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Comment by raziel2701 | Hacker News Reader

On wsb u/deepfuckingvalue showed he still holds 50,000 shares and 500 deep ITM call options. He has secured a profit of $13.8 million dollars, and his remaining open position is valued at $45 million.

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.

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> 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.

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.

Time to short everything.

Yes, exactly. When a hedge fund is getting its face ripped off because its shorts are up 50 - 200%, it will liquidate its longs to cover. The rotational dynamics of many funds doing that at once can drive the price down on traditionally stable stocks that everyone owns. In a worst case scenario that could trigger a massive selloff which would crash the market.

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.

After the sell-off, there’s a lot of cash (yes even more) washing around right? 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’. So why is a crash in equities prices such a big deal?

It depends.

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.

There's also leverage/margin (i.e. borrowing to buy stocks). With higher volatility, investors might be less willing to use leverage, resulting in less total demand, which results in lower prices.

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.

Okay - that begins to explain the problem a bit. So people being afraid and just holding on to their newfound gains in just cash or say, T-bills - can depress the entire economy by a lack of interest in stocks. Structurally it seems a little problematic though that companies would depend so much on issuing stock to fund their operations or even growth - ideally they should be able to do that with revenue (or even debt)...

Alt hypothesis: Retail just learned a method of turning tables. Hedges will temper market moving short positions due to increased risk. Overall it’s a rebalance due to innovation.

Alt alt hypothesis: smart hedges realized the overexposure while ago and wsb is schooling the dumb hedges who filled the vacuum.

https://www.institutionalinvestor.com/article/b1q3cxqlbmltyl...

It only becomes a big deal when the government steps in to "assist" in any way beyond providing copious liquidity.

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!!)

Money isn't conserved in the same way that matter is. Right now the market cap of gamestop is $22B, which is calculated by multiplying the share price times the number of outstanding shares. If some news comes out over the weekend that causes people to value the stock lower, we could see the first trade at $33/share instead of $330/share. $20B of money just disappears. It never really existed in the first place.

Right. At the same time, there would be a net loss of value because any shorts who were margin called on GME's meteoric rise will have blown up. Their investors will have lost (possibly all their) money at the same time retail investors found their asks unfulfilled at $330 because the bids crash landed at $33.

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.

Is there some reason a crash shouldn't happen? If you have a stake in the market, even in diversified index funds, presumably you know the risk is non-zero, and accept that because the rewards are higher than lower-risk choices like, say, stuffing your money under the mattress.

Been ten years since I was last in it, but a lot of large investment firms (before automated trading was prevalent in the older large institutions) don't have people responding to the market ad hoc. Trades are executed infrequently (weekly, if not monthly) and are approved upfront during trade planning meetings to define the qualifying parameters for a particular order.

> This market is terrifying.

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.

Well sure, I'd definitely rather short Gamestop and watch my short thesis get delegitimized in real time than literally run from a hungry tiger.

Except humans have been apex predators for a long long time.

If people know why the hedge funds are selling other positions (to cover shorts) I don't see that triggering a crash, more likely a buying opportunity.

Crashes happen when everybody starts selling and nobody knows why, so they sell even more.

It seems like a reduction in short-selling will probably help the market be healthier.

Companies shorting 130% of a stock doesn't help the market.

That doesn't necessarily have to be a bad thing doesn't it? If large hedges stop overleveraging themselves to such an extent where this could happen we might see a return to more accurate company valuations. I see it as a net positive for the market in the long run

There is nothing special about being short more than 100%, they short shares that are borrowed multiple times. But it also means the “long” interest is more than 200%. Even if you own equivalent of 100% of float there are still other shares that can be used to cover. The only issue starts if someone has lent out more than 100% of float and tries to simultaneously recall all of them.

It does create an issue for the company of the stock, though.

What issue is that?

Unless the company is trying to do a primary raise, which most companies do only once in a blue moon, the price of the stock is fairly irrelevant to the operations of the company.

How is that, it means (within the statement made)the stock is lent multiple times if a stock can be lent multiple times then that’s no different from a naked no borrowing short b) if it lent to multiple people it’s owned by none

No. Naked short would be when I sell without borrowing hoping that the stock will drop sufficiently (or new shares will be available for borrowing) that by the time settlement occurs (T+2) I will be able to cover. The “fraud” of naked short is that you fail to deliver the shares at settlement to the new owner. If you re-borrow shares then that’s different since then you really do have shares to deliver.

If a stock is lent multiple times then at least one of the borrowers can’t deliver and hence are naked

> There is nothing special about being short more than 100%

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.

Short interest is high, but AFAIK, none of the reporting tells you what price the shorts sold for.

If the shorts from $20 all got out, and you're seeing new shorts that got in wednesday, the dynamic is much different.

Is there any way to know if that has happened? I imagine if a big player knew this or it leaked from a credible source, the stock could crash.

Watch the documentary in 3 years? :) I've only got enough knowledge about the markets to be dangerous, so don't expect any of this to be complete and accurate.

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.

> militant activism via buying stock as a means to sticking it to the man.

> 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..."

Maybe we'll see a new class of financial instrument come out of this. Not sure how it would work but I have to imagine that some clever person on Wall Street can find a way to sell shares of:

> Give me $1 and I'll make sure your target loses $5

Spite investing? Count me in.

this sounds both illegal and extremely fun

But it’s no longer effecting just the rich. It’s working people with pensions and 401ks... and this better not mess up the decade long sweet bull market for a handful of millionaires.

I'm not without sympathy for them, but I also think it would be good if people stopped allocating their retirements towards "money tricks on Wall-Street" and instead found ways to put it towards creating a world worth retiring in.

Money tricks on wall street do have effects on the real world, some of which are positive.

Almost everything has a cost and benefit. Point is to tilt more toward benefit.

