I remember when this came out 20 years ago. It was part of the whole wave of P2P filesharing programs that came out between 1999-2002: Napster, Gnutella, Kazaa, Audiogalaxy, etc. Amazing it's still going on.
BTW, for folks new in tech - it's amazing how influential that wave of programs were, even though they largely failed in the marketplace. Napster founder Sean Parker later became the first investor and first president of Facebook. Also involved in the wave (in a tangential way) was Mark Zuckerburg, whose Synapse Media Player got a $M+ buyout offer from Microsoft while he was still in high school. Uber founder Travis Kalanick's first two projects were Scour (a P2P filesharing app) and Red Swoosh (a P2P CDN). I met the AudioGalaxy founder while working on Google Search - he later went on to become one of the early Waymo engineers. The Kazaa founders later went on to found Skype, and we know where that went. Chord (an academic research project in distributed hash tables) was led by Robert Tappan Morris (originally famous for creating the Internet Worm of 1988), who then went on to co-found YCombinator, which owns the website you're reading this on. The gossip protocol invented & refined by Gnutella forms the basis for many cryptocurrency P2P protocols like Bitcoin & Ethereum.
There's probably several trillion dollars in market cap attributable to the intellectual descendants of a bunch of nerds who wanted to share stuff over the Internet and fuck over the RIAA, MPAA, and governments.
Kinda funny small-world stuff that Justin Frankel (Winamp + Gnutella) went onto AOL/TimeWarner and got into a feud with an exec he wrote a passive-aggressive blog post about without naming him. The exec was Chamath Palihapitiya.
Justin was and always will be a legend - he wrote an AOL Messsenger ad blocker and mp3 search plugin _while working at AOL_
And Gnutella, too. I still remember hurrying to download it when it came out because I knew that Justin worked at AOL/TimeWarner and it was going to get taken down on Monday as soon as the powers that be realized someone had written a piracy app. Luckily people had mirrored it, and eventually ended up reverse-engineering the protocol.
The interesting thing is that most of those people weren't actually pals when working on P2P stuff, but they were all working on the same stuff. Zuckerburg and Parker didn't meet until Facebook was growing quickly. Scour/Red Swoosh, to my knowledge, had no major connection with the other projects.
I view it more like an instance of synchronicity, where a lot of bright young people looked at the world independently and decided that this was the space they wanted to be working on. And then when that space didn't pan out they went their separate ways, but the fact that they were bright & energetic meant that the successor projects became huge.
(I wonder if a similar effect explains the General Magic, Paypal, and Justin.TV mafias.)
Or more likely this is how synchronicity works:
- we have 7B people on earth
- at any point of time, all possible exciting among the moment are being worked on by someone
- if something succeed, we look back and wonder at the synchronicity: how it is possible that 10 people worked independently on the same thing - they must have all have been guided by the superior intellect they had in common!
...
I’m sure there were great synchronicity of people working on squaring the circle in 18th century, and of people working on the philosopher stone earlier, except they were all misguided so we don’t talk about them.
When the internet became a thing for the general public, it was a bit of a no-brainer to try and do "X but on the internet" for all X. "Filesystem but on the internet", "diary but on the internet", "cash but on the internet", "tv but on the internet" etc.
They may not have made money, but they certainly succeded in getting marketshare. The main reason they dont now (other than napster being sued out of existence) is that bit torrent displaced them, and really that should be considered the same class of program
BitTorrent was also careful to demonstrate that it had substantial non-infringing uses. That's perhaps a lesson to folks who want to challenge the system: seem as innocuous as possible for as long as possible, until you become the system.
Google did this to very good effect: even when I was there the first time (~2010, over a decade after founding) they still had a sterling reputation in the press, while Netscape got crushed by their arrogance (and Microsoft, relatedly) less than 5 years after founding. Microsoft too, for that matter: through the 80s they were seen as an innocuous software publisher, because the hardware was where the money was, and then in the 90s people realized hardware was a commodity and Microsoft was a monopoly.
The IPFS website at the bottom left contains a section "Protocol labs", the "About" link of that links to https://protocol.ai/ which says "We're decentralizing storage with Filecoin".
So their end goal might be making money off that cryptocurrency...
Thanks to the GP for causin me to figure out why the wheel is being re-invented here! :)
Why is adding an incentive mechanism to "pinning" files on IPFS inherently wrong? If you find the right incentives to a tech problem, that pushes the tech forward right? Like Satoshi Nakomoto putting together the right type of incentive to be able to create an almost unhackable network in Bitcoin (along with Ethereum and others).
