u/DeepFuckingValue and the GameStop Reddit mania
wsj.com
wsj.com
Freenet [0] has been providing censorship-resistant, anonymous, decentralized hosting for 20 years - and is still in active development!
You could upload it to Freenet without any server whatsoever and it would stay online for as long as it is popular, even if your machine goes offline.
And you'd be anonymous while doing so!
It's like saying speculating on py-umbral (a standalone open source project) because we use it to build NuCypher (a blockchain-dependent open source project).
The only add on here is that you can pay some service in filecoin to keep seeding your torrent forever.
So their end goal might be making money off that cryptocurrency...
Thanks to the GP for causin me to figure out why the wheel is being re-invented here! :)
:|
I'm not yet saying that Protocol Labs will ultimately find the success they're looking for BUT writing off their efforts as "just a way to make money off of cryptocurrency" I feel is pretty dismissive.
I.e, the value of the coin is driven by the interest in the tech it provides.
"The market price of the integral reward"? What is that supposed to mean? Filecoin is just a medium of exchange for people buying and selling storage services. Filecoin does not offer anything specific and its platform has to compete with plenty of mature, efficient alternatives.
> the value of the coin is driven by the interest in the tech it provides.
What "tech" does it provide? Not IPFS, for sure, that already was under development and could have come to fruition as a regular open source project. A decentralized market for storage, "proof-of-spacetime"? These might be interesting. But again, if we want to fund these things there are surely better/cheaper ways to do it. $250 million is a lot of money for the tech that was developed so far.
More importantly: there is nothing about the "tech" that requires $FIL to make it work. The market dynamics will be the same whether they used FIL, DAI, ETH, wrapped BTC or even a dollar-pegged token they decided to issue. People are not going to pay more or less for their storage because the price of the token went up or down.
> Currently at $22, not bad for a random coin.
These are the kind of statements that almost make me side with the buttcoiners. At this point, with all the speculation, market manipulation and naive FOMO "investing", there is no useful information to be had from the price of the token.
"X but we monetized it" (which includes "X but we got VCs to pay us") is an extremely common reason to reinvent X.
BTW, for folks new in tech - it's amazing how influential that wave of programs were, even though they largely failed in the marketplace. Napster founder Sean Parker later became the first investor and first president of Facebook. Also involved in the wave (in a tangential way) was Mark Zuckerburg, whose Synapse Media Player got a $M+ buyout offer from Microsoft while he was still in high school. Uber founder Travis Kalanick's first two projects were Scour (a P2P filesharing app) and Red Swoosh (a P2P CDN). I met the AudioGalaxy founder while working on Google Search - he later went on to become one of the early Waymo engineers. The Kazaa founders later went on to found Skype, and we know where that went. Chord (an academic research project in distributed hash tables) was led by Robert Tappan Morris (originally famous for creating the Internet Worm of 1988), who then went on to co-found YCombinator, which owns the website you're reading this on. The gossip protocol invented & refined by Gnutella forms the basis for many cryptocurrency P2P protocols like Bitcoin & Ethereum.
There's probably several trillion dollars in market cap attributable to the intellectual descendants of a bunch of nerds who wanted to share stuff over the Internet and fuck over the RIAA, MPAA, and governments.
I view it more like an instance of synchronicity, where a lot of bright young people looked at the world independently and decided that this was the space they wanted to be working on. And then when that space didn't pan out they went their separate ways, but the fact that they were bright & energetic meant that the successor projects became huge.
(I wonder if a similar effect explains the General Magic, Paypal, and Justin.TV mafias.)
...
I’m sure there were great synchronicity of people working on squaring the circle in 18th century, and of people working on the philosopher stone earlier, except they were all misguided so we don’t talk about them.
Google did this to very good effect: even when I was there the first time (~2010, over a decade after founding) they still had a sterling reputation in the press, while Netscape got crushed by their arrogance (and Microsoft, relatedly) less than 5 years after founding. Microsoft too, for that matter: through the 80s they were seen as an innocuous software publisher, because the hardware was where the money was, and then in the 90s people realized hardware was a commodity and Microsoft was a monopoly.
Justin was and always will be a legend - he wrote an AOL Messsenger ad blocker and mp3 search plugin _while working at AOL_
It at least aims to be so :)
As with any anonymous p2p network you need to know:
Your level of privacy depends on your threat level. If the government is after you, they may very well know exploits. If you just want privacy from corporations for perfectly legal reasons then you might be fine.
> How does it compare to Tor and i2p?
See "How is Freenet different to Tor?" here:
https://freenetproject.org/pages/help.html
TL;DR: Freenet is a self-contained *storage* network. Tor is a *communication* network, I2P as well. The latter is also self-contained. However as they're both communication networks they do not provide censorship-resistance. The endpoints you're connecting to are central servers and can be taken down.
Can you elaborate on this? This reads as essentially false to my understanding. If by endpoints you mean 'relays', those are not 'central servers'. If you mean directory authorities, then yes, those are centralized.
With that said, I'm still not sure what you mean by 'they do not provide censorship-resistance.'
They absolutely have and do provide censorship resistance.
No, it's not false AFAIK :)
By 'endpoint' I mean what an address on those networks actually *addresses*.
Both a Tor-address (a .onion hostname, or a regular web address if you use Tor to access one), and an I2P-address, are essentially similar to an IP-address in terms of being the address of a *machine*.
They are anonymized, but the data is routed to the very specific machine which the address is of.
A Freenet address on the other hand is the address of a *file* - basically a hash.
So in Tor and I2P, even though the machine behind the address is anonymous, you can still DoS it because you have the address of the specific machine where the data is at.
In Freenet, you cannot DoS the machine because the address does *not* tell the network where the file is stored. It only tells what file you get. Any machine on the network can serve the file to you!
And in fact, if you try to DoS a file by requesting it very frequently on Freenet, it will instead be distributed MORE on the network: Machines along the path where the data is routed will cache the file.
That's what provides the censorship resistance.
It offers a "darknet" mode where you manually add peers by exchanging cryptographic keys with them.
The connections to those peers are fully encrypted then and thus very difficult to block because you can't detect Freenet with merely packet inspection anymore.
Besides, the ability to censor individual Tor sites is *bad enough* already IMHO.
However, I'm asking about your description of Tor and I2P
>However as they're both communication networks they do not provide censorship-resistance. The endpoints you're connecting to are central servers and can be taken down.
This is technically incoherent, and I'm not sure what you mean by it.
As far as I'm aware, at no point does your TCP traffic from your tor client connect to a 'central server'. I'm not familiar enough with I2P to comment.
Think of freenet as anonoymous Gnutella
Source?
It's become satisfyingly fast for me over the past years.
> only supporting static documents instead of interactive (tcp) servers.
You can develop dynamic services on Freenet just fine.
It is just done in a different fashion technically:
Instead of hosting the software on a server, and running scripts on the clients' web browser, there is no server/client model. It's true peer-to-peer: Every client is its own server, and the code runs there.
I.e. users install "plugins" for Freenet, and those use the network primitives which Freenet provides to establish dynamic connections and render dynamic content.
So you can have dynamic HTML if you want to. It's just not served by the sites you visit. Instead, things are developed "once and for all" as plugins for all sites and users to use.
So it's kinda like "forced true decentralization". You can't just shove JavaScript down the throat of random visitors of your site. You actually have to go through the effort of making your site's service a real application which people voluntarily choose to run.
>Source?
>It's become satisfyingly fast for me over the past years.
My understanding is that freenet (At best) scales logarithmically where Tor scales mostly constantly. Scalability and (current) speed are not the same thing. However saying poorly was probably unfair, I should have said is less scalable than Tor is.
> You can develop dynamic services on Freenet just fine. > [...]
