Once again, this insistence on viewing 'Wall Street' as a monolothic entity. The largest asset management firm on Earth holds over 9 million Gamestop stock, none of the big banks that received bailouts in 08 are affected by this, 99.9% of hedge funds are not affected by this, high frequency traders are probably making a bundle. Institutional money was long Gamestop before this story entered the public consciousness. The idea of governments stepping in to bolster hedge funds is ludicrous, the whole point is that the government and SEC is hands off with them.
Ultimately, a few medium-sized hedge funds were caught doing something stupid and the market has rightfully taught them a lesson. It's great that retail investors got in on a high-level play like this and made money.
Sure, but Gabe Plotkin is the uber-wallstreeter. All the rich-but-average Chosen Ones who get internships because of mommy and daddy look at what guys like him accomplish and think, "someday that too can be mine."
This is like that scene in 300 where Leonidas makes Xerxes bleed. The point isn't that Wall Street has fallen. It's that, for once, Wall Street is fallible.
Right now it looks like retail investors stuck it to Wall Street and made some money because GME is still over $400/share this morning. Everyone holding GME can look at their app and feel great.
But not everyone is going to be able to sell it at $400... or even $100 in some cases. It will be interesting to see how everyone feels after the sell off.
> Short interest as a percentage of float above 20% is extremely high
> A high NYSE short interest ratio means that the stock market as a whole is vulnerable to a “short-squeeze.” It could rise quickly if new economic data, political news, or other types of information are released that make investors more optimistic.
GME was shorted 140%.
No idea if 20% being risky is sage advice but it seems like you're totally right: some hedge funds took on a massive risk, the market saw the opportunity and played the other side.
This story is far less dramatic than the media is making it out to be. Short-sellers are a fringe group within the industry who often totally fail on trades (short selling is a pretty risky bet with an unlimited downside). This situation is definitely not monumental or new. Retail investors have been pumping stocks for the last 100 years. They contributed to the crash of 1929 and the dot com bubble, for instance. No they didn't have a subreddit to express themselves, they instead were driven by newspapers and pundits to direct their trades, but a similar premise nonetheless.
A lens to look at this through is - "why is short selling allowed?" Advocates cite increased "liquidity." But, does society really benefit? Short-selling really just lets trading firms extract value from the failure of others. In that sense - professional trading firms that participate in short-selling could be grouped into a monolithic "Wall Street" in the sense that they are extracting value without a benefit for society.
I was wondering if this was really a pump and dump made to look like a short squeeze. Now I'm 100% convinced that this is what it is. All those people buying a couple hundred shares via Robinhood are going to lose their shirts.
> a few medium-sized hedge funds were caught doing something stupid and the market has rightfully taught them a lesson.
Individually, what they were doing (shorting that stock) might have been perfectly sensible. That they collectively overshorted made them vulnerable. I'm not convinced yet that it was stupid.
All those institutions are interconnected. A large hit to one player can cascade to the wider market as they're forced to sell off other positions to put up additional capital. That could cause additional sell-offs for more leveraged players. And so on... The phrase "too big to fail" exists for a reason and it's smaller than you think.
> Ultimately, a few medium-sized hedge funds were caught doing something stupid
Shorting a company that sells a physical product in malls during a pandemic is stupid? It seems their intuition is correct but there was a black swan event.
Yep, and this is a particularly silly article. One group of investors caught another group making a spectacularly poor decision. It just happens that the first group are retail traders (I'm not sure I would call them "investors").
>> this insistence on viewing 'Wall Street' as a monolithic entity.
That's not a fair statement. "Wall Street" isn't viewed as a monolithic entity. It's viewed as an entity, or industry. In fairness, Wall Street is even more insular than other industries that we happily refer to as a group: Petrogas, real estate developers, silicon valley, etc.
Thank you, I appreciate this level headed response. The populist outrage fueled by anonymous Reddit users who are often either lying outright or wildly speculating is completely out of control.
