191–200 of 410 posts
> On Wednesday Melvin said it had exited its bet against GameStop and repositioned its portfolio. Is this true? Louis Rossmann pointed out they would have a huge incentive to lie about this (to prompt people to sell and drive prices down).
No, it's not. According to S3 data they've not. They're running a massive smear compaign to convince the public otherwise.
Earlier quoted context omitted.
No, it's not. According to S3 data they've not. They're running a massive smear compaign to convince the public otherwise.
>According to S3 data they've not. And I suppose that's because short interest isn't going down? Aside from the fact that other short-interest sources (all unofficial, by the way) shows that short interest cooled down last week. it also ignores the fact that it's possible to close short positions by transferring to another fund. I'd imagine there's plenty of funds willing to short GME at $300.
Plenty? What type of mathematical model would support a move like that? Are hedge funds predicting a government bailout? Or are they certain retailers will close on Monday?
In other words, even though this is definitely painful, even inclusive of this event, it's one of the best performing hedge funds of the past decade.
[1]https://www.wsj.com/articles/citadel-point72-to-invest-2-75-... [2]https://www.bloomberg.com/news/articles/2019-07-19/cohen-cub... [3]https://www.baltimoresun.com/business/ct-biz-reddit-wall-str...
> On Wednesday Melvin said it had exited its bet against GameStop and repositioned its portfolio. Is this true? Louis Rossmann pointed out they would have a huge incentive to lie about this (to prompt people to sell and drive prices down).
It would be illegal for them to lie about it.
Earlier quoted context omitted.
I’m far from an expert in this, but this seems wrong. My understanding is that even though shorts can in theory have “infinite downside”, in practice the short-sellers have to bail if they can’t post enough collateral to buy back the stock. And the 140% isn’t some “impossible fraction” thing, it just means that if there were 10 million shares before, well then now there are technically 24 million, and the short-selle…
Aren't 140% of 10 million shares 14 million?
To expand: if there were 10 million shares, you borrowed all of them, and sold all of them, you would have a 100% short position and 20 million shares would be “owned” by various people. If you then went to the owners of 4 million of the freshly sold shares and borrowed from them and re-sold the shares... now you have a 140% short position and 24 million shares “exist”. 10 million of them are “real shares” and 14 million are “obligations” that you’ll have to fulfill at the end of each quarter.
My understanding (again, almost entirely from reading Matt Levine columns) is that this is a thing you can do if you’re really cheeky, you’d just need a mountain of collateral and balls of steel.
> On Wednesday Melvin said it had exited its bet against GameStop and repositioned its portfolio. Is this true? Louis Rossmann pointed out they would have a huge incentive to lie about this (to prompt people to sell and drive prices down).
1. Short interest on GME is still high, even after they claimed to have closed their short position.
2. They have a "huge incentive" to lie about this, because people believe it would encourage a selloff.
That is the entirety of the evidence. It is uncritical despite the fact that it gets frenetically repeated on reddit. Here is the evidence which suggests they didn't lie:
1. That first argument doesn't prove what people believe it does. First, short interest is only officially reported twice monthly, and most cited data is out of date or estimated. More importantly, short interest is an aggregate measure which does not track specific positions. It only tracks all positions together. Other firms which haven't been burned by the price increase have opened new positions, hoping to short from the top tick (or thereabouts).
2. The second argument is reddit cargo culting "game theory", and it violates both logic and Occam's Razor. If you're a fund manager who lies to the public about closing a highly volatile position that could bankrupt you, you are facing securities fraud and violation of fiduciary duty, respectively. Either of those will pierce the veil of your firm and leave your personal assets liable for reclamation by the SEC and/or angry investors. You will be sued. You will lose.
Moreover, the "incentive" of this move is that you might prompt a selloff and get to keep your short position. It strains credulity to think someone would make such an uncertain bet with a huge psychological component when their firm is literally on the line. If you're wrong, your firm is dead and all of your personal assets are up for seizure in the ensuing fallout for the aforementioned reasons.
The alternative is that you just close the position, don't lie about it, and your firm survives and you just have a bad year. You are personally unscathed as the fund manager. And since you've had historically excellent returns and this was a 3 or 4 sigma event, long term you'll probably be fine. You'll have a new signal to incorporate into your portfolio risk management and you'll move on.
Earlier quoted context omitted.
>According to S3 data they've not. And I suppose that's because short interest isn't going down? Aside from the fact that other short-interest sources (all unofficial, by the way) shows that short interest cooled down last week. it also ignores the fact that it's possible to close short positions by transferring to another fund. I'd imagine there's plenty of funds willing to short GME at $300.
>> I'd imagine there's plenty of funds willing to short GME at $300 Plenty? What type of mathematical model would support a move like that? Are hedge funds predicting a government bailout? Or are they certain retailers will close on Monday?
Do you really need a mathematical proof of this? If a stock is $30 and you think the FMV is actually $20. Then you'd expect to make $10 from shorting it. If it's at $300 you'd expect to make $280. So the higher the price, the more money you expect to make from it, and the more tempting it is.
>Are hedge funds predicting a government bailout? Or are they certain retailers will close on Monday?
No not really, a sibling comment explains it better than I can: https://news.ycombinator.com/item?id=25984493
It should be noted that Melvin Capital returned over 50% in 2020[1], 44% in 2019[2], and has averaged above 30% annual returns since inception[3]. In other words, even though this is definitely painful, even inclusive of this event, it's one of the best performing hedge funds of the past decade. [1] https://www.wsj.com/articles/citadel-point72-to-invest-2-75-... [2] https://www.bloomberg.com/news/articles/2019-07-19/…
And those returns are all net of fees.
Earlier quoted context omitted.
The general assumption on WSB is that Melvin Capital is lying and that they haven't closed their positions. I haven't seen any evidence to suggest they've closed it, and have seen circumstantial evidence suggesting they have not. You don't spend money on ads saying "we no longer have a financial stake in this stock" unless you, you know, have a financial stake in this stock. Considering this is a hedge fund, I just a…
The way that WSB has latched onto Melvin as their enemy is to their detriment. It was never about killing Melvin capital, or at least, it shouldn't have been. It ought to have been about the ridiculous short interest on the stock, regardless of who was funding it. Whether or not Melvin specifically has covered their shorts is irrelevant to how the short interest as a percentage of float has changed in the past week.…
Earlier quoted context omitted.
I mean the WSB user count has grown from 2.2m on Monday to now 7.5m. If 5 million of those users all bought $100 worth of GME that's half a billion, if they bought $1000, that's 5 billion.
Over 700 million shares were traded last week, so even if every WSB user bought 10 shares, that wouldn't account for close to a majority of the activity.
https://www.bloomberg.com/opinion/articles/2021-01-29/reddit...