Patterico's Pontifications

1/28/2021

GameStop Open Thread

Filed under: General — Patterico @ 8:29 am



I’m not smart enough on the topic to opine. I’m sure some of you are.

101 Responses to “GameStop Open Thread”

  1. My one unshakeable belief is that if I try to piggyback on something that has already hit mainstream media this hard, I will lose money. So I am doing nothing: just my boring dollar cost averaging strategy I have followed since my 20s.

    Patterico (115b1f)

  2. Down 43% today.

    As I understand it, this was a one-off strike against short-sellers at a particular hedge fund, where a group bid up the price hoping that the short-sellers would capitulate and rush to cover their shorts (which would then drive the price up and the original buyers would sell).

    It seems to have run its course.

    Kevin M (ab1c11)

  3. The only way to make money “quick” in the market is to correctly identify stocks that would benefit from a transforming event (The Internet, 9/11, the 2008 crash, Covid) and then betting big. The correct answer to the first 3 seems to be “Amazon”, but “Zoom” would have worked well this time.

    The most money I’ve made on a stock was Square, when I saw it tank after a bad earnings report, but understood what had happened from personal experience and knew that the apparent disaster would not be repeated and bet heavily.

    Kevin M (ab1c11)

  4. yeah this is way late and AMC or blackberry are played out also. But I’m hearing that they’re going to try and squeeze JP. Morgan via

    https://www.google.com/finance/quote/AG:NYSE?sa=X&ved=2ahUKEwjS4u_CjL_uAhWRQs0KHZZMCHYQ_AUoAXoECAMQAw

    Buddy of mine put 1500 on GME Tuesday night. He sold it on wed and made 2500 profit. He’s doing well and figured if he got wiped out that would be the new triathlon bike and rower he wanted to buy.

    He viewed it as the same kind of “investment” as betting on a hot shooter in Vegas.

    Time123 (653992)

  5. Sammey F, you are the king of detailed explanatory comments. I feel like this thread was made for you. 😀

    Time123 (d1bf33)

  6. It seems to have run its course.
    Kevin M (ab1c11) — 1/28/2021 @ 8:43 am

    Not quite. Wall Street is doing its best to prevent Redditors from deciding how and where they want to invest their money. Trading firms are halting trades on GME. Others are increasing margins needed to trade on the stocks the Redditors are buying.

    Yes, the little people gave the Titans of Wall Street a boo-boo. That simply cannot happen. So they are fighting back.

    The media is already on board, tarring the Redditors as white supremacists and terrorists.

    Janet Yellen is “watching” although I don’t see why this would fall under her purview.

    Biden and his gang will put an end to this madness. We know that little people can’t make money in the stock market – that is for the firms that are too big to fail. You know, the firms that sold the real estate market short back in 2006-2008.

    Hoi Polloi (139bf6)

  7. We are still watching the crypto craziness, then this comes along. Strange watching entrenched interests react in horror as regular people get in the game.

    I read that some of these hedge funds lost upwards of 20 billion to the Redditors, trying to short GME. LMAO.

    Little People – 1
    Wall Street – 0

    First time the score has ever been that. Feels good…

    Hoi Polloi (139bf6)

  8. Not quite. Wall Street is doing its best to prevent Redditors from deciding how and where they want to invest their money. Trading firms are halting trades on GME. Others are increasing margins needed to trade on the stocks the Redditors are buying.

    Yes, the little people gave the Titans of Wall Street a boo-boo. That simply cannot happen. So they are fighting back.

    The media is already on board, tarring the Redditors as white supremacists and terrorists.

    1. I have no problem with increasing margins in this situation. That means they don’t want to load people money to buy GME. Seems prudent to me.

    2. Can you support the media thing? The coverage I’ve seen hasn’t spent time on that.

    3. AOC, Trump Jr. and Ben Shaprio tweeted basically the same thing recently. I don’t think party lines tell us much on this.

    Time123 (653992)

  9. GameStop plunges after platforms place more restrictions on trading.
    GameStop’s shares were down as much as 50 percent by midday Thursday, in a sudden reversal as trading platforms placed restrictions on the stock after days of wild gains for small traders and huge losses for some of Wall Street’s most sophisticated investors.

    Other stocks that had been bid up by the frenzy were also giving up ground. AMC Entertainment dropped 60 percent, while American Airlines was up just 5 percent after starting the day with a gain of more than 25 percent.

    The drop on Thursday came after Robinhood, the trading app that has made it easier for inexperienced traders to enter the market, said it had placed more restrictions on trades of those companies, limiting users to only selling shares they owned and buying shares they had shorted. Webull, another trading app, said customers would only be able to liquidate any positions they had in GameStop, AMC and Koss, a headphone manufacturer.
    ………
    Current price.

    Rip Murdock (80e6b4)

  10. Time123 (653992) — 1/28/2021 @ 9:24 am

    I have no problem with increasing margins in this situation. That means they don’t want to load people money to buy GME. Seems prudent to me.

    I think the more interesting thing is that some of the market makers have decided to not allow trades in a set of stocks to protect the shorts. My guess is institutional traders or anyone not categorized as riff-raff are able to trade in the stock just fine. There are people probably still being allowed to short the stock because if there’s ever a time to short GME it’s after market-makers are actively trying to prevent it from going up.

    This seems like it should be some sort of SEC violation. It’s definitely an attempt at market manipulation. I’m also expecting someone to come along and explain with a straight face that this is how the free-market works.

    frosty (f27e97)

  11. Sammey F, you are the king of detailed explanatory comments.

    I’ve stopped believing anything Sammy says after he said with certainty that the COVID-19 virus wouldn’t mutate.

    Rip Murdock (80e6b4)

  12. Naked shorts are extremely harmful to the market and the SEC has gone after them in the past.

    https://www.sec.gov/news/press/2008/2008-204.htm

    I wonder what changed.

    I’m glad that some people made money on the abuses these hedges tried to use to make money by collapsing a company. It’s disgusting that Wall St and Hedges are putting pressure on companies that allow day trading to stop their customers from placing investments.

    NJRob (eb56c3)

  13. I have no problem with increasing margins in this situation. That means they don’t want to load people money to buy GME. Seems prudent to me.

    I would have not had a problem either if those firms had increased margins when the hedge funds had decided to destroy GME’s stock through shorts. But they didn’t. So I have a problem when Wall Street changes the rules on only one player and not the other.

    And they haven’t changed the margin for other speculative stock, like Tesla.

    And here is CNN blaming all of this on…Trumpists:

    https://www.cnn.com/2021/01/27/politics/gamestop-stock-surge-trumpism/index.html

    Hoi Polloi (139bf6)

  14. Stirewalt, on his calling AZ for Biden:

    The rebellion on the populist right against the results of the 2020 election was partly a cynical, knowing effort by political operators and their hype men in the media to steal an election or at least get rich trying. But it was also the tragic consequence of the informational malnourishment so badly afflicting the nation.

    When I defended the call for Biden in the Arizona election, I became a target of murderous rage from consumers who were furious at not having their views confirmed.

    Having been cosseted by self-validating coverage for so long, many Americans now consider any news that might suggest that they are in error or that their side has been defeated as an attack on them personally. The lie that Trump won the 2020 election wasn’t nearly as much aimed at the opposing party as it was at the news outlets that stated the obvious, incontrovertible fact.

