Comment by rspeele | Hacker News Reader

Comment by rspeele | Hacker News Reader

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Yeah. Copying my post from yesterday's thread -- which only looks more and more real today with increasing rationalization leading to explanations like that hedge funds are "short ladder attacking" GME.

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The claims and the consequences are very different, but I definitely get the same sense I got reading Q stuff when I skim the current WSB page.

- The media, government, and elites are conspiring against us.

- Info that says short interest has decreased / shorts have covered is propaganda and should be ignored.

- Info that says short interest is still sky-high is to be believed without question.

- Parties who were on our side of the bet but are now advising caution (e.g. Burry or S3) must be malicious or compromised, can't possibly be genuine.

- Mix of facts with misunderstood interpretations thereof: 140% short interest is very high (fact), 140% short interest should not be legally possible (misunderstanding).

- The dark truth we are about to reveal (counterfeit stocks?) has been going on for a long time, but now the wool will be lifted from the eyes of the nonbelievers.

- Your continued belief in "the plan" is important. You must keep the faith!

- "The Event" will take place on X date, but when it doesn't, no problem: it was always going to be Y date that It Happens.

- We all KNOW our version of the story is right. What particular pieces of evidence are so rock-solid and convincing? Oh, well, there's SO MUCH, but it's not my job to spoon feed you the facts. If you don't know, you clearly haven't been paying attention and should do your own research.

- If somebody published something saying that we're wrong, it means that "They" are scared of us. We must be getting close.

I don't know whether WSB's narrative is right or wrong, which is why I am on neither side of this trade and merely watching with interest from the sidelines. They could very well be correct about all of this.

I also am not trying to allege that being a "GME to the moon" person makes you a "Q person". They are completely different sets of beliefs. All that I'm observing is that the marketing of the ideas is similar.

Thanks for laying that all out so I don't have to. Here are some other examples I noticed.

"Memes" that are outright out of a WW2 propagandist playbook with phrases like "Hold the line" or the WSB kid with sunglasses seen taking out the enemy.

People trying prove their devotion to the cause is so much higher than their fellow brethren. "For every upvote I'll donate to the campaign/I'll buy stock in GME"

Stuff like that usually causes to walk away immediately from things. Still the overlap of methods is interesting.

Also, the WSB kid logo superficially looks like Trump (hair color, style and tie).

I know /r/wsb disavows politics, but I found it an interesting coincidence.

Or a "suit" as per the typical wall street uniform, and blonde hair?

I'd say you're heavily overfitting here.

I never read Q stuff, but from watching how this has unfolded on WSB I thought to myself "this sounds exactly like what the Q stuff must be like". That sucks, because I would hate to lose the raw WSB energy to this.

I'm only halfway in the conspiracy of GME moon.

I have seen several articles in the past week outright rejecting the idea that anyone is in on GME for the "cause" of shitting on the funds (even if it turns out ineffective). If I see an article failing to recognize the legitimate populist (and correct) element of the moment, while hand-wringing about the fund managers, my bullshit detector goes off.

Also, can you explain, or link, or anything, as to why shorting more shares than there are to trade a good thing? Why short selling is legal at all?

Shorting seems like a terrible tool in society, a way for people with money to gamble, win big, but occasionally fail so hard the federal government needs to step in.

Why short selling is legal at all? Well, why not? There are two or three parties to every short, all engaging in the activity because they expect to benefit.

1. The lender of the stock, who gets interest payments like any other lender

2. The short seller, who of course expects to pocket the difference if the stock goes down

3. The person who buys the stock from the short seller, presumably expecting it to go up (this party could, knowingly or not, be the same person as #1)

Sure, the short seller is taking the risk of a massive loss in a scenario like this, but that's their problem. And if they fail so hard they can't possibly return what they owe, then it becomes the lender's problem. But that's true of any loan, so it's up to the lender to set the terms in a way that limits their risk (e.g. not lending to "risky" borrowers, not lending too much of what they have in reserve). What's the difference with other forms of lending?

In the movie "The Big Short", weren't the short sellers the heroes of the tale -- the ones who really looked into the underlying assets, looked past the exuberance and overconfidence, and found the system to be rotting?

I think there's two things here. One is the case of the said underpricing. That's the theoretical role that short selling. The second is that it's a fantastic weapon to use against less sophisticated, less coordinated retail investors.

From what I understand here, large quantities of short selling can be a self-fulfilling prophecy. Drop the price with shorts and let panic set in. Retailers sell due to panic, dropping it further. This goes into a nice little spiral, which lets the shorters cover.

You could also argue that this current situation falls into a "short and distort" category as well if you take the media into consideration.

> Drop the price with shorts and let panic set in. Retailers sell due to panic, dropping it further. This goes into a nice little spiral, which lets the shorters cover.

What makes manipulating the price with short selling worse than manipulating the price with buying?

Your reference to "short and distort" suggests you're surely familiar with "pump and dump". They are two sides of the same coin. In both, it's not the stock trades themselves that make it a scam, it's the misinformation fed to the suckers on the losing end of the deal.

Because a short is a sale without actually having the stock for in possession. Combined with stock loaning and sufficient capital, it allows shorters to distort market pricing with something orthogonal to the core dynamics.

Ultimately I'm skeptical of price manipulation theories that rely on executing big trades to artificially move the price, as opposed to moving the price via changing trader sentiment about the underlying asset. There is a chance trader sentiment latches onto a price change and you start a herd movement just by making a big trade, but I think it's a LOT harder to pull off than it sounds.