We really need to get those vaccines out, people are going insane...
Ultimately, a few medium-sized hedge funds were caught doing something stupid and the market has rightfully taught them a lesson. It's great that retail investors got in on a high-level play like this and made money.
Why is betting on the decline of an off-line video-game chain stupid? I'm surprised GameStop is even still in business.
I agree with this mostly, but you can't deny that the swift action Wall Street firms/brokers have made to protect the interests of those effected hedge funds.
What is worrying, is that a lot of people are going to be left holding the bag.. And I dont see this retail trading squeeze not hurting some regular retail investors..
I'm wondering about this. I was a little skeptical of the whole David-vs-Goliath bring-down-wall-st thing. But if it's really true that this is just one small and low-relevance hedge fund getting their ass handed to them for doing something dumb, then why does it feel like there's a whole machine trying so hard to tear down /r/wallstreetbets and distort the entire retail investing market to stop it?
Why did Discord ban their server on a flimsy pretext right at the height of the attention? Why is there a sudden flood of articles about how this is all so very concerning in the mainstream financial press? Why are they mobilizing the universal weapon of calling everything they don't like Nazis?
They are blocking buying, and only allowing selling GME, BB and others.
How is this not evidence of a corrupted free market system? A CEO of one company can call up his connections in retail trading platform firms, CNBC, and Nasdaq and protect his profits? Why is Reddit the scandal and not that?
Reddit is full of rocket emojis and YOLO jokes. But what we see here, especially with the moralizing about gambling, is an elitism on full display.
People have had enough, it's not just WSB anymore. The community of retail investors in GME is far beyond WSB. It's people that are frustrated with the 1% getting bailed out time and time again and them not seeing a dime at their tax dollar expense.
So they're going to show Wall Street who's boss by gambling away their grocery money? (Some will make out but I suspect the vast majority will lose big--money at least some can't really afford to lose.) I have trouble conjuring up a lot of sympathy but that's almost certainly uncharitable as I'm sure there will be stories of serious individual loss.
Occupy Wall Street was just 10 years ago. It was the longest demonstration in a lifetime. Nothing changed. How did nothing change? What message does this send?
Feel like the platforms are helping out hedge funds by making it challenging to put more pressure on the short squeeze before Friday. Sounds a bit like a cartel in co-ordinating activity under the guise of "reducing risk exposure" - shepherded on by the Financial media.
Trade itself is no longer on technical merits (except those in early) but have you looked at valuations across the stock market these days -- everything is off given pandemic. So that line of reasoning by all the financial talking heads just proves they don't understand the moment.
It's pretty reckless behavior for sure but its more about rage and control then anything imho.
That everything is off is just your assessment which a lot of people disagree with.
When it's difficult to do business and make better use of the money then equites are more attractive place to keep your money. This is especially true with a lot of additional money supply and low interest rates.
It makes perfect sense to me why we had the run we had during the pandemic. Anything else would be a big surprise.
As someone who is not very educated in finance, I'm curious how to interpret today's events. Is nasdaq/robinhood/everyone else transparently manipulating the market on behalf of hedge funds? Or are these standard mechanisms in place for preventing the stock market from swinging wildly out of control? I don't know if it's standard to completely block trading on one or more stocks.
WSB has basically recreated a "boiler room", which is an ages old scam where a small group of insiders would encourage people to buy stock, drive them value up, and then the insiders dump the stock. The key insight here is that for every person selling the stock and making millions, somoene has to be buying. There's a narrative about short squeezes forcing a small number of hedge funds to buy stock, but in practice many of the people buying the stock at the inflated price are retail investors hoping to get rich quick. A few retail investors will get rich quick, but that money will come from the people who join the party late and can't get out before the price drops back to earth.
The trading stops and laws that exist to prevent this kind of wild volatility are basically because for 90% of people, this is not good. By the time your parents read about this in the paper and log into their TD Ameritrade accounts to "invest", they'll be in that group of people left holding the bag.
