? This type of nonsense is infuriating. Everyone loves capitalism and deregulation until a big player falls then it's time to run to the government and save them.

>This is the financial equivalent of asymmetric guerilla warfare

Which is what the average person not involved in the financial markets experiences every day they exist because of decisions being made by people far away with more money than they'll ever have in their lives.

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