The Irony in the GameStop Story(nasdaq.com) |
The Irony in the GameStop Story(nasdaq.com) |
I'm a bit lost with this article. What have an "angry mob" been doing to Andrew Left and his family in an "actually illegal way"? Seems to me this article is swaying to some type of narrative someone wants to propagate rather than aiming to be somewhat objective regarding current events.
Note the "If". Left had indeed claimed that there were attacks on his personal peers, and I agree that if it were true it is overstepping their right to privacy and probably life if the claimed attacks were death threats.
HOWEVER, if it turns out that Left is lying I will agree that Left have commited defamation against a group of possibly hundreds of thousands of people and I would really suggest to him at that moment (apart from what the law thinks appropriate, which is a somewhat long prison time) to really apologise and permanently stay outside of the stock market.
He is English and I knew from reading their (in a country sense) opinion pieces that they tend to put distance in unsure or unverified information, possibly because of the much stricter libel/defamation laws there (see as an example https://youtu.be/z49LjJj3VTI that discusses why there is avoidance on the phrase "tired and emotional" which acquired a different meaning in UK). I guess that this is just an unintentional carryover especially that American opinion pieces don't really delinate fact from opinion in their writing.
The way I see it, is that among the professional investors, one will lose hard (Citron), while most others will profit. When the sell-off starts, they'll be able to sell first, thanks to their sub-ms connections to exchanges, algorithms that monitor media in real time (including reddit!), and employees that are constantly monitoring this whenever the markets are open (as opposed to retailers doing this in their free time).
Among the retailers, a few will win big (/u/DFV), while most will lose. They'll either stubbornly "HODL" if they're in it to "get a message across", or if they're in it for profit, they'll notice the sell-off too late and act too late, probably exacerbated by RobinHood suffering outages at that point.
So my prediction is that in the end one hedge fund will go down while others will profit from it... Most retailers will lose. Then what was the point?
I mostly agree with your analysis, and I don’t have any money invested in GME (I usually do private investments). But at the same time, I think there is incredible value in exposing how much of a lie “the free market” is...
If these WSB folks rallied around GME because they were true believers of a beloved brand with faith in a turn around plan, god love em. I think that’s an interesting phenomenon that upgrades retail collective trading in much the same ways mutual funds behave on behalf of loads of retail investors.
But that’s not what happened. The brand is irrelevant. It’s just math and vengeance and in the end...a lot of retail folks are going to be left holding the bag as prices drop down to earth. That cannot be a good outcome for anyone. I don’t think we want a system to function like this.
https://twitter.com/endtwist/status/1354547622133051393?s=20
I do know that the DFV post was the match, but I think stimulus + people generally wanting to take revenge + the WSB post that revealed that Melvin was shorting GME, so let's fuck it up + Robinhood's post-pandemic popularity were the reasons for this to go out of control unlike other previous movements.
One thing it has shown is how much vulnerable the US financial system is. Although this time it was retail investors left holding the bag, this situation could be destructive very easily.
Imagine now, if Russia wanted to take down the US economy. They could create a buffer hedge fund, maybe 3-5B, which would be obliterating itself anyways. Then get some bots to bump up activity around a particular stock, maybe generate fake short interest against GS (smallest big 6 bank, so I chose it). Then create a CtA on WSB, calling for a mass short to dethrone GS based on fake information, and pump it up with bots. Retail starts shorting, Algobots might pick up on the momentum and join the trend, followed by traditional HFs joining the crowd. In the end, you'll have GS being shorted for no particular reason, but enough to cause some serious damage momentarily. Price goes down, they get deemed overlevered, and they're forced to take a bailout (highly damaging to the politicians in Congress who support it) or led to fail (which would cause shockwaves across the street). It's likely the politicians will sacrifice themselves for a cushy job post politics, but the current ruling party would lose all legitimacy in front of its voters.
I imagine such a scenario would be easily plausible in Europe, where the banks are much weaker financially (save for the Swiss ones).
I am very suspicious of WSB generally, but just like with Anonymous, there apparently are some skilled folks in the horde...
>They are very open about the fact that they or their clients may already have short positions in the stocks concerned and as I said, most of what they say is publicly available information. Clearly, they are not doing anything illegal, or even underhand. They have been sanctioned a few times by regulatory authorities and lost legal battles overseas but, as founder and Executive Editor Andrew Left has frequently pointed out, they have never lost a significant court case in America.
If anyone wonders, this is what the page looks like on Firefox with uBlock Origin: https://imgur.com/bvrLMTv
When the GameStop valuation jumped to ridiculous levels, it was obviously noticed by others who started shorting.
The end result of this is that some in the WallStreet are making even more profits than Citron Research. This time it's on the backside of those retail investors who think "holding the stock" is protecting it's price.