I would wait a few months and read the write-ups by people who have had time to ferret out the details and look at various angles.
There are a lot of "hot takes" and people thinking all this fits some "narrative". But I think there is just a lot going on and I'd be cautious about assigning too much meaning to any of it without a lot more information, which we won't have right away.
I have watched this mess from afar and the tone of the conversation has changed from "Hey, here is an opportunity to make some money off a mistake some hedge funds are making" to "Smash the system". Exhibit A - this idiotic article.
You cannot use the tools of the system to beat the system.
Here is the thing about hedge funds - they hedge. They hedge in the morning, hedge in the afternoon, eat some hedge for dinner and get in a few rounds of hedging in down at the hedge club before going to bed dreaming of hedges. The clue is in the name. They don't typically make huge loses or gains for a single stock, they are happy to make a consistent gain every day.
The vast majority of hedge funds are making stacks of small gains off this nonsense and anyone who doesn't cash out at the right time is going to be hosed. Do you know when the right time to cash out is? No? Sucks to be you.
Honestly I am worried. Mob investing has collapsed economies, brought down governments, and ruined more lives than can be counted during the last 150 years, and I don't see how this is different.
This is completely ridiculous and will all end in tears. I am actually glad that some pressure is being put on Reddit and the brokers to cool things off - there are opportunities to cash out big time but a lot of the small players are going to lose money.
The people who got in early will suffer least when GSE finally crashes and burns. But the poor suckers who bought it at $150 are going to be in big trouble. They're all trying to stay strong and hold long because that's the way to make the hedge funds suffer, but the smarter ones will figure out that their only chance to not lose their shirts is to be in the earliest 5% of scabs to get out, and then it's going to be a bloodbath when everybody gets trampled running for the exit door.
Meanwhile a couple of hedge funds go under while the rest just call it Tuesday.
I don't know- there must be institutional players on the long side by now right? Either way, _eventually_ someone will be left holding the bag when the stock comes back down to earth.
I despise HFT as much as the next guy, but it's mostly useless rent seeking, economically, not massive manipulation. There is money on the table in trading, and the HFT firms try to take a bigger part of that pie, rather than letting it go to their competitors or other traders (like funds or retail investors).
Next, hedge funds shorting businesses they consider overvalued is a perfectly fine activity that helps price discovery and capital allocation. To the extent that they are deceptive and manipulative, that is a problem, just as deceptively and manipulatively hyping a stock up is a problem.
Finally, note that there is no value created here. It's purely a transfer of money. A few hedge funds might lose something (though that remains to be seen - shorts have no expiry, per se, and the borrow cost is absolutely manageable over days, weeks, or even months).
But mostly, this will be a huge transfer of money from those that jumped on the long trade late, to those that were in it early.
EDIT to add: And, putting a cherry on the fine research that went into the article, the Keynes quote is from A. Gary Shilling from the 1980s.
> With their heads in cloud nine, hedge funds tried to kill GameStop ($GME). They tried to squeeze it so much that it would suffocate and die. They didn't care about the people who will be out of jobs, unable to pay their bills, or even survive.
A low stock price doesn't, by itself, kill a business and put people out of jobs. Bad management kills a business, as does being in a bad business to begin with.
> Never in their wildest dreams, the hedge funds would have thought this day would come. The tables have finally turned as the hedge funds try to gulp in their last breath of air.
We're really not talking about "the hedge funds" in this case. Just a few hedge funds who, indeed, should've seen it coming. It's not like during the subprime crisis where every large financial institution had a large exposure to them. The exposure of the financial industry to GameStop is minuscule at the scale of the system. It's also not new, in the sense that sometimes hedge funds will try to squeeze one another too
> I honestly don't believe that people are going to sell their positions on $GME stocks. As I said, they are not in for the money anymore. They are fighting the good fight, and they have the potential to win this WAR.