Sure, occasionally.

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.

If they did that, I doubt their would be retirements.

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.

What "a world worth retiring in" means in each retiree's case is gonna vary based on their situation. Wanna die on Mars? Maybe put it all in Space X, I don't know.

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.

> I hate letting my money sit in an account while smart kids can't afford college

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.

There's a YC idea there somewhere. Especially when a lot of family offices are looking at wealth preservation over volatility.

What is YC about it? It's called a predatory private student loan.

Agreed.

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.

> 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?

Well most of YC is predatory pricing covered in a veneer of good intentions and tech.

There are things called Income Sharing Agreements that in theory better align the incentives of lenders and students.

Yes, hedge fund's gambling affects us all and now they went too far and woken up an anti reaction. Don't blame others for the risks that Wall Street takes.

It says as much in the article. He literally just thought GME was undervalued on its merits. He had no intention of creating a squeeze or punishing Melvin.

The guy struck rich! Same with people who shorted crude last year when it went straight to -40. Billions were made.

I realize I need to do some basic reading on this stuff... but, when you say "made" does that really mean "changed hands"? Or is value/money somehow generated in these processes?

No, it’s zero sum.

It’s zero sum until a too big to fail actor is in danger, then new money is created and the game ceases to be zero sum.

well really, at that point everyone's purchasing power is diminished, so the game remains zero sum relative to anything outside itself.

Billions were made, but retail traders lost out.

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.

Liquidated everything on Robinhood today and moved to Fidelity.

As a derivative trader and some one who is constantly looking for mispriced assets from the upside (ie short), my number one concern when we have market turmoils is always broker liquidity. This is also why hedge funds have prime accounts directly with bulge brackets. My recommendation is to always have at least two accounts plus Fidelity. FIDO, while expensive, invested a ton of money into their platform/technology. I rarely see them go down. Plus they basically own everything including cryptos. Key is to have multiple accounts and know how to wire money without even looking up the information so that you’re up and running in minutes not hours or days.

Which are good brokers for the primary two accounts?

To be completely honest, you can’t beat RH and zero commish on options. But I only use it for trades that I can execute over the course of a day. Schwab/TOS is probably going to be the best discount broker when they complete the integration. I don’t like IKBR because it’s not that much better than others unless you are a quant. Pick the products you think you want to trade first then pick the brokers. For example, you don’t want to trade on a platform that doesn’t offer futures because you are more than likely to need it later down the road (this is also why some prefer IKBR due to their breadth in products). And make sure you try their mobile apps since most of them are horrible!

> He had no intention of creating a squeeze

If I am not mistaken he did say in one of his videos that there is a chance for a squeeze to happen.

I believe this is CYA (cover your ass) language. Given the recent interest in the case, he's likely saying now that he didn't intend to (or that even if he intended to, he didn't think it was within his power) as a pre-emptive defense against litigation.

It's more likely that he thought he was nowhere near influential enough to create one on his own. He would previously have had no reason to believe that his public statements would move the market.

That's exactly what I mean. Even if he thought he had some power, or acted as if he did, it's in his best interest to downplay that as much as possible.

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.

While the narrative has made him the poster boy, you can look at the past discussions regarding GME. His initial posts around a value play were widely ridiculed.

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"

There is zero chance of this hypothetical lawsuit (that alleges market manipulation/creating a squeeze using just $50k worth of cash, which is a laughable amount of money when it comes to the market) not getting thrown out of court the instant it lands on the court clerk's desk.

Saying there's a chance of something happening doesn't mean you intend it to or are advocating for it though.

if you trawl his reddit account, he mentioned 9 months ago there's a possibility of a short squeeze of some sort happening sometime.

It’s possible that when he said that, the short percentage was not greater than 100% of the floating shares, as they are now.

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.

I believe he has a youtube video from 6 months ago titled something like "> 100% short interest, short squeeze possible".

Just because he's still in doesn't mean that it's actually worth $300 on the fundamentals. I could definitely see the argument that $20 was undervalued, but it's plain to see that the short-squeeze is now part of the calculation of value.

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.

Trying to figure out the "fundamental" value of anything is a fools errand. Im not saying GME wont drop eventually but there is no value on fundamentals of everything.

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".

Wsb can remain irrational longer than the market can remain solvent. That was a comment by a poster which I find funny.

This is a common aphorism, attributed sometimes to Keynes: https://quoteinvestigator.com/2011/08/09/remain-solvent/

It is a funny spin on that aphorism.

Right but the WSB one is inverted.

I'm not sure you understood the web saying.

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.

I believe the term is “retarded”

Until Monday when the bills are due and their wives(let's be honest, this crazy train is the T train) discover their bank accounts are empty.

But what about the wives' boyfriends' accounts?

Funny, but it suggests the market hasn't learned anything from 2008.

Not quite accurate.

It's - WSB can remain retarded longer than you can remain solvent.

You're taking a couple of exceptions and deduct that fundamentals don't matter. That's like taking two people who smoke and reached 90 without cancer and assume cancer studies are fools errand.

AMD in 2015. NVDIA same period. Literally all the positions of Citron that Andrew Left missed the mark with over an order of magnitude difference. Many tech companies.

Here's a quote from your guy DFV:

"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."

Simply saying 'fundamentals' allows one to nullify things they don't understand, like owning the rights to one of the biggest duopolies (x86 that without one becomes a monopoly).

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.

I don't argue with that. It's called growth opportunities. But don't you think that a business losing customers quarter after quarter is a bad sign? Or that having a debt bigger than it can afford? etc. Let me say this, you cannot ignore the fundamentals until you can... (e.g., GME)

I would counter with the fact that humans ignore - either by their own accord, or through the unjustified belief that things will continue to be the way they were - the views that do not support the narrative they decided is true or they deem unlikely.

