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GameStop Is Rage Against the Financial Machine

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Re: GameStop Is Rage Against the Financial Machine

#241

Post by voisin »

jdjfktkrnj wrote: post #156
voisin wrote: post #29

Why doesn’t GME issue some shares at these prices and pay off all its debt and add cash to the balance sheet?

Some say that would be illegal, since GME knows these prices are wrong, and thus they would be guilty of fleecing whomever buys them. But supposedly they could make the investors sign a waiver that they acknowledge this?

This is not accurate. There is no such thing as “prices are wrong”. The price is being set by arm’s length third parties transacting. Their motivations may be questionable but that doesn’t make the price “wrong”.

Re: GameStop Is Rage Against the Financial Machine

#242

Post by ISL »

dannyw wrote: post #84
ISL wrote: post #61

Earlier quoted context omitted.

I think I do understand them, from a value-investor's perspective. If I buy an option, I actually intend to exercise it or hold it until expiration, not hedge with it. If I bought a GameStop put today, for the pricing in my post above, it would be because I was willing to make a strong bet that GameStop's intrinsic value in November would remain below $60/share and that I was fairly sure the market would return to it…

What I mean is you cannot make directional predictions of a stock from option prices. The information just isn’t there. The same way you can’t use long dated futures. Because S&P 500 futures (during regular trading hours) will always be the current price, modified by the financing cost. There can never be a directional prediction, because all directional predictions get arbitraged away into the current price.

I've had more time to think about this now -- it would appear that directional prediction can be arbitraged away in a world where the future cannot be known. In general, however, through research, one can begin to divine a glimmer (or more) of the future direction of the underlying.

In that situation, someone with a reasonable guess at the future could absolutely murder uninformed arbitrageurs, right? It is my expectation that "correct" pricing of the options should fold in information about both the expected volatility and the direction of the underlying.

Re: GameStop Is Rage Against the Financial Machine

#243

Post by dheera »

blueblisters wrote: post #223
dheera wrote: post #172

Earlier quoted context omitted.

Really the only thing the hedge funds could do to "win more" in the long run is to stop shorting stocks en masse. The more they short sell, the more this can be pulled off again and again. Which is good IMO, I'd be happy in a market where short selling and negativity in general just isn't a thing. If you aren't optimistic about a company just stay out.

Short sellers are incentivized to uncover scams and overvalued equities, as a few other folks pointed out. There are firms like Muddy Water doing the hard work of finding companies swindling investors and using publicly available data to make a case against them. Without short selling, they lose the incentive to do that.

I'm fine with them not having that incentive.

Scams can be uncovered by CUSTOMERS and plenty of other people than short sellers, and I don't think overvalued equities is actually a problem. Many times overvalued equities leads to faster adoption of EVs and solar and better GPUs and other nice things, which are more important to my personal life than maintaining the sanctity of capitalism.

Re: GameStop Is Rage Against the Financial Machine

#244

Post by blueblisters »

A more boring conversation about this is how will it actually impact Gamestop? Could the new price levels become a self fulfilling prophecy, with Gamestop being able to raise enough capital to revamp the business?

"Irrational" retail investors have perhaps saved a company before - Tesla - by holding onto the stock even when every hedge fund was saying it's doomed.

Re: GameStop Is Rage Against the Financial Machine

#245

Post by amalter »

cwhiz wrote: post #215
amalter wrote: post #194

Earlier quoted context omitted.

Hard no! I want scams and shady schemes uncovered. What a disappointment that Herbalife wasn't brought down by the shorts. I'm struggling to even understand what a market with "no negativity" means. We want to evaluate firms with a critical eye. If they are mis-valued, that serves no one.

>I'm struggling to even understand what a market with "no negativity" means. Just imagine basically... every single other market. The price of goods at Walmart is not based on your bet on supply and demand. If there are more buyers than sellers, the price goes up. If there are more sellers than buyers, the price goes down. If a business wants to raise money by issuing new shares, supply and demand will dictate the pr…

I think you're arguing for a market with only direct investments and no secondary derivatives. If that was all the equity market was, we could be in the same zip code.

However, we live in this hyper-securitized world, where every part of the economic fabric has bets for and against, with insurance, leverage and information asymmetry baked in.

The only way to "discover" price is to provide instruments that provide "gravity" for both upward and downward price movements. The lack of supply on it's own is not enough, especially when malicious actors are pushing on the supply and demand levers.

