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GameStop Is Rage Against the Financial Machine

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Re: GameStop Is Rage Against the Financial Machine

#791

Post by phyalow »

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…

You are not wrong, but you are also missing the part where risk management departments will forcibly unwind shorts of institutional investors, option gamma creating massive amounts of reflexivity and the Weaponized autism of /r/WSB and the viral network effects of its memes encouraging even more reflexivity.

I have no doubt this will end in tears for investors on both sides.

GME's management would be wise to issue 1-200% of new equity at a substantial discount to present market value to short holders (this lets them cover at a lower loss) and sit on the cash to transform their businesses strategic outlook.

Re: GameStop Is Rage Against the Financial Machine

#792

Post by Infinitesimus »

AznHisoka wrote: post #427
wesammikhail wrote: post #391

Earlier quoted context omitted.

You´re right in the short term. But in the long term the hope is that things average out and true value emerges as a function of countless transactions over years and years. Markets are a value ascribing heuristic machine. There is nothing about them that can deterministically point to objective value. However, the idea is that over a longer period of time, an approximation of true value emerges though wisdom of the…

But what if retail investors start to make up a larger % of investors? Then the dominant philosophy is hype, popularity and trying to sell to a greater fool. This is already happening: retail investors are growing in number. Originally, when institutions were the major players, stock prices followed fundamentals because most ppl cared about the revenue, earnings and cash flow. But what happens when the demographics c…

How confident are you that they followed fundamentals in any original setting? "Fundamentals" is just a collection of metrics and patterns a certain class of investor believes in. Usually those with most money and thus, power.

I think you have a rosier view of what drives most of our markets than what happens in reality. Look at the dot com bubbles. Look at how HFT firms make money by exploiting the tiniest of pricing discrepancies and leveraging them heavily. Or perhaps "analyst reports" that can make or break a stock because one person believes something and we give them a megaphone. We switched focuse from present earnings to forward looking revenue. We have stock buybacks. We applied large multiples to financially unsustainable businesses because "maybe one day they can monetize these millions of users with Ads". etc. etc.

The GFC was a game of trying to sell to the greater fool and involved intentional manipulation at the highest levels. It seems the system has been has always had these holes and it was "ok" until regular folks began to identify and act on these opportunities.

We likely wouldn't be having this conversation if another large hedge fund was making the play retail investors are today. We'd read articles talking about the public battle of the billions.

Reminds me of anytime a govt entity creates & exploits a backdoor and is surprised when other actors use the same door for their own activities.

Re: GameStop Is Rage Against the Financial Machine

#793

Post by blihp »

missedthecue wrote: post #769
garmaine wrote: post #737

Earlier quoted context omitted.

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.

Shorts aren't "due". You can hold them as long as you pay the interest and have the margin requirement.

Not always true. I've had brokers force me to close short positions (esp in '08-'09) because 'no shares available' which forced me to buy at the market in order to close out the position. It had nothing to do with interest or margin.

(Granted, they were some pretty illiquid stocks so I suspect that the broker had managed to get into a naked short situation when they allowed the trade to execute before actually trying to go out and borrow them. Of course, their mistake was made my problem.)

Re: GameStop Is Rage Against the Financial Machine

#794

Post by objektif »

gregable wrote: post #789
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…

I'm curious, if this is the case, why doesn't the market realize this and short sell like crazy right now, given it's clear the price isn't sustainable. That would then generate more negative price pressure and generally keep the whole thing from happening in the first place, no?

Market can remain irrational longer than your wallet can remain solvent or something like that.

Re: GameStop Is Rage Against the Financial Machine

#795

Post by moneywoes »

vimy wrote: post #705
fragmede wrote: post #626

Earlier quoted context omitted.

The fundamentals of bitcoin are illegal drug deals and money laundering. We can argue over how much that's worth, given the volume of BTC, and difficulty of the necessary conversion back to currency that banks/landlords/cafes/etc will accept, but that's not zero.

I don’t think that’s accurate anymore. Bitcoin ten years ago was like the www in 1995. Now we have DeFi which runs on crypto. DeFi is to banks what e-commerce was to retail stores in 2000.

Can you elaborate on defi please

Re: GameStop Is Rage Against the Financial Machine

#796

Post by adolph »

SigmundA wrote: post #768
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…

What makes no sense to me as a layman is how can you sell something you don’t own legally? If I borrow your cow and sell it that’s illegal without consent, if you give me consent to sell the cow, there is still only one cow and ownership changes hands, there are not now two cows.

Apparently there is some consent and interest payment involved.

https://www.investopedia.com/ask/answers/how-does-one-make-m...

Re: GameStop Is Rage Against the Financial Machine

#797

Post by parsimo2010 »

majormajor wrote: post #681
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…

Isn't this more like "10000 people each buy a fraction of the 100 cows" and you need all 10,000 of them to coordinate extremely well to manage it? Would even getting 1 cow from someone breaking with the big group let you break the pressure if the person you initially borrowed the cows from isn't part of the group trying to squeeze you? Return them 1 cow first, then buy it back, then return it again as the second cow…

You don't even need them to coordinate extremely well. This isn't some sophisticated group with plans, this is a bunch of randos making jokes on the internet. If you have a large enough starting pool (like say a subreddit with 3 million followers), you've got a pretty big force even if it's just a small fraction of them buying a single stock for the lulz. And once the price starts moving up, even more will join in without you asking. If all of those people are using their play money then they aren't getting hurt at all.

But with that said, u/DeepFuckingValue started his YOLO over a year ago- he was super committed and it finally came around. How many other idiots did something similar and went bankrupt? How many will try it because they saw it happen this time?

Re: GameStop Is Rage Against the Financial Machine

#798

Post by objektif »

gpm wrote: post #712
grecy wrote: post #691

Earlier quoted context omitted.

Who do you think complained to the SEC and is having them investigate?

I mean... Do we know if anyone actually complain to the SEC? I know they put out a statement they are monitoring it, but it's rather hard to miss, especially when noticing weird market trends is literally your job, unless they've said something otherwise it seems likely they did that on their own initiative. Especially when congress members (i.e. your bosses) have been putting out various statements about it... If th…

I do not think pension funds and mutual funds short GME I mean hope not.

Re: GameStop Is Rage Against the Financial Machine

#799

Post by aaron_m04 »

shadowgovt wrote: post #131
mdoms wrote: post #111

Earlier quoted context omitted.

There's a pretty simple defense here. "I saw the posts on reddit and wanted to get in on the upward swing". Efficient markets at work. Unless you can tie real identities to the reddit posts there's not much to be done.

I would not assume that de-pseudonymizing Reddit accounts is impossible, especially if large amounts of money are on the line. Reddit complies with FBI requests to hand over account data.

Indeed. In many cases, you can get far just by looking at post and comment history. You can tell what town they live in and see screenshots of their texts and FB posts (albeit with names and faces blurred).

Re: GameStop Is Rage Against the Financial Machine

#800

Post by [deleted] »

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…

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