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 agree that humans ignore the views that do not support the narrative they decided is true or they deem unlikely. I'm not following how is that relevant.

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.

> I agree that humans ignore the views that do not support the narrative they decided is true or they deem unlikely. I'm not following how is that relevant.

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.

idk. sometimes the skeptics are right. An easy grab is lobotomy. The studies showed that lobotomy is a good way to tread psychological issues, and doctors mostly agreed. However the premise of “treatment” was flawed. Turns out that the skeptics that pointed to the cases where lobotomy didn’t actually treat the patient were right.

Perhaps economists are basing these so called fundamentals on a false premise.

In the long run, the market gets more rational. In the short term, anything can happen.

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.

To be honest, this is kind of the problem I have to stock investing as a whole.

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.

> "fundamentals"

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.

You can literally just look at the P/E ratio and the yield on google finance. 50 years ago that was all you needed to know.

"Gamestop" is a string of letters. Unless it has a pile of unrestructurable liabilities, what's forcing it to become bankrupt vs. being a startup?

Probably its directors, who would probably be part of a startup if it was in their nature. As a director of GameStop they likely have other fine competencies suitable for running a large reseller org.

It’s its management. Gamestop wasnt able to catch up with the times and a pile of money won’t help them. The model isn’t vaible anymore and if they pivot into something else they may as well change the name as it would be irrelevant. A start up experiences most progress when they’re small and nimble. I assume Gamestop as a corp has accumulated a lot of cruft and that would hold them back.

Speaking of management...Ryan Cohen, founder of Chewy.com is a recent heavy investor in Gamestop. Pretty sure he knows a thing or two about startups and he wouldn't be pouring in money into it if he felt it's hopeless.

That's why most people should just stick to index funds.

If they get out before crashes. Otherwise you could end up at zero again after being in for a decade. Maybe that was timed just with your retirement when you were about to make use of your now vanished gains.

The value of a big index fund going to zero is so inconceivable as to be hardly worth considering.

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.

Sorry, to clarify: I meant end up at zero gain, not zero as in loss. So instead of losing money, it would just be not having gained anything in 10 years, which is not that unlikely, and has happened. Ask me, that is 10 years of potential profit loss, had you invested differently.

A trivial (not necessarily smart or optimal, but possible) way for GameStop to avoid that eventuality is to liquidate; close down the business and sell off all the assets - that wouldn't be a bankruptcy, they have more than enough cash and assets to cover their debts, so they would have a nonzero amount of cash left over to distribute to the shareholders.

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.

You think of what GameStop was, not what it is becoming.

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.

this is exactly what I've been thinking...Gamestop has over 5,000 physical locations across the country...this is an extremely valuable resource that if utilized correctly could turn them into a hugely successful empire again...Esports is still in its infancy but it's already a billion dollar market...even better...why not partner with AMC, another entity in this WSB movement that is failing and also has many locations with huge screens, sound systems, and seating...perfect for esports or some kind of AR/VR setups, IDK, if these CEO's can use their imaginations there's many paths they could try...

In that case the stock price would simply be assets-liabilities.

To put it bluntly, this is because of the Federal Reserve. Fundamentals refers to the ability to generate a steady return of profit. This goes back to Graham and Dodd, “value investing” (“the intelligent investor” and “security analysis”) and the perspective of a long term investor where all investments are fungible according to their risk adjusted rate of return.

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.

If the government was funding itself on printed money, we wouldn't see that massive debt clock ticking ever upward.

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.

At a certain price, fundamentals do actually matter. This is the price discovery phase of a company that's not really well known.

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.

Fundamentals isn't everything and is really a way that wallstreet has brainwashed people to invest in companies that provide no returns on their investment. As an extreme case, a biotech company with no sales, no profits, no approved drugs and sinking money into R&D is still worth something, and can be worth a lot.

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.

If the stock is worth a lot, they can sell more to raise cash, to pay off any debtors, and close all the stores. Then GameStop is just a corporation sitting on a large bank account.

Any stock that does not pay dividends _has no fundamentals_. It's just supply / demand.

If nobody sells, any seller can charge ANY price they want. 1 trillion per share.

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.

If nobody buys, does the trillion dollar seller make a sound?

Only if insolvency makes a sound. If the shorts don't have the trillion dollars to buy that stock to pay back the debt by the deadline then they are sol.

What deadline exists for shorts, assuming these aren't puts?

Today was the monthly option expiration day.

But of course not all options expire at the same time

Shorting doesn't only mean short stock. You can be short call options, and if they are in the money, the holder of the contract can exercise his or her option, which forces the seller of the contract to provide shares at whatever price.

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.

If they sold a call option which is exercised, they’d HAVE to buy

Is this still about GME (which does pay dividends) or just a random comment on the market in general?

Berkshire Hathaway?

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 has value if someone ultimately can extract value from it. As far as I know, there are only 2 ways, dividend and gaining control of the assets.

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.

You missed lending the stock to others for an interest payment, and when there exists other market participants with a view the stock will be worth more than it currently is.

I don't think it ultimately gives inherent value to the stock, because you don't extract value from the company with this mechanism, but from others.

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.

You don't need to gain control of the assets. You just sell some of the stock for a profit as it rises (and only getting capital gains tax rates). This can be repeated ad infinitum assuming the underlying asset value grows indefinitely and the stock keeps splitting.

But someone, ultimately, must be able to. You can't exchange your 1% of shares against 1% of the company assets, unless you have enough share to control the company.

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.

Some companies do buybacks that provide the same value as dividends - but avoid capital gains. Since there are less shares after the buyback, the remaining shareholders have relatively more value in the company.

This is wrong. All stock prices are supply and demand. Dividends are simply taking money from one pocket, the company you own shares, and putting into another, your bank account.