What you're describing is how I would define a static page (plus client side scripting). Which works fine in many use cases. But you can't ssh into some server over freenet, or plop your php site from the world wide web unchanged, on to freenet. You can do these things with Tor, along with (at least in principle) all the "true p2p" things you mentioned you can do with freenet (Obviously in the Tor case you need to have your server always going and have sufficient capacity). That's why I would describe Tor as more flexible in terms of the things you can "host" (for lack of a better word). But the flexibility comes at a cost, and in exchange for being less flexible, freenet has a lot of interesting properties that tor does not have.
- Anyone can use the "KeepAlive" [0] plugin to pin content.
- Nobody can take down any content, not even the original author [1].
Censorship-resistance is a central design goal of Freenet.
[0] https://github.com/freenet/plugin-KeepAlive [1] https://freenetproject.org/pages/help.html
https://github.com/sanity/tahrir
"Tahrir aims to be a distributed, decentralized, scalable, and anonymous "workalike" for services like Twitter, Google Plus, and Facebook. It is at an early stage of development, but is being actively worked on by a number of volunteers."
Anyway, software doesn't have well respected ISO standards and 20 years is an eternity in the age of the internet. So I don't see a problem with ipfs. Also, ipfs looks like it's more flexible and reusable.
There you go. It's not perfect though because a lot of the links still point to live assets. But it captured the important bits.
SingleFile is good for this:
- https://addons.mozilla.org/en-US/firefox/addon/single-file/
- https://chrome.google.com/webstore/detail/singlefile/mpiodij...
https://cloudflare-ipfs.com/ipfs/QmTW7sdBbZ1BXau8Cmrpv5srf38...
That's the beauty of IPFS. You can use whichever gateway you want, even your own.
I would caution people to not quickly fall into the "if he's still in, I'm still in" meme. He has secured a $14 million bag, regardless if the stock goes to zero he's already secured a life changing amount of money, he can afford to weather the storm. If you're holding because he's still in and you haven't taken any profits you are nowhere near in the same position as him.
A hodling mania has overtaken the subreddit that would make btc blush. Know that we don't know what kind of deals are happening behind closed doors in these two last days of manipulated activity. A sustained short interest does not necessarily mean that the shorts are holding their initial position, they could have closed and reopened at these elevated levels.
The narrative has changed so quickly from this being a value play, to a short squeeze, to now militant activism via buying stock as a means to sticking it to the man. The rhetoric is as volatile as the price. The overall market is stressed, things are getting weird and I would not be surprised if this is the beginning of another stock market crash.
The fact that IBKR couldn’t handle a negative oil price at that time made me realize that for all their marketing as being a higher quality broker for serious investors, they had some serious holes.
Then when they stopped buys on GME while Vanguard and Fidelity still allowed them, I gave up on IB completely.
Right now I’ve bought puts on IBKR - I expect a lot of clients with money will drop them (along with Robinhood etc.) and move to Vanguard/Fidelity.
If I am not mistaken he did say in one of his videos that there is a chance for a squeeze to happen.
This guy was a well known poster. I'm sure he thought he had some power to motivate wsb users to invest, but he might not have predicted he had enough power such that he would get embroiled in an investigation. Regardless of how "internet-tuff-guy" people are, most people really don't like to suddenly be thrown into the limelight of a financial fraud investigation, even if they are innocent of any crimes.
Thus, the CYA language. Better to get out in front and claim ignorance just in case.
The short squeeze thesis(s) were made by other reddit users. Even those weren't particularly popular until around 1/13-1/15 when GME saw an unexpected pop. It was around then people were like "oh this squeeze thing might happen. we could test it"
It seems like he was investing for the long haul, because of the stock and the company’s fundamentals.
But, the phenomenon now is the short squeeze, because of the excessive shorts over the available floating shares.
There is no way that GameStop has an actual fundamental value of $300 per share. That price is clearly inflated, and in a few weeks will decrease, probably to somewhere above $20, but not that much higher. The market will eventually correct, but $300 is an over-correction for sure.
Look at all the short-sellers of TSLA who made the same mistake. These companies are valued on what the market decides and we all know "The market is irrational".
Its meaning has nothing to do with Keynes' quote. It's instead a clever play on words that refers to the recurrent accusation (and subsequent meme) that WSB are a bunch of autists/retards who don't have any idea of what they are doing and thus are doing it entirely wrong, and the defiant reply from the WSB crowd where they state they are ready and able to continue doing it for far longer than what hedge funds, who are throwing rivers of cash at the problem, are able to withstand no matter the cost.
It's - WSB can remain retarded longer than you can remain solvent.
"Well as a longer-term investor I have the benefit of heavily discounting daily moves. I care much more about the longer-term charts, and these have been fairly constructive for months now. Even today, after the typical quarterly sell-off, the longer-term chart still looks decent so there’s been nothing to panic over. Let’s see what the price does over the next few weeks. Of course charts are only a minor part of the equation in my opinion. The fundamentals are much more important in a situation like this."
The issue with tech, much like math, is that it often takes a while to figure out all the potential, case in point GPGPUs and Deep Learning revolution. The tech, the ideas, the internal code/models, the people (Jim Keller in AMD, and TSLA) are all catalysts that can't be quantified in the same way as traditional 'fundamentals' are treated.
Case in point, who in their right mind thought a bunch of self proclaimed smooth brains would hold and not panic against ladder attacks and FUDs? The smooth brains have been in the game as much, they have seen their capital dropping to 0 more than the HedgeFunds are accustomed to losing at their own game.
A hedge fund with capital and influence, capable of controlling the narrative, could and tried to decide the outcome of their bet based on their bet, we saw this with TSLA as well. They believed, like most people, that GME would go bankrupt, they didn't consider the bull case [1] because things had been going down for so long, but GME's revenue is periodic, bringing us back to the fallacy. Things are how they are until they are not, and the inability to adapt due to logical fallacies becomes evident. There's a reason why reasonable people in WSB suggest an investor should know both cases by heart, if you can not afford to control the narrative, you can not direct the behavior of the market.
[1] www.gmedd.com
I do agree that fundamentals (for whatever it means) are not sufficient for success. In the end of the day, investments are based on speculations about the future. The reason the fundamentals matter is that they provide some guidance for your speculations. The basis which you can build your narrative upon. Sometimes they can mislead you, often things happen you missed or couldn't predict (e.g., a pandemic), etc.
Finally, I also agree (if that's what you meant) that some narratives people follow are not based on fundamentals, but rather based on their biases or whatever someone else may have told them. But if you ask me such investments fail more often than not.
That is the argument, the hedge funds made a bet and had already decided the outcome, my argument is simply that they ignored the bull thesis because they had already decided the outcome. They also ignored the possibility of getting royally forked up. If main street figured it out, somebody else could have as well, and Michael Burry did.
Perhaps economists are basing these so called fundamentals on a false premise.
Humans are emotional and make mistakes, but most investors at least attempt to make sound investments, and that’s what drives the market at the end of the day.
If GameStop the company continues its failing trajectory, then GameStop the stock will eventually follow.
It sounds great to "invest on the fundamentals", but there doesn't appear to be a way for the average person to even comprehend what "the fundamentals" even are.
But there has to be at least one fundamental: If the company goes bankrupt, the stock is worth nothing. Gamestop is most certainly going to go bankrupt eventually. Their business model doesn't work for today's market.
No one is going to convince me that GameStop has a way to avoid that eventuality.
You're right to call this out. It means absolutely nothing.
These massive hedge funds (etc.) throw around billions of dollars on a whim and suddenly they're worried about "fundamentals"? C'mon.
That would mean that ALL 500 of the US' largest companies by market cap all go completely bankrupt WITHIN ONE CALENDAR YEAR.
I think if atomic bombs were to destroy the 50 largest cities in the USA, that this wouldn't happen. There would still be enough economic activity in enough of the 500 companies to justify some price above zero.
So the scenario would literally be the apocalypse. The kind of apocalypse where the US dollar has zero value. The kind of apocalypse where the amount of money in a brokerage account would not even be on the top 100 list of things a human would be worried about.
Even losing 90% of value would be an event so unprecedented in magnitude that it would make anthropomorphic climate change seem like a footnote in history.