I'm not yet saying that Protocol Labs will ultimately find the success they're looking for BUT writing off their efforts as "just a way to make money off of cryptocurrency" I feel is pretty dismissive.
It's not dismissive. They already got their money. $257 million, to be exact. No one knows how Filecoin is going to make money except for Protocol Labs.
"The market price of the integral reward"? What is that supposed to mean? Filecoin is just a medium of exchange for people buying and selling storage services. Filecoin does not offer anything specific and its platform has to compete with plenty of mature, efficient alternatives.
> the value of the coin is driven by the interest in the tech it provides.
What "tech" does it provide? Not IPFS, for sure, that already was under development and could have come to fruition as a regular open source project. A decentralized market for storage, "proof-of-spacetime"? These might be interesting. But again, if we want to fund these things there are surely better/cheaper ways to do it. $250 million is a lot of money for the tech that was developed so far.
More importantly: there is nothing about the "tech" that requires $FIL to make it work. The market dynamics will be the same whether they used FIL, DAI, ETH, wrapped BTC or even a dollar-pegged token they decided to issue. People are not going to pay more or less for their storage because the price of the token went up or down.
> Currently at $22, not bad for a random coin.
These are the kind of statements that almost make me side with the buttcoiners. At this point, with all the speculation, market manipulation and naive FOMO "investing", there is no useful information to be had from the price of the token.
...yes, of course I'm familiar with Filecoin. If that is the explanation for how speculation prompts use of IPFS over Freenet (both of which I adore), then there is no explanation.
They can. Think of it like a torrent file and a webseed. You can freely use torrents to distribute your content, but if everyone who has ever downloaded it goes offline, any new downloaders will be stuck at 0% forever.
The only add on here is that you can pay some service in filecoin to keep seeding your torrent forever.
Of course you can. There is no substance to this line of reasoning except that PL publishes both.
It's like saying speculating on py-umbral (a standalone open source project) because we use it to build NuCypher (a blockchain-dependent open source project).
"Tahrir aims to be a distributed, decentralized, scalable, and anonymous "workalike" for services like Twitter, Google Plus, and Facebook. It is at an early stage of development, but is being actively worked on by a number of volunteers."
What are the benefits and disadvantages of Freenet vs IPFS? I am genuinely curious, they seem superficially similar and yet Freenet has been around for 20 years. Personally I haven't heard of it but does it have a lot of traffic/popularity compared to IPFS?
The short version: Freenet has better anonoyminity properties than tor/i2p at the cost of scaling poorly and only supporting static documents instead of interactive (tcp) servers.
It's become satisfyingly fast for me over the past years.
> only supporting static documents instead of interactive (tcp) servers.
You can develop dynamic services on Freenet just fine.
It is just done in a different fashion technically:
Instead of hosting the software on a server, and running scripts on the clients' web browser, there is no server/client model. It's true peer-to-peer: Every client is its own server, and the code runs there.
I.e. users install "plugins" for Freenet, and those use the network primitives which Freenet provides to establish dynamic connections and render dynamic content.
So you can have dynamic HTML if you want to. It's just not served by the sites you visit. Instead, things are developed "once and for all" as plugins for all sites and users to use.
So it's kinda like "forced true decentralization". You can't just shove JavaScript down the throat of random visitors of your site. You actually have to go through the effort of making your site's service a real application which people voluntarily choose to run.
>It's become satisfyingly fast for me over the past years.
My understanding is that freenet (At best) scales logarithmically where Tor scales mostly constantly. Scalability and (current) speed are not the same thing. However saying poorly was probably unfair, I should have said is less scalable than Tor is.
> You can develop dynamic services on Freenet just fine.
> [...]
What you're describing is how I would define a static page (plus client side scripting). Which works fine in many use cases. But you can't ssh into some server over freenet, or plop your php site from the world wide web unchanged, on to freenet. You can do these things with Tor, along with (at least in principle) all the "true p2p" things you mentioned you can do with freenet (Obviously in the Tor case you need to have your server always going and have sufficient capacity). That's why I would describe Tor as more flexible in terms of the things you can "host" (for lack of a better word). But the flexibility comes at a cost, and in exchange for being less flexible, freenet has a lot of interesting properties that tor does not have.