    Paul Montagu (77c694)

  15. Class action complaint filed in the southern district of New York against Robinhood App for shutting down trading on specific stocks. Discovery should be fun. Hope they go after all the companies that shut down trading.

    NJRob (eb56c3)

  16. 2020 was the worst year for economic growth since the Second World War
    The U.S. economy shrank by 3.5 percent last year as the novel coronavirus upended American businesses and households, making 2020 the worst year for U.S. economic growth since 1946.

    Economic growth slowed in the fourth quarter, rising just 1 percent from the previous quarter, according to the Bureau of Economic Analysis…….

    It is the first time the economy has contracted for the year since 2009, when Gross Domestic Product shrank by 2.5 percent during the depths of the Great Recession. It is also the worst year for economic growth since 1946, when the economy shrank by 11.6 percent as the nation demobilized from its wartime footing.
    …….
    …..[T]he economy has a long way to go before it heals entirely. More than 18 million Americans are receiving unemployment benefits, and jobs that depend heavily on person-to-person contact — like those at hotels, bars and restaurants — may not return until the pandemic ends.

    Consumer spending slowed down in all 15 categories tracked by the BEA, as the sectors that powered third-quarter growth faltered. Americans spent less on restaurants and hotels, a surprising third-quarter bright spot, and the growth of spending on motor vehicles and health care slowed after a steep third-quarter acceleration.
    …….
    Even as the economy shed jobs like never before in 2020, personal income grew significantly in 2020, BEA data shows, thanks largely to $1,200 stimulus checks and enhanced unemployment benefits provided the Cares Act. Disposable personal income grew faster for lower-income households than it did for the average household, according to an analysis published Thursday by Jason Furman, a senior fellow at the Peterson Institute for International Economics and a former top economist in the Obama administration, and Wilson Powell III of the Harvard Kennedy School.

    However, those gains were front-loaded and have begun to erode. Federal stimulus drove personal income to record highs in the late spring, but the levels fell off significantly in the second half of the year as relief programs under the Cares Act wound down or expired. Congress also approved a $900 billion stimulus package last month, which sent Americans new $600 stimulus checks and newly extended unemployment benefits to $300 a week through mid-March.
    …….
    This is the last GDP report from former president Donald Trump’s tenure. Until the pandemic, Trump was on track for an economic record that put him near the middle of the pack among recent presidents. But the covid-19 crisis ensured Trump oversaw the slowest economic growth of any president in the period since World War II.
    ……..

    Rip Murdock (80e6b4)

  17. I would have not had a problem either if those firms had increased margins when the hedge funds had decided to destroy GME’s stock through shorts. But they didn’t. So I have a problem when Wall Street changes the rules on only one player and not the other.

    If you owned a company that loaned people money to buy stock and you knew that many retail investors were buying a stock as part of a complicated and high risk play, a short squeeze, and that much of the ‘analysis’ of their position was based in large part on inflicting damage to a large and well funded hedge fund, would you be concerned? Would your concern go up if the price of the stock got extremely high?

    There exists a good chance that GME is going to collapse. The current price is not based on the value of the underlying asset. If you were unsure if your clients would be able to cover their margin what would you plan to tell your boss or investors? That you took no action because you wanted to be ‘fair’?

    Time123 (653992)

  18. I wonder what changed.

    The head of the SEC? Appointed by Trump; subsequent appointment as USA-SDNY stymied?

    nk (1d9030)

  19. Class action complaint filed in the southern district of New York against Robinhood App for shutting down trading on specific stocks.

    Exchanges routinely suspend trading in certain stocks when there is excessive volatility. Trading in these stocks wasn’t shut down, Robinhood limited trading to only selling shares owned by traders and buying shares they had shorted. They may get sued, but not prosecuted.

    Rip Murdock (80e6b4)

  20. If you owned a company that loaned people money to buy stock and you knew that many retail investors were buying a stock as part of a complicated and high risk play, a short squeeze, and that much of the ‘analysis’ of their position was based in large part on inflicting damage to a large and well funded hedge fund, would you be concerned? Would your concern go up if the price of the stock got extremely high?

    I would be concerned, especially if the shorts were about to destroy the real estate market in the United States. Amazing how that concern was non-existent in 2002-2008, but when a bunch of people on the internet buy up GME, then they have to change the rules.

    Even funnier when Wall Street gets taxpayer money to prop themselves up to prevent failure. In fact, maybe that explains why the little people’s irrational plays are nipped in the bud while the fat cats can short with impunity.

    The current price is not based on the value of the underlying asset.

    Lots of stocks are like that. Pick a tech stock these days and most are waaay overvalued. PE is through the roof.

    Hoi Polloi (139bf6)

  21. Time123 (653992) — 1/28/2021 @ 10:09 am

    You’re arguing in favor of protecting hedge fund short-sellers (hint: these are not the good guys) and hanging a lot on this margin issue. That’s probably small potatoes in this whole thing.

    I think it’s entirely possible we’re going to find out that people at Robinhood were internally saying they need to stop the shorts because the people losing money are also linked to their own funding, i.e. this isn’t a conflict of interest free situation. It’s also entirely possible this wasn’t just internal communication.

    Also, just in case you’re thinking, no frosty, these just might be the good guys;

    Robinhood faced controversy in June 2020 after University of Nebraska student Alexander E. Kearns committed suicide after seeing a negative cash balance of U.S. $730,000 in his Robinhood margin trading account. It was later discovered that this was a temporary negative balance due to unsettled trading activity. In his suicide note, Kearns, who was 20 years old at the time of his death, accused Robinhood of allowing him to pile on too much risk. In a press release, Robinhood promised considering additional criteria and education for customers seeking level 3 options authorization.

    frosty (f27e97)

  22. “Revenge of the Nerds.” 😉

    DCSCA (f4c5e5)

  23. As of now, Robinhood and other trading companies are only allowing individual investors to sell GME stock. Meanwhile, the hedge funds can buy and/or sell with impunity.

    These trading companies are punishing the individual investors for beating the hedge funds.

    Hoi Polloi (139bf6)

  24. Most people talk about this as if this was something else other than a standard short squeeze. (conducted by a non-usual group of people)

    https://en.wikipedia.org/wiki/Short_squeeze

    https://www.marketwatch.com/story/here-are-the-biggest-short-squeezes-in-the-stock-market-including-gamestop-and-amc-11611842270

    As soon as the short sellers have bought back their shares this will be over. If they don’t try again.

    Patterico (115b1f) — 1/28/2021 @ 8:34 am

    My one unshakeable belief is that if I try to piggyback on something that has already hit mainstream media this hard, I will lose money.

    That usually is the way with stocks, although there are some thins that can go on for along time, like drops in interest rates. In 1929 I once read someone decided the time had come to sell shares when he started getting tips from his shoe shine boy or something like that. It’s a general rule not to by stocks on the “greater fool” theory.

    Sammy Finkelman (7bb55f)

  25. Hoi Polloi (139bf6) — 1/28/2021 @ 10:49 am

    Meanwhile, the hedge funds can buy and/or sell with impunity.

    And short. What sort of game is it when everything is rigged to guarantee a profit on shorts?

    frosty (f27e97)

  26. Time123 (653992) — 1/28/2021 @ 10:09 am

    You’re arguing in favor of protecting hedge fund short-sellers (hint: these are not the good guys) and hanging a lot on this margin issue. That’s probably small potatoes in this whole thing.