In essence, you're correct that if the company goes bankrupt, the stock is worth nothing, but you make a mistaken assumption in that a company without a viable business model or future profit must go bankrupt - if they have an asset base, they can restructure or shut down long before their accumulated wealth is spent.
Chewy's Founders and now board members are obviously not in the business of losing money, they bought a sizeable portion of the stock and are now members of the board.
GME has been transitioning to e-commerce (this is where Ryan Cohen and the new board comes in), where they tripled their sales (e-commerce) each year.
In addition, one of the board members is owner of Cloud9, an e-sports company. I suspect that this could enable GME shops to organize events/tournaments, another idea is to play the same role sports pubs do, but adjusted for e-sports.
But since the government can’t fund itself on revenue, but relies on the central bank printing money, all this new currency flows into the economy and into the stock portfolios of the upper classes, which inflates the price of the stock faster than the business can generate a profit. Which means all the old value investing stuff doesn’t tell you how to make the most money anymore. So the “fundamentals” have changed and no one knows exactly what they are.
In other words, the government is partly running on borrowed money.
There is some level of money being printed to buy some of that debt, but that is in more severe cases like recently.
The issue is that at current prices, speculation and forward thinking far outpace any value one could derive from analysis of fundamentals. A very successful strategy is momentum trading. Technical/Trend Analysis is all about understanding momentum trading, and at what entries and stops algorithms set up their strategies.
On a more practical case, if you'd preferred to have invested in Intel on "fundamentals" instead of AMD because INTC has 10x more sales...then go ahead. But you should know, 1 stock went sideways for 3 years and another is up 750%.
And Chamath Palihapitiya said it best when he was on CNBC...who got the TSLA investment wrong? Hedge funds. Who got it right? Retail investors.
When more is shorted than exists, you’re in a let good place to know that there’s no such thing as the last biggest fool.
But of course not all options expire at the same time
For every long call option contract, there is a counterparty who is subject to unlimited upside price risk, just as a traditional stock shorter. The difference is the contract has an end date.
I would argue that options account for more of the pressure/volatility of these recent stock prices than the shares themselves.
Do you understand the tax-reasons why a company would buy back shares instead of issue dividends?
What about book value, where a company could have $1b in assets (real machinery, tractors, factories, etc), no debt, and no dividend? Does that mean it still has no fundamental value?
A stock where neither of both are possible ever (now and in the future) has no fundamental value since you have no way to extract value from it, it's pure speculation. Stock buybacks only have value because something else gives the stock value.
Of course, I don't think the situation described above actually happens in the real world, dividends or ownership will (or at least can) happen at some point.
Let's take a planet in another galaxy. I would argue the inherent economic value of this planet for a human on Earth is null. You cannot and there's no realistic time frame in which you would be able to extract value from owning it. And yet you could sell the ownership, lend it, ..., and make money. That doesn't give inherent value to the planet, it's just speculation.
Let's take Facebook, where I think Mark Zuckerberg has ~60% of the shares, and only 40% are on the market, thus even if you buy them all you cannot gain control of the company. You can't extract value from the company from this avenue.
Again, what gives inherent value to a stock is that you, or someone else, will be able at some point to get value from the company itself, not from someone else. In a rational market, a price rise should mean the market will eventually be able to extract more value from the company then thought.
What matters is that the company is capable of making cash and, ideally, of increasing that amount of cash with time. Dividends are just a capital allocation decision.
The price is bonkers.
Amazon dominates a market and is making outrageous revenue and income. Tesla doesn't compare.
The greatest generation is dying off and the boomers are retiring. If no one seriously challenges amazon, there is going to be a lot of growth in e-commerce.
https://www.bloomberg.com/opinion/articles/2021-01-29/reddit...
The same reason Parler got taken down for inciting violence without proper moderation, I'm seeing a lot of baseless claims from literally millions of people who do not understand how large/complex the financial systems at play are.
I'm kind of worried Reddit could shut down r/wsb because of the amount of influential misinformation being spread.
Do you have any proof for that? If not then arent you the one who is spreading misinformation?
Even if this instance is not manipulation, I'm sure there are people on wsb that do try to make money through manipulating each other. I think that's just the nature of the internet in general.
6,000 upvotes about the possibility of disinformation
Also kn0thing endorsed WSB yesterday. He's no longer officially affiliated with reddit, but it still says something.
[0] https://www.reddit.com/r/wallstreetbets/comments/l7yc12/wsb_...
I understand that there's no guarantee one will be able to exit it successfully even if it flies so high that it crashes the market. However I don't see a better insurance for people who don't have access to options/inverse etfs and don't want to sell their stocks.
What is the reasoning here? Are you under the impression GME wouldn't crash right alongside the market? This isn't BTC or gold we're talking about. It's just another stock.
The insurance pays up if they buy your share.
Do you have another idea how it could end?
I share your skepticism that it would actually happen this way, but it seems at least somewhat plausible.
Well ... yeah. Today it hasn't.
I do believe it will last at least one more week, though, yeah. And I'm putting money where my mouth is.
The best part in all of this is that you're free to short it if you disagree. See where that leads you.
Never shorted a stock in my life. Not going to start now. I cannot predict when this will stop. Nither can you. What currently holds everything together is the unknown. People don't know who, when, and how the shorter s are going to close their positions. Once things will clear out I predict it's gonna be the beginning of the end.
Just to be clear. I don't think it will crash to nothing any time soon. It will keep trading much higher than what it was pre this saga. When I say crash I mean down around 70-80% from its current value of $330.
As of mr. DFV, I'm sure he'd like to close his position at the current price. But my guess is that he prefers to hold for his reputation. Since he already guaranteed more money than he would ever need, it's not a bad decision. The other option is that he believes it's going climb even more, which is possible. But don't assume people hold for any reason other than making money. Once the squeeze is over it will fall like dominoes.
This is true for every market participant, the fun situation here is that the short squeezers know that what they are doing is risky, but they don't care, because it's fun to take risks, and anyways they have better chances than buying lottery or going to casino.
If the market doesn't crash then GME can go to $0, as it won't be needed for the insurance purpose anymore.
(1) fund degrossing as the initial driver - already happening
(2) everyone is being reminded of 99/00 mania
(3) uncertain regulatory environment surrounding trading
(4) worries of systemic risks created by bubble
GME going higher is likely to trigger it more than it dropping off right now
Are there other companies that have "hidden" short interest in this way? Are some of the big unexplained market moves in companies without short interest some of these "hidden" shorts unwinding before everyone finds out?
Is that legal? Manipulating report agencies to manipulate the value of a stock?
There are multiple Congressmembers interested in this situation. That could be a very dangerous game.
But as I understand it, the Market Makers like Citadel are only required to be market neutral in terms of their statistical exposure at the end of the day, and don't need to report their long/short position. On the other hand, brokers aren't required to be delta neutral, but do report their long/short position. You can probably hide a lot of these shorts in this baby. I guess this also doesn't count short interest that's in bespoke one-off derivatives that hedge funds and investment banks trade between themselves.
Also, nobody has to tell Ortex what their short interest is. The only true numbers we can sort of trust are the twice monthly delayed reports. Ortex is just a third party service provider that goes around calling brokerages and doing some stats on the market to see how they think the short interest has changed.
So, I can see it being pretty low risk even if you do get caught.
I think (with very low probability, but it is an explanation) this could also be why we're seeing random 100% spikes in unrelated stocks that claim to have approximately 0% short interest. Some hedge fund somewhere is in some sort of hidden short, getting margin called, or nervous, or just de-risking and getting out of an off the books short trade, causing a mini short squeeze. There are a couple companies with suspicious pops this week, and I'd be on the lookout for more of this activity on Monday. Could just be people getting out of high volatility positions though, or freeing up capital for other things. But that would be selling pressure, not buying. So, -\?/-
My key takeaways here are that there was probably a little fraud (maybe someone found a bug in some broker that let them do some sort of infinite shares glitch), maybe a little rolling of shorts (but not by anyone big), and probably a lot of writing of covered calls by the likes of Fidelity and Blackrock as a way to get income generation while at the same time acting as a limit sell order (albeit one that you can't take down). Coupled with some early botched PR and celebrity pumping etc, and even my own speculation, this feels almost Q-like in it's explosive growth and conspiracy-theory oriented thinking.