As with any anonymous p2p network you need to know:
Your level of privacy depends on your threat level. If the government is after you, they may very well know exploits. If you just want privacy from corporations for perfectly legal reasons then you might be fine.
TL;DR: Freenet is a self-contained *storage* network. Tor is a *communication* network, I2P as well. The latter is also self-contained. However as they're both communication networks they do not provide censorship-resistance. The endpoints you're connecting to are central servers and can be taken down.
>However as they're both communication networks they do not provide censorship-resistance. The endpoints you're connecting to are central servers and can be taken down.
Can you elaborate on this? This reads as essentially false to my understanding. If by endpoints you mean 'relays', those are not 'central servers'. If you mean directory authorities, then yes, those are centralized.
With that said, I'm still not sure what you mean by 'they do not provide censorship-resistance.'
They absolutely have and do provide censorship resistance.
> Can you elaborate on this? This reads as essentially false to my understanding.
No, it's not false AFAIK :)
By 'endpoint' I mean what an address on those networks actually *addresses*.
Both a Tor-address (a .onion hostname, or a regular web address if you use Tor to access one), and an I2P-address, are essentially similar to an IP-address in terms of being the address of a *machine*.
They are anonymized, but the data is routed to the very specific machine which the address is of.
A Freenet address on the other hand is the address of a *file* - basically a hash.
So in Tor and I2P, even though the machine behind the address is anonymous, you can still DoS it because you have the address of the specific machine where the data is at.
In Freenet, you cannot DoS the machine because the address does *not* tell the network where the file is stored. It only tells what file you get. Any machine on the network can serve the file to you!
And in fact, if you try to DoS a file by requesting it very frequently on Freenet, it will instead be distributed MORE on the network: Machines along the path where the data is routed will cache the file.
The wording can be a little confusing, because i believe in tor when people talk about censorship resistance they mean censorship of the whole network - e.g. blocking all the entry nodes, trying to find bridges and blocking them, which is a different type of censorship. I imagine freenet is just as vulnerable to that, and i would imagine that is an easier thing for powerful entities to do than to push GB of data into the tor network for an extended period of time to hopefully knock out a single hidden service.
Freenet in fact is less vulnerable to that because they aim to prevent that specific attack you described with the following feature:
It offers a "darknet" mode where you manually add peers by exchanging cryptographic keys with them.
The connections to those peers are fully encrypted then and thus very difficult to block because you can't detect Freenet with merely packet inspection anymore.
Besides, the ability to censor individual Tor sites is *bad enough* already IMHO.
The properties of Freenet you describe are extremely intriguing.
However, I'm asking about your description of Tor and I2P
>However as they're both communication networks they do not provide censorship-resistance. The endpoints you're connecting to are central servers and can be taken down.
This is technically incoherent, and I'm not sure what you mean by it.
As far as I'm aware, at no point does your TCP traffic from your tor client connect to a 'central server'. I'm not familiar enough with I2P to comment.
I think they meant servers as in the machine hosting the content you are acessing, such as the machine that hosts HN. Not that every connection goes through a central server, but your content is hosted on a central server, as opposed to FreeNet where your content is distributed and so can't be taken down like a server can.
A p2p fille sharing system is not a wheel. I found that freenet was a little complex. Ipfs is quite simple and modern. Doesn't freenet use Java?
Anyway, software doesn't have well respected ISO standards and 20 years is an eternity in the age of the internet. So I don't see a problem with ipfs. Also, ipfs looks like it's more flexible and reusable.
Seems interesting. Wanted to give it a shot but it looks like they had no official docker containers and it wasn't packaged in the fedora repos. I noticed the I2P project does have a docker image and seems to do a similar thing. Do you know what the differences between the projects are?
However it does munge content and break sites by serving captchas instead of images or css so I don't link to it by default. It is generally faster though.
That's the beauty of IPFS. You can use whichever gateway you want, even your own.
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.
> 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.
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.
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.
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?
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.
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.
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!!)
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.
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
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.
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.
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.
> 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.
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.
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.
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
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.
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.
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?
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.
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".
Could you please stop posting flamebait to HN? We've asked you before. Also, comments like the last bit of https://news.ycombinator.com/item?id=25873304 are bannable offences on HN for obvious reasons. Please don't do anything like that again.
If you wouldn't mind reviewing https://news.ycombinator.com/newsguidelines.html and sticking to the rules when posting here, we'd be grateful. You've also posted good comments, so that should be doable.