Maybe they won't sell, but there are cases where fundamentals will catch up with the gamers. If/when the business runs out of cash and undergoes restructuring, the stockholders will be left holding pennies.
Maybe the CEO of GameStop (notice how he's been quiet?) will be like, f--- this job, I'm selling all my stock and retiring, thanks Internet
The author seems to have bought in a bit too much into the narrative in the WSB forum. This post reads more like a regurgitation of the grandiose pronouncements you see there rather than an insightful analysis of the situation.
One of the more interesting aspects of this story, IMO, is how many people used Robinhood to grab small amounts of GameStop stock.
Robinhood is suspected of having a business model of spying on their clients and selling that data to hedge funds (https://seekingalpha.com/article/4205379-robinhood-is-making...). Essentially, this puts their own clientele at an average disadvantage in all trades; the funds buying their data can set up algorithms to front-run any RH trades and skim a little more value than the people using RH could expect to get.
In this situation, it seems it didn't matter. Even if RH sold to the shorting traders "Hey, our clientele is buying the hell out of this near-junk stock," all the signal told them was how fast the train was coming at them, not which way to go to get off the tracks.
What I find interesting is that RobhinHood has removed GME, AMC, BB, and other WSB darlings. This immediately caused massive drops before market opening. Why does this read poorly to me? I don't do much trading on RH, but I had been using it to monitor the prices as I passively follow this saga. People are upset, and I get it.
So you're telling me that by buying GameStop stock, I can help screw over hedge fund managers? I have not bought a single stock in my whole life, but I'm in. How do I start?
[+] [-] bidirectional|5 years ago|reply
Ultimately, a few medium-sized hedge funds were caught doing something stupid and the market has rightfully taught them a lesson. It's great that retail investors got in on a high-level play like this and made money.
[+] [-] dcolkitt|5 years ago|reply
I've heard from a former colleague at a major HFT firm, that they hit their entire revenue target for the year, just in the past week.
[+] [-] totalZero|5 years ago|reply
This is like that scene in 300 where Leonidas makes Xerxes bleed. The point isn't that Wall Street has fallen. It's that, for once, Wall Street is fallible.
[+] [-] kev_da_dev|5 years ago|reply
It's government intervention no matter how you look at it. Just because it's not a direct capital infusion does not make it any less bad
[+] [-] TheAlchemist|5 years ago|reply
Just take a look at the shareholders and count how many shares those institutional have: https://money.cnn.com/quote/shareholders/shareholders.html?s...
It's Wall Street vs Wall Street - redditors were just the catalyst, and will be left holding the bag.
[+] [-] snowwrestler|5 years ago|reply
But not everyone is going to be able to sell it at $400... or even $100 in some cases. It will be interesting to see how everyone feels after the sell off.
[+] [-] bvirb|5 years ago|reply
> Short interest as a percentage of float above 20% is extremely high
> A high NYSE short interest ratio means that the stock market as a whole is vulnerable to a “short-squeeze.” It could rise quickly if new economic data, political news, or other types of information are released that make investors more optimistic.
GME was shorted 140%.
No idea if 20% being risky is sage advice but it seems like you're totally right: some hedge funds took on a massive risk, the market saw the opportunity and played the other side.
[+] [-] boh|5 years ago|reply
[+] [-] philip1209|5 years ago|reply
[+] [-] bluetwo|5 years ago|reply
[+] [-] FabHK|5 years ago|reply
Individually, what they were doing (shorting that stock) might have been perfectly sensible. That they collectively overshorted made them vulnerable. I'm not convinced yet that it was stupid.
[+] [-] koolba|5 years ago|reply
[+] [-] ketamine__|5 years ago|reply
Shorting a company that sells a physical product in malls during a pandemic is stupid? It seems their intuition is correct but there was a black swan event.