After everything I've seen this week I think I actually have the highest faith I've had in a long time in our financial system.
I saw a tweet that I cannot find right now, unfortunately. It showed that de-grossing M-W of this week was nearly at the same level as March of 2020.
People said Tesla would crash when Tesla doubled a year ago from $200 to $400, and then to $900, etc., and then it did a 5-1 split, etc. Yes it did crash 20% in August, but from a price that was so high that it was still considerably higher than it was last year when the pundits were warning of a bubble.
Few foresaw the S&P 500 would surge 70% off the lows from Covid and make new highs later that year. The pundit consensus what that that it would be a bad, deep, long bear market.
Same for the post-Covid tech boom, which few foresaw too.
GME is not crashing as everyone is expected it to, even with Robinhood restricting buys. It is up huge today. I think this has a lot more to run, IMHO. More shorts will get squeezed out next week.
Like Tesla, GME may not really end badly at all and just keep going up and up.
I own some GME and not worried. Yeah, it is not that much of my total net worth, but I have found that heeding warnings of bubbles usually just means selling too soon.
If GME does crash, there will be no systemic risk or anything like that. It will be an isolated event.
Of course it might not happen.
The stock is worth what people think it’s worth. If people keep buying and holding, then it is worth what it is worth.
Honestly, I don't think it is and there would be more media attention if it was. The firms that are shorting GME only have something like $50 billion AUM. Lehman Bros was around $600 billion and was a lot more integral to the markets. The only real issue would be a lack of liquidity, which isn't going to cause a crash alone.
To be clear, I don’t actually think they did.
First it'll be just to plug up the money their operations are constantly losing. Then they'll start going on acquisition sprees, giving out giant compensation packages, get into empire building. Maybe they'll buy a movie studio or a Vegas casino. That's a constant supply of new stock that will keep pushing down the price. It's the same way that AOL used their stock to buy Time Warner during the Internet bubble.
AMC already took advantage of the meme madness by selling a huge chunk of shares to lock in some cash. That's why AMC didn't moon like GME. But give it a week or two, and GME's board will pretty much be forced to do the same thing.
The primary goal of a stock market is really to allow exactly that. The market determines the cost of capital for each company, thereby influencing the allocation of capital in society. The question then becomes how efficiently the company can put that capital to use.
As the saying goes: If you're at a poker table and you can't tell who's the fish, get up. You're the fish.
But with payment for order flow you know there are tons of other fish at the table. That changes things, as you only have to beat the other fish to get a small payout. And the sharks aren't focusing on you in particular, so you might get lucky and beat the sharks.
To quote Obi-Wan: "Who's more foolish? The fool or the one who follows him?"
If you assume that all Joe Random on Robinhood can do is to chase momentum and try to offload before everyone else, then yes.
But if you believe that certain Joe Randoms are actually talented and lucky enough to identify a bona fide unrealized potential in a stock and then invest in that, all the other Joe Randoms doing stuff provides enough noise that you don't get immediately picked up as a signal by the big players who can outgun you.
GME short interest was still greater 100% of shares outstanding as of 1pm 1/29 (S3 Shortsight numbers). If forced to cover, short holders will have to liquidate other assets. Could those liquidations force more liquidations in a positive feedback loop? Hopefully no, but certainly possible.
This is compounded by the fact that funds will defensively sell off (or sell short) stable stocks owned by other funds that look like they're about to blow up. If a fund seems like it's circling the drain and it owns 5% of a ticker, other firms are not going to wait for it to implode and move the price down before they liquidate their own positions in that stock.
This market is terrifying.
If a hedge fund went bankrupt, the cash will go to investors who may be risk averse.
If the hedge fund survives it will have significant losses and probably be cagey about deploying a lot of capital again too quickly because it just stared into the face of death.
In the case of individual investors selling off everything, they might be scared because everything is crashing.
There's no rule that says the money will come back to the market quickly. It depends on investor sentiment. Often things have a V-shaped recovery and things are more or less "fine". We had a few of those over the past few years.
But put it to you this way, if this statement of yours:
It has to go somewhere, and so it will come back into securities in probably a few weeks or max, months. The value represented isn’t exactly disappearing it’s still in the ‘system’.
...was correct, then we wouldn't have crashes. But we do. When fear takes over the money doesn't just come back into the market quickly. And then even if it could, it doesn't because second order effects take over. Small businesses close en masse, etc, which magnifies the downturn until it snowballs into a legitimate recession.
I'm not saying a crash will happen because of this. I'm saying it very realistically can happen.
When stocks drop, excess income and capitol drops, reducing demand in the wider market. Companies come under pressure to cut costs, and end up doing layoffs. This further lowers demand, resulting in a feedback loop.
This is all described by Minsky's financial instability-hypothesis. And Steve Keen has built fully dynamic mathematical models that exhibit the process.
https://www.institutionalinvestor.com/article/b1q3cxqlbmltyl...
Downdrafts and even crashes are called corrections for a reason. They eliminate the weak holders and cause the remainder to carefully evaluate their positions. In the absence of interference, they will be over quickly.
They are a disaster for retail investors on margin. I've never understood why the SEC doesn't gradually increase margin requirements across the board when the market starts to get overheated. (But not once it tops!!)
In this scenario both the short funds and the retail investors are fucked. A select few retail investors and some of the momentum-trading quants do well. But the majority of the money on either side just evaporates - rapidly.
In a more distant but plausible scenario, this hits a bunch of funds across a bunch of tickers, and it goes systemic. They liquidate their longs trying to survive, and when it's not enough it rolls up into their brokers who are left holding the bag.
I think this represents an upgrade from being chased by tigers. Sedentaryism, metabolic syndrome, being fired by the machine, sweatshops, homelessness, addiction, those are downsides from foraging aboriginal lifestyle. But being terrified of losing money is different than being terrified of getting literally eaten.
Crashes happen when everybody starts selling and nobody knows why, so they sell even more.
Companies shorting 130% of a stock doesn't help the market.
The actual value was 113% from S3, but other sources had different values so I rounded down. While there is nothing magic about 113% or 100% or any other number, it is a measure of the difficulty of covering the entirety of the short interest: Higher numbers are more likely to result in a short squeeze, since those covering will likely have a higher bid to attract the attention of longs.
If the shorts from $20 all got out, and you're seeing new shorts that got in wednesday, the dynamic is much different.
I don't think this type of information is publicly reported; or really aggregated anywhere. The brokers whose clients sold short presumably know the clients positions, and the clients know their positions, but absent an aggregated report across brokerages of that, nobody would know the whole picture. A brokerage probably has a duty to keep their clients' positions confidential, however.
I don't know how securities lending is organized. If it's centralized around a single vendor like clearing and depository is; maybe that vendor would know when shares were borrowed and returned, and could guess about the positions. Similarly, brokerages with lending programs should know when their clients' shares were borrowed and returned and could have a partial picture. This may again be data the brokerage or the lending facilitators would have a duty to keep confidential.
I think these realizations are why much of the r/WSB discourse over the past two days has shifted from "we're going to be millionaires" to "i'm just in it at this point to stick it to the man". That's fair, and some people did legitimately become very rich off of this, but at this point, more funds are playing with WSB than against them. Funds are not some conglomerate that moves together; they hate each other as much as the public hates all of them.
Short interest in the past week has remained pretty steady. Some people view this as "the funds are doubling down, get 'em while they're bleeding". No, actually; they know what's most likely to happen, which is, everyone is going to forget about this in about three days. Gamestop's stock isn't good. These new shorts are not priced like "I think its going to go below $7"; they're priced like "I think its going to go below $200".