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.
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.
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.
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...
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.
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.
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.
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.
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.
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.
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.
"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.
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.
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_.
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 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.
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.
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.
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.
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.
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.
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.
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.
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!
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?
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.
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.
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.
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.
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".
>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.
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.
> 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.
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.
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.
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.
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.
> 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.
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.
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.
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.
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.
> 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.
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.
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.
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?
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.
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.
> 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 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.
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.
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.
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.
> 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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
> 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.
> 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?
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.
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.
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.
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.
> 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.
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.
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.
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’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 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.
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.
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?
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.
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.
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 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.
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.
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.
Looking back at (u/deepfuckingvalue) Keith Gill's comments on r/wsb, it looks like they had a solid theory to cash out by Jan 2021 for $8+ a share (most of their calls starting June 2019 were 80 cents a share or less [0]). This was by no means a strategy to make money by squeezing the short, though one user, conspicuously named u/burrym, speculated that it ought to be [1].
For those out of the loop like I was, Michael Burry is the guy from the Big Short, who also owned 3 million shares of GME before the squeeze began. [1]
Wow, some of DFV's comments are great. No wonder he eventually attracted a lot of believers. I love this:
"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."
It's intriguing that he, while not quite an "insider", is from an investment & finance background. More of an Arminius figure than some random Joe off the street.
Casts a slightly different light on the whole narrative about the uprising of retail investors.
Compared to the general air I've been seeing about articles hating on a bunch of Redditors, this one is decidedly more neutral and seems to speak more about what is actually happening than "redditors bad, mess with stock, they evil".
I appreciate that. Not enough to give WSJ $20 (!!!) a month, but I do appreciate it.
Check all his recents posts, then you can fact-check that statement and see that he has liquidated and earned some cash, and is simultaneously holding on to some significant stocks. Both things are true.
About $13.8 million he’s got out of the stock to be exact, if reports elsewhere in the thread are correct. This shows how ability to influence large numbers of people can convert to money, and the closer you are to the root the bigger slice of the cake you get.
I’m not sure it’s about media. Media may provide a channel to carry a message to many people, but that channel can be used for good or for evil.
I think we are talking about converting influence over masses to personal gain (don’t know if GME guy did it intentionally or not, but it benefitted him), less about media (which itself may not become richer from this) and more about how some use it. Admittedly some media may be prone to facilitating these scenarios.
Yes. Was just pointing out that this statement is false or dangerously half-true: “as of now, he has not sold his shares”. This, however, would be true: “as of now, he has not sold all of his shares”.
The danger in “he has not sold his shares” is that a retail investor who did not do their research might misinterpret it and imagine a guy who never sold and will never sell; since that guy has background in finance and knows what he’s doing, common sense would suggest it must be safe to invest into this stock right now; meanwhile, in reality that guy has already cashed in big time.
How much does a successful youtuber/internet personality make? It seems like he might have even some economic incentive not to jump ship and risk losing social cache
it will keep going up. Good for him. This calls into doubt the stronger forms of EMH given how many people have made so much money with what is effectively a momentum play. I would not be surprised if he becomes a billionaire soon with other investments and GME.
He'd have to find some other very cheap stock with very cheap far out of the money calls with a high potential for rising 11000% in a year.
I'm taking suggestions.
I don't know if there is anything cheap available on the options market these days.
I don't think GME is going to stay at this price for very long, but on the other hand the retails trader are only ~25% of the volume (Matt Levine's latest column) and on balance selling, so I think the stock price is driven by big players, and "what do they know that I don't?"
I'm honestly confused by the press around this event.
I get it, /DFV started a short squeeze and got rich, that is great for him. I don't support naked shorting, it should probably be illegal (if it is not already) and it looks that was part of the reason this happened. Everyone has been suspecting for a while (especially here) that a lot of volatility in stocks like TSLA etc was due to Robinhood.
As of 5:33 EST, I'm on CNN right now and the main headline "Inside the Reddit army that's crushing Wall Street" (And the reddit army isnt crushing Wall Street, it's crushing a few hedge funds that happened to hold short positions in a few stocks.
) , so now a lot portion of America (and the world) is paying attention.
Hedge funds blow up all the time. Enron blew up, basically all of the Investment Banks blew up in 2008, LTCM blew up. Why is this such a big deal?
It's a compelling story with multiple, interesting and intertwining narratives.
