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GameStop Is Rage Against the Financial Machine
721–730 of 1001 posts
Re: GameStop Is Rage Against the Financial Machine
#722How does this differ from other populist manipulation via social media? We've seen this technique used repeatedly in many domains. IMHO, it looks obviously the same in many ways. It's very effective and we should have anticipated that it would be used to move markets. I expect people on HN to recognize it. The question is, what will we do about it? It's tearing society apart and now it looks to damage our economy too…
> The question is, what will we do?
You stop worrying about the boogiemen on Reddit and penalize the dimwitted hedge funds who shorted more than 100% of GameStop's stock.
Re: GameStop Is Rage Against the Financial Machine
#723Earlier quoted context omitted.
> A Redditor notices this. She knows that in a month's time, the hedge-fund will have to buy 200 cows, and there are only 100 available. This is a common misconception, but fundamentally wrong. Every short sell has an equal but opposite buy. Therefore every share shorted creates a new synthetic long share. Alice owns 100 shares. Bob borrows 100 shares from Alice, then short sells them to Chuck. There are now 200 shar…
Naked short selling is illegal
That is not naked short selling. Naked short selling is when you sell a stock short without first borrowing it.
The parent to your comment describes someone buying a stock from someone who sold it short, and turning around and it selling it short themselves. This happens organically and is not "naked."
Beware the incredible amount of false and misleading information about this situation online. Things catch on in the zeitgeist and don't really get fact checked.
Re: GameStop Is Rage Against the Financial Machine
#724Re: GameStop Is Rage Against the Financial Machine
#725Earlier quoted context omitted.
I agree. The anger seems like an ancillary phenomenon. People seem to be buying because they think it's a sure thing that the asset price will increase. Maybe anger at shorters helps justify exploiting their error, but it's not the primary motive.
Yeah, I think the anger is a device for keeping each other from selling, but has nothing to do with how this situation arose.
HODLers also use emotion and ideology to keep from selling.
It’s decentralized motivation to coordinate!! :)
Someone would do well to inspire a cult following and a viral one at that... then it will attract people who just believe in the To the Moon rocket emojis
Re: GameStop Is Rage Against the Financial Machine
#726Earlier quoted context omitted.
You can expect whatever you want. What actually happens is something else. On any given trade you can end up with something worth more or less than what you started with. Even if you sell and cash out, you may end up "losing" because things went on to perform better than you expected and the person/entity on the other end of the trade knew something you didn't. The market owes you nothing.
You're loudly and carefully missing the point. The expectation is that investment is done to derive ownership of something with actual value. This is a public pump and dump scheme masquerading as a righteous uprising. Nobody said the market owed anyone anything. Save the sophism. Idiots are getting bilked, those are the answer to your question, and they still exist even if you want to re-define around them. This is i…
You're missing the point completely. Short squeezes have nothing to do with pump and dumps
Re: GameStop Is Rage Against the Financial Machine
#727There are 100 cows. A hedge-fund believes that the milk consumption will go to zero, so they borrow the 100 cows for one month and sell them for $1 each. Then they borrow them again, and sell them once more for 90c. Certain that they will worth $0 at the end of the month A Redditor notices this. She knows that in a month's time, the hedge-fund will have to buy 200 cows, and there are only 100 available. Her plan is s…
> borrow the 100 cows for one month and sell them for $1 each. Who on earth is buying those cow for $1, if it is pretty obvious they are worth $0?!?! By cows i mean GME, before the meme.
People who would like to rent out cows for other people to sell, and then pay back.
Re: GameStop Is Rage Against the Financial Machine
#728There are 100 cows. A hedge-fund believes that the milk consumption will go to zero, so they borrow the 100 cows for one month and sell them for $1 each. Then they borrow them again, and sell them once more for 90c. Certain that they will worth $0 at the end of the month A Redditor notices this. She knows that in a month's time, the hedge-fund will have to buy 200 cows, and there are only 100 available. Her plan is s…
> Then they borrow them again, and sell them once more for 90c IANAL but I believe this is actually illegal and if so the hedge funds are in the red for doing this
No it's not illegal. Reasonable people can disagree about whether it should be illegal, but it would be nontrivial to enforce and it's meaningfully distinct from what's termed "naked short selling."
Re: GameStop Is Rage Against the Financial Machine
#729Earlier quoted context omitted.
but a stock is partial ownership of a real business, which has revenue and owns other assets
That is true for businesses with "reasonable" P/E multiples of ~5 or less. When a business has a P/E multiple of >100+, a significant portion of the investment is speculative rather than a rational projection assets and future earnings. It's really hard to make a rational value fundamentals argument for why anyone is willing to invest in TSLA, with its current price putting its P/E of 1700.
P/E of 5 is really small. Historic P/E ratios are multiples of that.
Re: GameStop Is Rage Against the Financial Machine
#730How does this differ from other populist manipulation via social media? We've seen this technique used repeatedly in many domains. IMHO, it looks obviously the same in many ways. It's very effective and we should have anticipated that it would be used to move markets. I expect people on HN to recognize it. The question is, what will we do about it? It's tearing society apart and now it looks to damage our economy too…
> How does this differ than other populist manipulation via social media? We've seen this technique used repeatedly in many domains. IMHO, it looks obviously the same in many ways. Are you sure you are up to date with what happened? My understanding, and in layman's terms, is that a hedge fund shorted more GME stocks than they are available. Redditors noticed and correctly thought that if they buy all the stocks avai…
> Make shorting illegal.
Short sellers profit from exposing fraud (like those that researched Enron and Wirecard). Making the only market participants with financial incentive to put downward pressure on stock prices illegal seems like a bad idea.