    I think it’s entirely possible we’re going to find out that people at Robinhood were internally saying they need to stop the shorts because the people losing money are also linked to their own funding, i.e. this isn’t a conflict of interest free situation. It’s also entirely possible this wasn’t just internal communication.

    Also, just in case you’re thinking, no frosty, these just might be the good guys;

    Robinhood faced controversy in June 2020 after University of Nebraska student Alexander E. Kearns committed suicide after seeing a negative cash balance of U.S. $730,000 in his Robinhood margin trading account. It was later discovered that this was a temporary negative balance due to unsettled trading activity. In his suicide note, Kearns, who was 20 years old at the time of his death, accused Robinhood of allowing him to pile on too much risk. In a press release, Robinhood promised considering additional criteria and education for customers seeking level 3 options authorization.

    frosty (f27e97) — 1/28/2021 @ 10:41 am

    Let me be very clear. The only thing the trading houses have done that I’m defending is raising their margin requirements for retail investors.

    Bob: “Hey Jen, it looks like we’re loaning a lot of money to people to buy GME.”
    Jen: “Thanks Bob, do you know why?”
    Bob “Yes, it’s so rocket ship go Brrrrr and they can screw the shorts.”
    Jen: “What? What’s GME. They sell old video games at the mall.”
    Bob: “It’s a meme, It’s at 250$+ up 700% and the early money is getting rich. But we’re loaning a lot of money here to small investors to buy it.”
    Jen: “Raise the restriction to 50% for this Trade.”

    I have no hate for short sellers. A company that sells old video games in a mall has a terrible business model. Applying downward pressure on this dog is fine with me.

    I have no love for hedge funds and them using their power and influence to knock people like me out of the market pisses me off. I hope people draw the right conclusion from what Robin Hood did; that Robin doesn’t exist to help people do what they want to do and you can’t trust them.

    But that one little part makes sense to me.

    Time123 (653992)

  27. I don;t think short squeezes happen very much now. There are some stock market rules to limit them – like a stock is not allowed to be shorted unless the last trade was an uptick.

    In commodities markets, when done by an individual, it is known as “cornering the market.”

    https://en.wikipedia.org/wiki/Cornering_the_market

    1950s: The onion market

    In the late 1950s, United States onion farmers alleged that Sam Seigel and Vincent Kosuga, Chicago Mercantile Exchange traders, were attempting to corner the market on onions. Their complaints resulted in the passage of the Onion Futures Act, which banned trading in onion futures in the United States and remains in effect as of 2018.[5]

    1970s: The Hunt brothers and the silver market

    Brothers Nelson Bunker Hunt and William Herbert Hunt attempted to corner the world silver markets in the late 1970s and early 1980s, at one stage holding the rights to more than half of the world’s deliverable silver.[6] During the Hunts’ accumulation of the precious metal, silver prices rose from $11 an ounce in September 1979 to nearly $50 an ounce in January 1980.[7] Silver prices ultimately collapsed to below $11 an ounce two months later,[7] much of the fall occurring on a single day now known as Silver Thursday, due to changes made to exchange rules regarding the purchase of commodities on margin.[8]

    This type of thing is very 19th century or at least pre-SEC.

    Sammy Finkelman (7bb55f)

  28. @Patterico.

    The issue here is “short selling” stocks.

    What is short selling?

    There’s a financial/stock construct where you can “borrow” x-number of stocks from someone for usually a small fee, along with the promise that you’d return the same number of stocks back by a specific date.

    The reason *why* you’d want to do that, is that you’re betting that the stock would lose value by the time you have to re-purchase the stock back for the original owner.

    Say you have 100 GME stocks at $4 per stock and I want to borrow it.

    You define a “fee” for me to borrow each stock for $1 with a contractual obligation that I return 100 GME stock within 4 weeks.

    So I’m out by -$100 for $400 worth stocks at the time.

    I then sell it for $400.

    I now have $300 more than I did before I borrowed the stocks from you.

    Let’s say GME’s share drops, for whatever reason, to $2 per share two weeks later.

    I then buy 100 GME shares for $200 to return the stock back to you before the agree-by date we’ve established when I borrowed your stocks.

    I’ve made $100 during these transactions.

    Now factor in the buying power of Hedge Funds and you’re talking huge money.

    It’s literally casino gambling, because you’re expecting the price to drop and you don’t have total control over that.

    Now these hedge funds are good, so they’re mitigating their risks like crazy.

    What makes these practice so detestable, is that huge hedge funds could impact the prices by strategic leaks and public statements.

    It also impacts the targeted company because it’ll hamstring them financially if they want to use the stocks as collateral.

    So, big hedge funds has done this for years.

    The reddit crew figured out that GME was being shorted and decided to go on a buying spree. It also made the news, such that the big whales who detest shorting (Elon Musk is famous for this) were also massively buy GME stocks whenever they can, thus massively driving up the stock price.

    Hedge funds are losing billions because of their contractually obligation when they started the short (borrowing at x fee + the initial stock sales). They’ll be forced to re-purchase the stock at a higher price, thus losing billions in the process.

    The reddit crew isn’t doing anything illegal and its an amazing ordeal as this ragtag group are able to “hold” their position for so long before selling. (of course, some may lose big)

    At least, this is how I understood this.

    Same goes for AMC, Nokia, blackberry stocks.

    whembly (a500a7)

  29. @Thread, if my math is wrong please let me know. 😉

    whembly (a500a7)

  30. From link @14.

    Once, in order to beat his competitors with the results of an important state election in the early 1840s, Brooks hired out a stateroom on a Hudson River steamboat and installed a printing press.

    By the time the competition’s reporters returned to New York City from Albany to file their stories, Brooks already had the finished product in hand.

    NB: The early 1840s. Before the telegraph.

    Sammy Finkelman (7bb55f)

  31. Gamestop just went down from about 263 to 251.

    The shorts are probably not yet covered but the holders may now be people for whom selling at $250 is a loss, otherwise they’d get out because Gamestop is heading back to $10 or so.

    It went back up to $263. The next moment it is at $247.

    Sammy Finkelman (7bb55f)

  32. I read that 140% of the number of shares outstanding were sold.

    Sammy Finkelman (7bb55f)

  33. Whembly,

    the only thing to add is that the hedges leveraged over 140% of GME stock in their short. That’s more stock than exists so they are depending on using the same stock multiple times to cover their bet. The reddit crew was bullish on GME beforehand, saw the hedges overcommitting and overleveraging and decided to bet against them and won. Big.

    Now the big companies and hedges are teaming up to stop their losses and take back legitimate earnings from the redditors. This would’ve all ended tomorrow when the hedge’s margins had to be called in and they’d take a massive bath in losses.

    NJRob (eb56c3)

  34. It’s not 140% of share outstanding but 140% of the float, or shares generally available for trading (not considered unavailable for various reasons) although the number of shares sold can exceed the total number of shares outstanding also.

    https://money.stackexchange.com/questions/135446/how-can-gamestop-be-short-140-of-float

    There are different definitions of “float” possible.

    Sammy Finkelman (7bb55f)

  35. GME has a market cap over 16 billion and 5,500 stores.

    There are a lot of ways to value a company. In price / store Game Stop is currently valued 2.2 million.