Citron Research was caught on surprise by WSB, these new speculators have the benefit of weighting and analyzing WSB group action. They can take account possible short squeeze risk and duration and take a long view.
https://isthesqueezesquoze.com/
>GME shorts have not begun to close their positions in substantial numbers.
>the situation (1/28 5 PM ET):
>- short interest: 100% of float by Ortex, 123.25% of float by S3 Shortsight
>- change in short share availability: +9,000
Matt Levine covers all scenarios nicely, must read as always: https://www.bloomberg.com/opinion/articles/2021-01-28/knowin...
It’s becoming clear that a better designed attack was necessary. Unless government steps in, this attack will enrich market makers and a lot of hedge funds, while cleaning out retails who may not have fully understood the dynamics of this attack.
In my view though, that’s the market. It’s a learning process. Retailers will gain more understanding and the next attack will be better designed.
Source, u/DeepFuckingValues earliest comments on reddit on GME around Mark Cubans involvement
And yet no one raised the alarm then. No one worried about retail investors with a long position in GME, or the workers who could be laid off. The truth is that almost no one at all cared about the market being detached from reality or the ordinary people left holding the bag when the hedge funds were set to profit. But now that they’re losing, suddenly everyone is beside themselves with worry.
Are they, though? Sure, some of them lost. But there are others that will only get stronger if some competitors are eliminated (a point also made by https://news.ycombinator.com/item?id=25957142). And even the ones that lost big so far can get back into the frenzy. Buying on the way up... or shorting near the top.
Here is my take on the "irony" of the situation: Hedge funds can make money off of stocks they believe to be overvalued. So the WSB activists handed them... a stock that everyone knows to be MASSIVELY overvalued. Yeah, that will show them.
Look at Tesla. Musk’s cult of personality is clearly a component of the interest in the stock. I don’t think these are just abstract objects made of balance sheets.
It's not investments. It's playing the casino. They are betting. And proud of it.
And this is one of the first times they have an advantage over the rest of the table. Because a couple of hedge funds overplayed their hand on a stock small enough to be influenced by the people active in that sub.
They are ready to lose it all just for the lulz. It's entertaining. Expensive, but thrilling.
The same counts for BTC "investments". There are no fundamentals. It's all irrational bets. Bad for the solvency of some, but that's what all casino's are.
It’s also illegal, which seems to have been left out of all the conversations.
“ The rush by short sellers to cover produces additional upward pressure on the price of the stock, which then can cause an even greater squeeze. Although some short squeezes may occur naturally in the market, a scheme to manipulate the price or availability of stock in order to cause a short squeeze is illegal.”
The more people take part and have strong hands, the more the losses will be democratized, on the way to the real desired outcome against naked shorting hedge funds. I don't mind losing a couple hundred bucks investment for this.
It’s a credentialist argument. Whatever we say the stock is worth is fundamentally correct, and if you disagree, well, you’re just an unsophisticated investor who shouldn’t be allowed to participate in the market.
The irony is, once this stock finally comes crashing down, it will be the small retail investors losing a lot of money, and a different set of Wall Street investors will be the ones reaping the reward.
What is not OK is bending and breaking the existing regulations to stop a group of individual investors who are individually doing nothing wrong in order to protect a hedge fund that was exploiting the existing (bad) regulations.
Also, it seems insulting to suggest that the only "good" reason for someone to buy a stock is faith in the fundamentals of the company when finance media has been yapping up the joys of derivative trading for decades.
People keep assuming the WSB crowd are idiots. I don't think it's a given that they can't do risk management, and in a short squeeze it's generally the short sellers who end up holding the bag.
Anyone who FOMOs in this week is probably in for a hurtin', but the ones who got in before this was all over the media have a good shot at significant profit.
[1] https://www.nasdaq.com/market-activity/stocks/gme/advanced-c... select log scale, period=max
Not sure what you suggest be done about it. Hopefully people learn their lessons but it is not like we can eliminate the possibility of doing dumb things, and doing so would be quite illiberal.
Either you go full on Eugene Fama and claim that you do not even understand what market manipulation means as long as there is no hidden information, as markets are efficient and it is just market reflecting unidentified changes in the fundamentals or random fluctuation around the correct value or whatnot.
Or, you can say that yes, this is just exhibit N about how prices can be manipulated, which means that prices are not always correct. Which means that we can't trust blindly on markets to allocate resources efficiently, but we need to have careful discussion about in which circumstances it is prudent to restrict the market operations (including price, supply and demand).
What is weird, is how rare it is to find either of these approaches in public discussion. (For the record, I am in the latter camp. And no, I do not propose fullo on communism and regulated markets, but "to have careful discussion about in which circumstances it is prudent to restrict the market operations")
This is like going to war, all will give some, but some will give all. At least we’re talking about money and not lives.