My gut feeling here comes from another environment, PredictIt betting markets, where both the number of traders and the size of the investments are capped so the markets are smaller. The order books there are also directly visible, so you can calculate how much it will cost to move a market price by a given amount. There are many markets on there with order books thin enough that a hundred bucks will move the price by several percent. You can experiment with this manipulation on a middle-class salary there, and you'll find that unless you accompany your price swing with a compelling pump story in the (unregulated of course) message board, it doesn't last long enough for you to get out. Some of the really small-cap cryptos might be another example of a playground to try stuff like that out in.

I think most traders in both short and long positions are not attempting manipulation, and just expecting that the market will naturally move to a more realistic (in their view) valuation of the stock.

Here are the mirror scenarios as I see them. The price-moving influence for a given capital investment is no different between the short-seller and the long-buyer. And in both, it cuts both ways -- the trades you make exiting your position have a market force opposite to the trades you made creating it. There's no free lunch. Winning either trade requires convincing other traders that the higher or lower price is a fair one. That could be done with false info if you're a scammer, or it could be real info if you are just trying to make some money off pointing out the truth (see Nikola).

Scenario A:

I am a short-seller. I borrow $100M worth of stock from a broker, and sell it with a market order.

My sells chew through the bids on the order book, highest bid first, moving the last share price number down as I fill the standing orders of everybody buying at X, then at X-1, then at X-2, etc. But I haven't affected the ask side of the order book directly. Those people are all still offering high prices to sell, I just jumped the line ahead of them and told all the buyers "I'll beat that price! Get your cheap shares here!".

I hope that some of the people on the ask side see the movement, panic and either execute market sells or at least lower their sell limits, so that I can buy the shares back cheap. But they might not, and if they don't, I'll have to buy back higher than I sold. I really need for this to catch on and cause a frenzy, because in moving the market down I sold a lot of my shares at bargain prices! To make money on those I'll need the price to sink even deeper so I can buy them back at extra-bargain prices. In trying to keep the price low as I repurchase shares, I'm fighting against other smart traders who see that none of the fundamentals have changed, do not wish to sell low, and may even be competing with me to buy low. I'm also fighting against myself in a way, because just as I put downwards pressure on the price by selling this huge number of shares, I'm now putting upwards pressure on the price by trying to buy them back.

Scenario B:

I am a buyer. I borrow cash to buy $100M worth of stock with a market order. (You may ask who would lend me that much cash, but in scenario A they don't lend $100M of stock to just anybody either so we're comparing apples to apples)

My buys chew through the asks on the order book, lowest ask first, moving the last share price number up as I fill the standing orders of everybody selling at X, then at X+1, then at X+2, etc. But I haven't affected the bid side of the order book directly. Those people are all still offering to buy at low prices, I just jumped the line ahead of them and told all the sellers "I don't mind your price, I'll take all you got!".

I hope that some of the people on the bid side see the movement and think, this rocket is taking off! Hopefully they either execute market buys or at least raise their bid limits so I can sell them shares at the inflated price. But they might not, and if they don't, I'll have to sell lower than I bought. I really need for this to catch on and cause a frenzy, because in moving the market up I bought a lot of my shares at highway robbery prices! To make money on those I'll need the price to rise even higher so I can sell those shares at extra-highway-robbery prices. In trying to keep the price high as I dump my position, I'm fighting against other smart traders who see that none of the fundamentals have changed, do not wish to buy high, and may even be competing with me to sell high. I'm also fighting against myself in a way, because just as I put upwards pressure on the price by buying this huge number of shares, I'm now putting downwards pressure on the price by trying to unload them.

>If I see an article failing to recognize the legitimate populist (and correct) element of the moment, while hand-wringing about the fund managers, my bullshit detector goes off.

link?

>Also, can you explain, or link, or anything, as to why shorting more shares than there are to trade a good thing? Why short selling is legal at all?

https://en.wikipedia.org/wiki/Short_(finance)#Views_of_short...

>Shorting seems like a terrible tool in society, a way for people with money to gamble, win big, but occasionally fail so hard the federal government needs to step in.

Are you referring to the last financial crisis? If anything that was caused by the long side, not the short side.

shorting gives incentive to uncover companies which are overpriced - this is good for uncovering frauds, debunking pumpers, and for simply getting the fundamentals in the open so the market can price it more accurately.

Another similarity: outsiders (and even insiders) aren't sure whether the whole thing is a joke or not.

When it's put that way, the mechanics looks similar. I wonder if there are people who took this psyche down to science and monetising it.

Yeah, it's pretty far gone once it gets to the literally posting "we're over the target" phase.

Thanks, this is really nicely laid out.

yeah the "Deepstate" is now "Hedgefund + Mainstream Media"

if you actually swap out the words, it reads almost exactly like the Q conspiracy and the other crap Trump supporters been echoing in their chambers.

I wonder if there is a math formula to these conspiracy/pseudo realities. They seem to have very similar structures and literally just the variables are different each time.

Coupled with attaching legitimacy to numbers (your account is too new therefore untrustworthy, you have lot of karma points so you can't be lying), it would be very easy to paint any type of narrative while signaling trustworthiness.

Also, people often claim to be part of X or in position Y without any verification to win confidence.

Literally the psychology of confidence man has now taken the form of some integer attached to a username in a database somewhere.

We also see this blind trust in large numbers on Instagram and Youtube where the number of subscribers and likes automatically signals importance, legitimacy when all of it are easily manipulated, paid for.

The irony is these tropes have been used by the establishment forever.

Maybe the establishment is still using them in this case.

Hah! Great point. The bourgeoisie like to use us proles as a pretext for their shenanigans.

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