    Who here thinks their inventory + the value of their lease between the TJ Max and the Hot Topic is worth 2.2 million a store.

    But they’re up!
    To infinity and beyond!!!!!

    Time123 (653992)

  36. 34. Xi Jinping and company are coming to the rescue if the people left holding the bag.

    I see zerohedge says WeBull says GME, AMC, and KOSS are no longer restricted. (as of 1:35 PM · Jan 28, 2021 – unknown time zone)

    WeBull is based in China.

    Perhaps China would like to damage the shorts. There are probably a lot of bad Chinese stocks.

    Sept. 18, 2020:

    https://finance.yahoo.com/news/short-sellers-piling-chinese-stocks-210025174.html

    …With the November election now only about six weeks away, S3 Partners analyst Ihor Dusaniwsky said short sellers are targeting Chinese stocks in a major way.

    Dusaniwsky said China and Hong Kong short interest now totals $104 billion, an increase of $2.03 billion in the past month. The dispute between Trump and China over TikTok could be a preview of what’s to come between now and the election, and short sellers seem to believe Chinese stocks could suffer….

    https://www.bloomberg.com/news/articles/2021-01-05/nyse-u-turn-on-china-stocks-a-short-reprieve-u-s-officials-say

    The New York Stock Exchange is considering proceeding in delisting three major Chinese telecommunications firms after Treasury Secretary Steven Mnuchin criticized its shock decision to grant the companies a reprieve, said three people familiar with the matter.

    The NYSE’s potential pivot follows a whirlwind 18 hours in which the exchange caught U.S. officials off guard, with the exasperation reaching the highest levels of the Trump administration. The back-and-forth also sowed deep confusion within global financial markets about the policy that set off the remarkable chain of events: an order signed by President Donald Trump in November that requires investors to unload Chinese businesses deemed a threat to U.S. national security.

    Sammy Finkelman (7bb55f)

  37. Wups, type, it’s 2.9, not 2.2

    Time123 (d1bf33)

  38. Time123 (653992) — 1/28/2021 @ 12:27 pm

    There are a lot of ways to value a company. In price / store Game Stop is currently valued 2.2 million.

    In the end what you have is book value; the value at which the company might be bought for; the value that the majority owners of the company are determined to keep it at by buying back their shares; or the present value of the expected future stream of dividends. This, plus ignorance and speculation keeps a stocks price from dropping down to $0.00.

    It heads there only if it is thought to be possibly becoming insolvent. And when that happens a lot of people bet that it won’t – and others bet that it will by selling short. The insiders really do not like that because the stock has value even if not sold.

    Sammy Finkelman (7bb55f)

  39. Time123 (653992) — 1/28/2021 @ 11:31 am

    Also,

    Let me be very clear. The only thing the trading houses have done that I’m defending is raising their margin requirements for retail investors.

    as part of raising the margin requirements Robinhood “chose” to sell on behalf of traders, i.e. Robinhood forced sales over the new margin limits to cover the hedged shorts. They loaned someone money then called the loan once they realized they (Robinhood) were underwater.

    frosty (f27e97)

  40. $2.9 million divided by 90 million shares is around 3 cents per share. But this is a going concern. If $2.9 million is book value, that’s not a factor. But is it?

    Sammy Finkelman (7bb55f)

  41. Biden is pretty much continuing Trump’s last China policy.

    Sammy Finkelman (7bb55f)

  42. Time123 (653992) — 1/28/2021 @ 11:31 am

    Also,

    Let me be very clear. The only thing the trading houses have done that I’m defending is raising their margin requirements for retail investors.

    as part of raising the margin requirements Robinhood “chose” to sell on behalf of traders, i.e. Robinhood forced sales over the new margin limits to cover the hedged shorts. They loaned someone money then called the loan once they realized they (Robinhood) were underwater.

    frosty (f27e97) — 1/28/2021 @ 12:38 pm

    I didn’t know that, and can’t think of any possible defense for it.

    Time123 (d1bf33)

  43. Time123 (653992) — 1/28/2021 @ 12:27 pm
    There are a lot of ways to value a company. In price / store Game Stop is currently valued 2.2 million.
    In the end what you have is book value; the value at which the company might be bought for; the value that the majority owners of the company are determined to keep it at by buying back their shares; or the present value of the expected future stream of dividends. This, plus ignorance and speculation keeps a stocks price from dropping down to $0.00.

    It heads there only if it is thought to be possibly becoming insolvent. And when that happens a lot of people bet that it won’t – and others bet that it will by selling short. The insiders really do not like that because the stock has value even if not sold.

    Sammy Finkelman (7bb55f) — 1/28/2021 @ 12:37 pm

    Yes, I know. But Market Cap divided by various things (Stores, units sold, earnings etc) are all measures of valuation. I thought this one would be a fun way to illustrate how insane the current price is. Similar to dividing Tesla’s MC by units sold.

    Time123 (d1bf33)

  44. There is a massive difference between Tesla and GME, one is in a growth business where they had no issue selling the product, they just had a bad cash position and problem actually bolting cars together. Either problem could be solved.

    GME is in a dying business, brick and mortar digital sales. There’s a reason that Circuit City and CompUSA don’t exist anymore.

    This was never about GME, it was a good option to test a theory on if they could create a short squeeze, it had nothing whatsoever to do with the actual business that GME is in.

    Colonel Klink (Ret) (1367c0)

  45. There is a massive difference between Tesla and GME, one is in a growth business where they had no issue selling the product, they just had a bad cash position and problem actually bolting cars together. Either problem could be solved.

    GME is in a dying business, brick and mortar digital sales. There’s a reason that Circuit City and CompUSA don’t exist anymore.

    This was never about GME, it was a good option to test a theory on if they could create a short squeeze, it had nothing whatsoever to do with the actual business that GME is in.

    Colonel Klink (Ret) (1367c0) — 1/28/2021 @ 1:15 pm

    You could work for a hedge fund. 😀

    Time123 (d1bf33)

  46. Time123 (d1bf33) — 1/28/2021 @ 12:58 pm

    The GME price has no basis in reality. That is part of the point. Politicians will still point to “the market” and say look how well we’re doing. People will get upset at the redditers pointing out that the emperor has no clothes.

    2. Can you support the media thing? The coverage I’ve seen hasn’t spent time on that.

    I’m not sure why you aren’t seeing this sort of thing.

    Every time one of these “cherished” institutions is shown for what it is it’s labeled Trumpism. It’s an attack on the system. You’re not seeing the trend yet?

    frosty (f27e97)

  47. Time123 (d1bf33) — 1/28/2021 @ 12:58 pm

    The GME price has no basis in reality. That is part of the point. Politicians will still point to “the market” and say look how well we’re doing. People will get upset at the redditers pointing out that the emperor has no clothes.

    Agree about the reality thing, it was a point i was trying to make up thread. I Haven’t seen many ppl who don’t work and hedge funds mad redditors. Hell AOC and Ted Cruz are agree on this one.

    I went to read the CNN article but stopped when I saw it was Chris Cillizza. Thank you for taking the time to link it. Life is too short to read his analysis. It’s worthless. If you tell me there’s trend of ppl attacking WSB for being white supremacist’s and terrorists I’ll believe you. But I haven’t seen that in the coverage I’ve been reading. I have seen is that ppl are mostly rooting for the retail investors and assuming people they already didn’t like are rooting against them. But YMMV.