Re: GameStop Is Rage Against the Financial Machine

#246

Post by gmadsen »

Blackstone4 wrote: post #214
gmadsen wrote: post #165

Earlier quoted context omitted.

value of a stock is what the market dictates is the value of the stock, not what an analyst wants the price to be. It is laughable to say that Hedges were using purely "fundamentals" for the past 10 years. Were people in the financial services worried about retail investors when Melvin was shorting GME into the ground at $5 a share? Intentional manipulation to quickly bankrupt a company. How about with the 2000s deri…

Price is what you pay in the market and value is what something is worth...clear difference. Some people with in a group who hold a view does not mean the entire group holds that view. In this game, I believe retail investors feel like they are winning now but ultimately many will lose money when the price comes down. In my view the price is not sustainable....

how much is a $20 USD bill worth to you? Its a penny or less of cotton.

obviously its not sustainable, we are entering a short squeeze. But capping at $4 a share shouldn't have been either, I think $60-$80 is a really reasonable assessment, it will spike, and rightly so, as the too greedy naked short sellers get screwed over and forced to cover their positions

Re: GameStop Is Rage Against the Financial Machine

#247

Post by cbozeman »

corey_moncure wrote: post #234
cbozeman wrote: post #136

Earlier quoted context omitted.

They're not useful. They're a means of wealth extraction disguised under whatever load of bullshit someone wants you to believe. I'll even prove it to you. Ask someone with skin in the Wall Street game to explain this stuff to you, not mathematically, but in layperson's terms, so simple that a young child could understand it. They either won't be able to do it, or they won't do it. You'll get one of two answers, "It'…

Tell your 5 year old you're going to give him 10 cookies, but he has a choice. Either he can have the 10 cookies right now, or he can pick up his room, and then he has the option of getting 10 cookies from you any time of the day or night during the next month, whenever he wants, no questions asked, no matter how busy daddy is. Or he can sell the option to any one of his friends or family, to guarantee they get 10 co…

LOL, now take your analogy all the way.

"If you don't clean your room in one week, Daddy is going to take away all your cookies, plus you'll owe Daddy 10 cookies."

Re: GameStop Is Rage Against the Financial Machine

#248

Post by diarrhea »

as1mov wrote: post #183
diarrhea wrote: post #105

Earlier quoted context omitted.

I'm not sure there's much of an overlap. Incels are a rather small group, and I think most wallstreetbets users are surprisingly... normal. You can't bet on stocks if you're poor. So you'll have lots of mid/late 20s educated guys with decent incomes. This to me really feels like a classic "for the lulz" (and some personal profit), avalanche-style event.

This applies even to the internet "cesspools" really. Most of my friends were/are regular posters on reddit/4chan, and they are surprisingly normal. All of them have decent jobs that pay well, some are married. If you met them in real life, you couldn't really tell there's something wrong with them. They seem a far cry from what internet tells you a 4chan user looks like. Funny enough, none of them (including me) are…

> you couldn't really tell there's something wrong with them.

Okay, but is there? The way you're phrasing it sounds that merely posting to 4chan makes them abnormal.

The other way around is true: there's an unusually high share of abnormal people on 4chan. Just posting there shouldn't be a sign of abnormality. It's just a Mongolian basket weaving forum after all.

Re: GameStop Is Rage Against the Financial Machine

#249

Post by mLuby »

_jal wrote: post #216
koheripbal wrote: post #175

Earlier quoted context omitted.

> You know why front running isn't illegal? Because it keeps happening and companies keep getting fined for it. This is not a logical sentence. They are obviously getting fined because it's illegal. The traders involved are also terminated, fyi. All banks are required to submit automated reports on Front Running detection algorithms daily to the regulators. Every trade is evaluated by the compliance systems. If you t…

> If you think the fines are not big enough With crimes like these, it is nearly definitional. It is trivial to put a price on the value of an action like this; if the fine for the action is less than it grosses, it is just a tax.

> if the fine for the action is less than it grosses, it is just a tax.

And not just the actions regulators catch, but the others too.

    do { new Crimes() } while ( fine(Crimes.detected)

Re: GameStop Is Rage Against the Financial Machine

#250

Post by chrchang523 »

fairity wrote: post #240
chrchang523 wrote: post #186

Earlier quoted context omitted.

I've been keeping an eye on the far-out-dated put options, and I haven't seen anything that's more compelling than simply leaving money parked in an index fund. The expectation that GME will drop back down to Earth over that timeframe remains priced in. The main takeaway from this incident is that margin-call-constrained short selling is even more dangerous than previously understood.

>The expectation that GME will drop back down to Earth over that timeframe remains priced in. Yea, it does seem largely priced in, but perhaps not completely. If share price is $60 in 1 year, the ROI on that contract would be 9% -- so slightly better than what you'd reasonably expect an index fund to return. A $60 share price is higher than GME's all-time high prior this fiasco.

The inferior tax treatment of put options relative to index funds also matters. Not tempted.
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