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GameStop Is Rage Against the Financial Machine

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Re: GameStop Is Rage Against the Financial Machine

#731

Post by garmaine »

dcolkitt wrote: post #711
noncoml wrote: post #654

There 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…

> 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…

But once borrowed, the shares can’t be borrowed a second time. So if 100 shares are borrowed and sold short, they’re back on the market, yes. But the total number of shares available is 100, not 200.

Re: GameStop Is Rage Against the Financial Machine

#732

Post by 0xB31B1B »

noncoml wrote: post #654

There 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…

To add something to this:

The redditor doesn't need to pay 1 dollar per cow (the market price as sold by fund), the redditor pays .01 cents for an option contract to buy the cow for 2 dollars at the end of the month. The options contract requires the bank selling the contract to buy a cow today. In effect, the redditor is able to force the bank to buy 100 cows by spending only 1 cent.

Re: GameStop Is Rage Against the Financial Machine

#733

Post by garmaine »

gpm wrote: post #682
noncoml wrote: post #654

There 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…

> Hedge-fund cries foul. Doesn't like being beaten in it's own game. Have any of the hedge funds actually cried foul?

Have you seen CNBC this week?

Re: GameStop Is Rage Against the Financial Machine

#734

Post by tengbretson »

wolverine876 wrote: post #666
noncoml wrote: post #654

There 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…

Can you provide some factual basis for these claims? We can type out claims without foundation endlessly; the Internet demonstrates that well; what we need is real knowledge and facts.

You might have missed it, but the cows are the facts, Jack.

Re: GameStop Is Rage Against the Financial Machine

#735

Post by dcolkitt »

garmaine wrote: post #731
dcolkitt wrote: post #711

Earlier 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…

But once borrowed, the shares can’t be borrowed a second time. So if 100 shares are borrowed and sold short, they’re back on the market, yes. But the total number of shares available is 100, not 200.

That's not true. The same share can be borrowed an arbitrary amount of times. Palm reached short interest of nearly 150% during its heyday. By definition that would require float to be borrowed a second time.

https://money.stackexchange.com/questions/126685/can-a-singl...

Re: GameStop Is Rage Against the Financial Machine

#736

Post by xxpor »

chrisseaton wrote: post #641
fragmede wrote: post #624

Earlier quoted context omitted.

They're both forms of retirements savings, but a 401k is a totally different form of retirements savings from a pension.

I don't know why people get confused about this! It's a fund to give you income in retirement. That's a pension! You can have both defined-benefit and defined-contribution pensions. Not all pensions are defined-benefit: 401(k) is a defined-contribution pension. Wikipedia say it's a pension: > a 401(k) plan is an employer-sponsored defined-contribution pension https://en.wikipedia.org/wiki/401(k) The US Code also says…

You're using the legal term to be pedantic. However, it makes nearly 0 sense in this case because with 401(k)s, you can usually only invest in the funds allowed by the plan, not individual stocks.

Re: GameStop Is Rage Against the Financial Machine

#737

Post by garmaine »

dcolkitt wrote: post #735
garmaine wrote: post #731

Earlier quoted context omitted.

But once borrowed, the shares can’t be borrowed a second time. So if 100 shares are borrowed and sold short, they’re back on the market, yes. But the total number of shares available is 100, not 200.

That's not true. The same share can be borrowed an arbitrary amount of times. Palm reached short interest of nearly 150% during its heyday. By definition that would require float to be borrowed a second time. https://money.stackexchange.com/questions/126685/can-a-singl...

Yes but what I’m saying is that the float doesn’t increase from 100 -> 200. There’s still only 100 shares on the market at any given time.

If Alice shorts 100 cows on Monday, and then Bob shorts 100 cows on Tuesday, and both are due at close of market on Friday, it’s gonna be a bloodbath.

Re: GameStop Is Rage Against the Financial Machine

#738

Post by thekyle »

cwkoss wrote: post #593
nerfhammer wrote: post #504

Earlier 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.

There are plenty of value ETFs for those who want stocks with low P/Es. Historically value stocks have even outperformed growth stocks.

Also, the long term average P/E ratio is 15. Stocks haven't really had P/Es less than 5 since the Great Depression.

Re: GameStop Is Rage Against the Financial Machine

#739

Post by kasey_junk »

voteflipper wrote: post #562
kasey_junk wrote: post #528

Earlier quoted context omitted.

Citadel invested in Melvin this week on the cheap. Citadel is the main internalizer for Robinhood. I don’t think it changes much about your post but the connection between HFT and Melvin is public and directly financially relevant.

Citadel != Citadel Securities

Yet they have the same headquarters, same CEO and same principal investor...

Re: GameStop Is Rage Against the Financial Machine

#740

Post by gspr »

erichocean wrote: post #667
cwkoss wrote: post #593

Earlier quoted context omitted.

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.

Siri, what is Amazon's P/E ratio?

Best ask Alexa.
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