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.

what is the fundamentals for the short positionsv

The incredible due diligence of ‘I think no one is going to buy cds anymore yo’.

A short position when the stock is at $350 is probably more of the idea that the fundamentals point to a much lower price in the future.

You can check option pricing for the market-expected price in the future. The July options are pointing to an expected $40-$50 price point.

What is TSLA’s fundamental value?

The price is bonkers.

More bonkers than Amazon?

Yes.

Amazon dominates a market and is making outrageous revenue and income. Tesla doesn't compare.

Which market?

https://en.m.wikipedia.org/wiki/List_of_largest_retail_compa...

Check the operational format column. Notice that amazon, being number 4 overall, is literally the only one on that list that says "e-commerce".

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.

Hmm, what’s wrong with growth in e-commerce? I tend to like it myself but maybe I’m missing something.

Apparently retails traders were only 1/3rd of the transactions, and the stock went up on the aftermarket on thursday, so I don't think retail traders are driving this price _anymore_.

https://www.bloomberg.com/opinion/articles/2021-01-29/reddit...

Retail traders with directionality can drive the market even with small volume, because non-directional volume will amplify them.

The correct way to phrase this question in wsb parlance is ‘How did his wife’s boyfriend feel about all of this?’.

> Know that we don't know what kind of deals are happening behind closed doors in these two last days of manipulated activity.

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.

If you know that there is only one fish and a lot of sharks, sure.

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.

Isn't that the "bigger fool" theory?

To quote Obi-Wan: "Who's more foolish? The fool or the one who follows him?"

Well, yes and no.

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.

Imagine if you’re his wife (and I believe he has a young daughter) and saw that your husband is leaving a $11M trade on a 8 sigma type of event? I want to ask him so many questions. Like when did you tell your wife? How did she react? Did she force you to take some profits? They need to make a movie about this whole thing when all the details spill out.

I was a professional poker player for ~5 years, and my wife—who has a much lower risk tolerance—asked that I never share variance with her since it causes quite a bit of anxiety.

My daily numbers were in tens of thousands range rather than $11M, but the effect was the same.

How'd you get into pro poker? I'm good at statistics and would be interested in learning how to play really well.

Not a pro but I recently started learning some poker. Two texts that absolutely opened the game up to me were The Grinders Manual (fundamentals) and The Mathematics of Poker (where your stats/math background will be useful). The way I started was by dedicating 2 hours per day (1 hour studying, one hour playing online micro stakes). Next I will start learning and memorizing output from Solvers, that seems to be key to success at higher levels. Good luck on your journey if you get into it!

I’m curious. Poker has a lot of strong strategies and what not, but if a new player comes in, how do those strategies prevail? You may be confident with two Aces, but the player could be extremely confident in their king pair and wager as if they have a straight

Most poker players do not read books and drink while playing. As the stakes get higher then the meaning of a fish changes. Strategies that worked at lower stakes become blunders at higher stakes and so each time players move up those new players are the fish.

I know what you are trying to say here, but the example is funny to us veterans. That player's extreme confidence has won us a lot of money with our aces.

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.)

I wouldn’t be terribly surprised if some big players have carefully arranged to have large short interest but to be hedged against large upswings. This could be an expensive position to carry, but it could be quite profitable if people thought they were squeezing an unsqueezable short.

According to one report I saw, the long/short fundamentals driven hedge funds see this as really bad news, but the quant funds are simply adjusting to the implications.

This generally requires far out of the money call options for medium term and long term dates. For most of the week, there have been no options available for sale far out of the money. Last week there were no calls that even could exist that were out of the money. See last Friday's gamma squeeze and resulting short covering on the 25th and 26th. Anyway, at this point, the position is costing many 10's of % per week to carry, not exactly great when the bag has also been doubling in size every day.

Right. My biggest concern with these plays, at this point, is that they're not taking into account the possibility of bankruptcy. There's a ton of "they have to buy it, if we hold all the shares then it'll go to the moon, 1k, 2k, 4k". (1) The sheer variety of financial vehicles available to professional investors is staggering, and while the initial DD was really good, we probably missed something at this point, and (2) if all else fails, and a fund can't buy back the 50,000 shares it owes some brokerage, that fund doesn't have to buy them back. They can just declare bankruptcy.

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".

That's a great part of their sentiment - "I may not profit that much, but these fat cats will suffer". Also, bankruptcy still means a fair share in the assets of the bankrupted.

Well, the other fat cats will have a claim on a fair share in the assets of the bankrupted; the WSB investors would not have any claim whatsoever on the assets of a bankrupt hedge fund who shorted the same stock - they will have the stocks they bought, the fund does not owe them anything, the broken promise to buy and return loaned shares was to some broker, not to any retail investors.

I believe anyone's shares can be lent out by their brokerage. That might differ broker by broker but that's the general idea, there's no dedicated "other side of the short" as such.

When I signed up for IB I had to check a box that permits IB to loan out my shares for a small fee. I'm not sure if a broker can loan out a client's shares without the client's approval.

It may be fine print in the TOS, though.

I thought bankruptcy would still mean the brokers are on the line for the money?

They are. That’s what collateral, broker risk management, and (if the broker fails) DTCC is for, to derisk counterparty failure risk.

Someone is paying up.

This is as I understood it. There is a lot of misinformation from folks who believe to understand the entire situation from all players' perspective. I am not able to comprehend the situation well enough. If anyone has seen a good non-biased write up on what has happened so far and what may happen, I would love to see it.

I feel that I learnt something from this twitter thread.

https://twitter.com/KralcTrebor/status/1354952686165225478

That’s a good thread.

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.

Sure the collateral holders pay up. But if they need to get liquidated to service the debt, watch out.

