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Hedge fund Melvin sustains 53% loss after Reddit onslaught

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

#271

Post by fny »

malandrew wrote: post #216
nl wrote: post #171

Earlier quoted context omitted.

> the WSB user count has grown from 2.2m on Monday to now 7.5m. If 5 million of those users all... Is 5/7.5M users of any forum did anything it would be some kind of record level conversion, let alone speculating $100.

On average I don't think $100 is that crazy. Most haven't YOLO-ed anything. While many YOLO-ed for 1-2 shares, there are many who have YOLO-ed for thousands to tens of thousands of dollars.

I'll also add that tons of people I know who have never traded in the markets woke up Tuesday and Wednesday and decided to buy a single share for the lulz. I'm fairly convinced 70% of the volume may have been due to retail.

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

#272

Post by runako »

fractionalhare wrote: post #198
dcolkitt wrote: post #193

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/…

> 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]. And those returns are all net of fees.

I'm curious; do you know that from some document from the fund? The linked source doesn't appear to support that conclusion.

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

#273

Post by m3kw9 »

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…

Makes sense, but don’t let this spoil the party back at wsb

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

#274

Post by dragonwriter »

notahacker wrote: post #97
drcross wrote: post #59

Earlier quoted context omitted.

...or they lied. You're picking one answer and I'm picking a different one, either are just as likely.

One of them involves them deciding they'd rather be prosecuted by the SEC for lying than use the bailout for what they said they used it for, and the other involves some people on Reddit being wrong. I don't think "either are just as likely"

> One of them involves them deciding they'd rather be prosecuted by the SEC for lying

Also, anyone who claims that their investment decisions were made based on an adversely impacted by that lie, which could be the bigger danger, because the SEC might let you go with a also in the wrist (maybe not, to, politics and policy considerations here can be hard to anticipate), but investors who recognize that you've made yourself a money piñata won't.

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

#275

Post by runako »

dcolkitt wrote: post #193

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/…

Context is important, so the Nasdaq 100 (as represented by the QQQ ETF) returned ~49% in 2020, 39% in 2019, and 24% over the last 5 years. Beating the indexes by 5-6 points consistently is very good, but it's important to keep in mind that most equities were doing really well over that period.

(Edit: It's been reported elsewhere that these numbers are net of fees. However, it's entirely possible that for taxable accounts, tax considerations still narrow the performance gap. And of course, the QQQ offers instant liquidity and did not drop 53% this month.)

Either way, the money currently in there is very likely to underperform the indexes over the next 5 years (because they need to return 100% to get back to the pre-GME position).

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

#277

Post by 0xy »

gruez wrote: post #266
0xy wrote: post #254

Earlier quoted context omitted.

Considering other hedge funds reloaded shorts after getting decimated, there's no indication their losses will stay at 53%. Like a bankrupt gambler returning to the casino after getting bailed out by their parents, Melvin will be back to the shorting slot machines soon enough.

...except that unlike slot machines, the probability of you winning does increase the second time around. It costs more money (in aggregate) to pump from $20 to $200, than from $200 to $2000. I'd also imagine that the buy side will gradually lose steam once meme fatigue starts to set in.

TSLA's valuation can only be described as extremely optimistic, hedging on "huge bubble" status. I don't think we've seen the brakes on the buy side at all, considering the buy side has been artificially constrained by limits and restrictions.

Is $2,000 GME possible? Of course it is. It's not even unprecedented considering the other businesses valued at billions of dollars with shaky business models.

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

#278

Post by UncleMeat »

bugzz wrote: post #238
BoorishBears wrote: post #201

Earlier quoted context omitted.

20B in volume in a single trading day and people still think this is just retail. Sheesh.

2-3 weeks ago when share prices were around $17, GME had a market cap of less than 1.2B. WSB has 7.6 million users now, but I assume it went up a lot recently. Say 2 million of them bought some GME. To buy 50% of the shares a couple weeks ago it would have only taken $296 each. So they could ABSOLUTELY get prices moving significantly. Now of course lots more people have jumped on now. But that 20B volume number is af…

> Say 2 million of them bought some GME.

I think you are off by one or two orders of magnitude. I'd wager that a full half of the subscribers haven't even opened reddit in the last week.

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

#279

Post by protastus »

vmception wrote: post #222
kshacker wrote: post #149

Earlier quoted context omitted.

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.

> 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

I don't know who you could persuade with such lack of conviction...

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

#280

Post by twistedpair »

Judgmentality wrote: post #11
wrkronmiller wrote: post #5

> On Wednesday Melvin said it had exited its bet against GameStop and repositioned its portfolio. The firm moved to reduce risk in its investments following a turbulent start to January when it lost 30 percent in the first three weeks. Melvin’s leverage ratio is at the lowest it has been since the firm’s founding in 2014, said a source familiar with the firm. The news of Melvin’s January performance was first reporte…

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…

Short interest numbers are published on the 15th and 31st of the month. We'll get a look to day on how the shorts have changed over the last 2 weeks.
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