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GameStop Is Rage Against the Financial Machine

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Re: GameStop Is Rage Against the Financial Machine

#841

Post by ImprovedSilence »

gpm wrote: post #804
gpm wrote: post #682

Earlier quoted context omitted.

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

Since no one replied with anything substantive yet, I looked around a bit to try and answer my own question. Nothing I've found from a hedge fund is even remotely close to crying foul... but here's a collection of quotes Citron research (not a hedge fund, but one of the parties that had a large short position) put out the following video generally supporting redditors and wsb: https://www.youtube.com/watch?v=yS4yPsma…

>> We are pleased to have the opportunity to invest additional capital and take a non-controlling revenue share in Melvin Capital

Haha, seems to me like other funds are taking advantage of Melvin's position to buy up some of Melvin on the cheap. All those hedge funds must love the squeeze!

Re: GameStop Is Rage Against the Financial Machine

#842

Post by tomrod »

khawkins wrote: post #837
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…

>The only reason Gamestop is going up is because of Tulip-mania. It's a classic bubble. Some early people on the hype train reaped eye-popping gains as more jumped on and bid up the price. A cursory look at /r/WallStreetBets suggests this is statement is mostly wrong. You're suggesting the price is rising due to speculation/hype, but this phenomenon is fundamentally different. The reason for this rally is clearly act…

Perhaps classic is a bridge too far, but it is certainly a bubble!

Re: GameStop Is Rage Against the Financial Machine

#843

Post by samblogs »

noncoml wrote: post #639
wolverine876 wrote: post #629

How 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…

Regulations (https://www.investopedia.com/terms/r/regsho.asp) exist to prevent more shares being shorted than exist. However, those lending out shares to be used in a short can demand them back. Also, banks might demand you put up more capital as a stock you shorted increased in value. But I wanted to clarify that there are regulations such that you can't short a stock out of thin air, the stock you're shorting must be "located". Making shorting completely illegal would likely lead to irrationally high values in the market, creating more bubbles like this one.

Re: GameStop Is Rage Against the Financial Machine

#844

Post by FabHK »

sethammons wrote: post #649
ryandward wrote: post #646

Earlier quoted context omitted.

John Maynard Keynes quips that "in the long run we are all dead."

he also said, "the market can remain irrational longer than you can remain solvent."

Apparently, that nice bon mot is from A. Gary Shilling from the 1980s.

https://quoteinvestigator.com/2011/08/09/remain-solvent/

Re: GameStop Is Rage Against the Financial Machine

#845

Post by mancerayder »

CrazyDave wrote: post #650
mancerayder wrote: post #511

Earlier quoted context omitted.

It ruffles my feathers when I read that we should "combat institutional gambling via trading and not allow retail investors to gamble." Who died and made the author a moral decision-maker? Is the problem that gambling is a 'sin' or is the problem that we're TRULY worried about people losing all their money and we want to protect them from themselves? Do you want to put them in prison when they bet money on fantasy fo…

Irresponsible gambling costs the government money because we have safety nets. This applies to both institutions and individuals. The government needs to bail out banks and provide social welfare. It's not a moral issue to me. Gambling through leveraged stocks should to be taxed more heavily to offset its cost. Something like the rate on lottery tickets.

That's a clear straw man argument, that there exists a sequence of events between people buying stocks on margin, going bankrupt, and living off of government assistance. And this occurrence is so commonplace as to warrant a proposed punitive tax on margin trade profit? What evidence do you have that this actually happens? I think you ARE making a moral argument, namely around 'risk taking' being something that society should punish and discourage via taxation. You left the second part, the societal cost (which may be real, who knows, you only offered a hypothetical government assistance scenario) completely in the realm of speculative fancy.

Not to mention, if you really truly wanted to morally punish and discourage gambling, I seriously doubt a tax on profit would make a dent in it! Have you ever met a real gambler?

Re: GameStop Is Rage Against the Financial Machine

#846

Post by nostrademons »

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?

That's happening. I just tried to short GME and my brokerage gave me an error message that it was "hard-to-borrow" and no shares were available at this time, and to check back tomorrow.

Re: GameStop Is Rage Against the Financial Machine

#847

Post by robocat »

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.

> “reasonable" P/E multiples of ~5 or less.

So you are saying more than 10% yield should be normal? (Assuming normal payout ratio is 50% - highly variable).

Re: GameStop Is Rage Against the Financial Machine

#848

Post by cortesoft »

anonymouse008 wrote: post #777
dcolkitt wrote: post #735

Earlier quoted context omitted.

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...

So this one is wrong? https://money.stackexchange.com/questions/98418/does-short-s...

No, it is saying something different. You can only loan out your share of stock once, but the person who buys the stock can lend it out again.

So let's imagine there is one share of a stock and person A owns it... they lend it to person B, who sells it to person C, who lends it to person D who sells it to person E....

Now, person E is the only person who currently holds an actual 'share', and is the only person who can lend it out. Person A and C will have an IOU saying they will be given back their share at date x... they can sell the IOU, since it has the same value as a share, but they can't lend out an IOU.

Re: GameStop Is Rage Against the Financial Machine

#849

Post by SigmundA »

pishpash wrote: post #830
SigmundA wrote: post #817

Earlier quoted context omitted.

Right but the bank no longer has the money in their account they let you borrow, so one dollar does not become two.

The bank has an "asset" in their account that is the debt note from you. This asset has the value of the money you borrowed, plus interest, and it can be sold for that. One dollar just became two. (If it's a mortgage it's called a mortgage-backed security which the Federal Reserve will gladly take off your hands currently. The money they pay is created from nothing.)

That asset has associated risk vs cash that for the most part doesn’t. The risk being you don’t get the cash back. One dollar did not become two. If you sell the asset you get your cash back from whoever bought it, and it comes out of their account, again one dollar did not become two, unless it’s the Fed sure, they can create money.

Shares aren’t created unless the company issues more right?

Re: GameStop Is Rage Against the Financial Machine

#850

Post by gregable »

nostrademons wrote: post #846
gregable wrote: post #789

Earlier quoted context omitted.

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?

That's happening. I just tried to short GME and my brokerage gave me an error message that it was "hard-to-borrow" and no shares were available at this time, and to check back tomorrow.

That's what I figured might be the limiting factor. At some point, nobody wants to take the other end of the short, so it becomes impossible to short further.
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