In the case of shorting a stock, the broker is owed shares of the stock by the firm who shorted it. The broker is absolutely still "on the line for it". Its a red line in their books. But in this situation, there's no one going out into the markets to buy a share to repay the broker.

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.

There are two crucial differences. The first one is where the money goes. If they would cover the short, they buy the stocks for a large price on the open market and give the stocks back to the people who loaned them the stock in the first place - so the money goes to people who are currently holding that stock and would be willing to sell at that high price.

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 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".

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 know quite a few people who still think there's money to be made by getting in at $300+

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.

> My biggest concern with these plays, at this point, is that they're not taking into account the possibility of bankruptcy.

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.

The funds. There's an ocean of difference between "we finished the year down 98% but we met all of our obligations" and "we finished the year down 100%, and we also failed to meet our obligations". Those obligations include the repurchase and repayment of short-sold stocks sold by the brokerage.

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.

> 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.

In a sibling thread someone already coined the term "spite investing".

I'm personally into boring index and ETF vehicles, but I am stocking up on something right now: popcorn.

> if all else fails, and a fund can't buy back the 50,000 shares it owes some brokerage, that fund doesn't have to buy them back. They can just declare bankruptcy.

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..

They may not do that because they are more risk averse than WSB. WSB can distribute losses over individuals and can tolerate, hedge funds probably can't. And it goes without saying - WSB can remain retarded longer.

There is no free money. The IV on options like long calls to hedge a short is astronomical. Line numbers I've never seen.

The prices on puts go up even when the price skyrockets - it’s crazy!

I saw an IV yesterday that was 1000%. I’m not sure I’ll ever see that again in my lifetime.

IVs in the crypto world can get up to 100-250, but 1000 is insane even for crypto. Truly incredible.

Well if a stock market crash triggered by this is realistic (which I agree is), doesn't it make sense to hold a bit of GME for insurance?

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.

> Well if a stock market crash triggered by this is realistic (which I agree is), doesn't it make sense to hold a bit of GME for insurance

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.

Presumably the crash would occur after the GME price skyrockets and shorts (and then their brokers and clearing houses) go broke trying to close the short positions.

The insurance pays up if they buy your share.

Do you have another idea how it could end?

It could end by simply crashing without shorts going broke. There's not much reason to believe a larger short squeeze is forthcoming.

Why would that crash the entire stock market?

The theory I've seen is that there could be hidden systemic risks here. If GME tanks suddenly, there's some possibility that traders bailing out of their trades will take down Robinhood (who doesn't seem to be very healthy right now), and a major broker collapsing is never gonna be great for the market.

I share your skepticism that it would actually happen this way, but it seems at least somewhat plausible.

Robinhood are tiny on the brokerage stage. Important to retail, barely matter otherwise. That’s my understanding at least

That seems consistent with what I've read recently. Good news.

It's got nothing to do with Robinhood. If a hedge decides to cover the short so they don't have to admit defeat and go bankrupt, then the entire market goes down because they'll end up selling thousands of unrelated shares for their cover.

You've fallen victim to some common misinformation that's spreading. Multiple hedge funds have already been able to cover their shorts, and there's not much reason to believe this will change.

Not an endorsement but this was retweeted by Kai Ryssdal: https://twitter.com/TheStalwart/status/1355531873896824834

> Are you under the impression GME wouldn't crash right alongside the market?

Well ... yeah. Today it hasn't.

We all know why it hasn't. Do you really believe it will last forever? or even 6 months from now? People are trying to make money. Once the momentum slows down the big sell off will start and nobody would be able to stop it. Not DFV or even the biggest troll of all, mr. Elon Musk.

Forever is a long time. No, I do not believe it will last forever, or even six months.

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.

So you basically agree with me. You still wrote your last paragraph. That is because you're invested emotionally in this.

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.

That seems like sound logic to me. GME has been a vortex this week sucking up value from the rest of the market. Seems smart for the next few days/week at least until we learn otherwise.

The problem for GME is that it will crash regardless if there's stock market crash or not. When a market crash happens you're much better off holding value stocks of solid companies.

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.

That's what makes it an infinite short. Short makes complete sense every dollar it goes up it makes more sense. Timing it is one hell of a dice roll.

> But don't assume people hold for any reason other than making money

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.

Why do you think a crash of GME would cause a full blown crash of the stock market?

I don't think that.

You replied to a comment discussing making use of GME as an insurance against a market crash related to this possible short squeeze.

If the market doesn't crash then GME can go to $0, as it won't be needed for the insurance purpose anymore.

Still waiting for TSLA to fall.

This isn't really the place for financial advice. Matt Levine does publish a newsletter that attempts to unpack the GameStop Reddit mania situation and what it means for the retail investors piling on.

You can always place limit sell orders

Limit sell orders with this kind of volatility is not as safe as you might think. Just because you set a sell limit does not mean your trades will execute at that price.

A limit sell order guarantees the limit price or better. A Stop Loss triggers a market order (at any price available) once crossed to the downside.

Yes it does mean that, by definition

GME is absolutely going to crash and everyone knows it. There was a mod post just today reminding everyone to be ready. The stock is worth $10-20 on it's merits and that's where it will land. We just don't know when. The chance of this as a contagion that brings down indexes seems very unlikely.

I think this whole episode might cause the next market sell-off:

(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

All we need to wait for now is the shoeshine boy's tip and it'll be time to get out! See https://seekingalpha.com/instablog/661124-brijwanth/73895-hi... for a humorous variation on that classic theme.

What is fund degrossing?

Long short funds having to sell longs to cover losses on their shorts

Thanks!