- An unprecedented and uncoordinated but sophisticated financial engineering play driven by an internet community.
- There is a loose analogy to the terrorist attack on the Capitol, an internet community organizing to destroy existing institutions.
- The ongoing class warfare that was highlighted by Occupy Wallstreet, 2008 crash and bailout.
- The frustration with the completely disjoint experience of the pandemic that the average American has had in contrast to the record highs of the stock market.
- America loves an underdog story.
It has something for everyone. But if you ignore all other context of the story and have tunnel vision on just /DFV gains then it's less interesting I guess.
Plus the story had somehow intertwined all these big named hedge funds, Melvin, Citadel, with real losses in the Billions (capital B), all being covered by every major news outlet and commented on by major politicians and celebrities.
Life is strange. It’s a Cinderella story if you look at it from the pure narrative perspective.
If anyone ever makes a documentary/movie about it, it should be a dark comedy - money is just depressingly funny. The things we justify and do for it.
I watched Congresswoman Ocasio-Cortez's Twitch stream last night. She had on Alexis Ohanian, Alexis Goldstein, and TheStockGuy as guests to discuss the event and the current political/economic environment. Amazing to see this new model for the 'fireside chat' unfolding in real time.
Personally I'm looking forward to reading the Michael Lewis book.
> I'm honestly confused by the press around this event.
A lot of people wish they struck it rich, just like him. Money (to some degree) buys happiness. Gets you out of a job you don't like. Gets you more time with your family, less time doing stuff you don't like (like working).
If the poor can "eat the rich" and "catch them with their shorts down" in a stock trade that literally millions of others are pouring into (check how many subscribers r/wsb has gained past 7 days), it's literal herd mentality.
ya sure, i get it .... but he took a bet and won, He could have easily lost everything. For every winner in the options game there are probably 99 losers. It's call survivorship bias.
Sure. He was smart, understood investment and had 50k to spare. And at least a bit lucky. This does not apply to most people who want to be him.
Much as the narrative that this is the little guys 'crushing Wall St' sells more clicks than a lot of betting going on with plenty of Wall St winners and plenty more little guy losers, mainstream media really ought to know better. (That said, I think this particular profile is a lot more illuminating than a lot of the rubbish being written)
> For every winner in the options game there are probably 99 losers. It's call survivorship bias.
Sure, if people are taking aggressive positions. I'm not sure his initial YOLO was that insane, it had a fair chance of being OK. (In this unique case, the massive naked short position turned out to be the insane play.)
But it's approximately a zero-sum game, so it's not irrational in general to be betting on options.
Robinhood investors, collectively account for something like 10% of the money thrown at TSLA. The reason why TSLA surged after S&P inclusion is because the "smart money" (huge benchmarked funds) was waiting to buy TSLA in a post S&P dip, but were caught out.
Now, the really smart money is buying equal weight into TSLA on this dip!
> it's crushing a few hedge funds that happened to hold short positions in a few stocks
You haven't noticed that the big three indexes are DOWN ~2% today? They were down 2% when this first took off. [If you want to split hairs...go for it but...the correlation is very strong, news cycles are soaking it up and the White House talks about monitoring the situation. This is not a light matter]
This is bigger than just a few firms. The added limitations to buying various stocks. The heavy-handed nature is making it clear, let alone the media frenzy.
WSB broke their models which in turn is crippling the 'economy'. If you don't think so, please, advocate for the free citizens to buy as much as they want because the hype isn't subsiding, it's only growing.
Great, I love the sarcasm! Can you please help push RH and other brokers to allow the unbridled buying of the current stocks being restricted? Then we can really put the theories to the test.
Speculation is that it's not your "average" hedge fund bust, but that brokers accepted too much shorts/options without securing shares and some of them might go out as well trying to find shares to cover calls
I've also seen some speculation that Citadel may have been intentionally amplifying the short squeeze caused by Redditors, and then getting a sweet deal with Melvin capital by injecting money the latter sorely needed in exchange for a share of future revenue.
I don't understand exactly how the math works out there to be able to evaluate if it was an extra good deal or not, but I find it credible that institutional investors jumping on the Reddit hype would be necessary in ordet to sustain the kind of momentum we are seeing.
Edit - or as people on Twitter put it:
any story that doesn't say how, past the retail ignition, the rocket ship was mostly intra-fast money warfare, simply isn't telling the truth
and its because the media likes the narrative and people are running with it. david vs goliath etc. ignoring there are goliaths who were long on gamestop and pensioners who had their money in the hedge fund.