It may be fine print in the TOS, though.
Someone is paying up.
Here’s the part that makes no sense to me: why can’t Robinhood use customer funds for their deposit? Imagine a degenerate case: all but one client make no trades at all. One client has $100k deposited and buys $100k worth of GME. Prior to settlement, GME drops by 50%. That client is (effectively) out the entire $100k, and they are owed $50k worth of GME. Robinhood needs to post somewhere between $50k and $100k of collateral to the clearinghouse.
This all seems entirely reasonable with one giant of exception: apparently Robinhood may not draw on the client’s deposit for this. Never mind that, at settlement, the client will be debited the entire $100k. Somehow Robinhood is expected to temporarily come up with an additional $50k-$100k for a two day period. This seems bizarre to me.
The remaining assets the firm has would be liquidated, those would be used to pay off debts, including those owed to the brokerage. I'm not 100% sure how this works, like, if the estate would purchase as many shares owed as possible, or if they would settle in cash with the brokerage, or what. But, regardless, that wouldn't happen until long after the epicenter of this black swan event.
On the other hand, if they go bankrupt, then their assets are used to compensate (as much as possible) to everyone they owe in cash - not (as previously expected) in that stock. So the expected huge future purchase of the shorted stocks never happens, and all the WSB people who are holding the stock get to keep it or sell it to each other, as all that compensation money does not flow to the market for GME stocks as it would be if the shorts were actually covered. The brokers would be liable, and they might have insurance that might be liable, but all that liability would be cash-denominated and (as far as I understand - if I'm mistaken, please correct me) would not obligate anyone to buy any GME stocks.
The second big difference is in the timing. The current price is driven by short-term expectations, a hope that somebody is going to (or would be forced to) buy large quantities of that stock soon. If one of the shorting hedge funds goes bankrupt, then any settlement for that will take many months, and that money won't influence the market for that time.
I think that's more the activist crowd that has joined over the past week. I have a hard time believing the original r/WSB people care more about making a political statement instead of money.
I don't know if they're right or wrong, but the fact remains there are people who are getting in to both make money as well as stick it to the man.
Whose bankruptcy? The WSB crowd are very vocal in their goals of bankrupting hedge funds who have a lot riding on forcing gamespot's stock price to plummet.
WSB wants a short squeeze. They got that. But, their theory is that it isn't over, and if they get the 10x+ returns in the coming weeks (I don't think they will, but lets say they do), then these funds are potentially looking at commitments that approach their AUM, and a nasty margin call. That's a real recipe for shutting down, and if that happens, there is no more short to squeeze. Everyone loses.
It seems you didn't understood that for the WSB crowd the definition of winning is getting these funds to shut down, regardless of their personal losses.
This is no longer about money. This is a protest against a rigged system.
I'm personally into boring index and ETF vehicles, but I am stocking up on something right now: popcorn.
If that's true wouldn't it incentivize the brokerages to help the funds weather the storm? Everyone can just wait it out till the stock crashes back and instead of sticking it to the man WSB just emptied their pockets into the mans accounts..
Good. Let it crash and burn. The stock market has never done anything for me. Shareholders making money out of my work is not exactly in my interests, nor is it in the interest of the majority of the world’s workers.
My only wish is that this time around the stock markets will stay down after they burn, and be remembered in history as the idiotic idea that it truly is.
As a bonus—while you are not using that money—other members of your credit union can use this savings in a form of a loan, to buy a home, start a business, etc.
The idea of my retirement being at the will of some hedgefund manager is not appealing next to the idea of my retirement being used temporary to help my neighbors buying a house or start a business.
With interest rates as low as they are, savings accounts have a negative real return. The $1000 you save today would have substantially less purchasing power by the time you'd retire.
> As a bonus—while you are not using that money—other members of your credit union can use this savings in a form of a loan, to buy a home, start a business, etc.
Well, yes and no. Banks don't really directly lend out the money deposited in savings accounts, due to fractional reserve requirements.
> The idea of my retirement being at the will of some hedgefund manager is not appealing next to the idea of my retirement being used temporary to help my neighbors buying a house or start a business.
I don't get this. With an IRA or a personal taxed brokerage account, you aren't at the mercy of anyone: you can choose which companies & funds to invest in. Hedge funds are not the be-all-and-end-all of the stock market, most funds are mutual funds who invest conservatively. If you just mean that hedge funds can cause black swan events like what we're seeing with GME, then sure, that's a concern, but only for the short term. Long-term, the stock market tends to appreciate and substantially beat inflation. We can add regulations to prevent hedge funds from fucking things up, without tearing the entire system down.
The longer and more money you have in a savings account, the less purchase power you actually have. Think of this like putting $100 into the account but only being able to spend $90 of it. Multiply that by your life's savings... and this becomes a horrible way to save for retirement.
A Money Market account would be better, and nearly as safe as a savings account.
IRA's and 401(k) where you control you money is ideal. If you don't want to be bothered to pay attention to the markets... get yourself a managed IRA (yes, a fund would then be in control of your future). With a managed portfolio, you generally get some say over how your money is invested - so you could direct them to invest in industrializing economies (which would help lift people out of poverty over time). Just because you make money on the stock market doesn't mean someone is getting screwed over...
Bottom line is, a savings account will lose you money over time (and that doesn't even touch on the maximum amount you can have per account to be insured, which is far less than you'll need for retirement).
I agree that this is not feasible now but that is only becaus of the low interest. That dynamic would change if the interest is dialed up.
We've just re-invented the stock market.
We don’t need the stock market.
You must be joking. My credit union is offering .1% on savings, and it’s not like they’re some extreme outlier, rates are incredibly low across the board. You are actively harming your future by doing this, you aren’t even keeping up with inflation!
And largely speaking, when you make money on the stock market it comes from a multitude of sources, including the hedge funds you seem to despise.
Not to mention, just because you made a profit on the market doesn't mean someone was screwed over. The stock is worth whatever it's worth when you sold it. It's an open market...
You do seem to have some fundamentals about the stock market, savings account, and finance a little mixed up.
I don’t despise hedge funds any more then I despise the stock market as a whole. We don’t need it. In fact I would argue that the existence of the stock market is actively harmful. I would go so far as stating the stock market is partially to blame for the current climate crisis. That is, if it wasn’t for the stock market, perhaps people would have acted sooner and prevented the climate emergency.
But fundamentally the stuck market is an idiotic idea. If we didn’t have stock markets, and someone pitch the idea of the first stock market here on HN, I don’t see how any businesses would subject them self to being bought and sold like that.
Are you trolling? You do realize why those shares are out there, right? Because your company needed money, and those people gave your company their money to get started, grow, hire more people, etc. Is that not bringing something of value?
The people that made the decision to sell the share still pay them selfs plenty of money, the shareholder’s reward is always coming from my paycheck, and I prefer it wouldn’t.
> the shareholder’s reward is always coming from my paycheck, and I prefer it wouldn’t.
This is just untrue for nearly all public companies. Most companies do not pay dividends... and a stock price going up and being sold by some investor literally has nothing to do with your company.
In fact, the stock price is largely irrelevant to your company. It's only relevant to those who own the stock.
> I would have preferred it if my company would have used less predatory means of getting that money, something like taking a loan or simply saving up part of the profits for any future investments.
Issuing stock is basically a loan that they never have to pay back if they do not want to. They can always buy back their stock if they no longer feel it's worth while being a public company.
FWIW, publicly traded companies have earned far more everyday working people comfortable retirements and more, than any single privately-held company.
Whatever the confusion is, I have it too.
Tomorrow, you sell it to a third person for $10.
Who lost money here?
Really no one I think.
I'm definitely wrong about something though. I need to think about it some more to figure out what.
You and the third person both lost money in some unknown combination. Either you're selling for a lower price, or 3rd is buying for a higher price, or probably both.
In the metaphor, this is aggregated across bazillions of transactions, and ignores benefits like supply and demand are generally evened out over time.