I think there's also evidence that the "short bubble" might be more widespread than we think. I'm not entirely convinced that Melvin was able to unwind their 50mln short position and drive the short interest down on Ortex (they're the best thing we've got in terms of guessing how much true short interest there is, because exchanges only report once or twice a month on a week or more delay) by covering. Equally likely in my mind is that Citadel bought Melvin's book thinking that it had a better plan than unwinding the short just yet. Instead, "hide" the short someplace that Ortex isn't looking and that the exchanges won't report on for another 3 weeks. That would be their order flow with a company they are in a unique position with - Robinhood - where lots of the buy orders are coming from. If you were Citadel and a little unscrupulous, you could immediately route every sell order on RH to the market but keep the buy orders for yourself. This positions you as short to Robinhood users, and you get to send those sold shares back to the book you bought from Melvin to unwind that short. So, the short does still exist, but now it's not visible to outside brokers. Outside brokers, when Ortex calls them up, will say, no no, Melvin covered a bunch today and short interest actually went down! So Ortex publishes a lower SI number. But, that short didn't actually just disappear. Either Citadel, or Robinhood, now are short to their customers.

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?

>Equally likely in my mind is that Citadel bought Melvin's book thinking that it had a better plan than unwinding the short just yet. Instead, "hide" the short someplace that Ortex isn't looking and that the exchanges won't report on for another 3 weeks. That would be their order flow with a company they are in a unique position with - Robinhood - where lots of the buy orders are coming from. If you were Citadel and a little unscrupulous, you could immediately route every sell order on RH to the market but keep the buy orders for yourself. This positions you as short to Robinhood users, and you get to send those sold shares back to the book you bought from Melvin to unwind that short. So, the short does still exist, but now it's not visible to outside brokers. Outside brokers, when Ortex calls them up, will say, no no, Melvin covered a bunch today and short interest actually went down!

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.

Probably a little bit illegal (like, hundreds of dollars of fines per millions of dollars of infringement) and this is pure speculation.

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, -\?/-

And now that we have a much more full picture of exactly what has been going on with the numbers of Failures to Deliver (since December), and better understanding of hedging strategies and income generating strategies (selling covered calls, buying protective calls with cash reserved for exercise), it appears that there isn't really any fraud here, no evidence of widespread naked shorting, no evidence of rolling of naked shorts in danger of hitting failure to deliver limits (which the SEC actually does actively pursue enforcement of and considers to be sham transactions).

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.

> (1) fund degrossing as the initial driver - already happening

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.

When everyone is convinced X is going to happen, it tends to not happen, or at least not in the way it is expected by the consensus.

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.

Completely different. Tesla soared on its positive outlook. They have strong sales and have managed to maintain an insurmountable lead in the EV market. Their surge is due to enthusiasm for their business. Gamestop was clinging to life a few months. The rally from $4 to $15 was optimism about their leadership. The rally from $15 to $350 was 100% due to the short squeeze. And the squeeze will most definitely play out and be over pretty soon.

Is your money where your mouth is? Opinions are cheap and if I've learned something in my career as a trader, it's that anything can happen

GME is worth what a few dozen billion at its current valuation? How would that impact SPX, DJIA, etc.

It's at like $25B last I looked. The market cap of the S&P is $36T. The NYSE manages about $25T. So this is like 0.1%.

If short squeeze happens[0], the shorts will have to buy the shares back at whatever the price will be. If they go bankrupt the responsibility passes to the brokers and further upstream.

Of course it might not happen.

[0] https://news.ycombinator.com/item?id=25945253

“Merits”

The stock is worth what people think it’s worth. If people keep buying and holding, then it is worth what it is worth.

That might be true in the short term, but can you point to the stock of a company has continued to lose money over decades still maintained a very high stock price?

> if a stock market crash triggered by this is realistic

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.

I'm not sure anyone cares, but the way to think about this is simply to ask if you would own GME at $300 a share if you had to hold it for the next 20 years. The answer is just obviously no. You'll never receive anything remotely close to that in dividends from the company. It's just a mania.

Why not? Gaming/hardware is a massive industry. They have enough brand recognition to take a slice of it if they make the right moves.

They don't have a moat. What can they do that Best Buy can't?

They are getting a hell of a press boost. Watch next earnings based on that alone. Also, is there no room for an amazing online retailer of computer/gaming hardware and accessories? They definitely aren’t that yet, but with some dudes from Chewy joining the board, I don’t see why they couldn’t put all this together to make a splash.

When I saw him bragging, I went long GME as well (even though it is not a stock I would typically buy) just because if it crashes it will be a guilty pleasure seeing him lose so much, but if it goes up, well then we both make money. The latter seem to be playing out.

> 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.

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').

It's wild over there now. WSB was always like the kid at school that always got into crazy stuff. Now, they're off their meds, haven't slept in a week, and just did a bunch of coke.

I don't know, I've lurked there a bit in the past (for amusement/actually got a couple of good tips from the more serious end of posts, didn't see DFV/RK on GME at the time unfortunately!) but when I looked last night it just seemed filled with obviously new people commenting, membership has tripled or something. I didn't really participate in its 'culture', but I think it would be a shame if it lost that - after all I don't lurk on r/investing or get any amusement from it. I suppose probably they'll get bored when there isn't an official announcement that the next quick buck shall be X and here is a step by step guide on purchasing shares and options, and move on.

> 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.

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.

1. https://www.investopedia.com/terms/i/icebergorder.asp

Reddit kids do not have enough money to keep doing this after this stock goes bust. Eventually they will try 1-2 more stocks and some will make them lose money then they will post their losses and blame the subreddit.

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 if bitcoin is any guide, people can hodl forever, bacause they are no longer doing it blindly. Who will blink first?

The difference is the supply of bitcoin is fixed. Whereas a company can issue shares at any time. Obviously if the market cap stays at $30 billion for a long time, Gamestop management is going to start spending their overvalued stock like drunken sailors.

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.

GME issuing shares would be the smart thing to do.

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.