Are we?
https://www.businessinsider.com/robinhood-office-installed-b...
The hedge funds have retreated, yet WSB is doubling down on the frenzy.
The posts over there are just insane. QAnon levels of delusion against an enemy that has already retreated.
Wall Street is just a straw man now, and WSB is using it to cannibalize WSB.
- Their primary product is used game sales, and the biggest players in that sector are making active moves against such sales (see: the disc-less PS5 and Xbox Series S consoles).
- Digital storefronts make purchasing new games much, much easier (and a borderline impulse purchase).
- Free-to-play multiplayer games cut Gamestop out of the customer acquisition loop. The most $GME gets is a cut of any prepaid cards, but those cards are commonplace nowadays (my local chain drugstore has an end-cap with dozens of prepaid cards of various types).
- Their primary model is to lease space in malls. With the pandemic, malls are either closed or seeing substantially less foot traffic.
- Consoles are typically a big driver of purchases, but their limited availability also limits $GME's potential. That said, that can be counterbalanced by very profitable bundles made more attractive by the limited availability of unbundled consoles.
I don't play the stock market, but even if I did, $GME wouldn't be something I'd look at in a buy-and-hold strategy.
the biggest player in /r/wallstreetbets is /u/DFV, and last I checked he had cashed out a small portion of his position. Still has like 30mill tied up in GME stock though.
Crazy story looking at his posts from 2019-now, though. At one point his GME portfolio was only worth 42k, and now it is over 40mill.
A lot of people are also going to be disappointed to learn that some Wall Street firms profited massively from this situation.
And finally, a lot of retail investors who were late to the party are going to lose a lot of money on this. Some of that will flow to early Redditors who got their exit timing right. Some of that will flow to hedge funds who cleverly scooped up the naive money in the chaos.
I'd go so far as to bet that journalists are already working on articles with all of these angles. They'll start to trickle out just as soon as the market euphoria wanes.
My point remains, though: where was the concern before the r/wallstreetbets saga? GME was at ~$4 last summer and made it up to ~$20 by the end of last year. If the hedge funds were right and it was massively overvalued, where was the concern for retail investors taking out long positions back then? And conversely, if the hedge funds were wrong, where was the concern for the GameStop workers?
We can go back and forth about the winners and losers, but it's pretty clear that no one really cared about the "ordinary people" before some hedge funds got caught with their pants down.
How do market makers get outsized benefits from this? I'm uninformed.
TL;DR Citadel sees Robinhood order flow and can get in front of it, and also bought a chunk of Melvin on the cheap when they got squeezed out of their short position.
If retail investors publicly coordinate buys is that manipulation?
What if they pool their assets and appoint a controller? ("make their own managed fund").
What if, rather than make the sentiment shift in the direction you think it's going, it actually makes people more upset for hedge funds gambling away main street's money irresponsibly? It's almost as if those who treat other people's money as a casino shouldn't get sympathy from those other people.
It's categorically false to suggest that Wall Street hedge funds are all suffering from this.
Some of them are making massive amounts of money on this situation. Some of that money comes at the expense of casual investors.
This idea that Redditors are siphoning money out of hedge funds is just not true for the last round of GME investors. In fact, those latest investors will probably end up funneling their losses right into hedge funds who short this on the way back down.
On the other hand, WSB is basically saying, "So what? We don't care about the argument, we don't care about the true value here, we're just exploiting a market dynamic (probably illegally), and collectively interfering with the ability of hte market to price this efficiently, and we just want the number on the price to move so we can cash out."
The history of financial markets is littered with the bodies of unsophisticated investors participating for non-fundamental reasons. Tulips, .com, real estate bubble. Every mania in history follows this pattern of being driven more by the emotion and inertia of the game vs. the underlying fundamentals, this looks no different to me.
Hedge funds took short positions because in their model, given GameStop's business and whatever other factors, the stock was due to drop. That's valid, but it's no more valid than the WSB model that the price would skyrocket because overexposed hedge funds would be forced to close their short positions. What is the fundamental argument that GME was overpriced at $20?
Also, "unsophisticated investors" are not the only ones participating for non-fundamental reasons. When Citadel pays for order flow from Robinhood and then gets out in front of those trades, they're not trading based on fundamentals, they're trading based on momentum. Is that not also interfering with the ability of the market to price GME efficiently?
Something like this could trigger a cascade, but that cascade would rest solely on the people who built this bubble.
The current market cap of GME is $25 billion. Meanwhile, the size of the subprime mortgage market in 2008 was in the neighborhood of $50 trillion.
Argument for cascading.