[+] [-] DougN7|5 years ago|reply
[+] [-] mcguire|5 years ago|reply
[+] [-] dalbasal|5 years ago|reply
That's not a fair statement. "Wall Street" isn't viewed as a monolithic entity. It's viewed as an entity, or industry. In fairness, Wall Street is even more insular than other industries that we happily refer to as a group: Petrogas, real estate developers, silicon valley, etc.
[+] [-] TameAntelope|5 years ago|reply
We really need to get those vaccines out, people are going insane...
[+] [-] KKKKkkkk1|5 years ago|reply
Why is betting on the decline of an off-line video-game chain stupid? I'm surprised GameStop is even still in business.
[+] [-] partiallypro|5 years ago|reply
[+] [-] bilekas|5 years ago|reply
[+] [-] ufmace|5 years ago|reply
Why did Discord ban their server on a flimsy pretext right at the height of the attention? Why is there a sudden flood of articles about how this is all so very concerning in the mainstream financial press? Why are they mobilizing the universal weapon of calling everything they don't like Nazis?
[+] [-] ffggvv|5 years ago|reply
[+] [-] chaganated|5 years ago|reply
[+] [-] minikites|5 years ago|reply
Has it? What leads you to believe that THIS is the time investment firms will stop being reckless?
[+] [-] zouhair|5 years ago|reply
[+] [-] mancerayder|5 years ago|reply
How is this not evidence of a corrupted free market system? A CEO of one company can call up his connections in retail trading platform firms, CNBC, and Nasdaq and protect his profits? Why is Reddit the scandal and not that?
Reddit is full of rocket emojis and YOLO jokes. But what we see here, especially with the moralizing about gambling, is an elitism on full display.
The people are sick of it.
[+] [-] Beefin|5 years ago|reply
[+] [-] ghaff|5 years ago|reply
[+] [-] willis936|5 years ago|reply
[+] [-] dna_polymerase|5 years ago|reply
[+] [-] boringg|5 years ago|reply
Trade itself is no longer on technical merits (except those in early) but have you looked at valuations across the stock market these days -- everything is off given pandemic. So that line of reasoning by all the financial talking heads just proves they don't understand the moment.
It's pretty reckless behavior for sure but its more about rage and control then anything imho.
[+] [-] bluecalm|5 years ago|reply
[+] [-] tenaciousDaniel|5 years ago|reply
[+] [-] jsjsbdkj|5 years ago|reply
The trading stops and laws that exist to prevent this kind of wild volatility are basically because for 90% of people, this is not good. By the time your parents read about this in the paper and log into their TD Ameritrade accounts to "invest", they'll be in that group of people left holding the bag.
[+] [-] davidw|5 years ago|reply
There are a lot of "hot takes" and people thinking all this fits some "narrative". But I think there is just a lot going on and I'd be cautious about assigning too much meaning to any of it without a lot more information, which we won't have right away.
[+] [-] AndrewStephens|5 years ago|reply
You cannot use the tools of the system to beat the system.
Here is the thing about hedge funds - they hedge. They hedge in the morning, hedge in the afternoon, eat some hedge for dinner and get in a few rounds of hedging in down at the hedge club before going to bed dreaming of hedges. The clue is in the name. They don't typically make huge loses or gains for a single stock, they are happy to make a consistent gain every day.
The vast majority of hedge funds are making stacks of small gains off this nonsense and anyone who doesn't cash out at the right time is going to be hosed. Do you know when the right time to cash out is? No? Sucks to be you.
Honestly I am worried. Mob investing has collapsed economies, brought down governments, and ruined more lives than can be counted during the last 150 years, and I don't see how this is different.
This is completely ridiculous and will all end in tears. I am actually glad that some pressure is being put on Reddit and the brokers to cool things off - there are opportunities to cash out big time but a lot of the small players are going to lose money.
[+] [-] isatty|5 years ago|reply
I've been in WSB for ages, and it was, is and will always be about the money.