If they do that it's instant bankruptcy for GameStop. Nobody will ever shop there again. Period. It's over.

Agreed. I think the smart play is to come out with a grand plan that hopefully entices some people to hold onto their stock and keep the game going. Possibly use this to convince people that a small issuance of additional shares to do X would be a good idea. Then, just live off of the crazy publicity and hopefully good will this affords you.

Why? Nobody will remember the memes. Boycotts hardly ever work. And AMC already did it.

The supply of Bitcoin is “limited” but in reality it’s irrelevant. 1 satoshi is 0.00000001 which means for every 1 Bitcoin in circulation there is actually 100,000,000 satoshi. You can’t buy a hundred millionth of GME.

The supply of Bitcoin being limited absolutely is relevant, and you can buy partial shares of stock (not sure if you can go down to a hundred millionth, but not sure that's relevant). The point is that Gamestop can issue new shares, diluting the existing supply, making it a terrible "store of value". Bitcoin on the other hand has a fixed supply that cannot be increased.

Supply constraints don’t matter when there is virtually infinite availability. There are nearly 19,000,000 coins in circulation and each coin represents 100,000,000 swappable assets. We will reach the heat death of the universe before Bitcoin supply matters.

This is only true if 1 unit is treated the same as 100k units, and it is not.

I still don’t understand the purpose of Bitcoin. Especially when another one can be created. Dogecoin anyone?

I'm not sure there really is much systemic risk. It's pretty clear that there are many mechanisms in play to prevent that (just look at the buy restrictions the past 2 days). There are circuit breakers, they will stop trading before this stock goes astronomical. They will just have GME issue more shares is my guess if things get dicy.

Couldn't those with shorts buy otm calls to hedge the possibility of a squeeze?

OTM calls are super expensive because the IV is through the roof (it has been over 700% most of the week).

However, if Melvin had picked up deep OTM calls before the (literal in both senses) volume started ramping up about two weeks ago, they might have done a little better.

To be clear, I don’t actually think they did.

And even if they did, who's on the other side of those options now that they're in the money?

Could be anyone. What matters is whether they're covered calls or not. I don't know if that info is available. If it's a covered call the seller of the option has the shares, so they essentially sell them to whoever bought the option and decided to exercise the option. If they're not covered, then they have to go out and buy them.

I think this is sound advice. I still have some in, but I locked in gains such that if I lost anything still in I'd still be well up.

Could you explain who would "loan" these hedge funds shorts at these elevates levels? Or is that not how it works.

Anyone who has the stock. The loans are usually collateralized at 100+% and marked to market daily. For stocks this crazy the interest rates on the loans would be equally insane.

So any large institutions (ex: pension funds) holding the stock are making bank lending it out.

Seems more effective than Occupy or Warren

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

https://twitter.com/SenWarren/status/1355187260514250754

This isn’t holding mania. It’s a war. $GME is the front line.

> I would not be surprised if this is the beginning of another stock market crash.

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.

Honest question, do you not have a 401(k) or similar? I certainly have a vested interest in seeing a healthy, sustainable stock market over the long term. Not because I'm part of the 1%, but because my upper-middle class retirement depends on it.

idk. It seems like a savings account could do the trick. You can save a healthy retirement by putting a portion of your salaries in a savings account in your local credit union.

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.

> It seems like a savings account could do the trick. You can save a healthy retirement by putting a portion of your salaries in a savings account in your local credit union.

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.

Well in my ideal situation, the stock markets have already crashed and burned. My argument above is not that savings accounts are optimal for me personally, but that they are an alternative to the stock market. Better yet, an alternative which is far more worker friendly as they don’t rely on taking the profits from the workers and putting giving them to the shareholders.

You might be missing the issue here. A savings account will cost you money in the long term - ie. your purchase power will decrease every year because the interest paid on savings accounts does not even keep up with inflation.

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 think the parent is talking about an ideal situation in which saving accounts do actually pay off a nice interest that beats the inflation and sprinkle some extra profit on top. Not a lot but it is risk free. Isn’t the idea that banks make the money flow by circulating it around a good one? A saver who doesn’t need it now can park it in a bank and when their time to retire comes they get their actualized money plus some profit. And since the interest compounds, with a nice rate it could be both safe and profitable.

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.

The only way a bank could afford to pay enough interest on a savings account to meet inflation would be to... wait for it... invest that money in something that would beat the inflation rate.

We've just re-invented the stock market.

No. That is not the only way... Alternatives include: charging more interest on loans then on savings, charging service fees for each transaction. Also just think about this for a second. If the economy keeps growing (which is what inflation really is) more people will have more money, they would want to keep that money somewhere. They put it in a savings account. The bank now has more money to pay more interests.

We don’t need the stock market.

> You can save a healthy retirement by putting a portion of your salaries in a savings account in your local credit union.

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!

No I’m not joking, nor am I harming my future. I don’t have to make an optimal amount of growth on my savings to afford my retirement. There is no harm in owning less money then if I had used them to swindle more workers out of their profits on the open markets. In fact, every dollar you make as a result of not working is a dollar somebody else worked for and didn’t get. You are harming workers by earning money on the stock markets.

You do understand where the "interest" comes from on your savings account right? The bank doesn't just invent it...

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.

idk. I simply don’t like the fact that people are gambling with my workplace. And I especially don’t like it when shareholders pocket parts of the profit that I made them without bringing anything of value to the company.

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.

"And I especially don’t like it when shareholders pocket parts of the profit that I made them without bringing anything of value to the company."

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?

IMO no. 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.

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.

> And I especially don’t like it when shareholders pocket parts of the profit that I made them without bringing anything of value to the company.

> 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.

I am not able rightly to apprehend the kind of confusion of ideas that could provoke such a comment.

