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.
There is no way that GameStop has an actual fundamental value of $300 per share. That price is clearly inflated, and in a few weeks will decrease, probably to somewhere above $20, but not that much higher. The market will eventually correct, but $300 is an over-correction for sure.
Look at all the short-sellers of TSLA who made the same mistake. These companies are valued on what the market decides and we all know "The market is irrational".
Its meaning has nothing to do with Keynes' quote. It's instead a clever play on words that refers to the recurrent accusation (and subsequent meme) that WSB are a bunch of autists/retards who don't have any idea of what they are doing and thus are doing it entirely wrong, and the defiant reply from the WSB crowd where they state they are ready and able to continue doing it for far longer than what hedge funds, who are throwing rivers of cash at the problem, are able to withstand no matter the cost.
It's - WSB can remain retarded longer than you can remain solvent.
"Well as a longer-term investor I have the benefit of heavily discounting daily moves. I care much more about the longer-term charts, and these have been fairly constructive for months now. Even today, after the typical quarterly sell-off, the longer-term chart still looks decent so there’s been nothing to panic over. Let’s see what the price does over the next few weeks. Of course charts are only a minor part of the equation in my opinion. The fundamentals are much more important in a situation like this."
The issue with tech, much like math, is that it often takes a while to figure out all the potential, case in point GPGPUs and Deep Learning revolution. The tech, the ideas, the internal code/models, the people (Jim Keller in AMD, and TSLA) are all catalysts that can't be quantified in the same way as traditional 'fundamentals' are treated.
Case in point, who in their right mind thought a bunch of self proclaimed smooth brains would hold and not panic against ladder attacks and FUDs? The smooth brains have been in the game as much, they have seen their capital dropping to 0 more than the HedgeFunds are accustomed to losing at their own game.
A hedge fund with capital and influence, capable of controlling the narrative, could and tried to decide the outcome of their bet based on their bet, we saw this with TSLA as well. They believed, like most people, that GME would go bankrupt, they didn't consider the bull case [1] because things had been going down for so long, but GME's revenue is periodic, bringing us back to the fallacy. Things are how they are until they are not, and the inability to adapt due to logical fallacies becomes evident. There's a reason why reasonable people in WSB suggest an investor should know both cases by heart, if you can not afford to control the narrative, you can not direct the behavior of the market.
[1] www.gmedd.com
I do agree that fundamentals (for whatever it means) are not sufficient for success. In the end of the day, investments are based on speculations about the future. The reason the fundamentals matter is that they provide some guidance for your speculations. The basis which you can build your narrative upon. Sometimes they can mislead you, often things happen you missed or couldn't predict (e.g., a pandemic), etc.
Finally, I also agree (if that's what you meant) that some narratives people follow are not based on fundamentals, but rather based on their biases or whatever someone else may have told them. But if you ask me such investments fail more often than not.
That is the argument, the hedge funds made a bet and had already decided the outcome, my argument is simply that they ignored the bull thesis because they had already decided the outcome. They also ignored the possibility of getting royally forked up. If main street figured it out, somebody else could have as well, and Michael Burry did.
Perhaps economists are basing these so called fundamentals on a false premise.
Humans are emotional and make mistakes, but most investors at least attempt to make sound investments, and that’s what drives the market at the end of the day.
If GameStop the company continues its failing trajectory, then GameStop the stock will eventually follow.
It sounds great to "invest on the fundamentals", but there doesn't appear to be a way for the average person to even comprehend what "the fundamentals" even are.
But there has to be at least one fundamental: If the company goes bankrupt, the stock is worth nothing. Gamestop is most certainly going to go bankrupt eventually. Their business model doesn't work for today's market.
No one is going to convince me that GameStop has a way to avoid that eventuality.
You're right to call this out. It means absolutely nothing.
These massive hedge funds (etc.) throw around billions of dollars on a whim and suddenly they're worried about "fundamentals"? C'mon.
That would mean that ALL 500 of the US' largest companies by market cap all go completely bankrupt WITHIN ONE CALENDAR YEAR.
I think if atomic bombs were to destroy the 50 largest cities in the USA, that this wouldn't happen. There would still be enough economic activity in enough of the 500 companies to justify some price above zero.
So the scenario would literally be the apocalypse. The kind of apocalypse where the US dollar has zero value. The kind of apocalypse where the amount of money in a brokerage account would not even be on the top 100 list of things a human would be worried about.
Even losing 90% of value would be an event so unprecedented in magnitude that it would make anthropomorphic climate change seem like a footnote in history.
In essence, you're correct that if the company goes bankrupt, the stock is worth nothing, but you make a mistaken assumption in that a company without a viable business model or future profit must go bankrupt - if they have an asset base, they can restructure or shut down long before their accumulated wealth is spent.