Since we are talking about the stock market (and stock brokers don’t make anything of value) a better question would be:
You hire a worker for $2 to make something you sell for $5. Someone buys it for $5 and sells it to a forth person for $10. Who lost money?
Now to make this simplification more accurate, there is a system in place for the $5 to $10 transaction called The stock market where there are bazillions of these transaction. Another question arises. Who is selling something for $5 when they could sell it straight to the forth person for %10? Who has is $10 and why are they paying $10 for it? How did they get that $10? Did they make something worth $10 and sold it for $10?
I think the real answer for who is loosing money is: Workers across the globe are.
The interest you are paying when you take out a loan is a) compensating the creditor for money lost because of inflation, and b) paying for a service. The bank/credit union at the same time will at the same time a) compensate for inflation and b) reward savings accounts for injecting money into the bank/credit union.
This is fundamentally different from shareholders buying stocks from a business siphoning parts of the profits from the workers to the shareholder.
People taking loans need the people that open the saving account, and get something of value (money they need). Workers don’t need the shareholders, and they get nothing in return (except lower salaries).
I’m sorry if I sound like I’m talking down to you. It is just that the different is so obvious I don’t know how to explain it differently.
I will state this once as simply as I can: stock market investors are rewarded for funding companies by taking on that risk in hopes that the companies they invest in produce a profit. It is overwhelmingly similar to the process you are describing with your credit union, but in a much more distributed way.
> Workers don’t need the shareholders, and they get nothing in return (except lower salaries).
There would be no workers if companies didn’t have the capital the needed. So no, the workers very very much need the shareholders. The money has to come from somewhere. No bank is going to bankroll the next Airbnb, Uber, Instacart, DoorDash, etc.
Beyond that, the workers aren’t owed a penny more than they agreed to be paid. If public shareholders didn’t exist, the owners would have full ownership which is what happens with small businesses. Nowhere in these circumstances are workers any better off. Profits and losses are not their domain.
I’m sorry if I sound like I’m talking down to you. It is just that you are a victim of cognitive dissonance possibly due to your unconscious bias against wealth.
It's probably best you don't take me seriously. I don't have any strongly held opinions about any of it. Maybe I'll develop some, but I'm just trying to figure it out for now.
You have to ask your self, who are these people that have gotten extremely wealthy from Amazon? How did they contribute to generating that wealth? From where does the wealth come from that they are profiting from?
Now some of that wealth goes to hedge funds and workers see some of it in their 401(K) and what not. But if the alternative is that non of these people that invested in Amazon got extremely wealthy from it... They just got their investment’s worth and a little extra (like a proper loan would). And the wealth generated by Amazon would stay within the company, let’s be a little ideological here and imagine that this wealth would actually be used to pay workers what they deserve. Don’t you think the workers would get more from that deal, perhaps they could use that extra money to open up a saving account, perhaps they could pay it in social security.
Anyways I really don’t see in what possible world the existence of the stock market can benefit workers. It just does not seem to work out mathematically.
To use the Occam’s razor here... If you have to invent epicycles to explain your case, perhaps the simpler explanation is true. This stock market + 401(K) + hedgefuns + etc. seems to me just to be a bunch of epicycles, and money is actually simply being siphoned away from the value generated by the workers into rich folks that use the stock market for that endeavor.
I see two possibilities here:
a) The stock market is a predatory lending scheme
b) The stock market is a pyramid scheme
Either way the stock market should crash and burn
* Setting aside parts of the profit for future investment
* Getting a loan from a bank or your local credit union
* Community or owner funding
Do you honestly think that if it wasn’t for investors businesses would just stop existing? In a world without venture capitalists businesses would need to stand on their own merits, if it is not profitable it will go bankrupt. If it is a popular idea though, a competitor will find a better way of making it profitable, and share that profits with the owners and the workers (and not a shareholder because we don’t need them).
Arguably the existence of venture capitalist markets makes stupid unprofitable businesses out-compete better run businesses, simply by merit of being able to persuade investors.
Companies go public without being profitable. Raising money via IPO is one step to becoming profitable.
> Getting a loan from a bank or your local credit union
No bank is going to loan $100M to a complicated startup with no collateral that needs capital to grow quickly and is unlikely to be able to start repaying for years. This is where VCs come in — they understand complex business models and invest as needed in exchange for equity.
> Community
This is regular investing. The people in your community are not more important than people living elsewhere. Everyone should have an equal opportunity to invest in promising businesses everywhere.
> Owner funding
Bootstrapping is already extremely common and accounts for most small businesses of which there are thousands and thousands. It’s not suitable for big businesses that make global impact. You can’t have a bootstrapped Google or Airbnb or Square.
Community funding includes accelerators such as Y-combinator, wealthy philanthropists, and charities. Heck I didn’t mention it but you could crowdsource the money for all I care... Point is, alternatives exists that are less predatory then shareholders and investors.
> No bank is going to loan $100M to a complicated startup
(Since we are both just trying to win this argument) Perhaps startups that need $100M to get started, and are unable to crowdsource, loan, or community fund that amount simply should exist. Or at the very least, perhaps it should downscale to a more affordable price, earn some profits and scale up as the profits turn in. I’m not gonna cry for a hypothetical startup that failed because they couldn’t raise $100M before they even began the work.
> You can’t have a bootstrapped Google or Airbnb or Square.
So what? I see people complain about Google and AirBnB all the time on this very forum. These are massive companies that have shown predatory and monopolistic behavior time and time again. Maybe the business world would be better if we didn’t have any tech giants. And instead, smaller tech companies would have to collaborate on big scale projects. Remember that we got the CD by a collaboration.
You’re projecting.
> Y Combinator
You realize YC takes 7% of the equity and becomes a shareholder forever, right? This is exactly what you’re complaining about.
> you could crowdsource the money
If only there existed a system where anyone can fund any company at any time and then exchange hands when they wanted to fund another one... hmm...
I’m done here. You’re just trolling now.
I mean, it could, if you were to invest.
> Shareholders making money out of my work is not exactly in my interests, nor is it in the interest of the majority of the world’s workers.
So instead of, say, encouraging people to learn how to invest, and maybe even incentivizing firms to allocate shares to their employees, you'd rather just have the whole stock market burn to the ground?
What this means is, that unless you are already one of the richest person on the stock markets, your most likely outcome is that you will loose money by participating. So—unless you are already rich—your optimal strategy is not to participate in the stock markets.
If not, then I can live with it, knowing that what little interest I earned, at least it wasn’t earned by taking profits out of other workers. And in the best case scenario my savings got lent out to other members of my credit union that used it to buy homes or start businesses in my community.
Alternatively based on your posts it seems like maybe you would like investing in a ESG fund.
https://www.investopedia.com/terms/e/environmental-social-an...
There might be something to the idea that an internet forum will have a harder time getting away with the sort of market manipulation that the most unscrupulous hedge funds do all the time, but that's a different discussion entirely.
There's of course a related discussion of how much some people can afford to invest in the stock market each year, but it's really only partially related. I do understand where the anger is coming from, as should everyone who has been following American politics since 2015 at the latest.
I can see the aversion to HF / VC. But you can't use that broad brush to paint all investment capital as predatory.
First, I can infer that your aversion to capital is due to vulture funds that have been known to extract money from perfect viable companies via buyouts (i.e. thinking "barbarians at the gates" type investments) for example.
However, the solution is not just to put everything in a savings account and disregard everything else is predatory.
How did we get here ? How did these funds come to exist ? Why are savers getting hurt and vultures making bank ? That's what you should really be questioning.
I think a much better argument can be made in that you would much rather increase interest rates, and stop the profilgate money lending by the fed, so that extremely cheap capital would not be available for these vultures to exist.
How do you back such scenario by direct action ? I don't know. However, i know you are not contributing to utopia by wasting your investment capital by letting it slowly burn in a savings account.
> beginning of another stock market crash
Hmm sounds like it's working then..