    I hope Robin Hood goes belly up for what they did to their customers in this

    Time123 (653992)

  48. GME was a $4 stock last year. It is at $159 for no underlying reason beyond a bunch of small investors ganging up on the short sellers in a case of turnabout being fair play..
    Eventually it will need to return closer to $4 than $159.
    That said, if GME was in a position where they could have raised cash by selling stock at the higher prices their value would maybe be greater than $4.
    My guess is GME goes quietly out of business within a year or two, so its actually a screaming short. GME is a brick and mortar shop that rents games.That can be done more efficiently online.
    I’d wait until the dust settles to go short, the price will fall.

    I can only guess why the hedge funders were bailed out here (ahem Janet Yellen and corruption in the new Administration), because hedge funds do this type of thing all the time. They all gang up and short sell the heck out of companies, driving their stock down and the company into the ground. Most of the time they merely hasten the demise of a dying company. So when a group of people get together and buy the heck out of their shorted company forcing them to buy at market to stop losses? That has to be stopped? Why? Hedge funders do it to others but suddenly Robinhood gets its arm twisted into caving over a legal event? Since when is it illegal for a stock buying club to get together and buy a stock in the hopes of triggering a short squeeze.

    steveg (43b7a5)

  49. The problem with this is that the uninformed follower’s just seeing the run up are the ones who are going to lose massively.

    I detest hedge fund’s people generally, they’re mostly giant d-bags, but fundamentally you need a counterpoint to the VC/Bulge Belt to balance a market.

    Robinhood is also a terrible company, not in concept, but I’ve met the founders when they were doing their Series A, aaannndd nope, not my cup of tea. The concept is fine, but they had/have a serious problem with having standard practices, an ability to provide an equitable trade close process, and on and on.

    Colonel Klink (Ret) (1367c0)

  50. Hedge funds spend a lot of money on donations, bundling, hosting per plate dinners and have access to powerful people that the Redditors don’t. Their bankers and those who own their credit lines do as well.
    I’d want to find out if a deal was hammered out where hedge funders re-shorted knowing Robinhood would announce their moratorium this AM

    steveg (43b7a5)

  51. The main problem with short-selling is the open-ended risk and the limited possibility of gain.

    Kevin M (ab1c11)

  52. #50 Avoro is headed by a good person. They are buy side biotech so they can help get good products to people and make money doing it.
    Royalty Pharm isn’t a hedge fund, but their funding often keeps short selling hedge funds at bay while drugs can be developed through the pipeline.
    Those are two white hats in the biotech space. (disclosure, I own some RPRX)

    Hedge funds that are heavy short sellers are like those videos of hyenas taking down the old limping wildebeast. Most of the time the animal is done sooner than later anyway, but its a brutal end that balances life out.
    Some hedge funders are like the animals that raid the little giraffe babies or ivory poachers who kill the rhino just for the horn and they are irredeemable d-bags. They could care less if the company could cure cancer tomorrow if left alone

    steveg (43b7a5)

  53. Shorting GME when it was at 400 was a no brainer. The problem was that the short was so over-subscribed that you couldn’t get in without some serious clout. Believe me, I tried desperately Tuesday, I was willing to put a significant chunk in, and I have a pretty good relationship with the banks.

    Most of the hedge funds had no choice but to get some bridge financing to cover and re-short, their probably only going to lose a lot as opposed to all the monies, and the redditors that actually follow the plan and hold will also lose a ton, if you didn’t pull the ripcord in the last 24 you’ve missed the big window.

    Colonel Klink (Ret) (1367c0)

  54. #52

    About the only risk to shorting GME at this price is the Redditors… and right now that too much for me.
    What price do you think it will be at next year this time? I predict back to single digits, maybe low teens

    steveg (43b7a5)

  55. In my experience, there’s a pretty low number of white hats on Wall Street, they’re focused on the deal, money. There are some VC’s that money isn’t the primary factor, every one I know already made a massive pile being the former giving them flexibility to be the latter.

    Colonel Klink (Ret) (1367c0)

  56. What price do you think it will be at next year this time?

    Fair market value…maybe ~$15, probably ~$10. $5 is too low, just from a branding value, but as it’s currently constructed, it isn’t a viable business.

    Colonel Klink (Ret) (1367c0)

  57. But they’re up!
    To infinity and beyond!!!!!
    Time123 (653992) — 1/28/2021 @ 12:27 pm

    Toyota is the largest automaker in the world right now – sold more cars than VW last year to take the title.

    And yet, Tesla, who sells a minuscule fraction of the cars Toyota does, has a much bigger market cap.

    Hoi Polloi (139bf6)

  58. steveg (43b7a5) — 1/28/2021 @ 2:17 pm

    I’d want to find out if a deal was hammered out where hedge funders re-shorted knowing Robinhood would announce their moratorium this AM

    This is being claimed. I’d like to find out if that’s true. It’d also be interesting to see if this goes beyond Robinhood.

    For everyone doing a deep dive stock analysis, a much simpler way to see it; a bunch of kids that grew up in the 2000’s and saw normal people get screwed and wall street get bailed out were all in a forum, someone jumped in and explained how $40, $80, or $300 bucks could buy them a ticket to see a billon $ hedge fund go boom.

    frosty (f27e97)

  59. This is being claimed. I’d like to find out if that’s true. It’d also be interesting to see if this goes beyond Robinhood.

    Several exchanges, especially ones that focus on online trading, did this too. It was not just Robinhood.

    Hoi Polloi (139bf6)

  60. After hours trading has it going nuts again. Good show.

    NJRob (eb56c3)

  61. These redditors are not going idly into the night. Good for them.

    Hoi Polloi (139bf6)

  62. https://www.cnbc.com/2021/01/28/robinhood-ceo-says-it-limited-buying-in-gamestop-to-protect-the-firm-and-protect-our-customers.html

    GameStop shares closed down 44% on Thursday after Robinhood restricted trading and then jumped more than 60% in after hours activity following the decision to ease the restrictions.

    Sammy Finkelman (7bb55f)

  63. A short, but quite relevant video.

    All of this is of a piece with the January 6th events. These people are the same type who freaked out and ran because a bunch of Trump supporters jumped the rope line at the Capitol and roamed deserted Congressional offices. This wasn’t kabuki, they genuinely feared the red hat invasion. It’s preposterous, isn’t it? But you forget this: fear is often a mask for guilt. They fear the mob because they are conscious of their thoughts and deeds. “The wicked flee when no man pursueth” is a piece of wisdom about 2700 years old, and it applies here, even or especially to those who wield this sort of power.

    This Gamestop business is worse than a polite mob because this is a symbolic assault on their source of power, their control of giant economic instruments. This new ingredient has been stirred into a boiling cauldron of paranoia, fear, loathing, and consciousness of guilt. These people live in fear because they know what they truly are, which is what makes them lash out in rage and go overboard when more innocent heads would step back and attempt to understand what is happening fully before reacting.

    Their own guilt is in control of their minds. That is why when things like this happen they panic and do things that are not really in their own self-interest, like banning conspiracy nuts from YouTube or shutting down the discord of a bunch of Reddit traders claiming it is because of “white supremacism”.