Chewy's Founders and now board members are obviously not in the business of losing money, they bought a sizeable portion of the stock and are now members of the board.
GME has been transitioning to e-commerce (this is where Ryan Cohen and the new board comes in), where they tripled their sales (e-commerce) each year.
In addition, one of the board members is owner of Cloud9, an e-sports company. I suspect that this could enable GME shops to organize events/tournaments, another idea is to play the same role sports pubs do, but adjusted for e-sports.
But since the government can’t fund itself on revenue, but relies on the central bank printing money, all this new currency flows into the economy and into the stock portfolios of the upper classes, which inflates the price of the stock faster than the business can generate a profit. Which means all the old value investing stuff doesn’t tell you how to make the most money anymore. So the “fundamentals” have changed and no one knows exactly what they are.
In other words, the government is partly running on borrowed money.
There is some level of money being printed to buy some of that debt, but that is in more severe cases like recently.
The issue is that at current prices, speculation and forward thinking far outpace any value one could derive from analysis of fundamentals. A very successful strategy is momentum trading. Technical/Trend Analysis is all about understanding momentum trading, and at what entries and stops algorithms set up their strategies.
On a more practical case, if you'd preferred to have invested in Intel on "fundamentals" instead of AMD because INTC has 10x more sales...then go ahead. But you should know, 1 stock went sideways for 3 years and another is up 750%.
And Chamath Palihapitiya said it best when he was on CNBC...who got the TSLA investment wrong? Hedge funds. Who got it right? Retail investors.
When more is shorted than exists, you’re in a let good place to know that there’s no such thing as the last biggest fool.
But of course not all options expire at the same time
For every long call option contract, there is a counterparty who is subject to unlimited upside price risk, just as a traditional stock shorter. The difference is the contract has an end date.
I would argue that options account for more of the pressure/volatility of these recent stock prices than the shares themselves.
Do you understand the tax-reasons why a company would buy back shares instead of issue dividends?
What about book value, where a company could have $1b in assets (real machinery, tractors, factories, etc), no debt, and no dividend? Does that mean it still has no fundamental value?
A stock where neither of both are possible ever (now and in the future) has no fundamental value since you have no way to extract value from it, it's pure speculation. Stock buybacks only have value because something else gives the stock value.
Of course, I don't think the situation described above actually happens in the real world, dividends or ownership will (or at least can) happen at some point.
Let's take a planet in another galaxy. I would argue the inherent economic value of this planet for a human on Earth is null. You cannot and there's no realistic time frame in which you would be able to extract value from owning it. And yet you could sell the ownership, lend it, ..., and make money. That doesn't give inherent value to the planet, it's just speculation.
Let's take Facebook, where I think Mark Zuckerberg has ~60% of the shares, and only 40% are on the market, thus even if you buy them all you cannot gain control of the company. You can't extract value from the company from this avenue.
Again, what gives inherent value to a stock is that you, or someone else, will be able at some point to get value from the company itself, not from someone else. In a rational market, a price rise should mean the market will eventually be able to extract more value from the company then thought.
What matters is that the company is capable of making cash and, ideally, of increasing that amount of cash with time. Dividends are just a capital allocation decision.
The price is bonkers.
Amazon dominates a market and is making outrageous revenue and income. Tesla doesn't compare.
The greatest generation is dying off and the boomers are retiring. If no one seriously challenges amazon, there is going to be a lot of growth in e-commerce.
https://www.bloomberg.com/opinion/articles/2021-01-29/reddit...
The fact that IBKR couldn’t handle a negative oil price at that time made me realize that for all their marketing as being a higher quality broker for serious investors, they had some serious holes.
Then when they stopped buys on GME while Vanguard and Fidelity still allowed them, I gave up on IB completely.
Right now I’ve bought puts on IBKR - I expect a lot of clients with money will drop them (along with Robinhood etc.) and move to Vanguard/Fidelity.
If I am not mistaken he did say in one of his videos that there is a chance for a squeeze to happen.
This guy was a well known poster. I'm sure he thought he had some power to motivate wsb users to invest, but he might not have predicted he had enough power such that he would get embroiled in an investigation. Regardless of how "internet-tuff-guy" people are, most people really don't like to suddenly be thrown into the limelight of a financial fraud investigation, even if they are innocent of any crimes.
Thus, the CYA language. Better to get out in front and claim ignorance just in case.
The short squeeze thesis(s) were made by other reddit users. Even those weren't particularly popular until around 1/13-1/15 when GME saw an unexpected pop. It was around then people were like "oh this squeeze thing might happen. we could test it"
It seems like he was investing for the long haul, because of the stock and the company’s fundamentals.
But, the phenomenon now is the short squeeze, because of the excessive shorts over the available floating shares.