> Enron blew up, basically all of the Investment Banks blew up in 2008, LTCM blew up.
Right, and each of those events is news that you can identify it by saying Enron, or 2008, or LTCM. It isn't just about DFV. It's about all the other little guys who have made hundreds of thousands or millions on this.
Not a CFA like DFV, and not financial advice but here goes.
A way to assess what any stock is valued is to take the DCF, but since it's nearly black box to the shareholder for growth companies (no dividend), treat any interest payments on outstanding short float as part of the DCF. That means there's a growth directly associated with capitalization. so it makes sense that the capitalization becomes untethered with the business. Google’s ROE is about 12%, so 6-7% on the cap isnt great, but it’s not nothing either. The other side is if the short interest decreases that would collapse the cap sharply, but the longer the shorts wait, the less lucrative and difficult it could get.
Can they offer additional shares in the market, after clearing it with the SEC?
Then, can they take that windfall money, and actually reinvest it into R&D, and build their own GameStation 1 video game system? In order to justify their new lofty valuation.
They issued 50 million new shares at-the-market last week. They also had a $600M loan that was convertible and converted into stock. As a result, they’re sitting on nearly a billion new dollars, which should help them ride the pandemic out.
I bought a bit of AMC. If WSB makes it pop to a multiple of where I entered, I'll cash out. Otherwise I'll hold through the recovery. Suspect there is enough pint-up demand for people to get out more post-COVID to boost the stock enough for me to exit higher in year or so anyway.
Does anyone know if it's illegal to lie about your holdings as an individual retail investor? I've seen a handful of screenshots on /r/wallstreetbets showing large holdings, but it would be trivial to modify the page source before taking a screenshot.
Not illegal in itself. It's probably possible (though almost impossible just based on a random screenshot) for someone to prove that you committed fraud and it directly caused them harm.
I like Matt Levine's comment " The guy behind one of the greatest trades of our time was giving out financial advice for MassMutual, and somehow they let him go."
edit I missed the best part of the quote "I hope he showed up at client meetings in a headband and sunglasses with a glass of champagne in one hand and a chicken tender in the other. I hope he was like “never mind life insurance, man, you gotta buy GameStop calls! Get those tendies!” And then I hope the clients were like “what” and MassMutual fired him and he just went and did the thing. "
Really helps discredit this notion of retail vs hedge fund. Most people who frequently make “DD” posts to r/wsb have ties to the financial industry and Wall Street. They either work there or have worked there. And yet they are critical of the Man? This is like ex-Facebook employees having a found-Jesus moment.
I worked at a hedge fund as my first job on the IT and Dev side. I will never put my money in a hedge fund. Just the way they spend money to boost the sense of self importance, etc. is nauseating. I once Fedex-ed a ream of printer paper from NYC to a partner on vacation in Miami because he was too entitled to drive to the nearest office supply store. I literally found a store like 10 minutes away but was told to just Fedex the paper. Then there were the allegations of PIPE and various other SEC investigations that always end up settling without any admission of guilt.
There are quite a few genuinely good people in finance so don't be surprised to find good people doing good things who also work in finance but finance also attracts a lot of people who are amoral at best. I shake my head at the memory of one of the partners screaming at someone over the phone, "This isn't even illegal! How is it immoral!?"
Yes, I was on Wall Street for awhile on trading desks, research etc. I’ve seen how the sausage was made. I only respected very few people with academic credentials who had genuine intellectual curiosity for the markets. Outside of that it’s a jungle and you will get eaten if you don’t watch your back. People steal all the time without any remorse.
buy-side or sell-side? I don't have any exp with working at a fund or a bank, but I work at a prop shop and the atmosphere is markedly different than what people would expect. Money is not wasted, profits are distributed every month in a way such that every employee does very well (some more well then others ofc), and everyone hustles to generate pnl. When you are fully invested (life savings in the firm) you tend to get much better results. On the other hand, if you're using OPM or not even really trading except to rip off dumb businessmen on high spreads, things probably look a lot different.
That's because the costs come from OPM. When you work at a prop shop and all the money is literally the money of the employees, things are very different. Sure, everyone makes out like bandits and gets rich if things are going according to plan, but no one, and I mean no one, is wasting money.
If your prop shop blowing up means everyone who works there is now penniless, you tend to get much better results.