    AMC jillionaire (732dce)

  64. James Bonet, not a crisis actor, not an Antifa in MAGA clothing.

    ARRESTED: James Bonet, 29, from Glens Falls NY promoted conspiracy theories as a shift manager in Saratoga Springs & smoked marijuana in the Capitol: “We made it in the building b*tches! We’re taking it back! We are taking it back!”

    More from the Times Union:

    The complaint said Bonet works as a shift manager of an unidentified business in Saratoga Springs. It said Bonet “openly talks about government conspiracy theories at work” and attempted to convince co-workers that former President Donald J. Trump’s re-election was “stolen.”

    Co-workers tipped off the FBI after they saw Bonet share a photo of himself smoking in the Capitol on Jan. 6. That day, supporters of Trump stormed the Capitol during a joint session of Congress as lawmakers were certifying the results of President Joseph Biden’s November election victory.

    The complaint said FBI, using license plate reading technology, matched Bonet’s vehicle to one traveling south through Baltimore on Interstate 95 late on Jan. 5. On Jan. 7, the same vehicle moved north on Interstate 95 from Baltimore through Albany County.

    Paul Montagu (77c694)

  65. My nephew made 30K. We used to think he lacked initiative.

    JRH (52aed3)

  66. no worries here

    Yellen, a former Federal Reserve chairman, was paid $810,000 by hedge fund Citadel for three events in 2019 and 2020, according to disclosure forms.

    Or here

    Yellen, whose agency is a powerful financial regulator, made $7 million from banks and Wall Street firms in 2019 and 2020 according to her financial disclosure forms.

    Or

    The firm reportedly infused $2 billion into Melvin Capital Management, a hedge fund hammered by losses in the GameStop struggle waged by smaller investors.

    and

    The secret to Robinhood’s success (and profitability) is simple: payment for order flow. To ensure trades are commission free, trades are sold to “market makers” or large firms such as Citadel Securities—Robinhood’s largest customer, which tried to bail out Melvin Capital after its Gamestop shorts cost it billions.

    Now, I know what you’re thinking, it’s the customers fault if they know they’re doing business like this, except

    In December, Robinhood was fined $65 million by the Securities and Exchange Commission for “misleading statements and omissions in customer communications” about its revenue, but specifically around its payment of order flow process.

    But anywho, anyone else think we’re going to find out tomorrow these Reddit guys also coordinated the capital riot and they’re being rounded up by the FBI?

    frosty (f27e97)

  67. Hoi Polloi (139bf6) — 1/28/2021 @ 3:59 pm

    I can verify that. I received an alert in my ETrade account yesterday morning that the margin requirement for a stock I hold was raised from 60% to 75%. It was of no matter to me since although I have a margin account, I never use borrowed funds to purchase shares.

    Also, many here have not touched upon the fact that a lot of this activity has been done not by purchasing shares or borrowing and selling shares short. It is being done with put and call options. One of the hedge funds which was bailed out by the billionaire owners of 2 other hedge funds had his short positions in the form of put options which he had sold, and the underlying shares of which he did not own, i.e. a legal form of naked shorting.

    The WSB crowd was buying out-of-the-money calls with short expiration dates, then buying the underlying shares to push up the price of the shares so the the call options would go in the money. The activity fed on itself.

    JoeH (f94276)

  68. But anywho, anyone else think we’re going to find out tomorrow these Reddit guys also coordinated the capital riot and they’re being rounded up by the FBI?

    If Enrique Tarrio snitches them out.

    nk (1d9030)

  69. Time123 (653992) — 1/28/2021 @ 1:39 pm

    If you tell me there’s trend of ppl attacking WSB for being white supremacist’s and terrorists I’ll believe you. But I haven’t seen that in the coverage I’ve been reading.

    The Wall Street Journal ran a story earlier today titled “WallStreetBets Founder Reckons With Legacy Amid Stock-Market Frenzy”. The founder, Jaime Rogozinski, is hitting the media today, so although the WSJ article is probably behind a paywall, you can read what he is saying elsewhere. Here is a quote from it:

    Then there was the hate speech. Last year, Mr. Rogozinski decided to do some housekeeping and scrub some of the more distasteful content being shared in the community. In an off-Reddit chat room associated with WallStreetBets, he found language rife with obscenity, racism and antigay views that moderators let stand.

    “There were a handful of mods who were straight up white supremacists,” he said. As a Jewish man married to a Mexican woman, he found it impossible to stomach.

    “I have really thick skin and people can say whatever they want to me, but at some point there’s a moral standpoint—like with my kids, I don’t want them to think, ‘Well, they can say whatever they want about you,’” he said.

    Mr. Rogozinski wound up deleting the private chat room hosted on Discord where the offensive messages were exchanged. He also removed some of the moderators. The backlash was swift: Enough users chafed at his actions—along with his promoting a book based on WallStreetBets, as well as an esports-style trading competition under the WallStreetBets name—that he was booted out by other moderators. He hasn’t moderated the community since April.

    JoeH (f94276)

  70. JoeH (f94276) — 1/28/2021 @ 9:09 pm

    Wall Street Journal ran a story earlier today … Then there was the hate speech. Last year … He hasn’t moderated the community since April.

    I will gladly tell you a story today about a thing that may or may not have happened almost a year ago.

    he was booted out by other moderators

    sort of but maybe there’s more to it

    frosty (f27e97)

  71. frosty (f27e97) — 1/28/2021 @ 9:49 pm

    Thanks for pointing out the other side of the story.

    JoeH (f94276)

  72. Trading in game stop will resume tomorrow after buying stock was halted to drive the price down so hedge fund short positions could be covered. Now less then 10% is short. This is why AOC will be president in 2024. Hedge funds own both party establishments like janet yellen.

    asset (37cbd8)

  73. JoeH & Frosty,

    1. When i told frosty I would believe his assertion I meant it. He’s always been honest and If he says he saw that theme I believe him. Look at the comment today it kind of reads like a dismissal. It wasn’t intended to be

    2. The article you provided is a great example of his point. WSJ is a right of center mainstream newspaper, even if they did leave part of the story out.

    3. Your other comments were informative.

    Time123 (653992)

  74. Frosty, I actually read the Clizza piece. It seems to be saying that both Trump and WSB tapped in a feeling that average people are as good if not better then the elites, resentment at the elites belief otherwise, and a desire to demonstrate the elites lack of superiority.

    It seems like a reasonable point, made in the typical annoying way he’s made every point for the last 4 years.

    It also seems so obvious I don’t understand why CNN is paying him to do analysis. He brought no new information and his ‘insight’ isn’t.

    This is him at his best, annoyingly stating obvious things.

    Time123 (f5cf77)

  75. Time123 (f5cf77) — 1/29/2021 @ 5:50 am

    It also seems so obvious I don’t understand why CNN is paying him to do analysis. He brought no new information and his ‘insight’ isn’t.

    It’s part of how the narrative is shaped. In one of the comments on wsb someone posted ‘f### you I won’t do what you tell me’. That seems trivial and it seems trivial to point out the source of that sentiment has actually flipped to the other side. But that sentiment is real, it’s not some white nationalist movement, and there is a very real effort being made to keep it in check.