Going off of the resentment against the 'elites' in wsb comments to the tune of "I started broke and I'll go broke again but if the rich go broke..."
> Give me $1 and I'll make sure your target loses $5
But I think that the most common side effect is an increase in class stratification--which I'd argue undermines the political stability of the future that you're hoping to retire into.
Assuming all eco-tech companies on WS are trustworthy enough (not Enron-esque), and investing in eco-tech will "create a world worth retiring in", most people would have seen a significant part of their retirement go to zero.
Or if they decided to invest in a publicly traded life-sciences company in hopes of finding more breakthroughs, they would see their investment go towards funding some pricey acquisition instead.
"Create a world worth retiring in" is as vague as it gets.
All I'm saying is that it's a shame that we're taught that the point of investing is to make money, rather than make a difference with a side effect of having more money. Because left to its own devices, money tends to motivate some pretty awful things.
I don't want retire rich, I wanna retire post-scarcity. I hate letting my money sit in an account while smart kids can't afford college. Those kids are gonna develop the tech that saves my ass one day--or not--depending on how we play our cards now.
Blindly picking a fund based on performance just feels like shooting my future self in the foot.
If you know of a smart kid that can't afford to go to college, you could make them a reasonable interest loan and it would be a win for both of you.
It doesn't matter that I'm the one collecting interest instead of the bank--I've still set that student up to go forth and play zero sum games until they're out of debt, which is the kind of thing I'm wishing for a way to avoid.
You feel that society investing in education is a zero sum game?
My daily numbers were in tens of thousands range rather than $11M, but the effect was the same.
New strategies have to be pretty extraordinary to disrupt a game as mature as poker. There is a lot of innovation to be tapped, but that usually isn't happening at the low- and mid-stakes games in your home room. For the most part, my skill is being able to adapt to you faster than you can adapt to me. I am relying on you playing your kings like a straight.
(Also, it's a well-known phenomenon that recreational players will hear about and mis-apply contemporary strategies with the same confidence. Somebody like Doug Polk professing about "GTO" on his hugely popular YouTube channel is often creating many more fish than he is sharks.)
So any large institutions (ex: pension funds) holding the stock are making bank lending it out.
Absolutely! A week or so ago I watched his July 2020 video (declaring it a great value buy looking for 50-100% at around $4..!!) out of curiousity. Interesting, but totally disconnected from the short squeeze mania, I missed that leap, at least from there to anti-shorters makes more sense (as in 'I understand your position').
This occurred to me today. I see it as entirely plausible that one or more large funds willingly took the loss to exit their initial short position, and proceeded open new short positions at the current crazy prices. In fact, I would not be surprised if they haven't been doing that all this past week with iceberg orders[1] so to not tip their hands by driving the price that much higher while doing so. It doesn't matter if they were able to bankroll the new position themselves or had to take on additional leverage to do so. A huge profit could be made from trying to short from these new crazy prices, and I'd not be surprised if big money was willing to fund such an attempt.
With all the hype this past week, a bunch of people have jumped onto the bandwagon. I'd wager many are doing so out of an emotional excitement, without honestly considering the risk and whether they're truly willing to lose everything they put into this play. I'd also wager there are many who only think they're willing to lose everything they spend on $GME. But, when the share price starts going down, whether crashing from a panic selloff, or gently drifting downward as people start exiting their positions to lock in their profits, many will realize they're not as willing to lose everything as they thought.
I fully expect the funds to try to play chicken with those trying to short squeeze. I fully expect them to try every dirty trick in the book to kick off a panic selloff. I would not be surprised if new dirty tricks get invented. I would not be surprised if favors get called in from politicians and other persons of power to try to scare everyone out of holding, whether that's looking the other way while the big funds do something maybe-not-so-legal, or other shenanigans, like very public arrests of u/DeepFuckingValue and others on BS charges.
There's potentially very big money to be had here, and the big hedge funds everyone wants to screw over didn't get to their present riches by playing nice or fair.
2 years ago everyone was crazy about bitcoin(even close friends, family members, coworkers). Although it is 30k now, I don't hear it from a single person.
This is another social media experiment and won't repeat this successfully in the future.
And called it for Jan 2021: https://www.reddit.com/r/wallstreetbets/comments/e8wqvs/gme_...
And his Youtube channel: https://www.youtube.com/channel/UC0patpmwYbhcEUap0bTX3JQ
[1] https://www.businessinsider.com/gamestop-michael-burry-big-s...
"Well as a longer-term investor I have the benefit of heavily discounting daily moves. I care much more about the longer-term charts, and these have been fairly constructive for months now. Even today, after the typical quarterly sell-off, the longer-term chart still looks decent so there’s been nothing to panic over. Let’s see what the price does over the next few weeks. Of course charts are only a minor part of the equation in my opinion. The fundamentals are much more important in a situation like this."
Casts a slightly different light on the whole narrative about the uprising of retail investors.
I appreciate that. Not enough to give WSJ $20 (!!!) a month, but I do appreciate it.
Talk about "diamond hands".
https://www.reddit.com/r/wallstreetbets/comments/l846a1/gme_...
I think we are talking about converting influence over masses to personal gain (don’t know if GME guy did it intentionally or not, but it benefitted him), less about media (which itself may not become richer from this) and more about how some use it. Admittedly some media may be prone to facilitating these scenarios.
The danger in “he has not sold his shares” is that a retail investor who did not do their research might misinterpret it and imagine a guy who never sold and will never sell; since that guy has background in finance and knows what he’s doing, common sense would suggest it must be safe to invest into this stock right now; meanwhile, in reality that guy has already cashed in big time.
I'm taking suggestions.
I don't know if there is anything cheap available on the options market these days.
I don't think GME is going to stay at this price for very long, but on the other hand the retails trader are only ~25% of the volume (Matt Levine's latest column) and on balance selling, so I think the stock price is driven by big players, and "what do they know that I don't?"
I get it, /DFV started a short squeeze and got rich, that is great for him. I don't support naked shorting, it should probably be illegal (if it is not already) and it looks that was part of the reason this happened. Everyone has been suspecting for a while (especially here) that a lot of volatility in stocks like TSLA etc was due to Robinhood.
As of 5:33 EST, I'm on CNN right now and the main headline "Inside the Reddit army that's crushing Wall Street" (And the reddit army isnt crushing Wall Street, it's crushing a few hedge funds that happened to hold short positions in a few stocks. ) , so now a lot portion of America (and the world) is paying attention.
Hedge funds blow up all the time. Enron blew up, basically all of the Investment Banks blew up in 2008, LTCM blew up. Why is this such a big deal?
A lot of people wish they struck it rich, just like him. Money (to some degree) buys happiness. Gets you out of a job you don't like. Gets you more time with your family, less time doing stuff you don't like (like working).
If the poor can "eat the rich" and "catch them with their shorts down" in a stock trade that literally millions of others are pouring into (check how many subscribers r/wsb has gained past 7 days), it's literal herd mentality.
Much as the narrative that this is the little guys 'crushing Wall St' sells more clicks than a lot of betting going on with plenty of Wall St winners and plenty more little guy losers, mainstream media really ought to know better. (That said, I think this particular profile is a lot more illuminating than a lot of the rubbish being written)
he rents [0]
[0] - https://www.wsj.com/articles/keith-gill-drove-the-gamestop-r...
Sure, if people are taking aggressive positions. I'm not sure his initial YOLO was that insane, it had a fair chance of being OK. (In this unique case, the massive naked short position turned out to be the insane play.)
But it's approximately a zero-sum game, so it's not irrational in general to be betting on options.
To be fair Robinhood also had to get extra funding to cover its liquidity issues.
IB CEO also said they had to stop GME buying or else it might take down the system.
You sure about that? TSLA has a market cap of 750b. GME, now, is at 20b. Before this insanity it was a fraction of that.
I don't understand exactly how the math works out there to be able to evaluate if it was an extra good deal or not, but I find it credible that institutional investors jumping on the Reddit hype would be necessary in ordet to sustain the kind of momentum we are seeing.