+1 for the Charles Babbage reference

If you make money on trades and then spend it on food, it certainly does seem like some kind of magic trick to me. Whatever money you earned must have been lost by someone else. Or does the amount of money increase when stocks go up?

Whatever the confusion is, I have it too.

I make something and sell it to you for $5.

Tomorrow, you sell it to a third person for $10.

Who lost money here?

Excellent question.

Really no one I think.

I'm definitely wrong about something though. I need to think about it some more to figure out what.

A new interpretation came to overnight, as if in a dream. I don't know what's correct, but here it goes.

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.

I think the question is flawed... Or at least irrelevant.

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.

Without the middleman it seems possible that some of the buyers and sellers never might have found each other. I don't know.

Every dollar you make in interest from your savings account at your credit union is $30 that someone had to pay the credit union in interest on their mortgage. You are swindling people out of their hard earned money — people who are struggling to own their home or business — to fund your own retirement.

Do you honestly believe that these are equivalent? Or are you just arguing in bad faith? I’m gonna assume the former and explain the difference.

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.

It’s odd to me that you see the mutually beneficial transaction there but not in the stock market.

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.

If I buy a stock of a company, how is that funding the company? Only the previous holder of the stock gets the money.

At some point, the previous holder of the stock was the company itself. That’s called an IPO. Additionally, companies frequently issue new shares to raise money. Tesla has done this multiple times in the past few years.

Most of the activity (all of it?) on the stock market seems unrelated to IPOs. Is there any particular reason stocks must be transferable?

Yes, it’s an incentive to encourage buying by reducing the commitment.

It does seem to have that effect. It also seems to have other effects. And it seems to be mostly other effects. If funding companies requires all those effects, it seems legitimate to question whether it's a net benefit.

I would take you more seriously if you spoke more concretely. What other effects, specifically? I’ll give you one: it distributes wealth by letting the common man invest in highly valuable companies rather than limiting it to just wealthy people profiting from entrepreneurship. I’ll bet you you and people like you wouldn’t be too happy if only the original founders of companies like Apple, Facebook, Google and their descendants owned those companies. Do you know how I know? Because Jeff Bezos owns just 11% of his own company and people still hate him despite that the other near 90% has made other people very wealthy too. Now imagine he owned 100% of it. That’s what you’re advocating for. If you think Jeffy boy would be more generous to his employees if he owned all of it, then you must not know the realities of most family owned businesses.

I don't think I'm advocating for anything. I don't know what all the effects of the stock market are, but it seems like it probably has some.

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.

I’m not parent but I’m gonna chime in here and take this threat do yet another direction:

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

Shareholders and investors aren’t the only means of collecting revenue for a business. Alternatives include:

* 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.

> Setting aside parts of the profit for future investment

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.

Now I do think you are just trying to win an argument and not actually debating in good faith.

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.

> Now I do think you are just trying to win an argument and not actually debating in good faith.

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.

It’s a pretty decent idea, at least in theory. Prior to stocks, it was difficult for the little guy to own a piece of a company. I certainly don’t have the money or time to get a stake of a private company, and I’m glad to be able to participate in the compounding machines that are well-managed companies.

> The stock market has never done anything for me.

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?

Statistically, in a zero sum game, where all players are equally skilled and the winner of each transaction is determined at random. The more transaction made, the more the wealth accumulates.

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.

The stock market--just like the economy--is not a zero-sum game. I don't know what to tell you. The S&P500 over the long term has consistently performed quite well, for many decades. Maybe if your picture of participating in the stock market involves day trading, sure, statistically the majority of people who try will break even or come out with a loss. But that's not what financial advisers recommend average people do! You should be doing a daily cost average by setting aside a small portion of your income to invest, ideally in a tax-advantaged IRA (or 401k if your employer offers one.)

Thank you, but I prefer a savings account at my local credit union. I’m sure the interests will amount to something similar as what some random hedgefund manager can conjure by gaming the market.

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.

With all due respect, savings accounts can barely keep up with inflation, if at all. The last couple of years it was not uncommon to have 15%+ gains with a diversified portfolio.

At today's interest rates it seems like you're probably going to lose a lot of money to inflation. At the very least why not buy government bonds?

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...

You're going to have to explain how buying shares === workers earning less because I don't follow.

A simple index fund will outperform interest earned from a savings account by quite a bit.

Is there any particular reason to believe that financial advisors' advice for average people is in their best interest? (The average people that is)

Robinhood was founded on that idea, but it turns out it's kinda hard to deliver. When people where trying to invest into this rising stock they ran out of credit at their clearinghouse and had to stop their customers from trading.

The real problem is that the stock market has historically delivered 7-9% on average, and consensus is it will likely be considerably lower in the future. Making significant money from an ownership share like that takes decades of disciplined saving and investing. The narrative of WSB that "the rich won't let poor people invest in the stock market like they do" is ridiculous; most of the rich would be very happy with 8% per year on average.

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 think your argument is better stated in that you don't see value from predatory capital vs sweat capital.

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.

A ton of people aren't doing any thinking for themselves. I'm pretty convinced there's some kind of organized manipulation attack going on within r/wsb.

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.

> I'm pretty convinced there's some kind of organized manipulation attack going on within r/wsb

Do you have any proof for that? If not then arent you the one who is spreading misinformation?

I personally won't go as far as the grandposter here, but I'd be at least skeptical of any investment advice from random internet people.

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.

https://www.reddit.com/r/wallstreetbets/comments/l7u8h5/remi...

6,000 upvotes about the possibility of disinformation

Reddit admins have been rather supportive of WallStreetBets[0], even helping the mods with special technical support and tooling to handle the load of users. They seem to have a good relationship.

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_...

There is no misinformation in there. It's average people buying, and the market is doing its thing. The eye-opening part of this is how brokerages like Robinhood are reacting.

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