    I know normal everyday salt of the earth people who I’ve spoken to about the GameStop deal. I try to explain it in a neutral objective way and not far into the story they’ll say they thought what’s going on is illegal. I’ve never made it past the part about the market makers only allowing sells before that comes up. What do you think happens when those same people see the retail traders painted as white nationalists? I usually leave it out but I was watching a discussion on fox with a member of casa da frosty and I was asked why one of the panelists kept referring to people who took billions from a hedge fund as amateurs.

    It’s not Trumpism to notice how the game is being played and one of the things I love about Americans is ‘f you I won’t do what you tell me’ could be an unofficial motto.

    frosty (f27e97)

  76. Frosty, AFAIK the WSB crew are amateurs. Amateur doesn’t mean stupid or bad, it just means you don’t do it for a living, and often aren’t as good at it as a professional. But the CNN piece didn’t say anything about racism or white nationalism. It just said that both the GME play on WSB and Trump appealed to an anti-elite sentiment.

    I’m saying that it’s stupidly obvious that both Trump and WSB appealed to anti-elitism and that an analysis that just makes that point is trivial.

    Time123 (653992)

  77. Trump appealed to an anti-elite sentiment.

    “Anti-elitism.” That’s one way to view it, I suppose. I prefer the view that if you turn over a rock you’ll find all sorts of vermin, not only Trump.

    nk (1d9030)

  78. Jelani Cobb:

    My objective this Black History Month is to procure a space laser for my people.

    Kevin Farzad:

    I know this GameStop stuff is funny, but you have to remember this is hurting real people who own multiple boats

    Paul Montagu (77c694)

  79. Another Non-amateur on WSB.

    WASHINGTON (Reuters) – A YouTube streamer who helped drive a surge in the shares of GameStop Corp is a 34-year-old financial advisor from Massachusetts and until recently worked for insurance giant MassMutual, public records and social media posts show.

    Time123 (f5cf77)

  80. @28

    There’s a financial/stock construct where you can “borrow” x-number of stocks from someone for usually a small fee, along with the promise that you’d return the same number of stocks back by a specific date.

    There is no obligation to return shorted stock by a specified date. Short stock is being confused with selling a call option contract which does come with obligations known as the expiration date and strike price.

    Short Selling: How long does a short seller have before closing
    “In a short sale, brokerage firms lend shares out of their inventory, out of their clients’ margin accounts, or they borrow them from another brokerage firm. If a firm lends out shares from one of its clients’ margin accounts and that client, in turn, decides to sell their position, the brokerage firm will be required to replace the shares lent out from that client’s account with other shares from their inventory, another clients’ margin account, or from another brokerage firm. This situation does not impact the short seller.

    Forced Closings
    However, there are some cases in which the lender will force the position to be closed. This is usually done when the position is moving in the opposite direction of the short and creating heavy losses, threatening the likelihood of the shares being returned in the future. In this situation, either a request will be made to return the shares, or the brokerage firm will complete the closing of the transaction for the investor. The terms of margin account contracts allow brokerage firms the freedom to do this.

    Short covering can also occur involuntarily when a stock with very high short interest is subjected to a “buy-in”. This term refers to the closing of a short position by a broker-dealer when the stock is extremely difficult to borrow and lenders are demanding it back. Often times, this occurs in stocks that are less liquid with fewer shareholders.

    While the lender of a short sale transaction always has the power to force the return of the shares, this power is usually not exercised. An investor can maintain a short position for as long as they are able to pay the required interest and maintain the margin requirements, and for as long as the broker lending the shares allows for them to be borrowed.

    Purple Haze (34bae0)

  81. Time123 (653992) — 1/29/2021 @ 8:24 am

    Frosty, AFAIK the WSB crew are amateurs.

    Two things, (a) this wasn’t the tone of the person saying it and that’s part of the point. The person using that phrase was also trying to establish that these people are bad because they are destabilizing the system. It was clearly meant to be derogatory but to allow just this sort of response if challenged later. And (b) you don’t know what these “retail” traders do for a living and it’s an open question whether they are as good as the “professionals”. Ask yourself why you think you know anything about the retail traders. I think you’ll find that those assumptions have been shaped.

    But the CNN piece didn’t say anything about racism or white nationalism.

    It doesn’t have to precisely because of people like Clizza, i.e. your earlier question about why he’s being paid. All you need to do now is link it to any number of catchphrases. You can see that going on @78.

    This is also why earlier in the thread this point was made and you mentioned you hadn’t seen it yet. The effect here is similar to racists dog whistles. Something can be said and the average black person will hear something different from the average white person. And the same result happens. People who didn’t “hear” the whistle dismiss the entire idea that the issue is being framed.

    frosty (f27e97)

  82. aul Montagu (77c694) — 1/29/2021 @ 8:51 am

    can … barely … type. laughing so hard it hurts.

    Occurred to me that I should probably check George Clinton’s garage before I run out and start pricing new ones.

    That will just lead to an ethnic space laser race.

    I called it for Muslims yesterday and we are borrowing it today after Friday prayers. We are returning it to the Jews after sunset on Saturday. After that you all decide amongst yourselves.

    frosty (f27e97)

  83. Ask yourself why you think you know anything about the retail traders.

    Because I use Reddit and read WSB.

    Time123 (f5cf77)

  84. Time123 (f5cf77) — 1/29/2021 @ 9:45 am

    Because I use Reddit and read WSB.

    The current estimate is that these amateurs have cost the professionals ~$70b across multiple symbols. It probably doesn’t matter what you call them.

    frosty (f27e97)

  85. Time123 (f5cf77) — 1/29/2021 @ 9:45 am

    Because I use Reddit and read WSB.

    The current estimate is that these amateurs have cost the professionals ~$70b across multiple symbols. It probably doesn’t matter what you call them.

    frosty (f27e97) — 1/29/2021 @ 9:57 am

    If they were indeed amateurs.

    Time123 (653992)

  86. asset (37cbd8) — 1/29/2021 @ 12:17 am

    Now less then 10% is short.

    I’d want to know the source for that. There’s a history of funds misreporting shorts because the fine is less than the effect of accurately reporting. There is reporting today that other firms are taking short positions because market makers are trying to force the price down. At this point, the market manipulation is obvious and other firms want to cash in.

    It’s also being reported that Robinhood “opened” trading but only for people with less than a few shares. So, instead of protecting the retail trader like they are claiming on CNN they are encouraging new trades on the high because they need the cash.

    frosty (f27e97)

  87. At this point, the market manipulation is obvious and other firms want to cash in.

    This has been market manipulation from the bell. WSB noticed a huge number of shorts on a small cap stock and tried to corner the market to drive the price up. That’s not a value play, that’s a market play. No one I’ve seen has argued that Gamestop is actually a good company that’s worth 16 billion. This is WSB manipulating the market for fun, profit and spite against shorts. I have no problem with that and think it’s hilarious, but don’t pretend that they’re some sort of noble force fighting for a good company. Keep in mind, GME sells physical copies of digital media in strip malls. Their main market is people with old game systems that can’t download the new content. Game systems are moving to digital delivery and the demand for what GameStop sells is diminishing.

    If I had an options account(and more money) some of the July 16 puts look pretty attractive. The average price of GME over the last 5 years is about 25$. For 60$ you can sell a share at 100$ in July. That’s not too bad. If you a little more aggressive you can do it in Feb for 33$

    Time123 (653992)

  88. Time123 (653992) — 1/29/2021 @ 10:42 am

    This is WSB manipulating the market for fun, profit and spite against shorts.