> I worked at a hedge fund as my first job on the IT and Dev side. I will never put my money in a hedge fund. Just the way they spend money to boost the sense of self importance, etc. is nauseating. I once Fedex-ed a ream of printer paper from NYC to a partner on vacation in Miami because he was too entitled to drive to the nearest office supply store.
I think this is almost expected behavior. Anybody who spends enough time in the trenches of any industry will come out jaded and bitter. In my limited time working on the tech side of some Wall St giants, 99% of the grunts are normal people with their noses in very narrow tasks. Tasks that seem too mundane to have any implications for the outside world. I even heard a top marketing exec at Goldman talk about how to shed their image as a "vampire squid". None of them set out to be evil, they just set out to earn profits. Same everybody else.
personally i haven't seen any commentary from DFV disparaging institutions. its not accurate to take WSB commentary in aggregate and assign it to an individual.
not to mention, not everyone is in a position to say "screw the man" and do their own thing. the ideal exists but the means may not be there.
If GameStop issues some million shares on Monday morning to raise capital isn't it game over for every retail player? Shorts will close their positions, RH users will suffer great losses from dilution.
Am I missing something?
If they issue a few million shares at the current price, shorts still have to cover at an absurdly high price compared to their entry which will cost them in the single to low double digit billions. It may screw over retail investors but bankruptcy is inevitable.
Pardon my ignorance, I have no expertise in the field. When you issue new shares, do they have a fixed price or are they sold at market value (whatever market decides the price to be)? If the latter happens, I expect that the price of the [edit:GME] stock will collapse immediately.
Issuing shares is a move done to raise money. It would then follow that GameStop would want to get the most money possible for these shares so they would try to sell them for the highest price possible, somewhere around the current going price. I’m not 100% on whether they have to release them all at once but I’m guessing dumping multiple million shares all at once would crash the price which isn’t good for anyone in normal circumstances so it’s probably not done that way. Regardless, there are like 50-60M shares currently shorted — there’s no chance GameStop would issue that many.
I’m new to this as well - how do you know how many shares that have shorted? I heard that even the number of shares shorted isn’t guaranteed to be accurate.
You can find it on many finance websites[0] but yes, the accurate numbers are only released twice a month. There are companies that specialize in estimating the short interest on a daily basis. It’s likely to be accurate enough to draw the same conclusions.
You are. I believe they have to preannounce something like this, which would cause the price to instantly drop. In addition, the public backlash they would receive would likely be overwhelming.
I'm not sure the HN crowd appreciates his style on this picture. I love me a bandana and am known to use some ironic wolf tee once in a while. I felt so inspired when I saw the photo and am not even joking.
“This story is so much bigger than me,” Mr. Gill told The Wall Street Journal in his first interview since the unboxing this week of a volatile new stock-market game. “I support these retail investors, their ability to make a statement.”
They seem to have gotten a couple of comments from him, then fleshed it out with remarks from his mother and a few other online identities, plus some simple background research.
Nothing like I would expect for "an interview with...", which would normally be dominated by the subject's own words.
I know this forum is capitalist to the core, but there is a lack of appreciation for this moment and an undue air of cynicism.
This whole situation breaks a ton of fundamental assumptions about how markets work and will change hedging strategies for a lot of investors moving forward. Yes, we know there are hedge funds on both sides of this equation (Blackrock owns 12% of Gamestop, Burry made a ton and smartly got out earlier in the week), it doesn't change anything. The internet is already searching for more securities to manipulate. This will accelerate adoption of the DeFi space. Scaramucci called it "the French Revolution of Finance."
Instead of being negative, look to see how you can learn and profit from this.
There is no undue air of cynicism. No fundamental assumptions have been broken. Odds are overwhelming that everything will once again happen as it has thousands of times before.
A very risky play from a hedge fund has resulted in people who don't know what they're doing convincing more people who don't know what they're doing that there is a clear ally (other retail investors who are getting back at The Man) and a clear enemy (evil hedge funds that have robbed the American people), and that what they're doing is some sort of justice and not just an extreme market correction. They've attached emotions to these trades, and when the time inevitably comes that they have to become The Man to stand with The Man against The Man, a very small percentage will realize what needs to be done to trade another day, while the rest are going to learn how little say they actually had in this incident. WSB (or at least what it was before this) has had a lot of laughs at the expense of the latter group -- "it literally can't go tits up!" is trotted out whenever somebody finds out that they're not in control.
