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

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

#391

Post by ddevault »

fairity wrote: post #385
ddevault wrote: post #380

Earlier quoted context omitted.

It's not Robinhood's responsibility to protect retail clients. They are not financial advisers. By doing this they have violated their mandate. Why? Maybe it's for their clients, but when you consider their incentives, that seems at best suspiciously convenient, and at worst deliberate market manipulation to save their ass.

How is Robinhood in danger through all of this? My understanding is they make money by selling order flow. If anything, they're losing money by halting trades?

The story is that they're subservient to interests which are losing money from the GME shorts.

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

#392

Post by WorldMaker »

Finnucane wrote: post #196
snowwrestler wrote: post #156

Earlier quoted context omitted.

Right now it looks like retail investors stuck it to Wall Street and made some money because GME is still over $400/share this morning. Everyone holding GME can look at their app and feel great. But not everyone is going to be able to sell it at $400... or even $100 in some cases. It will be interesting to see how everyone feels after the sell off.

Sure, once the squeeze is over they'll be holding expensive stock in a fundamentally near-worthless company. But then, they're probably Bitcoin believers too.

I think the argument remains that GME is not fundamentally a near-worthless company and some of these investors are probably right that it was hugely undervalued by all the funds shorting it (maybe not to the tune of $400 a share, but many of those investors have seemed to have been whales, not average joes). Retail is down in the pandemic, but it is not out. My opinions that GME is the biggest pawn shop operation in the US makes me look down on the shops from a high horse that I don't currently feel a need in my personal life for pawn shops, but America as whole will always need pawn shops.

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

#393

Post by fock »

clarkevans wrote: post #193
DougN7 wrote: post #137

Earlier quoted context omitted.

Some retail investors made money. The rest that are still jumping in will lose a lot as the stock returns to it’s correct price over time.

As repeated Reddit, the shorts are still oversubscribed and the short squeeze has yet to start. Retail investors are around 15% -- there are many index funds that are invested, perhaps they might be the last ones holding? Even so, I'll be damned if I understand anything about this. I think it's interesting that "accredited investors" (e.g. 1MM in assets) can unionize to play in the stock market (e.g. hedge funds) but…

Looking at this, I guess it's safe to say that the WSB-crowd won't pull of the short squeeze: https://money.cnn.com/quote/shareholders/shareholders.html?s...... it's institutional investors lending their stock out and buying it back...

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

#394

Post by npsimons »

paulddraper wrote: post #259
52-6F-62 wrote: post #138

Earlier quoted context omitted.

I can't see how that's the case. They aren't going to suffer for this, let alone personally. Even if the fund tanks, they can set up a new one, probably with sympathetic money or just cruise off into the sunset with their millions.

They're so disconnected that losing billions doesn't matter? The problem is bigger than originally conceived then.

> The problem is bigger than originally conceived then.

You're starting to get it.

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

#395

Post by jonplackett »

joss82 wrote: post #40
jonplackett wrote: post #6

I’m seeing so much news about this but don’t understand what’s happening. Can someone do a recap?

It's quite simple really: 1. Big hedge fund bet against GameStop stock (shorted up to 140% of the stock, it's called naked short and everybody thought it was illegal since 2008 but that's another story) 2. Lot of small-to-medium investors coordinated over Reddit to take the opposite "bet" en masse (basically buying a lot of GameStop shares) so that the price will go up and "big hedge fund" lose a lot of money. => The…

Was/is there a risk of the redditors losing all their money / just as much money a the hedge fund? Or is it like the hedge fund were betting with worse odds so have more to lose (excuse my ignorance of how shorting works!)

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

#396

Post by FabHK »

FabHK wrote: post #358
bilekas wrote: post #295

Earlier quoted context omitted.

I'm pretty stupid on this, but how does one short for +100% is that not naked shoring ?

Entity A holds 100 shares and lends 80 to B, who shorts it by selling it to C, who lends 60 to D, who shorts it by selling it to E. Now there are 240 long positions (100 A, 80 C, 60 E), and 140 short positions (80 B, 60 D), for a net 100 long, as before. Short interest is 140/100 = 140% of the shares outstanding.

Oh, and by the way: Now A has 20 shares left (out of a 100 long position), C has 20 shares left (out of a 80 long position), and E has 60 shares (out of 60 long position).

Now assume that entity E is redditors/RobinHood/financial justice warriors that pledge to hold, and not let anyone borrow their shares, to squeeze the bad bad shorts B and D. So, FJW/HODLers control 60% of the shares now, and will never ever lend or sell!

