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GameStop Is Rage Against the Financial Machine

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Re: GameStop Is Rage Against the Financial Machine

#861

Post by nrmitchi »

adolph wrote: post #815
admax88q wrote: post #315

Earlier quoted context omitted.

> The "little guy" refers to the Reddit traders that are making a killing right now, with the expectation that eventually the stock price will crash again. The reddit traders are only making a killing if they're selling these inflated positions. At some point somebody will be left holding the bag, odds are it will be a bunch of people from wallstreetbets and other retail investors that are late to the party. There's…

Maybe GameStop could leverage its position and “acquire” something with actual value, something private looking to go public. Afterwards the result would be worth more than GME did when this started? https://www.usatoday.com/story/tech/news/2018/01/29/vmware-c...

Why would anyone accept Gamestop stock as compensation for anything right now? Especially when they almost-definitely wouldn't be able to turn around and sell it right away.

Re: GameStop Is Rage Against the Financial Machine

#862

Post by amluto »

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?

I’m not convinced that the economics work like this. Suppose there are n real shares, i.e. longs - shorts = n. A short squeeze happens if the number of shorts exceeds the number of long shares that aren’t trying to squeeze the shorts. That’s longs - squeezers Imagine there’s a near-squeeze situation, and someone shorts more shares. This drives the price down, which makes it less expensive for squeezers to buy shares, which exacerbates the problem.

This is complicated by margin calls and their institutional equivalents. This cuts both ways. Enough downward price pressure could cause some longs to get margin called. But more shorting also means more danger.

If I were the SEC, I would consider restricting the total short interest to a fixed fraction of total outstanding shares to improve market stability. I don’t know whether this would be a good policy overall.

Re: GameStop Is Rage Against the Financial Machine

#863

Post by CGamesPlay »

SigmundA wrote: post #849
pishpash wrote: post #830

Earlier quoted context omitted.

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?

So I think you do actually have it right. That's why you'll see careful commenters in this thread referring to "synthetic shares", which are like normal shares but come with that risk that you don't get it back. Except, if I understand correctly there are also laws around shorts which say that you are required to have the money to cover the share, which helps diminish the risk.

Re: GameStop Is Rage Against the Financial Machine

#864

Post by phendrenad2 »

blhack wrote: post #57

Okay a serious question: at what point does it make sense for these hedge fund guys to just purchase reddit and shut it down? To be clear: I don't think that would work, but I think we're at the point where stuff like that is going to be tried. These guys are losing BILLIONS of dollars. Billions. Can they spend $1B to prevent the loss of $2B? (Is reddit worth more than $1B?) Other stuff I won't be surprised if we see…

Just make 5 accounts and report the subreddit for hate speech. Works every time.

Re: GameStop Is Rage Against the Financial Machine

#866

Post by vineyardmike »

gcblkjaidfj wrote: post #716
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…

> 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 buy one of every livestock, then sell shares of that bundle.

(index funds, for example)

Re: GameStop Is Rage Against the Financial Machine

#867

Post by conductr »

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…

> The reason for this rally is clearly activistic in nature, an attempt to bankrupt the hedge funds who engage in vulture capitalism.

That's a fun rally cry that happens to be true, but even if it wasn't true and the conditions existed naturally, these WSB folks just spotted an opportunity to make money and jumped on it like anyone else. Activism is just trash talk like much of this subreddit has always been.

Re: GameStop Is Rage Against the Financial Machine

#868

Post by Thorrez »

anonymouse008 wrote: post #782
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 really confused because wouldn't that require a filing with the SEC to authorize shares? Wouldn't that number become part of the float? I looked into "fails" data, and I'm a bit lost [0]. Is Alice's IOU sellable as a security with voting rights? Who gets to vote on those 100 shares? There are now 200 votes? That's very strange. I've heard of synthetic longs before but in options [1] [0] https://www.sec.gov/data/f…

I can't answer most of your questions, but I think I can answer the voting part.

There are 100 shares, Alice owns all of them, but loans them all to Bob so Bob can short them. Bob sells all of them to Charlie.

So Alice owns 100 shares and Charlie owns 100 shares even though only 100 real shares exist. (Bob owns -100 shares.) But Alice can't use her shares for voting because she loaned them out, only Charlie can vote.

Re: GameStop Is Rage Against the Financial Machine

#869

Post by tenpies »

dkrich wrote: post #857
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…

This is the exact thing I have been trying to convince people of since this began. It started with a kernel of truth and a case to be made for a potential short squeeze but at some point along the way transitioned from a squeeze to a bubble with more and more chasing gains out of fomo and some ridiculous concocted story about the little guy vs the big bad Wall Street. This is further evident from the spillover effect…

It's literally impossible for it all to be retail money.

What I think people are missing is that in about a month we'll find that "Wallstreetbets" and "retail" were also other fund managers like Ackman.

This is not the first time one fund manager messed up with their short and got absolutely eaten up by other fund managers (see, famously, Herbalife where Ackman and Icahn were direct adversaries). Melvin Capital clearly messed up - their losses exceed any reasonable risk-managed short position and it's clear there was some naked shorting in there because you cannot lost 30% of your fund in a week unless you're being reckless.

The media - in classic post-Trumpian mentality - is just fabricating a reality about market insurrections, how male traders are incels, or how Trumpism has spread into the market. The reality is we're witnessing another classic short squeeze between fund managers - and sure - retail got in on this one too, but they are at best a spark, rather than the gun powder.

Re: GameStop Is Rage Against the Financial Machine

#870

Post by neartheplain »

cortesoft wrote: post #848
anonymouse008 wrote: post #777

Earlier quoted context omitted.

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 c…

Can the value of that IOU drop to zero if the lendee can't return the share, e.g. if lendee no longer holds the share and none are for sale? Does the IOU specify alternate restitution in that case?
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