Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

WallStreetBets vs WallStreet: It's not about the money anymore

thinkingthrough.substack.com

Post reply on HN
Print view View original

331–340 of 475 posts

Re: WallStreetBets vs WallStreet: It's not about the money anymore

#331

Post by derefr »

dumbfounder wrote: post #292
lifeslogit wrote: post #154

Earlier quoted context omitted.

That is very interesting to hear! I imagined that this was the perfect storm for HFT. Lots of retail investors using default exchange routing settings via brokers like Robinhood and ETrade that sell their order flow. Meanwhile these retail investors are buying small amounts of very volatile equities! Lots of opportunity to rack up lots of pennies.

So RobinHood is stealing information from the poor to give to the rich? To make them richer? Surely I am not the first to notice this irony.

To stretch the analogy, the equivalent of an HFT firm in English folklore would probably be a toll-road operator; or a city-state customs officer accepting lesser private bribes in place of levying greater official tariffs on imported goods.

Robin Hood, by stealing from the rich and giving to the poor (in a period with commodity currency with no monetary policy), would be encouraging deal-flow (as the rich traders stolen from need to send the same goods again to fulfill their contracts; and the poor now have money to spend to purchase exotic goods, requiring more be imported by traders), in turn increasing travel on the toll-road/through the customs office, in turn making the toll-road operator/customs officer money. It would make perfect sense for the mythical Robin Hood to, in fact, be a toll-road operator/customs officer — or at least to be in cahoots with them.

(In fact, come to think of it, he wouldn't even need to steal from the rich, per se. He could just destroy trade caravans, and collect a cut of the revenue from the toll-booth operators; or destroy goods already imported but not yet sold, and collect a cut from the customs office; and then distribute said cut to the poor. The same virtuous(?) cycle would occur.)

Re: WallStreetBets vs WallStreet: It's not about the money anymore

#332

Post by jansan »

I am surprised that the cornering of the silver market in 1980 is not mentioned here. The Hunt brothers had driven the silver price to the moon, so the big guys simply had the rules at COMEX changed, which led to a sudden drop of the silver price.

https://en.wikipedia.org/wiki/Silver_Thursday

Re: WallStreetBets vs WallStreet: It's not about the money anymore

#333

Post by shawabawa3 »

dreamcompiler wrote: post #163

The endgame here is fascinating to me. The people who got in early will suffer least when GSE finally crashes and burns. But the poor suckers who bought it at $150 are going to be in big trouble. They're all trying to stay strong and hold long because that's the way to make the hedge funds suffer, but the smarter ones will figure out that their only chance to not lose their shirts is to be in the earliest 5% of scabs…

The idea isn't to hold forever

It's to hold until the hedge funds are forced to buy at any price to close out

Re: WallStreetBets vs WallStreet: It's not about the money anymore

#334

Post by FabHK »

The article is very tendentious.

I despise HFT as much as the next guy, but it's mostly useless rent seeking, economically, not massive manipulation. There is money on the table in trading, and the HFT firms try to take a bigger part of that pie, rather than letting it go to their competitors or other traders (like funds or retail investors).

Next, hedge funds shorting businesses they consider overvalued is a perfectly fine activity that helps price discovery and capital allocation. To the extent that they are deceptive and manipulative, that is a problem, just as deceptively and manipulatively hyping a stock up is a problem.

Finally, note that there is no value created here. It's purely a transfer of money. A few hedge funds might lose something (though that remains to be seen - shorts have no expiry, per se, and the borrow cost is absolutely manageable over days, weeks, or even months).

But mostly, this will be a huge transfer of money from those that jumped on the long trade late, to those that were in it early.

EDIT to add: And, putting a cherry on the fine research that went into the article, the Keynes quote is from A. Gary Shilling from the 1980s.

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

Re: WallStreetBets vs WallStreet: It's not about the money anymore

#335

Post by tomp »

willis936 wrote: post #209
djbebs wrote: post #177

Earlier quoted context omitted.

And now you see the necessity of violence to advance political goals.

I’ll see it only after a liberal party controls the executive and legislative branch in the absence of a filibuster failing to implement meaningful change.

The same liberal party that bailed out Wall Street last time?

Re: WallStreetBets vs WallStreet: It's not about the money anymore

#336

Post by myWindoonn »

dragontamer wrote: post #17
waylandsmithers wrote: post #4

I don't know- there must be institutional players on the long side by now right? Either way, _eventually_ someone will be left holding the bag when the stock comes back down to earth.

This is literally an event that options / derivatives were made for. If you're a long GME holder who feels like this price is temporary: you can buy calls or sell puts (bull-trades). Or, you can sell calls or buy puts (bear-trades). If you own a ton of the underlying and are willing to be "forced to sell" the stock, selling calls would be a marvelous option to benefit from the uncertainty of the situation. Worst case…

This helps sketch why derivatives for stocks should not be legally tradeable. The stock isn't supposed to be an investment vehicle, but a tool for steering the owned corporation.

