Hedge funds rethink tactics after $12bn hit from meme stock army | Hacker News Reader

Hedge funds rethink tactics after $12bn hit from meme stock army

ft.com

15 pointshhs11 comments

The language in this article highlights how important "financial professionals" view themselves and their peers...

"Extinction-level events" to describe the potential collapse of their hedge fund, when engaged in behavior designed to destroy companies (short selling), that ultimately results in thousands of lost jobs for the workers of said companies if the shorting of a stock is utterly successful. The arrogance is staggering. No wonder WallStreetBets are taking the fight to these short sellers.

Short selling provides a way and incentive for regular people to keep companies accountable. A recent example is Luckin Coffee (https://en.wikipedia.org/wiki/Luckin_Coffee) which fabricated 90% (!) of sales in 2019 and was only spotted by a due diligence firm that actually sent in people to measure foot traffic in stores.

Short selling is not a bad or evil thing.

Short selling is perhaps ok but definitely not naked short selling

A lot hedge funding is just having a big enough pile of cash to bully smaller investors around. In this particular case the hedge fund ran into a much larger pile of cash and got bullied in return and went running home to cry to mommy. Life is tough in the sand box of who's got the bigger pile.

Like shooting isn't a bad or evil thing, per se. But you can break companies or people.

“Short selling is not a crime!”

https://archive.is/676Bn

"rethink tactics" These companies have no institutional memory. Their reward systems will always move them from one indulgent greed fest to another, until someone is finally left holding the bag.

Can Wall Street Bets maintain their edge with hedge funds monitoring them? Will they need to move into private forums?

The thing is, once you build a few billion dollar position, you can’t unload it quickly and profitably when you know you’ve been spotted.

Indeed, shorting AMC and GameStop was very rational by any single actor - the problems were that too many hedge funds were doing it at the same time, and that WSB noticed , turning the “market can stay irrational longer than you can stay solvent” on against the hedge funds at full throttle.

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