Active retail investment requires a fatalistic view of the market. This is hard to swallow when you think of going short as "bad" or squeezing out a hedge fund as "good."
> This will accelerate adoption of the DeFi space.
Why would it do that?
I think the most likely outcome is more regulations from the government, and more rules from brokerages about what most of their customers are allowed to do.
Besides the huge push on dogecoin, which is big for onboarding people into crypto (yes, I know DOGE isn't DeFi), the bottlenecking of orders by brokerages undermines people's faith in the fairness of traditional securities and the markets. People will be more interested in decentralized solutions where they can have more faith in exchanges (I am aware that DeFi is not that decentralized or fair, but the majority of the public that is aware of crypto and DeFi thinks it is, just as they thought that traditional securities were fair).
The "Bypass Paywalls" extension is also effective, although you may want to limit the number of extensions you run for memory usage or performance reasons.
nothing. I'm in the social media business and I can tell you it's very easy to make 5 figures/month gaming reddit(as an individual operation) using farmed accounts and it's been going on for years. Not necessarily with stock schemes. they got next to none security when it comes to stuff like this. agency that I worked at a few years ago literally had thousands of aged reddit/twitter accounts in their portfolio. there are whole apps available for sale that manage your reddit farms including fingerprint faking, proxy management, captcha solving(outsourced to developing countries), etc. the market for it is pretty huge.
Edit: hints = look at porn subreddits, /r/entrepreneur, stock subreddits. By the way, some of the moderators are making a killing too (by promoting their "own" people)
It's not about gaming reddit, but rather about gaming the algorithms scraping WSB and attempting to correlate stock tickers with rocket and eggplant emojis as a form of sentiment analysis
(Yes, this is a thing, and there is significant $$$ actually invested into this)
My guess is putting out content and pumping it up or making it go viral, that somehow promotes clients of yours. Or your own products or affiliate programs or something.
But can anyone even do that? With crowds this big there has to be a number of sophisticated investors who'll be able to call anyone spewing BS out very early on.
matt levine talks about this very thing in one of his other posts on wsj
> So if you buy stock with the purpose of pushing the price up so that other people will buy it, that’s market manipulation. If you buy stock hoping that the price will go up because other people buy it, that’s not market manipulation; that’s just normal. Those things are not so different. There is a “traditional four-part test for manipulation that has developed in case law”:
(1) That the accused had the ability to influence market prices; (2) that the accused specifically intended to create or effect a price or price trend that does not reflect legitimate forces of supply and demand; (3) that artificial prices existed; and (4) that the accused caused the artificial prices.
It's a price that "does not reflect legitimate forces of supply and demand". One of the canonical examples of an artificial price is spoofing, where you set up fake sell orders to trick people into thinking a stock is crashing so you can buy it at a discount.
So when people who want to buy and have the funds to buy are prevented from buying by their broker, would the resulting price be one that "does not reflect legitimate forces of supply and demand"?
In general, no, brokers being unwilling or unable to help facilitate a trade is a legitimate market factor. There's no fundamental right to have people trade with you.
It's would of course be a different story if the broker's unwillingness came from their participation in a price manipulation scheme. I don't think that's really plausible here, although I suppose I wouldn't rule it out given the crazy dumb things Robinhood has done in the past.
The "legitimate forces of supply and demand" seems to be the critical part there. GME stock didn't go up because /u/DeepFuckingValue bought so much of it, it went up because everyone else did. In August 2019 GME had a market cap of $300 million so there was no way /u/DeepFuckingValue buying some hundreds of thousands worth had any real effect on its own.
> What stops somebody from purchasing aged reddit accounts and then pumping up, upvoting their own threads?
I think it is already happening. Search Reddit for Tootsie roll. One 3 yr old Reddit acct with no posts makes a flurry of posts about TR and it jumps 30% in 2 days.
So when he posted back in June, his GME holding was $121k. According to his YouTube video from then, that represented ~2% of his portfolio. That puts his portfolio at ~$6M.
Hedge funds only represent 5%< of the global financial markets. Everyone knows whales are playing on both sides, WSB attempting to profit on one end.
However, that 5%< of finance is just objectively morally bankrupt compared to the rest - because its exclusive, delivers no value to society, yet bears a significant influence to everyone else.
So sure, it's not really "poor vs wealthy" it's more "good vs evil".