A: 100 long (=20 shares, 80 lent), B: 80 short (=0 shares, 80 borrowed), A+B together net 20 long (the rest is held by C, D, E)

Well, so no A can sell, say 10 shares to B:

A: 90 long (=10 shares, 80 lent), B: 70 short (=10 shares, 80 borrowed), A+B together net 20 long (the rest is held by C, D, E)

And now, B returns those same 10 shares to A:

A: 90 long (=20 shares, 70 lent), B: 70 short (=0 shares, 70 borrowed), A+B together net 20 long (the rest is held by C, D, E)

Well, so no A can sell, again, say 10 shares to B:

A: 80 long (=10 shares, 70 lent), B: 60 short (=10 shares, 70 borrowed), A+B together net 20 long (the rest is held by C, D, E)

And now, B returns those same 10 shares to A:

A: 80 long (=20 shares, 60 lent), B: 60 short (=0 shares, 60 borrowed), A+B together net 20 long (the rest is held by C, D, E)

As you see, with only 10 shares circulating, and 60 shares in the hands of HODLers, B can happily reduce their short exposure. Let those shares circulate in this manner a bit more, and you end up with:

A: 20 long (=20 shares, 0 lent), B: 0 short (=0 shares, 0 borrowed), A+B together net 20 long (the rest is held by C, D, E)

Now, B is out of their short and flat, A has the same 20 shares it had at the beginning, and only a 20 long position now, and C, D, E keep holding their 80 shares net together.

Now, C,D can also drive down their position, we end up with A holding 20 shares, C holding 20 shares, and E holding 60 shares.

TL;DR: as long as 1 share is circulating, the shorts can reduce their position to zero, even if the majority of shares is held by never-lenders, never-sellers.

And now the market can collapse, and E is left holding the bag.

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

#397

Post by mcguire »

philip1209 wrote: post #246
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.…

A lens to look at this through is - "why is short selling allowed?" Advocates cite increased "liquidity." But, does society really benefit? Short-selling really just lets trading firms extract value from the failure of others. In that sense - professional trading firms that participate in short-selling could be grouped into a monolithic "Wall Street" in the sense that they are extracting value without a benefit for s…

The act of shorting a stock puts downward pressure on the stock price, similar to the way buying a stock puts upward pressure on it.

Suppose you see an ongoing pump-n-dump---sketchy pseudoinformation being passed around to raise the price of a stock someone has already bought, so they can sell later. If you short the stock, you act to reduce the price excursion and potentially help the eventual victims.

Suppose it's not a pump-n-dump, but rather "irrational exuberance"---people buying a stock and raising the share price for non-economic reasons. Short selling applies alternate pressure on the stock price, reducing the effects of a subsequent correction.

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

#398

Post by ufmace »

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.…

I'm wondering about this. I was a little skeptical of the whole David-vs-Goliath bring-down-wall-st thing. But if it's really true that this is just one small and low-relevance hedge fund getting their ass handed to them for doing something dumb, then why does it feel like there's a whole machine trying so hard to tear down /r/wallstreetbets and distort the entire retail investing market to stop it?

Why did Discord ban their server on a flimsy pretext right at the height of the attention? Why is there a sudden flood of articles about how this is all so very concerning in the mainstream financial press? Why are they mobilizing the universal weapon of calling everything they don't like Nazis?

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

#399

Post by aynyc »

kgwgk wrote: post #386
aynyc wrote: post #382

Earlier quoted context omitted.

That would block all margin trades, no? Not a specific instrument. I understand why they did it, but it leaves a very bad taste in my mouth.

They can set margin requirement separately for each stock. For example, with InteractiveBrokers "long stock positions [of AMC, BB, EXPR, GME, and KOSS] will require 100% margin and short stock positions will require 300% margin until further notice". https://twitter.com/IBKR/status/1354792600004386818

I get that part, but why would 100% margin on buys eliminate the buys? If I have $100K cash, I can still buy $50K of XXX and meet the margin requirement. They are blocking buys, but not sells.

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

#400

Post by 52-6F-62 »

function_seven wrote: post #372
52-6F-62 wrote: post #279

Earlier quoted context omitted.

But they didn't. The oil just sat on the shelf, and they picked it out because it was free.

I’m not following your analogy here. If a bottle of “10-40W” oil is offered to me for free, but it really contains olive oil, it’s my fault for trusting the label? I mean, pragmatically speaking a buyer should be more wary of a situation like this. But motor oil is not the same thing as brokerages. It is very common for trades to be executed with no fee these days. It’s a market norm. It is not a market norm at AutoZ…

I'm saying the oil is not labelled 10-40W, but is actually 2-cycle motor oil and they put it in their car anyway.

I'm an outsider, but that's how this appears to me. They weren't lied to, they misjudged—and mainly because of a lack of understanding.

Traditionally, acting without understanding but still a high degree of confidence was called hubris.

And it appears the institutional traders expressed hubris when they over-leveraged, and this subset of retail investors expressed hubris when they didn't properly understand the capabilities and limitations of the app they decided to use to engage with the stock market.

I haven't seen people on other platforms complain in the same ways. I mean, for instance I haven't been restricted on my platform. I haven't heard anything about Questrade or E-Trade or anything.

To go back to my contrived motor analogies, it looks like a lot of people also expected a lawnmower to compete with a Tercel, never mind a Ferrari.

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