Indeed, this entire situation is analogous to the economics of running a GameStop-like trading post, where preorders are allowed. The store wants to sell lots of preorders in order to stay afloat even outside of release seasons, and customers want to purchase preorders in order to guarantee a low price for hyped releases. This is just like the original purpose of derivatives, which were to ensure that foodstuffs would be fairly priced for both farmers and grocers, even when prepaying for not-yet-grown crops.

One would hope that GameStop would not sell preorders that it cannot guarantee from game publishers; if a game publisher promises only 100 copies to a particular brick-and-mortar, then they would be in big trouble if they took 140 preorders.

Now, folks generally agree that GameStop's business model is on the way out. The stock should not be worth much, because there is not much to say about the future of the corporation, and so not much point in participating in corporate governance. But instead, it is overly-shorted, with about 140% of shares sold short. That is no longer in the spirit of derivatives, but is now a magic trick.

[0] https://en.wikipedia.org/wiki/GameStop_short_squeeze

Re: WallStreetBets vs WallStreet: It's not about the money anymore

#337

Post by grosales »

I think it's a bit of both, but to be honest, it doesn't feel like sticking it to the man.

Why? Because it's a ponzi scheme. People who made money off this already (and are not holding the line) are not the people affected by the man. I don't believe my plumber, my electrician, or the busboy at the restaurant are investing their money on GME stock using Robinhood. Who do I see doing it? My friends, mostly young white collar workers with money to invest/lose in a bid to trying to get rick quick. Your typical reddit user of sorts.

I mean, my first few years on this country, while going to college at night, I worked construction. I worked with all kinds of people, from all kinds of lives and believes. When 2008 happened, many of them lost their life savings or their houses. At that point, I was working as a software engineer already, my older colleagues lost a chunk of their 401k - which they probably have regained and built upon by now.

Sticking it up to the man? I don't think so. The end of this will be fast and painful to many.

Re: WallStreetBets vs WallStreet: It's not about the money anymore

#338

Post by fairity »

dathinab wrote: post #327
fairity wrote: post #183

I'm really confused why the general public is enraged at the brokerages' decision to stop new buy orders for GME. It's very clear that retail is going to lose their shirts in the end of all of this. By blocking new buy orders, the brokerage is effectively protecting its naive clientele. This isn't some government conspiracy. This is a firm trying its best to operate in the best interest of its clients.

I think the large majority of the cliente is fully aware that they will lose out on this long term. So it's not about protecting the client. If it would be about protecting your clients it would be like your care (=a utility) not allowing you to drive into the mountains for a hike (=user action) because the weather is bad (=makes action risky). I think no one would say that this is ok or acceptable, but if the utilit…

I agree there are some retail traders who are going in with eyes wide open. However, due to the power of greed, a significant portion is not. And, the end result will be people losing their retirement income.

So, the difference between your analogy is in the severity of the risk. Your car shouldn't let you drive into the mountains for a hike if it knows there's a 20% chance you're going to lose a limb that prevents you from living a happy life.

Re: WallStreetBets vs WallStreet: It's not about the money anymore

#339

Post by mcguire »

bidirectional wrote: post #19

Once again, this insistence on viewing 'Wall Street' as a monolothic entity. The largest asset management firm on Earth holds over 9 million Gamestop stock, none of the big banks that received bailouts in 08 are affected by this, 99.9% of hedge funds are not affected by this, high frequency traders are probably making a bundle. Institutional money was long Gamestop before this story entered the public consciousness.…

Yep, and this is a particularly silly article. One group of investors caught another group making a spectacularly poor decision. It just happens that the first group are retail traders (I'm not sure I would call them "investors").

Re: WallStreetBets vs WallStreet: It's not about the money anymore

#340

Post by tomp »

jsjsbdkj wrote: post #39
tenaciousDaniel wrote: post #8

As someone who is not very educated in finance, I'm curious how to interpret today's events. Is nasdaq/robinhood/everyone else transparently manipulating the market on behalf of hedge funds? Or are these standard mechanisms in place for preventing the stock market from swinging wildly out of control? I don't know if it's standard to completely block trading on one or more stocks.

WSB has basically recreated a "boiler room", which is an ages old scam where a small group of insiders would encourage people to buy stock, drive them value up, and then the insiders dump the stock. The key insight here is that for every person selling the stock and making millions, somoene has to be buying. There's a narrative about short squeezes forcing a small number of hedge funds to buy stock, but in practice m…

People were saying the same when Tesla was 350$. Some suckers (e.g. me) actually believed them.
Post reply on HN