[+] [-] dreamcompiler|5 years ago|reply
The people who got in early will suffer least when GSE finally crashes and burns. But the poor suckers who bought it at $150 are going to be in big trouble. They're all trying to stay strong and hold long because that's the way to make the hedge funds suffer, but the smarter ones will figure out that their only chance to not lose their shirts is to be in the earliest 5% of scabs to get out, and then it's going to be a bloodbath when everybody gets trampled running for the exit door.
Meanwhile a couple of hedge funds go under while the rest just call it Tuesday.
[+] [-] waylandsmithers|5 years ago|reply
[+] [-] nappy-doo|5 years ago|reply
[+] [-] Tenoke|5 years ago|reply
[+] [-] monkeyfacebag|5 years ago|reply
[+] [-] FabHK|5 years ago|reply
I despise HFT as much as the next guy, but it's mostly useless rent seeking, economically, not massive manipulation. There is money on the table in trading, and the HFT firms try to take a bigger part of that pie, rather than letting it go to their competitors or other traders (like funds or retail investors).
Next, hedge funds shorting businesses they consider overvalued is a perfectly fine activity that helps price discovery and capital allocation. To the extent that they are deceptive and manipulative, that is a problem, just as deceptively and manipulatively hyping a stock up is a problem.
Finally, note that there is no value created here. It's purely a transfer of money. A few hedge funds might lose something (though that remains to be seen - shorts have no expiry, per se, and the borrow cost is absolutely manageable over days, weeks, or even months).
But mostly, this will be a huge transfer of money from those that jumped on the long trade late, to those that were in it early.
EDIT to add: And, putting a cherry on the fine research that went into the article, the Keynes quote is from A. Gary Shilling from the 1980s.
https://quoteinvestigator.com/2011/08/09/remain-solvent/
[+] [-] chaganated|5 years ago|reply
I see that you've been HODLing some GME. Sorry bro, have to charge you with economic terrorism. Nothing personal.
[+] [-] ridaj|5 years ago|reply
A low stock price doesn't, by itself, kill a business and put people out of jobs. Bad management kills a business, as does being in a bad business to begin with.
> Never in their wildest dreams, the hedge funds would have thought this day would come. The tables have finally turned as the hedge funds try to gulp in their last breath of air.
We're really not talking about "the hedge funds" in this case. Just a few hedge funds who, indeed, should've seen it coming. It's not like during the subprime crisis where every large financial institution had a large exposure to them. The exposure of the financial industry to GameStop is minuscule at the scale of the system. It's also not new, in the sense that sometimes hedge funds will try to squeeze one another too
> I honestly don't believe that people are going to sell their positions on $GME stocks. As I said, they are not in for the money anymore. They are fighting the good fight, and they have the potential to win this WAR.
Maybe they won't sell, but there are cases where fundamentals will catch up with the gamers. If/when the business runs out of cash and undergoes restructuring, the stockholders will be left holding pennies.
Maybe the CEO of GameStop (notice how he's been quiet?) will be like, f--- this job, I'm selling all my stock and retiring, thanks Internet
[+] [-] hannofcart|5 years ago|reply
[+] [-] shadowgovt|5 years ago|reply
Robinhood is suspected of having a business model of spying on their clients and selling that data to hedge funds (https://seekingalpha.com/article/4205379-robinhood-is-making...). Essentially, this puts their own clientele at an average disadvantage in all trades; the funds buying their data can set up algorithms to front-run any RH trades and skim a little more value than the people using RH could expect to get.
In this situation, it seems it didn't matter. Even if RH sold to the shorting traders "Hey, our clientele is buying the hell out of this near-junk stock," all the signal told them was how fast the train was coming at them, not which way to go to get off the tracks.
[+] [-] mgr86|5 years ago|reply
[+] [-] bjourne|5 years ago|reply
[+] [-] sharker8|5 years ago|reply