Edit - or as people on Twitter put it:
any story that doesn't say how, past the retail ignition, the rocket ship was mostly intra-fast money warfare, simply isn't telling the truth
https://twitter.com/zatapatique/status/1354904995901136896?s...
Speculation is that it's not your "average" hedge fund bust, but that brokers accepted too much shorts/options without securing shares and some of them might go out as well trying to find shares to cover calls
Now, the really smart money is buying equal weight into TSLA on this dip!
- An unprecedented and uncoordinated but sophisticated financial engineering play driven by an internet community.
- There is a loose analogy to the terrorist attack on the Capitol, an internet community organizing to destroy existing institutions.
- The ongoing class warfare that was highlighted by Occupy Wallstreet, 2008 crash and bailout.
- The frustration with the completely disjoint experience of the pandemic that the average American has had in contrast to the record highs of the stock market.
- America loves an underdog story.
It has something for everyone. But if you ignore all other context of the story and have tunnel vision on just /DFV gains then it's less interesting I guess.
Life is strange. It’s a Cinderella story if you look at it from the pure narrative perspective.
If anyone ever makes a documentary/movie about it, it should be a dark comedy - money is just depressingly funny. The things we justify and do for it.
Personally I'm looking forward to reading the Michael Lewis book.
You haven't noticed that the big three indexes are DOWN ~2% today? They were down 2% when this first took off. [If you want to split hairs...go for it but...the correlation is very strong, news cycles are soaking it up and the White House talks about monitoring the situation. This is not a light matter]
This is bigger than just a few firms. The added limitations to buying various stocks. The heavy-handed nature is making it clear, let alone the media frenzy.
WSB broke their models which in turn is crippling the 'economy'. If you don't think so, please, advocate for the free citizens to buy as much as they want because the hype isn't subsiding, it's only growing.
Great, I love the sarcasm! Can you please help push RH and other brokers to allow the unbridled buying of the current stocks being restricted? Then we can really put the theories to the test.
Right, and each of those events is news that you can identify it by saying Enron, or 2008, or LTCM. It isn't just about DFV. It's about all the other little guys who have made hundreds of thousands or millions on this.
You don't see it? You don't see any reason why this is a big deal?
When was the last time brokers shut down one direction of trading on stocks?
---
EDIT: FWIW, you can't shut down one direction of trading, there's a buy for every sell, but you can skew who get to do the buy and the sell.
2. People could still buy and sell.
3. I'd classify 2008 as a big deal as well.
and its because the media likes the narrative and people are running with it. david vs goliath etc. ignoring there are goliaths who were long on gamestop and pensioners who had their money in the hedge fund.
A way to assess what any stock is valued is to take the DCF, but since it's nearly black box to the shareholder for growth companies (no dividend), treat any interest payments on outstanding short float as part of the DCF. That means there's a growth directly associated with capitalization. so it makes sense that the capitalization becomes untethered with the business. Google’s ROE is about 12%, so 6-7% on the cap isnt great, but it’s not nothing either. The other side is if the short interest decreases that would collapse the cap sharply, but the longer the shorts wait, the less lucrative and difficult it could get.
Edit. Cost to borrow is at 50%! https://www.reddit.com/r/wallstreetbets/comments/l88i21/s3_s...
Can they cash out at $500 or $1000?
Can they offer additional shares in the market, after clearing it with the SEC?
Then, can they take that windfall money, and actually reinvest it into R&D, and build their own GameStation 1 video game system? In order to justify their new lofty valuation.
They issued 50 million new shares at-the-market last week. They also had a $600M loan that was convertible and converted into stock. As a result, they’re sitting on nearly a billion new dollars, which should help them ride the pandemic out.
edit I missed the best part of the quote "I hope he showed up at client meetings in a headband and sunglasses with a glass of champagne in one hand and a chicken tender in the other. I hope he was like “never mind life insurance, man, you gotta buy GameStop calls! Get those tendies!” And then I hope the clients were like “what” and MassMutual fired him and he just went and did the thing. "
https://www.bloomberg.com/opinion/articles/2021-01-29/reddit...
There are quite a few genuinely good people in finance so don't be surprised to find good people doing good things who also work in finance but finance also attracts a lot of people who are amoral at best. I shake my head at the memory of one of the partners screaming at someone over the phone, "This isn't even illegal! How is it immoral!?"
If your prop shop blowing up means everyone who works there is now penniless, you tend to get much better results.
Sounds like a good place to work tbh.
not to mention, not everyone is in a position to say "screw the man" and do their own thing. the ideal exists but the means may not be there.
[0] https://www.marketbeat.com/stocks/NYSE/GME/short-interest/
[EDIT: ok, they did talk to him, but this still isn't what most publications would call "an interview" ]
Nothing like I would expect for "an interview with...", which would normally be dominated by the subject's own words.
This whole situation breaks a ton of fundamental assumptions about how markets work and will change hedging strategies for a lot of investors moving forward. Yes, we know there are hedge funds on both sides of this equation (Blackrock owns 12% of Gamestop, Burry made a ton and smartly got out earlier in the week), it doesn't change anything. The internet is already searching for more securities to manipulate. This will accelerate adoption of the DeFi space. Scaramucci called it "the French Revolution of Finance."
Instead of being negative, look to see how you can learn and profit from this.
To push the analogy: When does Robespierre get his?
Why would it do that?
I think the most likely outcome is more regulations from the government, and more rules from brokerages about what most of their customers are allowed to do.
Great, that was one of their goals: To make them think about if shorting 140% is a good thing or not.
A very risky play from a hedge fund has resulted in people who don't know what they're doing convincing more people who don't know what they're doing that there is a clear ally (other retail investors who are getting back at The Man) and a clear enemy (evil hedge funds that have robbed the American people), and that what they're doing is some sort of justice and not just an extreme market correction. They've attached emotions to these trades, and when the time inevitably comes that they have to become The Man to stand with The Man against The Man, a very small percentage will realize what needs to be done to trade another day, while the rest are going to learn how little say they actually had in this incident. WSB (or at least what it was before this) has had a lot of laughs at the expense of the latter group -- "it literally can't go tits up!" is trotted out whenever somebody finds out that they're not in control.
Active retail investment requires a fatalistic view of the market. This is hard to swallow when you think of going short as "bad" or squeezing out a hedge fund as "good."
What stops somebody from purchasing aged reddit accounts and then pumping up, upvoting their own threads?
Edit: hints = look at porn subreddits, /r/entrepreneur, stock subreddits. By the way, some of the moderators are making a killing too (by promoting their "own" people)
(Yes, this is a thing, and there is significant $$$ actually invested into this)
My question is what stops somebody pulling off the same trick on WSB and how do we know? How can we know? Does the SEC know how to tell?
> So if you buy stock with the purpose of pushing the price up so that other people will buy it, that’s market manipulation. If you buy stock hoping that the price will go up because other people buy it, that’s not market manipulation; that’s just normal. Those things are not so different. There is a “traditional four-part test for manipulation that has developed in case law”:
(1) That the accused had the ability to influence market prices; (2) that the accused specifically intended to create or effect a price or price trend that does not reflect legitimate forces of supply and demand; (3) that artificial prices existed; and (4) that the accused caused the artificial prices.It's would of course be a different story if the broker's unwillingness came from their participation in a price manipulation scheme. I don't think that's really plausible here, although I suppose I wouldn't rule it out given the crazy dumb things Robinhood has done in the past.
I think it is already happening. Search Reddit for Tootsie roll. One 3 yr old Reddit acct with no posts makes a flurry of posts about TR and it jumps 30% in 2 days.
So much for "poor people fighting back" LOL.
However, that 5%< of finance is just objectively morally bankrupt compared to the rest - because its exclusive, delivers no value to society, yet bears a significant influence to everyone else.
So sure, it's not really "poor vs wealthy" it's more "good vs evil".