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Hedge fund Melvin sustains 53% loss after Reddit onslaught

arstechnica.com

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Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#221

Post by flunhat »

fractionalhare wrote: post #196
dataflow wrote: post #139

> 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).

The arguments that Melvin lied about closing their position are as follows: 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…

Thank you 1000x for writing this. I thought I was going insane reading all the comments like “Melvin publicly said they closed their short position, which is suspicious because they said it publicly (if they said nothing, you all would still find it suspicious!), so they are probably lying about closing their short position”

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#222

Post by vmception »

kshacker wrote: post #149
fractionalhare wrote: post #43

Earlier quoted context omitted.

> Considering this is a hedge fund, I just assume they're lying because, you know, it's a fucking hedge fund. If this is your prior for approaching evidence, you're always going to catch big finance lying. But not because you're actually calibrated on evidence. And you won't be able to distinguish between actual fraud and baseless conspiracy.

Well this has been going around on the reddits today. See for yourself: https://www.youtube.com/watch?v=gMShFx5rThI > Says Cramer: What's important when you're in that hedgefund mode, is to not do anything remotely truthful, because the truth is so against your view, so its important to CREATE A NEW TRUTH to develop a fiction...the great thing about the market is it has absolutely nothing to do with the actual stocks

quite a bit has changed since 2006, specifically in the financial reform bill of 2010 and the jobs act of 2012

not a lot, but a bit

circulating a clip from 2006 as your only insight into the hedge fund world just proves all the talking heads right about retail traders being a joke.

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#223

Post by vmception »

Mo3 wrote: post #155
dataflow wrote: post #139

> 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.

where does S3 get its data from? equities short interest from other sources is only updated twice a month.

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#224

Post by np_tedious »

kyrieeschaton wrote: post #29

How much evidence is there that the "reddit onslaught" actually moved the price, as opposed to them being the stalking horse for more sophisticated actors with more capital exercising a vanilla short squeeze strategy?

You're not the only one thinking this. https://www.bloomberg.com/opinion/articles/2021-01-29/reddit...

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#225

Post by fractionalhare »

ogre_codes wrote: post #214

Most stunning thing in this article to me: "The GameStop saga marks a fall from grace for Melvin, which gained 52 percent last year, ranking it among the best performing hedge funds ." This is kind of surprising. I personally know a few retail investors who crushed that number. Not with fancy day trading, just owning a few good companies. I know it's a lot harder for institutions to get outsized returns, I just didn'…

This is why we have the term, "capacity constraints." Melvin accomplished those returns in a year where they would have started off with $10B or close to it. The retail investors you know did it on what, $100k? $1M?

The liquidity available to retail investors is completely different from the liquidity available to firms with an 11 digit book. Assuming those retail investors actually have a working strategy, they can basically invest in anything.

If they find alpha in trading some overlooked company worth $100M total, they can deploy all their capital and make an outsized return. If a multibillion dollar hedge fund finds alpha in a $100M company, they can make a great return of 50% on let's say...0.1% of their capital, assuming they can buy 10% of that company without meaningfully moving the price against them.

So you have an 11 digit book, and you have to get an outsized return. You either find tons and tons of these little tiny companies you can buy single digit percentages of, or you win on big bets from a blue chips that can absorb your liquidity. Or some mix in between. Or you expand to foreign assets, or another class of asset that can handle the weight you're moving around. But you are fundamentally limited, and whatever you do has a different profile of risk attached to it. You are also bound by the risk thesis of your firm and what your investors' goals are.

That's not to say all hedge funds outperform retail. A lot of them plainly suck and fail to accomplish their mandate. But this is too uncharitable a take; the liquidity and risk characteristics are completely different. It's incomparable.

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#226

Post by tpmx »

motohagiography wrote: post #204
tpmx wrote: post #81

Earlier quoted context omitted.

> %53 What's with that weird way of writing a percentage numeric? Some weird "i'm an insider, trust me" signalling?

If you must know, I now use them interchangeably because on my android keyboard the % symbol is two meta options deep, so i am now in the habit of using it first because I don't want to risk typing additional characters triggering the auto-correct.

I suffer with you; it must be bad not being able to type what you want. If only there was a solution to your troubles...

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#227

Post by Uehreka »

qeternity wrote: post #191
Mo3 wrote: post #155

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.

Short interest down massively from Friday. Equities don’t settle instantly. Tomorrow will be bloody.

I kept seeing people saying Friday would be the reckoning and offering various contradictory reasons that orbited around “the margin call expires and they have to buy”. Nobody could say what time the margin call would “expire” or provide a source explaining how that worked, and when none of those things happened and the stock rose back to 300-ish and closed, everyone just updated their takes to Monday instead.

How do we know this won’t just sputter for another week or two and then end in the most anticlimactic way possible?

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#228

Post by ogre_codes »

kyrieeschaton wrote: post #29

How much evidence is there that the "reddit onslaught" actually moved the price, as opposed to them being the stalking horse for more sophisticated actors with more capital exercising a vanilla short squeeze strategy?

I don't think the big players attack each other like this. Its too traceable and if word gets out, it can come back and bite them.

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#229

Post by flunhat »

ogre_codes wrote: post #214

Most stunning thing in this article to me: "The GameStop saga marks a fall from grace for Melvin, which gained 52 percent last year, ranking it among the best performing hedge funds ." This is kind of surprising. I personally know a few retail investors who crushed that number. Not with fancy day trading, just owning a few good companies. I know it's a lot harder for institutions to get outsized returns, I just didn'…

The smaller the amount of capital you manage, the “easier” it is to get large returns on a % basis. There’s a video where Warren Buffett talks about this behavior (a bird hunting club that ended up finding oil, hopefully someone can find the video for me).

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#230

Post by sroussey »

sroussey wrote: post #219
rantwasp wrote: post #104

Earlier quoted context omitted.

this is a classic example of a positive feedback loop. wsb did not do all of this but they were the spark that created the fire.

Feedback loop for sure. A movie will be made on this. YOLO! I can see GameStop putting an end to some of this by issuing non-voting shares to one of the hedge funds that is current shorting, giving them a known out and pocketing a huge investment for M&A.

That wouldn’t be as fun though...
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