    That doesn’t make it market manipulation in the sense the term is normally used. Using your definition all technical trading discussions, or rather, any non-fundamentals-based trading conversations could be market manipulation.

    You’re lumping in WSB with things that are illegal. I’m not really sure why you specifically are doing that either. I can understand that from one of the usuals that need to frame everything as Trump but most of that crowd hasn’t shown up on this thread.

    frosty (f27e97)

  89. Time123 (653992) — 1/29/2021 @ 10:42 am

    This is WSB manipulating the market for fun, profit and spite against shorts.

    That doesn’t make it market manipulation in the sense the term is normally used. Using your definition all technical trading discussions, or rather, any non-fundamentals-based trading conversations could be market manipulation.

    You’re lumping in WSB with things that are illegal. I’m not really sure why you specifically are doing that either. I can understand that from one of the usuals that need to frame everything as Trump but most of that crowd hasn’t shown up on this thread.

    frosty (f27e97) — 1/29/2021 @ 10:58 am

    1. I don’t think Trump or Biden or party politics of any sort has much bearing here.
    2. I was lose with my language to play off of what you wrote, I didn’t mean that they were engaged in something illegal. Just that this isn’t Captain America sticking up for the little guy. GME is a dogfood company. The shorts weren’t trying to destroy something profitable. They saw it was dog food.

    Time123 (f5cf77)

  90. Dog food companies still employ people. The vultures were trying to eat a still living creature. Gamestop has moved most of their operations online. There was talk of them being bought out by Microsoft at the end of last year.

    For Klink and others, Circuit City exists in an online form. It’s now the equivalent of Tiger Direct or Newegg.

    NJRob (eb56c3)

  91. frosty (f27e97) — 1/29/2021 @ 10:58 am

    That doesn’t make it market manipulation in the sense the term is normally used. Using your definition all technical trading discussions, or rather, any non-fundamentals-based trading conversations could be market manipulation.

    You’re lumping in WSB with things that are illegal. I’m not really sure why you specifically are doing that either. I can understand that from one of the usuals that need to frame everything as Trump but most of that crowd hasn’t shown up on this thread.

    Market manipulation could very well be what it was.

    Why Gamestop stopped trading: 5 questions answered
    “According to the laws that govern the stock market, market manipulation happens when someone tries to create excitement and activity in a particular stock specifically to entice people to buy that stock and drive up the price.

    If those same initial investors then sell the stock at the heightened price, regulators get suspicious. They become concerned that said investors were just trying to create a frenzy in the market to artificially inflate the value of the stock so they can sell it at its new high price. “

    Purple Haze (34bae0)

  92. This has probably been mentioned, the Redditors have lost the element of surprise.
    Every short side hedge fund has put a couple interns on monitoring the WSB and Shortsqueeze reddits.
    There are no doubt some professionals on reddit trying to whip up enthusiasm for stocks they’ve got positions in to be short squeezed.
    You could go down the reddit lists and create a highly speculative basket of long trades, 1000 shares each for example. Your own version of an ETF. The stocks on their lists are already in the dumper so you won’t lose too much short term and only need one to hit the redditors funny bone.

    I am watching the boards myself so I know when interest in GME wanes and I may short it then if I can get shares.
    Maybe next week it tumbles and stays down and they move one..

    steveg (43b7a5)

  93. Steve, why not use options to short it?

    Time123 (f5cf77)

  94. …and they move on

    steveg (43b7a5)

  95. Purple Haze (34bae0) — 1/29/2021 @ 11:19 am

    Market manipulation could very well be what it was.

    The article quoted links to 15 U.S. Code § 78i and alleges a pump and dump scheme. I’d be interested in whether the SEC or anyone else could prove that. What exactly within 15 USC § 78i do you think applies to WSB?

    I think most of the actual regulations related to market manipulation focus on brokers, licensed traders, and market makers, i.e. there’s a difference between 15 USC § 78i and 15 USC § 77q.

    frosty (f27e97)

  96. Thanks for confirming exactly what I said. Circuit City died, dead. The brand name only, was bought by Tiger Direct, who then sold it off to its current website operator and brand owner.

    In exactly the situation where I said the branding was worth $5 a share.

    Colonel Klink (Ret) (1367c0)

  97. Pump and dump schemes have been prosecuted, but that was usually in situations where the same people were doing it time and again, and the prosecutors obtained a warrant, and chronicled an example of that from beginning to end.

    In this case the stock was touted last year, maybe logically. There was a potential buyer, who, up to this point, has acquired 13% of the shares, and he had a proposal to sell games over the Internet, so the stock could be worth something.

    It moved on to other things this month.

    Sammy Finkelman (7bb55f)

  98. One effect of this has been to drive down the cost of other stocks held by the hedge funds that shorted GME (and a few other stocks)

    They had to sell to raise cash. Then more people sold.

    Sammy Finkelman (7bb55f)

  99. 94. Time123 (f5cf77) — 1/29/2021 @ 11:49 am

    Steve, why not use options to short it?

    The edge funds wanted to maximize their profit, so they sold naked shorts (short sales not backed up by an option to buy at a modestly higher price.)

    Sammy Finkelman (7bb55f)

  100. With a traditional short option, you (the market organization) have to align both a bought/sold share with a future bought/sold share, so you can only ever have a 1/1 ratio. With a naked short, you are aligning 1 share today at an unlimited price in the future with cash. The bet they’re making is the lower limit, but with no actual hedge on the upper, so they’re acting less like a fund that hedges its investments, to a fund that is betting against the market, i.e. no hedge.

    One has much less risk/reward, which is why they were doing it that way, there’s usually little risk in a company that is as in as bad a position as GME. One of the reasons this worked so well is that GME is actually a small company, performing terribly, with little positive prospects, so the only potential for them, besides bankruptcy, was a buyer that could break it up and sell the parts with value raising the share price to $8-$12. So the short position was completely oversubscribed, opening up the option for a short squeeze. Redditors jumping in forced the price on available shares, not those tied in a short position, so free (available) shares are actually rare in this situation. Hence, basic supply and demand drove the price. There was little demand for a tiny supply (outside of shorts) so it balanced at its value, $3-$5. Then the redditors created artificial demand, with the tiny supply, price goes plaid.

    This is always a problem with an oversubscribed short position, usually it doesn’t have the exposure because this is almost always on a terrible business, like this one is, and most investment companies act in a very conservative (little c) manner. At the end of the day, this doesn’t do diddly for GME, they’re actually more likely to die in bankruptcy now. They’re not getting a white knight to show up and bail them out with a $12 offer any more, and they don’t have a lot of equity to sell into the market to take advantage of this one time crazy thing.

    Although, if I’m an exec with a bunch of stock (they’d lowered their exec pay and replaced it with stock over the last few years because they didn’t have the cash) that was basically worthless, I’m shovelling it out the door as fast as possible. If I’m the acting CIO for instance, and my package went from $375k OTE and 50k grants to $275k and 250k grants, whatever is vesting I’m dumping everything this week, instead of just letting it trickle out as it’s been above it’s target price for the last few months i.e. >$20. It’s a once in a lifetime opportunity to create F/U wealth, which is something around $20M if your 50, but YMMV.

    Colonel Klink (Ret) (1367c0)


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